December 4,1997

States Now Have the Option to Purchase Food Stamps
to Provide Food Assistance to Legal Immigrants
Stacy Dean and Kelly Carmody

Note: This paper was written prior to the federal restoration of food stamps for some legal immigrants, and will be revised soon to reflect the changes enacted in the new legislation. Until the paper is revised, please see "New Federal Food Stamp Restoration for Legal Immigrants: Implications and Implementation Issues" for a description of which legal immigrants will be eligible for federal food stamp benefits effective November 1, 1998.

On June 12, 1997, Congress passed and the President signed into law the FY1997 supplemental appropriations act (P.L. 105-18 see copy of legislation below). This law includes new authority for states to purchase food stamps from the federal government for use in a state-funded food assistance program for legal immigrants(1). This legislation provides states with important new flexibility to provide food assistance to legal immigrants who are ineligible for federal food stamps under the new welfare law. Without this change, states wishing to aid these immigrants would have faced the prospect of having to establish expensive and burdensome parallel food voucher programs. A state-funded food stamp program is likely to be the most cost-effective means for providing targeted food assistance to vulnerable state residents who will no longer be eligible for federal food stamp benefits.

Eleven states California, Florida, Illinois, Maryland, Massachusetts, Nebraska, New Jersey, New York, Rhode Island, Texas, and Washington, have already passed legislation that authorizes the purchase of food stamps for state-funded food assistance. Minnesota is providing food assistance in cash but may provide state-funded food stamps in the future. Still other states will be considering legislation to provide state-funded food stamps in the near future. In light of recent congressional action on the federal budget agreement, more states may become interested in providing some form of temporary or ongoing food assistance to low-income immigrants.

Because many legal immigrants will retain their SSI, the state cost of extending food assistance to legal immigrants will be reduced. The legal immigrant households that would retain their SSI under the budget agreement will still have incomes too low to cover their food needs and will continue to require food assistance. (The federal SSI benefit level for a single individual is only 75 percent of the poverty line.) However, since many will have some income as a result of the expected change in SSI rules, states wishing to fill the assistance gap created by the change in federal food stamp law will face a much lower cost.

 

Steps Needed to Elect the State Purchase Option

USDA issued detailed guidance on August 8, 1996 on the specifics of how the state purchase option will work; the basic elements are very simple. A state food stamp agency must inform USDA of the state's desire to purchase food stamps for distribution to immigrants made ineligible by the changes in the welfare law, P.L. 104-193. The state-funded food assistance program for legal immigrants may either follow the design of the federal food stamp program or a design of the state's choosing.

In addition to informing USDA of the nature of the state-funded program, the state must provide USDA with a plan for how it intends to reimburse USDA for the face value of the food stamps issued under the state program and the federal administrative costs associated with operating the state funded program. Once the state and USDA agree to the terms of the reimbursement, the state should be able to start issuing food stamps for its state-funded program shortly thereafter.

 

Complete Flexibility in Structuring their State-Funded Program

The new legislation does not contain any requirements that the eligibility rules or the structure or level of benefits under a state-funded program remain equivalent to the federal food stamp program. States have tremendous flexibility to design a food assistance program for poor immigrants that meets both their programmatic and budgetary needs. Food stamps are simply the means by which state-funded and state-designed food assistance can be distributed to immigrant households.

Although states can design their own food stamp rules for their state-funded program, a benefit structure that parallels the existing food stamp program is likely to be preferable to most other options for several reasons.

However, states could consider a variety of options which would best suit their needs and budgetary constraints. For instance, Maryland's state-funded program will only provide food assistance to low-income immigrant children.

 

States Could Use TANF Funds and Receive Credit Towards their TANF "MOE" for Providing Food Assistance for Some Families

States may want to consider using federal TANF funds to cover some of the cost of purchasing food stamps for certain legal immigrant families. TANF funds may be used to provide assistance to households that include children and that are needy as defined by the state TANF income standards. (Most states have set the TANF income standards below the food stamps standards.) However, if federal TANF funds are used for this purpose, this food assistance will make these families subject to the federal TANF time limits, work participation rates, and other federal TANF prohibitions and requirements. Therefore, states may want to use TANF funds only for those families that are receiving other types of TANF-funded assistance to ensure that the provision of food assistance does not subject families to time limits that will restrict needed help in the future. Similarly, states may not want to use TANF funds for food assistance if the effect would be to bring into TANF work requirements families for whom those requirements may not be appropriate. It may make more sense for the state to use state funds to provide food assistance for these families.

Under HHS guidelines, states could receive credit towards their TANF maintenance of effort (MOE) requirement for state funds spent providing food assistance to some legal immigrant households. The assistance provided to eligible families through a state-funded food assistance program is not subject to TANF restrictions such as the 60-month time limit or the work participation rates.(3) States would be allowed to count funds used to serve legal immigrant households with children whose income falls below the income thresholds in the state's TANF-funded program. This would mean that the state would not receive MOE credit for serving households comprised solely of elderly or disabled legal immigrants. Nor could they count assistance provided to working poor households with children whose income makes the family ineligible for TANF but still leaves them in need of food assistance. Nonetheless, a considerable portion of a state-funded food assistance program could be credited to the TANF MOE.(4) USDA estimates that some 40 percent of immigrant households who received food stamps in 1995 also received AFDC. Approximately 65 percent of the immigrant households on food stamps during that same year, were households with children.

 

Requirements for States Choosing to Purchase Coupons

While states have the flexibility to design a state-funded program of their choosing, the legislation does provide some guidelines for states electing to purchase food stamps for use in their own program.

 

Associated Federal Administrative Costs Are Not Significant

The total cost of the state purchase option can be split into three pieces: the benefit costs, the state administrative costs and the federal administrative costs. The benefit costs are determined by the benefit structure the state establishes when it creates its state-funded food assistance program. These costs are entirely at the discretion of the state.

State administrative costs are the costs the state incurs in operating the program. They include the time public assistance workers spend interviewing legal immigrant households and the time computing eligibility and benefits. The state would be responsible for these costs and could not charge them to the federal food stamp program as an administrative expense. These administrative costs would be similar to those the state incurs when it operates a state-funded cash assistance program such as General Assistance.

The federal administrative costs are those costs the federal government would incur were a state to elect the state purchase option. The most significant federal administrative cost is that of printing, shipping and redeeming the federal food stamp coupon or the related federal EBT expenses. USDA's guidance states that the Department will charge states 0.28 percent of the total benefit cost ($2,800 per $1 million worth of coupons) for federal administration. This means that if a state elects to operate the state purchase option for a program distributing $10 million annually, its annual federal administrative costs would be $28,000. While there are other related federal administrative costs such as data processing and personnel costs, USDA does not intend to charge states for these costs.

 

States May Want to Consider Moving Quickly to Elect this Option

This state purchase option is permanently available to all states, i.e, there is no legal deadline by which states must decide if they will elect the option or not. However, the welfare law terminates federal food stamp assistance to almost one million legal immigrants by August 1997. Among those losing benefits are children, elderly and disabled immigrants, low-income workers, and refugees who have been in the country for more than five years. These terminations are already being phased in and will soon be complete. Also, transitioning current recipients to a state-funded program will be cheaper, easier and more reliable than doing the work to cut them off and then take reapplications. If states wish to continue to provide food assistance to legal immigrants once the federal benefits are eliminated or if they wish to temporarily "cushion the blow" of the federal cuts, they will need to act quickly.

 

Conclusion

This new option for states to purchase food stamps provides states with a cost-effective means for providing targeted food assistance to low-income legal immigrants. Under the new federal law, states can assure that vulnerable low-income residents do not lose critical food assistance.


Pub. L. No. 105-18
June 12, 1997
(Supplemental Appropriations, HR1871)

STATE OPTION TO ISSUE FOOD STAMP BENEFITS TO CERTAIN INDIVIDUALS MADE INELIGIBLE BY WELFARE REFORM

(a) IN GENERAL Section 7 of the Food Stamp Act of 1977 (7 U.S.C. 2016) is amended

(1) in subsection (a), by inserting after "necessary, and" the following: "(except as provided in subsection (j)"; and

(2) by adding at the end the following:

''(j) STATE OPTION TO ISSUE BENEFITS TO CERTAIN INDIVIDUALS MADE INELIGIBLE BY WELFARE REFORM

''(1) IN GENERAL Notwithstanding any other provision of law, a State agency may, with the approval of the Secretary, issue benefits under this Act to an individual who is ineligible to participate in the food stamp program solely as a result of section 6(o)(2) of this Act or section 402 or 403 of the Personal Responsibility and Work Opportunity Reconciliation Act of 1996 (8 U.S.C. 1612 or 1613).

''(2) STATE PAYMENTS TO SECRETARY.

''(A) IN GENERAL. Not later than the date the State agency issues benefits to individuals under this subsection, the State agency shall pay the Secretary, in accordance with procedures established by the Secretary, an amount that is equal to

''(I) the value of the benefits; and

''(ii) the costs of printing, shipping, and redeeming coupons, and other Federal costs, incurred in providing the benefits, as determined by the Secretary.

''(B) CREDITING. Notwithstanding section 3302(b) of title 31, United States Code, payments received under subparagraph (A) shall be credited to the food stamp program appropriation account or the account from which the costs were drawn, as appropriate, for the fiscal year in which the payment is received.

''(3) REPORTING. To be eligible to issue benefits under this subsection, a State agency shall comply with reporting requirements established by the Secretary to carry out this subsection.

''(4) PLAN. To be eligible to issue benefits under this subsection, a State agency shall

''(A) submit a plan to the Secretary that describes the conditions and procedures under which the benefits will be issued, including eligibility standards, benefit levels, and the methodology the State agency will use to determine amounts due the Secretary under paragraph (2); and

''(B) obtain the approval of the Secretary for the plan.

''(5) VIOLATIONS. A sanction, disqualification, fine, or other penalty prescribed under Federal law (including sections 12 and 15) shall apply to a violation committed in connection with a coupon issued under this subsection.

''(6) INELIGIBILITY FOR ADMINISTRATIVE REIMBURSEMENT. Administrative and other costs incurred in issuing a benefit under this subsection shall not be eligible for Federal funding under this Act.

''(7) EXCLUSION FROM ENHANCED PAYMENT ACCURACY SYSTEMS. Section 16© shall not apply to benefits issued under this subsection."

(b) CONFORMING AMENDMENTS. Section 17(b)(1)(B)(iv) of the Food Stamp Act of 1977 (7 U.S.C. 2026(b)(1)(B)(iv)) is amended

(1) in subclause (V), by striking "or" at the end;

(2) in subclause (VI), by striking the period at the end and inserting "; or"; and

(3) by adding at the end the following:

"(VII) waives a provision of section 7(j).".


End Notes

1. The new legislation would also permit states to purchase food stamps from the federal government for use in a state-funded food assistance program for individuals subject to the three-month food stamp time limit.

2. There is one exception. Under the Balanced Budget Act, Cuban and Haitian Entrants as well as certain Amerasian immigrants will be treated as refugees for the purposes of food stamp eligibility. These immigrants, therefore, would be eligible to receive food stamps for their first five years in the United States.

3. The federal requirements differ for assistance provided with TANF funds, segregated TANF/state funds, and separate state funds. See HHS Policy Announcement No. TANF-ACF-PA-97-1, January 31, 1997; and Guyer, State Funding Requirements Under the New Welfare Law, Center on Budget and Policy Priorities, April 15, 1997.

4. States do not have to serve the families that meet the MOE requirements under a separate food assistance program in order to count the cost of assistance provided to them towards the state's MOE requirement. States can serve all legal immigrants under a state-funded food assistance program and then identify the assistance provided to these families for MOE reporting purposes.