SNAP Cliffs Are Coming

by Tom Yamachika, President, Tax Foundation Hawaii

Now that the federal One Big Beautiful Bill Act is law, we are going to focus on some provisions that are not as well known as the federal tax changes but may have a profound impact on our state fiscal health.

The Supplemental Nutrition Assistance Program, SNAP for short, has been part of our social safety net for decades.  The program helps some of the needier members of our community to buy healthy food.  The federal government has fully funded the cost of that food.  But that is going to change.

One of the provisions buried in the Act says that, beginning in 2028, some states are going to have to pay for part of the food cost.  The amount to be kicked in is going to start at 5% of the cost—depending on the state’s combined payment “error rate,” which measures the over- and under-payments its SNAP program makes in a year.

According to estimates by the Center on Budget and Policy Priorities, 5% of the cost will be $36 million.  The amount will be due if Hawaii’s combined error rate is or exceeds 6%.  If the error rate meets or exceeds 8%, the penalty is doubled—$73 million.  And if it meets or exceeds 10%, 15% will be due, for a budget hit of $109 million.  The difference between an error rate of 5.99% and an error rate of 6.00% will cost $36 million. There are no middle grounds, which is why we call them cliffs. 

To us, $36 million isn’t simply Trump change.  It’s the amount of general funds appropriated to the Department of Taxation or the Department of Law Enforcement for one year.

And how have our error rates been?  Here’s a table with numbers from USDA for the years 2017 to 2024, with no data available for the pandemic years 2020 and 2021.

Source:  U.S. Department of Agriculture

As Civil Beat reported, earlier this year the USDA whacked our state with an $11 million fine for its huge error rate two years in a row, in 2022 and 2023.  The USDA gave the State the option of investing half the amount in new technology and stated that it was open to waiving the rest of the penalty if the State is able to drop the error rate.  Lawmakers passed an emergency appropriation for that purpose this session.

Under the OBBB, the stakes are higher.  Much, much higher.  We brought the error rate down in 2024.  That might be enough to get the State out of the remaining $5.5 million penalty levied this year, but the error rate was still more than 6%.  The OBBB is going to give us a much more expensive problem, namely triple the hit we took and with no opportunity for a waiver, if that rate continues.

We need to get our act together, and fast.  We don’t have that much time before the day of judgment.  And if we do fall off the cliff, we are all going to suffer.  Lawmakers will have little choice but to come to us taxpayers and ask us to dig even deeper into our pockets.

So, let’s make some smart investments in our Department of Human Services so that we can accurately administer the SNAP program for the benefit of our citizens.