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The US Department of Agriculture (USDA) announced a proposed rule to modernize how utility costs affect low-income households’ eligibility and benefit amounts for the Supplemental Nutrition Assistance Program (SNAP), the country’s main food assistance program. SNAP provided more than $60 billion of assistance to 39.7 million individuals in 2018 and benefits are federally funded, although states share in the cost of program administration.
Federal standards for SNAP permit state agencies to deduct shelter costs from a household’s gross income when determining SNAP eligibility and benefit amount, including deductions for the cost of utilities. States can simplify the process of utility deductions by establishing standard utility allowances (SUAs), which set a standard deduction regardless of a household’s actual utility costs. Without specific guidance from the federal government on how to set SUAs, states currently use different methodologies. This means that in some states the SUA can be much higher than actual average household utility costs, while in others it might be much lower. This affects SNAP eligibility and benefit amounts depending on where one lives.
Source: FNS, USDA, “Standard Utility Allowances: FY2019 SNAP SUA”
Addressing inequities in SUAs is an important policy goal, as these allowances exhibit variation independent of actual low-income household utility costs. As the Department of Agriculture noted in announcing the new proposed rule, “Differences in SNAP utility allowances mean that similar households living a few miles apart across states lines could receive significantly different benefit amounts. The reform proposal replaces state variations in calculations for SUAs with a modernized, uniform approach based on data from national surveys on households’ actual utility costs by state, and adds basic internet access as an allowable utility.”
The Obama administration in 2012 proposed studying the development of “alternative methods for standardizing the development of Standard Utility Allowances (SUA) across the States,” which it suggested “could be used to improve and simplify State and Federal program administration.” A 2017 report prepared for USDA noted that “A major finding of the research effort is that average utility expenses for low income households are considerably lower than the SUAs currently being used by the states.” This is because the calculation of SUAs often does not take into consideration whether the actual cost of utility expenses for households receiving SNAP are covered by other government programs, such as the Low-Income Home Energy Assistance Program (LIHEAP) or Lifeline program, which provide assistance with utility costs. The implication of higher SUAs than actual costs is that some households receive larger benefits than they otherwise should.
The USDA proposed rule will standardize how states set the SUA and more accurately reflect actual utility costs for low-income households. According to the USDA, the new SUA methodology is expected to modestly increase benefits for 16 percent of SNAP households while reducing benefits for 19 percent of SNAP households. Currently, most states mandate the use of SUAs, but they have the option of allowing households to show their actual utility costs if a state is concerned that the SUA is set too low for some households. This means that if a household is set to lose SNAP benefits under the proposed rule, but has actual utility costs that support a higher benefit, the state can consider their actual costs in calculating their benefit.
The intent of this proposed change is a good one — to ensure expenses like utility costs are accurately reflected in determining benefit eligibility and amounts. It will better target benefits to those most in need regardless of what state they live in and ensure public dollars are spent appropriately. A notable concern, however, are the households that will lose SNAP benefits under the proposed rule through no fault of their own. The USDA should consider phasing in any benefit reductions or “grandfathering” existing SUAs for current benefit recipients.
This follows on a similar effort by USDA to better ensure that SNAP benefit terms are used to determine program eligibility (by closing the so-called “broad-based categorical eligibility” loophole). That loophole has allowed millions of individuals to gain access to SNAP benefits despite having income or savings that are greater than program terms would otherwise allow. SNAP receipt gradually declined in recent years as the economy recovered. But even with these changes and continued recovery, SNAP benefit receipt is expected to remain significantly above levels prior to the start of the great recession in 2007. Efforts to ensure benefits are administered appropriately are important for the integrity and long-term support of SNAP.
If a household is set to lose SNAP under the proposed rule but has utility costs that support a higher benefit, the state can consider actual costs.
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