EDITOR’S NOTE: As our state and nation continue to confront the COVID-19 pandemic, state fiscal and federal policies will play key roles in ensuring the physical and economic health of Nebraska and its residents. OpenSky Policy Institute staff will be continuously analyzing state and federal policies that impact Nebraskans during this national emergency. This analysis is part of that effort. You can access more of our pandemic-response policy analysis here. We also remind you that OpenSky staff are working remotely during the pandemic response. Remote contact information for staff members can be found here.
The Supplemental Nutrition Assistance Program (SNAP) not only helps more than 170,000 Nebraskans afford quality food, it also serves as an important economic stimulus tool, with studies showing that for every $1 of benefits redeemed, local economies see $1.70 in economic growth during a recession. In recognition of this, the federal government has recently given states increased flexibility in tailoring their programs to not only respond to increased need caused by the COVID-19 crisis, but also help states recover from the looming economic downturn. Nebraska has taken important steps toward maximizing this flexibility and ensuring more dollars are available to be spent at local businesses, but more could be done.
What is SNAP?
SNAP, formerly called Food Stamps, is a program providing nutritional support for low-wage working families, low-income seniors and people with disabilities living on fixed incomes, and other low-income families and individuals. The federal government pays the full cost of SNAP benefits and splits the cost of administering the program with states. In Fiscal Year 2019 (FY19), more than $220 million in SNAP benefits were issued to Nebraska residents at a cost to the state of $19 million in administrative expenses.[1]
How does SNAP work?
SNAP is intended to fill the gap between the cash a household has available to buy food and the cost of a “thrifty” food budget as set by the USDA.[2] A household with no income would receive the full cost of a thrifty food budget, known as the “maximum allotment.” As household income increases, the household is expected to contribute more of its own resources to food, and SNAP benefits decrease accordingly.
Who is eligible?
Under current state law, households without an elderly or disabled member must have monthly gross incomes — the amount they take home in pay before deductions — below 130% of the Federal Poverty Level, or $2,720 for a family of four, as well as net incomes — their gross income minus some statutory deductions[3] — below 100% of the FPL, or $2,092 a month for a family of four. They also can’t have more than $2,250 in liquid assets, such as cash or anything that could be readily sold for cash, excluding home value, retirement or educational savings accounts and a portion of a vehicle’s value.[4] Households with an elderly or disabled member must only meet the net income limit and have less than $3,250 in liquid assets. Households referred through the state’s Expanded Resource Program can have liquid assets up to $25,000.[5]
How does SNAP help businesses?
SNAP is an important public-private partnership that generates business for retailers and boosts local economies. In 2017, 1,276 retailers, ranging from farmers markets and butchers to national chains, redeemed roughly $246 million in benefits.[6]
In fact, every $1 in SNAP spending generates about $1.70 in economic activity during a weak economy, which the U.S. is currently entering.[7] This means the $246 million redeemed by retailers in 2017 would have generated $416 million in overall economic activity through what’s known as “multiplier effect.”
The multiplier effect works as follows: in an economic downturn, many households have less money to spend, causing business at local stores and restaurants to slow. These businesses then also have less money to spend, furthering the downturn. To weather the downturn, some households may enroll in SNAP, which gives them more money to spend at the local grocery store. Every dollar spent there helps the store recover. More revenue means the store can hire back staff, make improvements and purchase more food from farmers and distributors to meet increased demand. As the increased spending from SNAP flows through the economy, each sector receiving a share of that additional money is able to spend more money.
Because households are able to redeem their monthly SNAP benefits quickly, the program is one of the most effective forms of economic stimulus during an economic downturn.[8] In fact, a May 2019 study by the USDA looked at the impact of SNAP redemptions on county-level employment and found that, during the Great Recession, one job was created for every $10,000 in SNAP benefits redeemed within rural counties (the impact was smaller in metropolitan counties).[9] Further, because SNAP benefits can only be spent on food, money may be freed up for these households to spend on other goods and services at local businesses, helping them recover and raising sales tax revenue for state and local government entities.
Because the federal government pays the full cost of benefits, the more than $240 million in benefits redeemed in 2018 cost the state only $19 million in administrative expenses. That means for every $1 the state spent, Nebraska businesses received about $13 in SNAP redemptions.[10]
Nebraska streamlining processes, increasing benefits in response to health crisis
In recognition of SNAP’s ability to not only help families, but also local communities, the federal Families First Coronavirus Response Act has given the USDA and states broader flexibility in adapting SNAP to address food needs during the health crisis and concurrent economic shock.[11]
Nebraska has requested a number of waivers allowing it to streamline processes and reduce the risk of transmission for recipients,[12] such as allowing telephone interviews instead of face-to-face interviews for some purposes,[13] automatically renewing benefits for households whose benefits were set to expire in the next couple of months[14] and allowing benefits to be used for online grocery purchases.[15]
The state also recently joined 46 other states (as of April 10) that have used the flexibility allowed under the federal Families First Coronavirus Response Act to temporarily treat all households as though they have no income, thus allowing them to receive the maximum amount of SNAP benefits.[16] The state received approval April 7 and the first bump in benefits went out April 11, highlighting how quickly SNAP can put money into local economies. The Department of Health and Human Services estimates this provision will bring about $8.65 million per month into the state.[17]
Nebraska also applied for a waiver allowing schools to continue providing meals to some children who had been receiving free and reduced-price lunches.[18] However, the state has yet to give a temporary increase in benefits to those households whose schools aren’t participating or can’t otherwise access meals to offset the cost of providing them at home while schools are closed. Of the nine states to have applied for this type of waiver, known as “Pandemic EBT (P-EBT),” only Michigan had received approval as of April 10.[19] Applying for P-EBT could help increase the consumer spending power of SNAP households in Nebraska, which would help these residents as well as their local economies.
The state legislature could act to expand access even further
Under a policy known as “broad based categorical eligibility” (BBCE), states are given the choice of expanding categorical SNAP eligibility to households with incomes up to 200% of the FPL, or $4,292 a month for a family of four, with the federal government paying for the full cost of benefits issued.[20]
Nebraska is one of nine states to have kept the gross income limit at the minimum level of 130% of the FPL, or $2,720 a month for a family of four, while 17 others — including Colorado and North Dakota — have expanded all the way to the 200% FPL maximum, or $4,292 a month for a family of four.[21] The remaining 16 states have a gross income limit somewhere in between.
The Legislature could increase the gross income limit when it reconvenes, as provided in LB 255, which is on General File. That bill calls for a 10% increase in the income limit — taking it from 130% to 140% of the FPL — which was estimated to cost the state less than $150,000 a year and expand access to over 30,000 households.[22] The fiscal note shows that expanding SNAP income limits won’t significantly impact the state budget because it only has to pay half the increased administrative costs — the federal government still pays 100% of the benefits.
In light of the current crisis and need to ensure communities and businesses are supported as much as possible, now may be the time to join those 17 other states with gross income limits at the maximum level.
Conclusion
SNAP has proven to be a strong stimulus during economic downturns. With a recession on the horizon, we applaud the steps the administration has already taken to expand access and would encourage the legislature to consider expanding the program even further, as it would not only support households and local businesses that are suffering because of the current health crisis, but would do so with minimal cost to the state.
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