The Food Stamp Program After Welfare Reform

Family Economics and Nutrition Review, Winter, 1999

The Personal Responsibility and Work Opportunity Reconciliation Act of 1996 (PRWORA) dramatically changed Federal welfare policy. The Act eliminated the entitlement program Aid to Families with Dependent Children (AFDC), replacing it with a fixed block grant that gave States the fundamental role of helping poor families and that added new work requirements for recipients. PRWORA ended eligibility for many aliens and placed time limits on benefits for able-bodied, childless adults. The Congressional Budget Office estimated the savings to the Federal Government to be $54.2 billion through 2002.

About half of the expenditure cuts directly affect food stamps, now the only Federal entitlement, except for Medicaid, available to all low-income households. Lower transfer payments lead low-income households to reduce their food expenditures, change the types of food consumed, and reduce their expenditures on other goods. Lower food expenditures and changing patterns of food consumption, particularly for children, may have significant effects on nutrition and long-term consequences for cognitive development, medical outlays, and productivity losses.

This study focuses on three interrelated economic phenomena: the implications of decreasing food stamp benefits on food production and consumption and the general economy; the effect of changes in the macroeconomic environment on poverty, Food Stamp Program participation, and budget outlays for food stamps; and the potential for State governments to shift the burden of supporting the poor to the Food Stamp Program, thereby putting greater emphasis on the Food Stamp Program as a social safety net.

The Food Stamp Program

Federal spending on food stamps has traditionally exceeded Federal expenditures on both AFDC and housing assistance programs. The Federal Government funds the benefits under the Food Stamp Program but shares costs to administer the program with State and local governments.

To participate in the Food Stamp Program, households must meet eligibility requirements based on citizenship, income, and asset ownership. Gross monthly income of most households cannot exceed 130 percent of the Federal poverty guidelines, which, in 1998, defined the poverty threshold for a family of three (single parent and two children) as $1,445 per month. Another eligibility requirement states that households may have no more than $2,000 in assets ($3,000 if at least one member of the household is age 60 or older). The home, however, is not counted as an asset.

The maximum value of food stamps a household receives varies by household size and is adjusted annually for changes in the cost of the Thrifty Food Plan. Because households are assumed to spend about 30 percent of their income on food, a household's food stamp allotment is equal to the maximum allotment for that household's size, minus 30 percent of the household's net income. In 1996 the average food stamp household received a monthly food stamp benefit of $174 and had an average of 2.5 people in the household.

The characteristics of households receiving food stamps vary. In 1996, 60 percent of food stamp households had children, 20 percent had disabled persons, and 16 percent had elderly persons. About 60 percent of the children were school-age, and over two-thirds of the adults were women. Over 90 percent of the food stamp households lived in poverty, and most food stamp households with children were headed by a single parent receiving support from TANF--Temporary Assistance to Needy Families Program.(1) About one-quarter of food stamp households had earned income.

For the average food stamp household headed by a single female with two children, food stamps accounted for about 25 percent of the family's household resources. If the nominal dollar value of food stamp benefits is added to income, the distribution of poverty status among food stamp recipients differs significantly (table).

Effect of food stamp benefits on poverty, 1995

  Distribution of household income relative to poverty threshold

Gross income as a                     Food stamps
percentage of the       Without        included       Percent
poverty threshold     food stamps      as income       change

<50%                      42              19            -23
50-100%                   50              66             16
>100%                      9              15              6

Source: U.S. Department of Agriculture, 1998.

PRWORA stipulated that by 1997, 25 percent of the single-parent families receiving TANF benefits must work at least 20 hours a week, and, by 2002, 50 percent must work at least 30 hours a week. For two-parent families, 90 percent must work a combined 35 hours a week by 1999. If States do not meet these requirements, their grant from the Federal Government will be cut each year--providing States with an impetus to move families into the workplace and off welfare. Under TANF, recipient families can receive benefits funded by Federal monies for a lifetime total of only 5 years. PRWORA cut more funds from the Food Stamp Program than any other program: through reductions in household benefits and restrictions in eligibility. Expenditures for the Food Stamp Program are projected to decline by about $22 billion between 1997 and 2002. However, because the Food Stamp Program was not placed under block-granting authority, the program's entitlement status was retained and the national nutritional safety net was preserved.