When many people think of the U.S. Department of Agriculture and Congress, they think of farm subsidies, conservation set-asides, and programs designed to promote American agriculture.
In fact, the majority of the current budget of the USDA is devoted to nutrition programs. This is something to keep in mind as the lame-duck Congress considers whether to pass a new Farm Bill in the closing weeks of 2012. In the fiscal year just ended, the USDA spent $85 billion on the Supplemental Nutrition Assistance Program (SNAP), formerly known as the food stamp program. Another $19 billion in the USDA budget went to school lunches and related child nutrition programs, and $7 billion went to nutritional benefits for women, infants and children (WIC). These three programs together absorbed nearly three-quarters of the total USDA budget of $145 billion.
In 2010, over 40 million U.S. citizens received benefits from SNAP. Of these, about 19 million were children, representing 47 percent of all SNAP participants and 26 percent of all children in the country. The SNAP program is based upon family income; children are the age group with the highest overall poverty rates.
These food programs were developed under the auspices of the USDA because they all have an impact upon demand for agricultural products and agricultural production. At the same time, the programs’ primary purpose is to help ensure that Americans get the nutrition they need to remain healthy.
The annual funding for SNAP funding for children, WIC and child nutrition programs exceeds $66 billion annually, more than 12 times as much as federal funding for welfare payments for families under the Temporary Assistance to Needy Families (TANF) program. These nutrition programs constitute one of the largest sources of support to low-income working families with children who struggle to make ends meet.
Current Status of Children and Food Hardship in America and the Impact of Federal Programs
Drawing upon census data, the National Center for Children in Poverty reports that 15 million children — 21 percent of all children — live in families with incomes below the poverty line ($23,050 per year for a family of four Further, a full 44 percent of children live in “low income” families — that is, families who live in families below 200 percent of the poverty level. This level is much closer to the definition of what it takes for families to meet the basic needs for their children and themselves.
Income is only one part of the story, however. In 2010, the Food Research and Action Center determined that 50 million Americans — and 19 million children — lived in “food insecure households,” households that at some point during the year were unable to provide adequate food for an active and healthy life. Without SNAP benefits, WIC and child nutrition programs, many more children would live in such households.
The Structure of SNAP Benefits and Categorical Eligibility 
SNAP is a means-tested program. Unless states take action to the contrary, eligible families must have gross incomes less than 130 percent of poverty (seniors are exempt from the gross income eligibility limit). They also must have net incomes less than 100 percent of poverty. There also are certain limits on assets. The federal government pays the full costs of SNAP benefits, while states share costs with the federal government in administering the program.
Under this two-level federal means-test, a family of four with total (gross) earnings just below 130 percent of poverty receives $115 in SNAP benefits monthly (and somewhat more if it has high child care, health care, or other expenses) but loses all its SNAP benefits if its gross income goes $1 above 130 percent of poverty. This is known as a “cliff effect” in a means-tested program, where a small increase in income can make families far worse off as the loss of supports exceeds the gain in earned income. A family of four with total earnings at 130 percent of poverty makes about $2,500 monthly, so the $115 in SNAP benefits can be the difference between being adequately nourished or going hungry.
Iowa’s Use of Categorical Eligibility
Federal law allows states to set a gross income eligibility limit higher than 130 percent of poverty or to raise or eliminate the asset limitation requirement. This option is known as “categorical eligibility.” In 2008, Iowa lawmakers took advantage of this option to expand the gross income eligibility to 160 percent of poverty and eliminate the assets test for SNAP benefits.
Iowa is one of 20 states that have taken advantage of categorical eligibility and this has contributed to the state’s low level of food insecurity (19.5 percent compared with 21.5 percent nationally). According to the most recent report from the Iowa Department of Human Services, 15,000 children are among the 34,000 Iowans benefiting from these changes
The change to categorical eligibility in Iowa also eliminates the cliff effect. Food stamp benefits gradually decline as family income increases above the poverty level instead of dropping precipitously. SNAP benefits for a family with no special, allowable expenses are $115 at 130 percent of poverty, $46 at 145 percent and zero at 160 percent.
One of the major special, allowable expenses a family may have is child care costs. If a family has $400 per month in child care expenses, its SNAP benefits are consequently higher. That family is eligible for $136 in SNAP benefits at 145 percent of the poverty level. There is still a small “cliff” when the family gets above 160 percent of the federal poverty level, but it much lower than what the family would experience at 130 percent of the poverty level without categorical eligibility.
Federal Action on the Farm Bill and Nutrition Programs
In mid-June 2012, the U.S. Senate passed its version of the five-year Farm Bill — known this time as the “Agriculture Reform, Food and Jobs Act.” The House Agriculture Committee passed its version a few weeks later. Both bills included very significant reductions in government spending. The Senate bill cut nutrition programs by $4 billion, while the House bill cut them four times as much, by just over $16 billion. Most of this difference lies in the elimination of the option for states (like Iowa) to set categorical eligibility, estimated at $10 billion.
The Implications of Eliminating Categorical Eligibility to Iowa Children and Families
The Congressional Budget Office estimates that the changes to categorical eligibility in the House Farm Bill would cut off SNAP benefits to roughly 1.8 million Americans, including the 15,000 children and 18,000 adults in Iowa who currently benefit from the state’s choice to proceed with categorical eligibility.
Members of both parties have committed to reducing the federal deficit. Eliminating categorical eligibility, however, as this report shows, will have real — and adverse — consequences for Iowa children and families. It will re-impose a “cliff effect” that serves as a barrier to struggling families who are seeking to get by and get ahead, and that defies the concept of making work pay.
Logically, Congress, rather than eliminating the categorical eligibility option, should increase categorical eligibility at the federal level. It certainly shouldn’t penalize states like Iowa that have taken the common sense approach to provide a sliding scale SNAP benefit program.
Michael Bruner is a 2012 Research Fellow at the Child & Family Policy Center.