Food stamp inflation adjustment lags, resulting in inadequate benefits

by Dorothy Rosenbaum

Rosenbaum is a Senior Policy Analyst with the Center on Budget and Policy Priorities specializing in food stamp issues. This article first appeared on the CBPP website and may be viewed at http://www.cbpp.org/7-22-08fa.htm.

(July 23, 2008) The economic slowdown has coincided with a sharp increase in food prices, which has exacerbated hardship for many low-income families also facing high gas prices (and by the fall and winter, very high home heating bills). Unfortunately, during periods of rapid food inflation, the Food Stamp Program’s current rules do not ensure that needy families and individuals receive sufficient support to obtain a nutritionally adequate diet.

Food stamp benefits are adjusted annually for food price inflation, but the adjustment is based on lagged data that are four months old at the beginning of the fiscal year and 15 months out of date by the end of the fiscal year.

Food stamp benefits for each fiscal year are based on the cost of the “Thrifty Food Plan,” the Department of Agriculture’s lowest-cost nutritionally adequate diet plan, in June of the prior fiscal year.1

As a result, in every month of fiscal year 2008, as food prices have climbed, food stamp benefits have been inadequate to enable households to purchase the Thrifty Food Plan. By June 2008, the latest month for which USDA estimates are available, the cost of food had increased 8.5 percent since the previous June, and food stamp benefits were $46 a month below the cost of the Thrifty Food Plan for a family of four. (The maximum food stamp benefit for a family of four with no other income available for food purchases was $542 a month, while the monthly cost of the Thrifty Food Plan stood at $588.30). 2

Food stamp benefits will be adjusted on October 2008 to reflect food inflation for the June 2007 to June 2008 period. This increase will be 8.5 percent, a significant adjustment to reflect increased food costs over the June-to-June period. But when fiscal year 2009 starts this October, food stamp benefits will again already be four months out of date and will grow more out of date as the year progresses.

Even if food inflation is only half as high next year is it was this year, by Christmas food stamp benefits will fall about $10 behind the monthly cost of USDA’s Thrifty Food Plan for a family of four, and by the spring, a family of four’s benefits will fall more than $20 short. If food inflation next year equals this year’s levels, the shortfalls will be twice as large.

The food stamp improvements included in the recently enacted farm bill will help to provide some relief: about half of all food stamp recipients will receive about $1 to $5 a month in additional benefits in 2009 as a result of it. (The farm bill’s food stamp improvements become more significant over time.) But the farm bill’s improvements will not address the increased cost of food over the fiscal year if food inflation proves to be high again next year and will not help many of the poorest families who struggle the most to afford sufficient food.

Congress could address this problem for the coming fiscal year by anticipating the food price inflation that will occur and acting to offset some of it so assistance to needy families and elderly individuals does not again fall short of what is needed to purchase a minimally adequate diet. For example, for fiscal year 2009, food stamp benefits could be set at a level higher than the amount that otherwise is scheduled to take effect — that is, the benefits could be set several percentage points above June 2008 food costs so that as food prices rise over the course of the coming fiscal year, food stamp benefits will be adequate to meet them.

The approach would be consistent with the way that food stamps were regularly adjusted for food price inflation for many years prior to 1996. Until 1996, federal law set food stamp benefit levels for a given fiscal year at 103 percent of the cost of the Thrifty Food Plan in the previous June. Congress set the benefits at this level to compensate for the lag in data on food prices and thereby to try to ensure that food stamp households would have the resources to secure adequate food over the course of the year.

End Notes:

1. In calculating households’ food stamp benefit levels, program rules assume that households will pay 30 percent of their net income toward food purchases.

2. For USDA estimates of the monthly cost of the Thrifty Food Plan, see: http://www.cnpp.usda.gov/USDAFoodCost-Home.htm. Food stamp benefits are based on the cost of the Thrifty Food Plan for a family of four with children 6-9 and 9-11 years old. USDA makes adjustments for household size and for higher food prices in Alaska, Hawaii, Guam, and the Virgin Islands. For food stamp maximum benefit amounts, see http://www.fns.usda.gov/fsp/government/cola.htm. For information on the Thrifty Food Plan itself, see U.S. Department of Agriculture, Center for Nutrition Policy and Promotion, “Thrifty Food Plan, 2006,” April 2007, available at http://www.cnpp.usda.gov/Publications/FoodPlans/MiscPubs/TFP2006Report.pdf.

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