Georgia report finds steps Congress should take to SNAP ‘benefits cliffs’

by Erik Randolph | Nov 28, 2023

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Georgia report finds steps Congress should take to SNAP ‘benefits cliffs’

Design flaws in the federal food stamp program hinder recipients’ upward economic mobility and effectively force them into governmental dependency.

That’s the upshot of a new Georgia Center for Opportunity report exploring possible solutions for addressing the benefits cliffs in safety-net programs like the Supplemental Nutrition Assistance Program.

Erik Randolph, GCO’s research director, told The Center Square that the report — “Solving the Food Assistance (SNAP) Benefits Cliffs” — identified several steps federal authorities can take to ensure that SNAP functions as safety net programs should. In doing so, the federal government can eliminate SNAP benefit cliffs without spending more money.

“The very basic concept is that when you lose more in taxes and benefits than you receive from a gain in additional earnings, that’s how we’re defining a cliff,” Randolph said. “Let’s say that you get a pay raise worth $2,000, but you actually lose $3,000, you’re $1,000 behind; you’re worse off financially than what you were.

“The trade-off is that you can accept the pay raise but end up with less money,” Randolph added. “If someone’s acting in a rational manner, why would they do that? But in the long term, it’s going to harm them because it’s going to reduce their economic mobility. So, the system shouldn’t have that as part of it. It should be a hand up and not a handout that prevents you from making the right decision or that’s encouraging you to make the wrong decision.”

Read the full article here

Missouri is first state to pass law addressing benefits cliffs

by David Bass | Nov 15, 2023

Missouri lawmakers<br />
Senate Bill 82<br />
public assistance provisions<br />
benefits cliffs<br />
Temporary Assistance for Needy Families (TANF)<br />
Supplemental Nutrition Assistance Program (SNAP)<br />
child care subsidy programs<br />
transitional benefits program<br />
poverty level<br />
state median family income<br />
welfare programs<br />
fiscal note<br />
Medicaid<br />
self-sufficiency<br />
workforce solutions<br />
government assistance<br />
economic opportunity<br />
dependence on the government<br />
benefits cliff phenomenon<br />
social and economic opportunity

Missouri is first state to pass law addressing benefits cliffs

Key Points

Missouri Leads the Way: The enactment of Senate Bill 82 establishes Missouri as the first state in the nation to address public assistance provisions, breaking ground in reforming safety-net benefits and combating the cycle of dependence on government support.
Benefits Cliff Challenge: The legislation acknowledges the pervasive issue of benefits cliffs, where individuals and families face a sudden loss of government assistance as their income increases. The law aims to mitigate this challenge by introducing transitional benefits programs in TANF, SNAP, and childcare subsidy programs.
Incomplete Solution: While the Missouri law is a commendable first step, there are concerns about its comprehensive effectiveness. The legislation, utilizing new funds, creates a supplemental program to ease the loss of benefits but doesn’t address underlying program variables contributing to benefits cliffs. Additionally, potential underfunding and the absence of Medicaid in the scope raise questions about the long-term sustainability and impact of the solution.

Missouri lawmakers recently took an important step toward helping poor and working-class residents escape safety-net benefits cliffs and experience the dignity and opportunity of work. By enacting Senate Bill 82, the Show Me State is now the first in the nation to address public assistance provisions that often entrap program participants by punishing work and perpetuating dependence on the government.

It’s no secret that many Americans rely on government assistance programs to make ends meet. But they often get caught in a Catch-22 situation—a benefits cliff—which disincentivizes them from looking for more meaningful work and gaining independence.

These benefits cliffs occur when an individual, family, or household experiences a sudden, steep loss of government assistance as income increases. Perversely, this net loss undermines the natural desire to earn more income because it takes a huge pay bump to overcome the cliff. The unintended consequences of a benefits cliff can be devastating—trapping individuals and families in a cycle of poverty.

How the new law works

This new Missouri law modifies benefits cliffs to enable residents to more easily earn additional income and experience the fulfillment and belonging that comes with social and economic opportunity. It does so by easing the loss of benefits in the Temporary Assistance for Needy Families (TANF), Supplemental Nutrition Assistance Program (SNAP) and child care subsidy programs for families that lose income eligibility for these programs.

Specifically, this law establishes a transitional benefits program for TANF and SNAP—subject to funding from the state legislature—to help the transition off of benefits and reduce the impact of the program cliffs. The benefit is stepped down on a one-to-one basis as income increases.

It also helps to alleviate the loss of benefits from the child care subsidy program by creating a transitional benefits program using a sliding scale that steps down transitional benefits until the household reaches 300 percent of the poverty level or 85 percent of the state median family income.

When funded and implemented, this law will positively impact all individuals and families on the SNAP and childcare subsidy programs whose income exceeds program limits—but remain under income limits for the transitional benefits. It would not, however, impact TANF recipients because the program’s cash assistance tampers to zero, which means there would be no transitional benefits.

And building upon the foundation laid in Missouri, other states should similarly experiment with creative solutions to the cliffs problem.

The next step

While the new Missouri law is a commendable first step by a state to correct design flaws in benefit cliffs, there is still more work to do. For example, this legislation fails to address the variables in each program that drive the benefits cliff phenomenon in the first place. Instead, it uses new money to create a bridge that eases the loss of benefits when coming off designated programs.

Precisely because it uses new money, this solution represents a potentially huge and expensive expansion of welfare programs in Missouri. Indeed, the fiscal note accompanying the legislation estimates a cost of around $200 million per year in state revenue.

So rather than a comprehensive and holistic resolution to the benefits cliff problem, this new law essentially creates a supplemental program at risk of being underfunded in years when the legislature fails to fully fund at levels to meet demand—creating challenges for state agencies charged with program implementation. Moreover, the law doesn’t address Medicaid at all—the biggest driver of benefit cliffs in terms of dollar impact to families.

Despite these limitations, this new law recognizes that benefits cliffs are a real problem in need of a solution. And it attempts to address design flaws in two of the biggest-offending programs—SNAP and childcare. Finally, it recognizes the need to step down benefits in ways that eliminate cliffs as people earn additional income and learn to stand on their own with increasingly less dependence on the government.

In tackling the challenge of benefits cliffs, Missouri lawmakers have set the bar for other states to consider solutions to welfare systems that prevent people from becoming self-sufficient by holding them back from working as much as they could or should.

And building upon the foundation laid in Missouri, other states should similarly experiment with creative solutions to the cliffs problem. This includes waivers and other steps to address systemic program flaws. It also includes pilot projects to demonstrate how to eliminate cliffs with a net positive impact on those who work more, earn additional income and become self-sufficient faster than would otherwise be possible.

Solving the food stamp benefits cliffs

by David Bass | Oct 26, 2023

Solving the food stamp benefits cliffs

Many Americans rely on SNAP benefits to afford food, but these same individuals and families face a trap that keeps them mired in dependency. It’s called the SNAP benefits cliff. A new report from the Georgia Center for Opportunity analyzes some possible solutions for addressing the benefits cliffs still present in safety-net programs like SNAP.

What are benefits cliffs?

A benefits cliff is when an individual, family, or household loses more in net income and benefits from governmental assistance programs than it gains from additional earnings. This net loss is a perverse incentive that undermines the natural desire to earn more income.

At an individual level—or in the case of SNAP, at a household level—the impact has to do with the ability of the individual or household to overcome the cliff. If the household can increase its earnings (and other income) sufficiently relative to the loss in benefits and taxes, the cliff will have no impact on that specific individual or household.

Who is hurt the most by benefits cliffs?

Our computational analysis shows that it is mathematically possible for some one-member households, where the individual is disabled or elderly, to overcome a benefits cliff with a pay raise of less than 5%. However, almost all other households will require percentage income increases in the double digits or worse.

Larger families, especially those without elderly or disabled members of the household, fare much worse. For example, a family of four (where a single mom is raising three kids, for example) would require a pay raise of between 37% and 121%, assuming the family doesn’t have housing costs. For larger households with disabled or elderly members, that pay raise ranged from 30% to 109%.

Access the Report:

SOLVING THE FOOD ASSISTANCE (SNAP) BENEFITS CLIFFS

Our comprehensive report on the SNAP Benefits Cliffs outlines the pitfalls in the current structure of the program and steps that can be made at a federal, state, and agency level.

Learn More About This Report

Running the numbers: the impact of benefits cliffs

A family of four would begin experiencing SNAP benefits cliffs when their household income exceeds $36,084. This family would lose around $462.42 in SNAP benefits each month. To overcome those lost benefits, that same family would need to earn $58,280 a year, a 61.5 percent increase in income.

What is the marriage penalty?

Another example of benefits cliffs’ detrimental impacts lies in the marriage penalty. For instance, a couple choosing to marry would leave them worse off financially by getting married than by staying single. Instead, many couples decide to remain unmarried to avoid the financial burden of the marriage penalty.

SNAP benefits cliffs are at a 20-year high

During the COVID-19 pandemic, the SNAP maximum allotments were raised significantly—between 45% and 51%. The Thrifty Food Plan was recalculated by the USDA, which impacted these increases. However, SNAP’s current benefits cliffs are at a 20-year high and may be the highest they’ve ever been.

The situation is getting worse

Setting aside COVID-19 and the emergency allotment program, SNAP benefits cliffs are getting worse and, based on twenty years of data, have never been higher. This was not always the trend. The benefits cliffs cycled up to a high in 2009, slowly came down, and then leveled off for a few years. However, since the pandemic, they have all shot up to record highs.

Policy goals for improvement

We recommend approaching change from a policy perspective, and engaging Congress and the states to solve the problems with SNAP’s benefits cliffs.

As a public policy goal, it would make sense to design a safety-net assistance program in such a manner that it minimizes potential cliffs for most cases. We believe that it should be relatively easy for individuals and households to overcome benefits cliffs by earning additional income.

Our recommendations include:

Limiting how long future emergency allotment programs last
Requiring the USDA to recalculate the Thrifty Food Plan
Permanently eliminating benefits cliffs that a typical pay raise can’t mitigate
Implementing strategies to prevent marriage penalties
Amending U.S. code to test potential solutions via demonstration projects
Opening the floor for the Secretary of Agriculture to work with states to solve benefits cliffs
Allowing states to conduct §2026 demonstration projects

Benefits Cliffs in the Aggregate: Consequences for Welfare and Business Cycles

by Kimberly Sawatka | Oct 3, 2023

Benefits Cliffs in the Aggregate: Consequences for Welfare and Business Cycles

Benefits cliffs – sudden decreases in public benefits that may occur with a small increase in earnings – may inhibit upward mobility. I study the effect of a multitude of cliffs across the universe of benefit programs in nine southern US states on intensive-margin labor supply and the implications for aggregate fluctuations. Using the American Community Survey and proprietary data from the Georgia Center for Opportunity covering nine southern US states, I leverage geographic and household-structure variation to find that, in aggregate, individuals in households approaching benefits cliffs reduce their working hours by about 40 hours annually. I then build a dynamic stochastic general equilibrium model that matches this result, where a key assumption of inframarginal households allows me to accurately capture the benefits cliffs of the US tax and transfer system. I find the aggregate implications of benefits cliffs on output are small, but welfare gains from their elimination are large and concentrated. In a counterfactual model that smooths over benefit cliffs, output increases about 1.6% more on impact in response to an aggregate productivity shock compared to the baseline model with benefits cliffs, but the welfare gain to formally-constrained households doubles.

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Opinion: New Missouri law will help residents escape safety-net cliffs

by Eric Cochling | Sep 26, 2023

Opinion: New Missouri law will help residents escape safety-net cliffs

Missouri lawmakers took an important step forward for working-class and impoverished residents this year by enacting Senate Bill 82. This new law will help more Missourians escape from an entrapping safety-net system and experience the dignity and opportunity of work.

On paper, our safety-net programs in Missouri are intended to help people avoid abject poverty and meet their basic needs. These programs should be temporary whenever possible and encourage work and independence, because ultimately what we want for people is stability and mobility. The sad reality, however, is that many of the programs include a hidden time bomb that threatens the very individuals they are intended to help.

For those receiving safety-net benefits — especially SNAP, child care assistance, and Medicaid — there can be a sudden, steep loss of government assistance as a worker’s income increases. This often results in a loss in benefits that far exceeds the additional pay from a raise a worker receives. These unintended consequences of the benefits cliff can be devastating, trapping individuals and families in a perpetual cycle of poverty. It is high time we address this issue and strive for a more sustainable and supportive system.

Read the full article here

How programs to help the poor can harm upward mobility – Sutherland Institute

by Georgia Center for Opportunity | Aug 15, 2023

How programs to help the poor can harm upward mobility – Sutherland Institute

Imagine you’re offered a raise that, if accepted, would actually make your family worse off.

This is the experience of some families in poverty when they hit something called the benefits cliff. This “cliff effect” is triggered when a family’s increase in earned income prompts a disproportionately larger decrease in the benefits they receive through federally funded public assistance programs.

This week’s guest is Kelsey Underwood, vice president of strategy and product for the Georgia Center for Opportunity. She joins the show to discuss how the benefits cliff can disincentivize work, negatively impacting families struggling to escape poverty. She also touches on GCO’s efforts in various states to clear obstacles to upward mobility for impoverished Americans. The discussion centers around the dignity of work that fosters upward mobility and identifies resources available to policymakers and business leaders to help address the issue.

Listen to the podcast