Food Programs — News & Analysis

New Data Underscore SNAP Cost Shift's Harm to Low-Income Families and State Budgets (July 23, 2026)

July 23, 2026 — Newly released USDA error rates indicate that as many as 35 states and one U.S. territory will be required to pay substantial new costs to continue participating in SNAP beginning in fall 2027, with the remaining states at risk in future years, according to a Center on Budget and Policy Priorities report by Katie Bergh and Dottie Rosenbaum. Starting October 1, 2027, most states must pay a portion of benefit costs for the first time in the program's history — roughly $9 billion shifted from the federal government to state budgets in fiscal year 2028 alone, with nearly half of states potentially owing $100 million or more. The amount each state pays depends on its error rate, a measure of over- and underpayments that largely reflects unintentional mistakes rather than fraud. In fiscal year 2025 the national overpayment rate was 9.28 percent and the underpayment rate 1.33 percent, for a combined 10.62 percent — down just 0.31 percentage points from 2024, though nearly a quarter of states lowered their rate by a percentage point or more. Nine states and the U.S. Virgin Islands fall below the 6 percent threshold and face no cost shift for now; six states between 6 and 7.99 percent would pay 5 percent of benefit costs; 16 states between 8 and 9.99 percent would pay 10 percent; and 13 states plus Guam at or above 10 percent would pay 15 percent.

The law's structure produces perverse results. A last-minute carveout added on the Senate floor grants a one-year delay to states with fiscal year 2025 error rates at or above 13.33 percent — meaning six states and the District of Columbia with the highest error rates escape the requirement, while states that improved are penalized. Five states — Florida, Maryland, Massachusetts, New Jersey, and New York — had rates above that threshold in fiscal year 2024 but now face substantial obligations, having reduced their errors enough to lose the exemption but not enough to fall under 6 percent. New Jersey cut its error rate by more than 7 percentage points, from 14.33 percent to 6.86 percent, the largest improvement of any state, and may now owe roughly $100 million. At the other end, an increase of just one-tenth of a percentage point would push Nebraska over the 6 percent line. Compounding this, the fiscal year 2025 rates largely reflect decisions made before the law was enacted on July 4, 2025, more than three-quarters of the way through that fiscal year, and USDA will not finalize fiscal year 2026 rates until June 30, 2027 — one day before the new fiscal year begins for 46 states, long after most will have completed the relevant budgets.

CBPP documents several federal actions that made errors likelier while states were being judged on them. SNAP rules provide a grace period holding states harmless for errors stemming from a change in law, running 120 days from the required implementation date; USDA started that clock at enactment while withholding the details states needed, and by the time preliminary guidance on all immediately effective provisions had arrived, the grace period expired the next day. Guidance on how new eligibility rules for lawfully present immigrants interacted with existing law came only on December 9, and was corrected December 10 — in the interim some states relied on incomplete guidance and wrongly terminated assistance for people who remained eligible. Details on implementing the expanded work requirement did not arrive until June 11, 2026, more than eleven months after it took effect, and confirmed that some states had been wrongly subjecting exempt older adults to it. The 43-day government shutdown then diverted state capacity entirely, including an instruction not to issue November benefits, a reversal directing partial benefits requiring recalculation for every household, and a further correction issued after at least one state had already paid out on the erroneous formula.

Because denying or delaying benefits to an eligible household does not count as an error, states have a direct incentive to shrink caseloads rather than improve accuracy. Arizona ramped up documentation requirements shortly after laying off hundreds of eligibility workers — at one point apparently denying applicants who could not document who lived in their household even absent any reason to question it, with applicants reporting they needed a signed statement attesting that no one else lived in their home — and participation fell by more than 50 percent in the first ten months after enactment. Illinois and Georgia now require most households to recertify twice as often. CBPP illustrates the arithmetic bluntly: a state facing a $200 million cost share that can afford only $100 million would have to terminate food assistance for about half its participants, and the law provides no hardship exemption or waiver. States are already absorbing the administrative cut unevenly — Ohio legislation covers only $12.5 million of an estimated $38 million county shortfall, and North Carolina counties face roughly $52 million in added costs. Ripple effects extend to schools, since children losing SNAP also lose direct certification for free meals, threatening viability of the Community Eligibility Provision at some of the more than 50,000 participating schools, and to local economies, where every $1 of SNAP spending in a weak economy returns $1.54 in activity. NASBO projects the combined new state costs are comparable to total state transportation spending in fiscal year 2025. Meanwhile USDA has issued no guidance on how the cost share will actually operate, with proposed regulations not expected until December or later, leaving states unable to answer basic questions — including whether the requirement applies to Disaster SNAP.

Source documents: Full report (PDF, 16 pp.) · USDA SNAP Quality Control data · OMB regulatory agenda entry on benefit matching requirements