SNAP Policy Choices That Could Cost States Billions

At Code for America, we believe that the safety net should be simple, accessible, and resilient. But anyone who has ever navigated the Supplemental Nutrition Assistance Program (SNAP)—either as a client trying to feed their family or as a caseworker trying to process a backlog of applications—knows that the current system is weighed down by complexity.

The One Big Beautiful Bill Act (OBBBA) adds more administrative complexity that could become a massive financial liability for state governments if they don’t implement changes well. OBBBA includes new cost-sharing provisions that make most states responsible for a portion of SNAP benefit costs. Previously, SNAP benefits were entirely federally funded.

Crucially, whether a state is required to cover some costs for SNAP benefits—and how much they owe—is tied directly to its Payment Error Rate (PER). A state’s PER assesses the accuracy of state benefit determinations—which involves reviewing a selection of a state’s SNAP cases and looking for differences between the benefits households were issued and the benefits they should have received. The PER is not a measure of fraud: SNAP policy is complicated, and errors can occur when the state agency or SNAP participants make mistakes in the eligibility process.

States with low error rates can avoid these cost shares entirely. But for the vast majority of states, their current error rates could trigger hundreds of millions—or even billions—of dollars in new state liabilities.

Because the SNAP quality control review process takes up to two years, the fiscal impact of policy decisions made today won’t be visible until it’s too late to reverse course. As state legislatures and agencies consider changes to SNAP policy, they must evaluate the implementation reality. Some policy changes are virtually certain to increase a state’s PER. If states want to protect their budgets, here are four steps they can take to avoid policy traps that will increase their errors.

Don’t choose “change reporting.” Use simplified reporting instead.

SNAP participants are often navigating the low-wage labor market, which is notorious for unpredictable hours and fluctuating schedules—which means clients’ incomes change too. States have a choice in how they track this. They can use “simplified reporting,” where clients only need to report major changes that push their income over the eligibility threshold. Or, they can mandate “change reporting,” requiring clients to report almost every minor fluctuation in their circumstances.

Change reporting is an administrative challenge. It floods caseworkers, who are already stretched thin, with a continuous stream of documentation that they may not have the capacity to process. Under federal rules, many reports of changes in income must be acted upon within 10 days—or else the state can be assessed a payment error. When overworked caseworkers miss these tight deadlines, or when clients fail to navigate the maze of reporting rules for a $130 shift differential, states that choose change reporting expose themselves to additional error risk by creating many more reportable changes.

Simplified reporting, by contrast, means those small changes aren’t required to be reported, so no error exists when they are not reported. By using simplified reporting, states can drastically reduce their exposure to errors related to small, temporary variations in income, freeing up caseworker capacity and protecting the state from millions in penalties.

Don’t impose asset tests

SNAP rules allow states to choose whether to impose asset tests on SNAP participants, limiting access for people who have liquid resources over a state-established threshold, including vehicles over a certain value. Asset limits can be shockingly low, sometimes capping cash-on-hand at $2,000 or vehicle values at $4,650. Tracking the exact value of a 15-year-old used car in a fluctuating market is incredibly difficult. Furthermore, if a family saves a little money for a security deposit on a better apartment, they might quietly cross an asset threshold.

When states impose asset tests, they aren’t just penalizing families for having a modest savings account—they’re introducing a massive liability for expensive errors. When a SNAP household is found to fail an asset test during a quality control review, the entire value of the household’s benefit is counted as an error. Because OBBBA’s penalties are calculated based on the total dollar amount of errors, errors like these disproportionately inflate a state’s PER, risking devastating financial penalties. States should waive asset tests to preserve their own budgets.

Don’t artificially limit discretionary exemptions

Under federal rules, adults up to age 64 without dependents who are not disabled (a group referred to as ABAWDs) are limited to just three months of SNAP every three years, unless they document 80 hours of work activities a month or have a qualifying exemption. OBBBA significantly expanded the population subject to these confusing, difficult-to-track rules. This complexity also makes ABAWD policy a significant source of potential errors.

Historically, states have been granted a limited number of discretionary exemptions to give grace periods to vulnerable clients, like those experiencing homelessness, or people making a good-faith effort to navigate the bureaucracy.  In addition to helping clients, the exemptions also provide agencies with a much-needed buffer during periods of natural disasters, major IT system transitions, or government shutdowns. 

Some legislatures are now looking to prohibit state agencies from using these discretionary exemptions. This is a profound mistake. From a systems perspective, these exemptions are a crucial shock absorber. Stripping agencies of this tool guarantees that the sheer complexity of ABAWD time limits will translate directly into higher payment errors.

Don’t continuously verify income for Medicaid. Instead, verify income when someone is up for renewal.

OBBBA also introduced new “community engagement” requirements for many Medicaid participants. Some states are considering using back-end data sources to continuously monitor Medicaid enrollees’ work participation every single month. In states where SNAP and Medicaid eligibility systems are integrated, this tracking can create significant new error liabilities. 

When the state IT system pulls continuous wage data for Medicaid, that information instantly becomes “known to SNAP.” Even if the SNAP client is on simplified reporting and wasn’t legally required to report that minor income change, the SNAP caseworker is now federally mandated to act on the system alert immediately. As a result, SNAP agencies face new error risks when they are unable to keep up with a significantly increased flow of new information.

Verification backlogs mean states can incur significant payment errors. To protect the state budget, integrated agencies should only conduct Medicaid verifications at standard renewal times, not continuously.

States should take an informed approach to limiting error rates

The mandate of OBBBA is clear: states are now on the hook for the cost of complexity. The new law introduced three thresholds for cost-sharing liabilities based on states’ Payment Error Rates. For states near a cutoff for one of those thresholds, small upticks in program errors can create hundreds of millions of dollars in new costs for state budgets. 

At Code for America, we know that policy is only as good as its implementation. State legislatures and SNAP agencies should be mindful of a reality populated by overworked caseworkers and vulnerable families. By embracing simplified reporting, waiving asset tests, protecting discretionary exemptions, and limiting Medicaid verifications to standard renewal times, policy makers can build a safety net that actually works—and save their states billions in the process. Good stewardship of state dollars doesn’t mean making the safety net harder to access; it means making it easier to administer.