The House of Representatives will reportedly consider a budget resolution to initiate the budget reconciliation process by instructing certain committees to produce legislative recommendations.
The House Agriculture Committee should make addressing waste, fraud, and abuse in federal nutrition programs a top priority in responding to its reconciliation instruction.
Of particular concern is the Food Stamp program, which is rife with improper payments. The U.S. Department of Agriculture (USDA) recently reported a 10.62% Food Stamp payment error for FY 2025, equivalent to about $10.1 billion. The Government Accountability Office (GAO) ranks Food Stamps as having the fourth highest level of improper payments of any program, trailing only Medicare, Medicaid, and the Earned Income Tax Credit (EITC).
Common-Sense Policy Reforms to Reduce Food Stamp Fraud
Food Stamp improper payments are likely significantly higher than the officially reported amounts, due to the “error tolerance threshold,” which was originally created via regulation by the Carter Administration’s USDA. This policy instructs USDA to ignore improper payments up to its limit, which has been adjusted several times. After a temporary increase from $25 to $50 provided by President Barack Obama’s 2009 stimulus expired, the Obama Administration increased it back to $50 by executive action in 2012.
The 2014 Farm Bill initially set the threshold at $37, automatically indexed for inflation each year. The error tolerance threshold was $57 in FY 2025. Therefore, any payment error of $57 or less was excluded from the official FY 2025 payment error-rate calculation.
The Snap Back Inaccurate SNAP Payments Act, introduced by Rep. Randy Feenstra (R-IA) and Sen. Joni Ernst (R-IA), would clarify that all improper payments must be counted as errors in the official data.
Counting all Food Stamp fraud by eliminating the error tolerance threshold would have a substantial budgetary impact, thanks to the state cost share requirement that is based on official error rates established by the One Big Beautiful Bill Act (OBBBA). As true error rates are calculated, more states would be required to pay higher cost shares compared to the current system that tolerates errors. Based on current state error rates, most states would have a true error rate above 10% and be subject to a 15% cost share.
Unfortunately, due to a quirk in the OBBBA, in the near term, higher reported rates could make several states newly eligible for an implementation delay of the cost-share requirement, as explained further below. Over the longer term, the savings would sufficiently outweigh these modest short-term costs. I estimate that net total savings could be about $5 billion over the next decade.
Strengthen the State Cost Share Based on Payment Errors
The One Big Beautiful Bill Act requires states with error rates at or above 6% to pay a small share of the cost of Food Stamp benefits.
A state cost-sharing requirement does not reduce or change the federal Food Stamp benefit formula. It simply requires the states, which administer the program, to begin paying their fair share and provides an important incentive to address widespread waste, fraud, and abuse.
The state cost share begins in FY 2028 and is set on a sliding scale based on the reported payment error rate.
Food Stamp State Matching Rates Based on Payment Error Rates | |||||||
Payment Error Rate | House-Passed Bill | Final OBBBA | |||||
Below 6% | 5% | None | |||||
6% to 8% | 15% | 5% | |||||
8% to 10% | 20% | 10% | |||||
10% or higher* | 25% | 15%* | |||||
* Under the enacted OBBBA, states with error rates above 13.33% in FY 2025 have the cost share delayed to FY 2029; if a state crosses that threshold in FY 2026, the cost share is delayed until 2030. In 2031 and beyond, all states with error rates above 10% will be subject to a 15% cost share. | |||||||
The original House-passed version of the OBBBA included a much stronger version of the state matching requirement, which required all states to provide skin in the game.
The Congressional Budget Office (CBO) estimated that the House-passed state matching funds provision would have saved taxpayers $128.3 billion over the FY 2025–2034 period. The final enacted provision was estimated to save $40.8 billion.
Extrapolating the cost estimates to account for the current FY 2027–2036 budget window, implementing the stronger state matching requirement that was passed by the House would save taxpayers about $113 billion.
End the Incentive for Higher Payment Error Rates
Unfortunately, a last-minute change significantly undercut the state cost share and actually incentivizes states to increase their error rates.
This provision delays implementation of the state cost share for the states with the worst payment error rates. For states with an error rate of 13.33% or greater in FY 2025, no cost share is required until FY 2029. States whose error rates exceed 13.33% in FY 2026 do not pay a cost share until FY 2030.
This provision perversely incentivizes states to tolerate higher Food Stamp payment errors and provides a federally financed reward to the most irresponsible states. Some states are reportedly intentionally gaming the system to avoid paying their fair share:
- New Mexico halted planned implementation of error reduction initiatives in an effort to keep the state’s error rate high.
- A whistleblower in Maryland alleged that officials planned to “leave correctable errors uncorrected” to preserve or increase the error rate.
Eliminating the carve-out for the high-error states could save federal taxpayers about $4 billion; these savings would be realized in FY 2028 and FY 2029.
Eliminate the Legalized Fraud of “Categorical Eligibility”
Millions of Food Stamp recipients do not meet the program’s own statutory income and asset limit rules.
The policy of categorical eligibility allows households to automatically qualify for Food Stamp benefits if they also receive benefits from certain other welfare programs. Broad-based categorical eligibility (BBCE) can even allow qualification based on a nominal benefit, such as an informational pamphlet or access to an 800 number.
Under these regulations, states can bypass federal Food Stamp eligibility rules by waiving the asset test, waiving the net income test, and increasing the gross income limit to 200% of the federal poverty level (from 130% of FPL). Even millionaires can qualify for Food Stamps thanks to the categorical eligibility loophole.
Categorical eligibility should be considered legalized fraud because it spends billions of taxpayer dollars on people who are not even supposed to qualify for Food Stamp benefits under the federal eligibility guidelines. Categorical eligibility is also a contributor to the Food Stamp improper payment problem. An analysis by the Foundation for Government Accountability found that “BBCE households make up 82 percent of all payment errors.”
The FGA has estimated that fully eliminating BBCE would save about $100 billion over the next decade. A more modest regulatory proposal that would have curtailed BBCE by requiring welfare benefits of $50 per month to automatically also qualify for Food Stamps was estimated by USDA to save about $10 billion over a five year period.
Reconciliation Should Address Waste, Fraud, and Abuse
Waste, fraud, and abuse remain top concerns for taxpayers across the country. The federal government reported $186 billion in improper payments in FY 2025, and the true amount of wasted federal funds is likely much higher. Congress should use the reconciliation process to enact meaningful reforms that strengthen program integrity, hold states accountable, and protect taxpayers.