SNAP Disaster Imminent

by Tom Yamachika, President, Tax Foundation Hawaii

About a year ago, we wrote about one part of the One Big Beautiful Bill Act that could really hurt our State economically.

It’s about the federal SNAP program to help needy families with food costs. It used to be fully funded by the U.S. Department of Agriculture. So, Hawaii citizens benefited from this federal largess to the tune of about $700 million a year.

The OBBBA changed this. Now, the USDA audits the States, who are responsible for running the program and paying out the benefits, and if a State paid out too much or too little, then the State will need to pick up an escalating share of the cost depending on our “error rate.” If our error rate is less than 6%, the USDA picks up all benefit costs as they did before. If it’s between 6% and 8%, we need to pony up 5%, which would be around $36 million. Between 8% and 10%, we are on the hook for 10% of the benefits. And if the error rate is 10% or more, then we get socked for 15%, which would come out to about $109 million — which isn’t in our budget.

And then, of course, the feds didn’t make it easy for the States to comply. We wrote about some of the drama here. The issues included federal policy changes that kicked in immediately, giving states zero time to learn about the new changes and work them in to their processing procedures before they were made accountable for errors.

Historically, we have had issues even before OBBBA. Our error rate for 2022 and 2023 exceeded 20%. The USDA was thinking about whacking us with a $11 million fine, but our folks managed to talk their way out of it with promises of new, badder, and better computer system that our Legislature had no choice but to fund.

In 2024, our error rate dropped to 6.68%. It was much better than the previous two years, but still left lots of room for improvement.

Now the 2025 error rate is out. There is good news and bad news.

The good news is that we don’t have the worst error rate, and ours was just slightly above the national average. Also, the penalties don’t take effect just yet.

The bad news is that our error rate was 10.92%. Double digits mean triple penalties, and don’t expect anyone to cut us some slack. “These payment error rates are further proof that state accountability is severely lacking in SNAP,” Agriculture Secretary Brooke Rollins said in a statement. “USDA has taken historic action to help interested states curb SNAP waste, and I hope other states, regardless of political leadership, prioritize needy families and the American taxpayer over politics.”

The Star-Advertiser reports that our Department of Human Services is keenly aware of the problem and is working hard to fix it. DHS reported that its error rate through the end of June was 6.52%.

Again, that’s an improvement, but we are still in penalty territory. We should be able to do better. Our error rate for most of the last two decades was under 6%, so we should be able to get ourselves out of the proverbial hot water.

The Trump Administration was able to trot out J.D. Vance to make us a national laughingstock over Medicaid fraud enforcement. The last thing we all want is for the administration to set us up on another issue, this one with a massive price tag which we probably won’t be able to wiggle out of like with the proposed $11 million fine.

Let’s do this.