Convert Multiple Assistance Programs for Lower-Income People Into Smaller Block Grants to States

Background

There are sizable federal programs to assist people who have relatively low income. Those programs include the Supplemental Nutrition Assistance Program (SNAP) and a collection of child nutrition programs. Federal spending for SNAP and child nutrition programs in 2018 was $91 billion.

SNAP provides benefits to help low-income households buy food. Federal outlays for the program were $68 billion in 2018. Child nutrition programs subsidize meals provided to children at school, at child care centers, in after-school programs, and in other settings. In 2018, spending for those programs was $23 billion, most of it for the National School Lunch Program and the School Breakfast Program.

Option

This option would convert SNAP and the child nutrition programs to separate, smaller block grants to the states beginning in October 2019. The block grants would provide a set amount of funding to states each year, and states would be allowed to make significant changes to the structure of the programs.

The option would provide annual funding equal to federal outlays for each program in 2007 (the last full year before the most recent recession), increased to account for inflation in the cost of food since then. (The starting amounts would include outlays for both benefits and administrative costs and, for child nutrition programs, would represent total mandatory spending for that set of programs. Outlays for SNAP would be increased to account for inflation in the cost of food at home, and outlays for child nutrition would be increased to account for inflation in the cost of food away from home.)

Another alternative would convert SNAP and the child nutrition programs to block grants through which the federal government would provide funding to match state spending on those programs. The Congressional Budget Office has not analyzed that alternative here because its effects would depend on the amounts and conditions of the grants and on decisions by state governments, which are very difficult to predict.

Effects on the Budget

CBO's estimates of the budgetary effects of legislative proposals are measured relative to its baseline budget projections. As the rules governing those projections specify, CBO's baseline projections for SNAP reflect the assumption that the program will continue to be extended beyond its expiration at the end of 2018. Though most of the child nutrition programs are permanently authorized, authorization for some spending expired at the end of 2015 (including the authorizations for the Summer Food Service Program and state administrative expenses); that spending has been extended through annual appropriations. As with SNAP, CBO's baseline projections for the child nutrition programs reflect the assumption that the programs will continue to be extended.

In CBO's baseline projections, outlays for SNAP are projected to decline through 2022. Spending is projected to then increase between 2023 and 2028, reaching $70 billion in 2028, slightly higher than spending was in 2018. CBO projects that spending on SNAP would decline over the 2019-2022 period because the number of people receiving benefits would decrease as the economy improves. Despite a continued decline in the number of people receiving benefits between 2023 and 2028, CBO projects that spending would increase over that period because the increase in per-person benefits would more than offset the decline in the number of participants. In contrast, outlays for child nutrition programs are projected to increase through 2028, reaching $36 billion in that year, over 50 percent more than spending in 2018.

By CBO's estimates, setting annual funding amounts to equal the federal outlays for each program in 2007 (adjusted for inflation) would reduce spending on SNAP by $160 billion from 2020 through 2028—or by about a quarter of the spending projected in the baseline. For child nutrition programs, the reduction would be $88 billion, or about a third.

The budgetary effects of switching SNAP and child nutrition programs to block grants would depend heavily on the formulas used to set the amounts of the grants. If, instead of setting the inflation-adjusted value of the grants at the 2007 amounts, the grants were fixed in nominal dollars (as is, for example, the block grant for Temporary Assistance for Needy Families), savings would grow each year. By contrast, if the grants were indexed for both inflation and population growth—that is, if they were allowed to grow faster than specified in this option—savings would decline each year. Total savings would be less than those projected for this option if the change was phased in gradually instead of having spending immediately revert to the 2007 amounts (adjusted for inflation).

Although the formula used to set the amount of each separate block grant in this option is the same, the effects on spending would differ for each program. For SNAP, the estimated reduction in federal spending from converting to a block grant would decline through 2026, both in dollar terms and as a share of projected spending. In 2027 and 2028, the estimated savings would increase.

Those results occur because, under the option, spending on SNAP would increase throughout the 10-year period, whereas spending in the baseline declines through 2022; hence, the difference between the two would narrow during those first few years. From 2023 to 2026, when both spending in the baseline and projected spending under the option increase, the latter grows more rapidly than the former. That is because, in the baseline, participation is projected to continue to decline during those years, causing overall spending to increase more slowly than the rate of inflation (for the price of food at home) used to increase the grant funding under the option. As a result, savings under the option would continue to decline through 2026. After 2026, the projected savings would rise as the year-over-year decrease in participation in the baseline slowed.

For child nutrition programs, the reduction in federal spending from converting to the specified block grant would increase over time, both in dollar terms and as a share of projected spending under assumptions governing the baseline. The savings would be greater in later years because CBO expects participation in the programs toincrease. As a result, spending in the baseline grows faster than would spending under the option, in CBO's estimation.

Among the largest sources of uncertainty in the estimate of savings over the next 10 years are CBO's estimates of changes in the price of food at home (which is relevant for SNAP) and changes in the price of food away from home (which is relevant for the child nutrition programs). CBO's baseline projections of participation in SNAP and of the number of meals served through child nutrition programs are additional sources of uncertainty. Under the option, federal spending would not depend on participation in the programs. But because of the uncertainty regarding participation and the numbers of meals in CBO's baseline and the uncertainty regarding inflation in CBO's baseline and under the option, the savings from the option could be larger or smaller than those shown here.

The budgetary effects of a second alternative—which would convert SNAP and the child nutrition programs to block grants in which the federal government matched the amount states spent on those programs—would depend on how the block grants were specified. States would probably have substantial flexibility under such an alternative, and the budgetary effects would depend in large part on how states responded to that flexibility.

Other Effects

An argument for converting SNAP and the child nutrition programs to block grants is that state programs might better suit local needs and might be more innovative. States could define eligibility and administer benefits in ways that might better serve their populations. Moreover, allowing states to design their own programs would result in more experimentation, and some states could adopt approaches that had worked elsewhere.

Another argument for the option is that it would make spending by the federal government more predictable. The programs that this option affects must, under current law, make payments to eligible people. Therefore, spending automatically increases or decreases without any legislative action. For example, outlays for SNAP benefits more than doubled between 2007 and 2011, primarily because participation in the program increased (mainly because of deteriorating labor market conditions). And even if the number of participants in a program does not change, the benefits paid per person can change if the income of participants changes.

An argument against this option is that it would reduce federal support for lower-income people. Whom the cut in spending affected—and how it affected them—would depend on how states structured their programs and how state spending changed. But such a cut—amounting to about 30 percent of the projected mandatory spending on SNAP and child nutrition programs during those years—would almost certainly eliminate benefits for some people who would otherwise have received them, as well as significantly reduce the benefits of some people who remained in the programs.

Another argument against this option is that block grants would be less responsive to economic conditions than the current federal programs. The automatic changes in spending on benefits under current law help stabilize the economy, reducing the depth of recessions during economic downturns. Those stabilizing effects would no longer exist under the option. Furthermore, if federal spending did not increase during a future economic downturn and more people became eligible for benefits, states that could not increase their spending (at a time when their own revenues were probably declining) would have to reduce per-person benefits or tighten eligibility, perhaps adding to the hardship for families just when their need was greatest.