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The Ladder

A Blog from New America's Asset Building Program

New Report Shows Eliminating SNAP Asset Limit is a Bargain

Published:  April 20, 2012
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Asset limits are dumb. They're a barrier to the services that families need when hard times hit. They discourage building the savings families need to be financially stable. They add another layer of complexity to an already burdensome application process that cost states money to administer and can result in unnecessary errors.

So, how much would it cost to be rid of such a problematic policy? According to a report released yesterday by the number crunchers at the Congressional Budget Office, about $100 million a year.This amounts to about a tenth of a percent spending increase. At a time when states are bringing asset limits back for the stated purpose of targeting benefits to those families most in need and reducing costs, this report makes a couple of critical points that shed light on the credibility of those claims. 

First, the SNAP asset test performs poorly as a filter to target benefits. In the CBO report, the number of people projected to be impacted by the elimination of the asset test is indicated by an * because the numbers are so small. It's significant that the impact of the asset test on participation is so insignificant because it demonstrates how ineffectual the policy is. Not only would eliminating the test not open up the floodgate to new participants, imposing one similarly does not establish a barrier to keeping potential participants out. In Pennsylvania, for example, which will reinstate it's asset test (at $5,500) on May 1st, the Department of Public Welfare estimates that only about 2 percent of current beneficiaries will be impacted. Considering the average SNAP participant has only $333 in savings, assessing assets as an eligibility criteria is a practice with little pay off. 

Second, speaking of pay off, imposing a test that virtually everyone passes creates an unnecessary expense rather than reduces cost. Although the report estimates that this policy change will result in and additional $100 million in costs, most of it is likely due to the benefits paid to the * new participants and will be borne by the federal government. For states, SNAP is free money, and to claim that the asset test decreases their costs is demonstrably unsure. The only piece that states have to pitch in for SNAP is half of the administrative costs. If you guessed that requiring state employees to verify the savings of every person who applies would add to cost, you'd be right. According to the CBO report, "restricting eligibility for SNAP in that way (eliminating the mechanism that allows states to increase the asset test over the federal floor) would increase the time required to verify information on SNAP applications, which would probably result in more errors and greater administrative costs." States that have eliminated their asset test in other programs have actually reduced program costs.

As the report indicates, in addition to being expensive, asset tests are also complicated, which introduces more opportunity for errors. According to a 2007 GAO report, around two-thirds of payment errors in SNAP are due to caseworker mistakes in processing applicant information or applying program rules. And states have to pay for these errors. In 2009, for example, Texas owed the federal government $4 million for payment errors. It's worth noting that Texas still has an asset test.

Thanks CBO for one more log on the fire for the case against asset limits!



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