Income-Benefit Relationship for Two Families under Current and Proposed Rules

The main economic impact of this proposed change will be on families that have at least one ineligible alien. First, their chances for food stamp eligibility will be reduced as the level of counted family income used for eligibility will be higher, or a lower level of total family income will render them ineligible.⁶ According to the Department of Social Services (DSS), in the month of February 2012, approximately $117 million in SNAP benefits were issued to 914,445 persons in 439,966 households. Of the eligible persons, approximately 15,614 were excluded in the month of September 2011 from the program because of their immigration status. This suggests that the proposed regulation may affect approximately 7,500 families.⁷ Among these families, the ones with high income levels will have a reduced chance to qualify for food assistance. Second, among the 7,500 families, the ones with lower income levels will have their benefit amounts reduced because their counted income will be higher.

The impact of the proposed change on the income-benefit relationship of a family with an ineligible alien is illustrated in the graph by tilting the lower part of the green line to the left so that it completely overlaps the red line and becomes identical to it. In other words, the proposed change aligns the income-benefit relationship of a family containing an ineligible alien with that of a family containing an ineligible non-alien so that there is no differential treatment between the two families.

The fact that the food stamp program is financed 100% by the federal government has a crucial role in determining the economic impact of this change to the Commonwealth. Since the families with an ineligible alien either will cease to receive benefits, or start receiving reduced benefits, a reduction in the funds coming into the Commonwealth from the federal government is expected. Unlike the state or private funds, influx of federal funds coming into the Commonwealth does not have offsetting reductions in funds elsewhere in the state and thus has significant positive impact on the state's economy. A reduction in net influx of federal spending directed to residents of Virginia is expected to start a chain reduction in economic activity. The first effect would be a reduction in revenues of retailers. Then, retailers would buy less from their suppliers and hire fewer employees, creating more negative economic effects and so on. Even though the magnitude of the revenue loss to retailers is highly uncertain, the impact of such reduction would have negative consequences on Commonwealth's economy. Currently, there are 5,580 authorized retailers accepting food stamps in Virginia though households are not limited to use their benefits in Virginia.

The proposed change will also require DSS to reprogram the statewide eligibility system, change the program guidance, and train eligibility workers in local departments of social services. DSS estimates that three to four system experts would be involved in making the required system change over a three-month period. Also, approximately 2,500 local eligibility workers are estimated to be involved with the SNAP program and would have to be educated about this change. However, training usually covers multiple topics. Thus, the proposed change may be responsible for only a portion of the training costs that may accrue. Even though the proposed change is likely to create additional costs in terms of reprogramming, changing guidance documents, and training, DSS expects that these costs will be absorbed within existing budgets. On the other hand, the proposed change will also provide some administrative cost savings due to the expected reduction in the SNAP caseloads. Administrative costs of social services are funded 50% by federal government, 34.5% by state government, and 15.5% by local governments. While the administrative cost savings would work to offset some of the negative impact of reduced spending funded by the federal government to some extent, administrative costs are usually a fraction of benefits provided by most public assistance programs and therefore these savings are not likely to fully offset the expected negative impact.

Businesses and Entities Affected. The proposed regulation applies to SNAP program. In February 2012, there were approximately 914,445 persons in 439,966 households receiving benefits. Approximately 15,614 individuals in estimated 7,500 households were excluded in September 2011 from the program because of their immigration status. There are approximately 5,580 authorized retailers participating and about 2,500 eligibility workers involved in the program.

Localities Particularly Affected. The proposed regulation applies throughout the Commonwealth.

Projected Impact on Employment. The estimated reduction in the net influx of federal funds coming into the Commonwealth and reduction in caseloads are likely to reduce the demand for labor in Virginia. This reduction may be temporarily offset to a small degree by the increased labor demand necessary to reprogram the statewide eligibility system, to update guidance materials, and to attend and to provide training.

Effects on the Use and Value of Private Property. The proposed regulation does not have a direct effect on the use and value of private property. However, a reduction in food benefits would reduce revenues of authorized retailers participating in the program. A reduction in revenues may have a negative impact on the asset value of such businesses.

Small Businesses: Costs and Other Effects. The number of small businesses among the 5,580 authorized retailers is probably significant. The proposed change is expected to reduce issuance of food benefits in Virginia and consequently the revenues of retailers some of which may be small businesses.

Small Businesses: Alternative Method that Minimizes Adverse Impact. There is no known alternative method that minimizes the adverse impact on small businesses while accomplishing the same goals.

Real Estate Development Costs. No effect on real estate development costs is expected.

Legal Mandate. The Department of Planning and Budget (DPB) has analyzed the economic impact of this proposed regulation in accordance with § 2.2-4007.04 of the Administrative Process Act and Executive Order Number 14 (10). Section 2.2-4007.04 requires that such economic impact analyses include, but need not be limited to, the projected number of businesses or other entities to whom the regulation would apply, the identity of any localities and types of businesses or other entities particularly affected, the projected number of persons and employment positions to be affected, the projected costs to affected businesses or entities to implement or comply with the regulation, and the impact on the use and value of private property. Further, if the proposed regulation has adverse effect on small businesses, § 2.2-4007.04 requires that such economic impact analyses include (i) an identification and estimate of the number of small businesses subject to the regulation; (ii) the projected reporting, recordkeeping, and other administrative costs required for small businesses to comply with the regulation, including the type of professional skills necessary for preparing required reports and other documents; (iii) a statement of the probable effect of the regulation on affected small businesses; and (iv) a description of any less intrusive or less costly alternative methods of achieving the purpose of the regulation. The analysis presented above represents DPB's best estimate of these economic impacts.

Appendix

Income-Benefit Comparison for Two Families under Current and Proposed Rules

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¹ Prorate in this context means the income of the ineligible alien divided by the number of all household members is disregarded when calculating the total family income.

² Ineligible immigrant is referred in 7 CFR 273.11(c)(3)(i) to as someone: "who is not lawfully admitted for permanent residence; who is not granted asylum; who is not admitted as a refugee; who is not paroled; whose deportation or removal has not been withheld; who is not aged, blind, or disabled and is not admitted for temporary or permanent residence; or who is not a special agricultural worker admitted for temporary residence."

³ See federal regulations at 7 CFR 273.11(c)(3)(i).

⁴ Based on the comments provided, the impetus for this proposed change appears to originate from the eligibility workers at local departments of social services who believe there is a fairness issue involved in determining income for purposes of SNAP assessment.

⁵ The values the graph is derived from are provided in a table in the appendix.

⁶ This action will align SNAP guidance with that of Medicaid and Temporary Assistance to Needy families, as these programs count the full amount of ineligible immigrant's income in the eligibility determination.

⁷ 15,614/(914,445/439,966)=7,512.

Agency's Response to Economic Impact Analysis: This document represents the Department of Social Services' response to the Department of Planning and Budget's revised economic impact analysis of the proposed change to the Supplemental Nutrition Assistance Program at 22VAC40-601.

DPB EIA: The proposed change will remove an economic inequality that currently exists between families with an ineligible non-alien and families with an ineligible alien when determining eligibility and amount of benefits in the food stamp program. However, the costs likely exceed the benefits since the proposed change makes some of the food stamp recipients in the Commonwealth worse off without making anyone else in the state better off by a comparable magnitude.

Agency Response: Treating all households in similar situations is paramount and overrides any other economic considerations, especially when households with all citizen members are penalized and receive lower benefits than households with non-citizen members under the current eligibility rules. The agency believes that all households should be treated equitably, and while it is unfortunate that households with non-citizens may have their benefits reduced, this regulation will subject them to the same eligibility rules that currently reduce benefits for households containing all citizen members.

DBP EIA: The main economic impact of this proposed change will be on families that have at least one ineligible alien. First, their chances for food stamp eligibility will be reduced as the level of counted family income used for eligibility will be higher, or a lower level of total family income will render them ineligible. According to the Department of Social Services (DSS), in the month of February 2012, approximately $117 million in SNAP benefits were issued to 914,445 persons in 439,966 households. Of the eligible persons, approximately 15,614 were excluded in the month of September 2011 from the program because of their immigration status. This suggests that the proposed regulation may affect approximately 7,500 families. Among these families, the ones with high income levels will have a reduced chance to qualify for food assistance.

Agency Response: The agency does not agree. The proposed regulation will put households with an ineligible alien on par with a household with an ineligible citizen, giving both households an equal chance of accessing the same benefit when their incomes are the same.

DPB EIA: The fact that the food stamp program is financed 100% by the federal government has a crucial role in determining the economic impact of this change to the Commonwealth. Since the families with an ineligible alien either will cease to receive benefits, or start receiving reduced benefits, a reduction in the funds coming into the Commonwealth from the federal government is expected.

Agency Response: The DPB EIA overlooks the fact that federal SNAP benefits are financed by taxpayer dollars, including Virginia taxpayers. At a time when $.40 of every federal dollar spent is used to pay the federal debt, we should be very critical to cut federal spending if there is an inequity that favors one group over another. The federal deficit has long-term consequences to the Commonwealth if not resolved, compared to the one-time loss of federal SNAP funding. In addition, the American Recovery and Reinvestment Act increased SNAP benefit levels by 13.6% in March 2009, which was directly intended to stimulate economic activity in Virginia's retail grocery stores and businesses that support the grocery industry.

DPB EIA: The proposed change will also require DSS to reprogram the statewide eligibility system, change the program guidance, and train eligibility workers in local departments of social services. DSS estimates that three to four system experts would be involved in making the required system change over a three-month period. Also, approximately 2,500 local eligibility workers are estimated to be involved with the SNAP program and would have to be educated about this change. However, training usually covers multiple topics. Thus, the proposed change may be responsible for only a portion of the training costs that may accrue.

Agency Response: The programming changes will be minor since the system currently calculates the benefit for ineligible citizens without prorating the benefit. The training effort will also be minor since eligibility workers in local departments of social services know how to calculate the income of ineligible citizens without prorating. It is important to note that during the public comment period local staff overwhelmingly supported the proposed regulation as they recognize the inequity in the current benefit calculation for ineligible citizens.

DPB EIA: The estimated reduction in the net influx of federal funds coming into the Commonwealth and reduction in caseloads are likely to reduce the demand for labor in Virginia. This reduction may be temporarily offset to a small degree by the increased labor demand necessary to reprogram the statewide eligibility system, to update guidance materials, and to attend and to provide training.

Agency Response: The DPB EIA seems to indicate that high public assistance caseloads and individual dependence on public assistance are positive for Virginia's economy. To the contrary, Virginia's economy is the strongest when public assistance caseloads are low and individuals who were dependent on assistance have regained employment and are contributing to the Commonwealth's economic prosperity. In 1995, when Governor Robert F. McDonnell served in the Virginia House of Delegates, he was a very strong proponent of reforming Virginia's welfare system. He strongly supported the passage of the Virginia Independence Program as a way to reduce dependence on government assistance programs and promote personal responsibility through work.

Chapter 450 of the 1995 Acts of Assembly, the Virginia Independence Program, sets five goals that the legislation was intended to accomplish:

1. Offer Virginians living in poverty the opportunity to achieve economic independence by removing barriers and disincentives to work and providing positive incentives to work;

2. Provide families living in poverty with the opportunities and work skills necessary for self-sufficiency;

3. Allow families living in poverty to contribute materially to their own self-sufficiency;

4. Set out the responsibilities of and expectations for recipients of public assistance and the government; and

5. Provide families living in poverty with the opportunity to obtain work experience through the Virginia Initiative for Employment Not Welfare (VIEW).

During the deliberations on HB 2001, there was no discussion on the negative impact of reduced federal funding associated with falling caseloads, but rather the overall health of a Commonwealth that has citizens who support themselves and their families and do not depend on government assistance. The agency takes the same position on this proposed regulation.

Summary:

The proposed amendment requires that the income of persons who are ineligible for SNAP benefits because of their immigration status will be used in its entirety to determine the SNAP eligibility of the remaining eligible household members and alters current processes by using the full amount of an ineligible immigrant's income instead of a prorated amount of the income.

22VAC40-601-70. Income calculation method of ineligible immigrants.

The income and resources of an ineligible alien shall count in their entirety, and the ineligible alien's deductible expenses shall continue to apply to the remaining household members. The requirements of this section do not apply to those aliens described in 7 CFR 273.11(c)(3)(i)(A) through (G).