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Research & Commentary: Pennsylvania Looks to Clamp Down on SNAP Fraud

October 24, 2018

In this Research & Commentary, Matthew Glans examines a new bill in Pennsylvania that would combat SNAP fraud by requiring violators to pay restitution of up to three times the amount of fraud committed.

The Supplemental Nutrition Assistance Program (SNAP), commonly known as food stamps is the fourth-largest means-tested program. In order to ensure welfare funds are spent properly and used by those truly in need, all state welfare programs must ensure that they actively monitor how they determine eligibility and how they pay out benefits to both prevent fraud and keep costs in check. When fraud and abuse are discovered, a state must move quickly to remove these problems and enact strong sanctions to discourage future abuse.

In an effort to combat fraud and abuse in its food stamp program, a bill was introduced in Pennsylvania that would create new penalties for the fraudulent trafficking of SNAP benefits totaling more than $2,500. Under the proposed new rule, violators would be required to pay restitution of up to three times the amount of fraud committed.

According to a report from the U.S. Department of Agriculture, 35,891 food retailers across the country engaged in food stamp fraud from 2012 to 2014. They illegally trafficked more than $1 billion in SNAP benefits each year. The report found that the trafficking primarily consisted of SNAP recipients selling their benefits for cash to food retailers, often at a discount. The retailers then used the card as a commodity while the recipients used the cash received illegally from retailers to purchase items that cannot be purchased using SNAP funds. During the three-year period studied, 11.8 percent of the 303,522 retail stores authorized to accept SNAP benefits were involved in trafficking.

The level of SNAP fraud in many states may be even worse than most realize. Over the past five years, SNAP rolls have slowly declined, but recent reports now suggest many states have relied on inaccurate data to monitor their payments and eligibility standards for SNAP. States are required by law to provide data to the SNAP Quality Control program indicating their error-rate statistics related to overpayments made to ineligible recipients and underpayments to those who should have received benefits. But in a 2015 audit conducted by the U.S. Department of Agriculture’s Office of Inspector General, investigators found numerous problems with SNAP quality control data collected in eight states. However, the report found the data improved in seven of the eight states audited after outside consultants were hired. (The average error rates for seven of the eight states dropped an average of 55 percent.)

The audit also highlighted the quality control system’s vulnerability to abuse, which is important because a state can receive millions of dollars in federal performance bonuses by reporting lower payment errors, and bad data could lead states to receive tax dollars they did not earn.

In addition to hiring outside auditors, state legislatures looking to combat SNAP fraud should also look to a recent proposal in Ohio for guidance on how to reduce fraud. The Ohio proposal would require state officials to conduct quarterly eligibility checks using several state and federal databases, and it would also expand the data used in those checks. The data from SNAP recipients would be crosschecked with various records, including “real estate records, tax records, state lottery winnings, state residency data, other public assistance programs, incarceration records and immigration status reports.” Any discrepancies or other “red flags” would be reported to local officials, who would then be required to investigate further. Unfortunately, these reforms did not make it out of the Ohio legislature.

Lawmakers should reform welfare programs so that they function as a safety net that effectively helps move people out of poverty without creating incentives for dependency. Placing a greater emphasis on limiting fraud in SNAP programs is an important first step toward achieving that goal.

The following articles provide additional information about SNAP and other welfare programs.
 

Welfare Reform Report Card: A State-by-State Analysis of Anti-Poverty Performance and Welfare Reform Policies
https://www.heartland.org/publications-resources/publications/2015-welfare-reform-report-card?source=policybot
In 2015, The Heartland Institute published an updated version of its Welfare Reform Report Card. This report card compiles extensive data on five “inputs” and five “outputs” of state welfare and anti-poverty programs and assigns a final grade to each state for its welfare policies.

Welfare Reform after Ten Years: A State-by-State Analysis
https://www.heartland.org/publications-resources/publications/no-119-welfare-reform-after-ten-years-a-state-by-state-analysis?source=policybot
In 2008, The Heartland Institute published Welfare Reform after Ten Years: A State-by-State Analysis, which reports the welfare policy choices of all 50 states and the District of Columbia, and then ranks the states by how aggressively they have implemented effective policies. The study provides policymakers with a roadmap to successful anti-poverty efforts.

Food Stamp Dependence in the States
http://thefga.org/solutions/food-stamps/
This interactive map from Foundation for Government Accountability shows what percentage of each state’s population is dependent on food stamps and how much it costs the state.

Research & Commentary: Work Requirements Are a Necessary Component of Any SNAP Reform Plan
https://www.heartland.org/publications-resources/publications/research--commentary-work-requirements-are-a-necessary-component-of-any-snap-reform-plan?source=policybot
In this Heartland Institute Research & Commentary, Matthew Glans examines the Supplemental Nutrition Assistance Program and recent proposals to reform food stamp programs by restoring work requirements.

Welfare Rules Database
http://anfdata.urban.org/wrd/Query/query.cfm 
The Urban Institute’s Welfare Rules Database provides a “comprehensive, sophisticated resource for comparing cash assistance programs between states” and for researching changes in cash assistance rules between states.

The Work Versus Welfare Tradeoff: 2013
https://www.heartland.org/publications-resources/publications/the-work-versus-welfare-trade-off-2013-1?source=policybot
The Cato Institute estimates the value of the full package of welfare benefits available to a typical recipient in each of the 50 states and the District of Columbia. The study found welfare benefits outpace the income most recipients can expect to earn from an entry-level job, and the income gap between welfare and work may actually have grown worse in recent years.

More States Enforce Food Stamp Work Requirements
http://www.pewtrusts.org/en/research-and-analysis/blogs/stateline/2014/09/15/more-states-enforce-food-stamp-work-requirements
With the U.S. economy emerging from the recession, food stamp work requirements suspended during the downturn will be reinstated in many states, says Jake Grovum notes in Stateline.

Research & Commentary: SNAP Update and the Return of Work Requirements
https://www.heartland.org/publications-resources/publications/research--commentary-snap-update-and-the-return-of-work-requirements?source=policybot
In this Heartland Institute Research & Commentary, Matthew Glans examines the Supplemental Nutrition Assistance Program and recent proposals to reform food stamp programs by restoring work requirements.

Maine Food Stamp Work Requirement Cuts Non-Parent Caseload by 80 Percent
http://www.heritage.org/welfare/report/maine-food-stamp-work-requirement-cuts-non-parent-caseload-80-percent#_ftnref36
Robert Rector, Rachel Sheffield, and Kevin Dayaratna of The Heritage Foundation examine Maine’s food stamp reforms and discuss how they could act as a model for other states. “The Maine food stamp work requirement is sound public policy. Government should aid those in need, but welfare should not be a one-way handout. Able-bodied, nonelderly adults who receive cash, food, or housing assistance from the government should be required to work or prepare for work as a condition of receiving aid. Giving welfare to those who refuse to take steps to help themselves is unfair to taxpayers and fosters a harmful dependence among beneficiaries,” the authors wrote.

Maine Entitlement Reforms, Audits Cut ‘SNAP’ Fraud Rates
https://www.heartland.org/news-opinion/news/maine-entitlement-reforms-audits-cut-snap-fraud-rates?source=policybot
Kimberly Morin writes in Budget & Tax News about entitlement reforms in Maine which have led to a decline in the amount of one type of program fraud occurring in the state.
 

Nothing in this Research & Commentary is intended to influence the passage of legislation, and it does not necessarily represent the views of The Heartland Institute. For further information on this and other topics, visit the Budget & Tax News website, The Heartland Institute’s website, and PolicyBot, Heartland’s free online research database.

The Heartland Institute can send an expert to your state to testify or brief your caucus; host an event in your state, or send you further information on a topic. Please don’t hesitate to contact us if we can be of assistance! If you have any questions or comments, contact John Nothdurft, Heartland’s director of government relations, at jnothdurft@heartland.org or 312/377-4000.

Author
Matthew Glans joined the staff of The Heartland Institute in November 2007 as legislative specialist for insurance and finance. In 2012, Glans was named senior policy analyst.
mglans@heartland.org @HeartlandGR

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