The 2014 Farm Bill: Changing the Treatment of LIHEAP Receipt in the Calculation of SNAP Benefits
Released: 2014-02-12T00:00:00

Introduction

After over two years of deliberations, spanning the 112 th and 113 th Congresses, the Agricultural Act of 2014 (the "2014 farm bill") was enacted on February 7, 2014. Within this omnibus reauthorization of dozens of agricultural and nutrition statutes, the Supplemental Nutrition Assistance Program (SNAP, formerly Food Stamps) was reauthorized. While the reauthorization maintained the vast majority of prior law eligibility and benefit calculation policies, the new law does change the impact of the Low Income Home Energy Assistance Program (LIHEAP) in the calculation of SNAP monthly benefit amounts.

Under prior law, SNAP recipients who also receive benefits from LIHEAP may have received increased SNAP benefits, no matter the amount of LIHEAP received. Under the 2014 farm bill, LIHEAP can only impact a household's benefit if a household receives more than $20 a year. This policy contained in the farm bill conference agreement follows similar changes in the Senate- and House-passed bills, with the Senate passing a $10 threshold and the House passing a $20 threshold.

Because SNAP benefits are 100% federally funded and because SNAP is an open-ended entitlement, policy changes to benefit amounts or eligibility can generate substantial changes in spending. The Congressional Budget Office (CBO) estimated that this LIHEAP-related change included in the 2014 farm bill would reduce SNAP spending by approximately $8.6 billion over the 10-year budget window of FY2014-FY2023. (Although this change is similar to the House-passed proposal, it is estimated to impact spending slightly less due to the timing of implementation. )

Throughout the formulation of the new farm bill, reauthorization proposals focused on deficit reduction as well as agricultural program reforms. At issue throughout the process was whether and/or to what extent a reauthorization of SNAP should reduce program spending, affect eligibility, or affect benefit amounts.

Supporters of the changes to LIHEAP's treatment in SNAP have framed it as a policy to improve SNAP integrity, assuring that LIHEAP is treated uniformly across all states and according to congressional intent. Detractors argue that ending the so-called "Heat and Eat" practice reduces benefits for those in need.

In addition to the significance of this provision for the farm bill's cost estimate, the newly enacted policy is complex, and it can be difficult to untangle how the farm bill change would work and which states and households may be affected. This report provides prior law background on the benefit amount interactions between SNAP and LIHEAP, an explanation of the 2014 farm bill change, as well as the potential impact of this change on households and states' administration of SNAP.

For further information on the farm bill and SNAP in general, please see

CRS Report R43076, The 2014 Farm Bill (P.L. 113-79): Summary and Side-by-Side , coordinated by [author name scrubbed]

CRS Report R43332, Reauthorization of SNAP and Other Nutrition Programs in the Next Farm Bill: Issues for the 113 th Congress , by [author name scrubbed]

CRS Report R42353, Domestic Food Assistance: Summary of Programs

CRS Report R42505, Supplemental Nutrition Assistance Program (SNAP): A Primer on Eligibility and Benefits

SNAP Benefit Calculation, Prior Law, and the 2014 Farm Bill

Brief Overview of SNAP Benefit Calculation8

SNAP benefits are a function of a household's size, its net (counted) monthly income, and inflation-indexed maximum monthly benefit levels (in some cases, adjusted for geographic location). An eligible household's net income is determined (i.e., the deductions noted earlier for judging eligibility are subtracted from gross income), its maximum benefit level is established, and a benefit is calculated by subtracting its expected contribution (by law, 30% of its net income) from its maximum allotment. This equation is illustrated in the first row of Figure 1 .

The calculation for a hypothetical three-person household in the 48 states with a net income of $400 is shown in the second row of Figure 1 . The current FY2014 maximum three-person benefit in the 48 states (and DC) is $497. Subtract from that maximum benefit, 30% of the household's net income. Thus, a three-person household in one of the 48 states with $400 in counted net income (after deductions) would receive a monthly allotment of $377 in FY2014. A three-person household with no counted/net income would receive the maximum monthly benefit.

LIHEAP's Role in SNAP Deductions and Benefit Calculation

In most states, SNAP programs can use LIHEAP payments as proof that households have incurred heating and cooling costs. Under prior law, if a SNAP household received a LIHEAP payment in any amount , then that household could receive a higher SNAP benefit than if the household had not received LIHEAP (assuming they did not document heating and cooling costs in some other way). Under the 2014 farm bill, using LIHEAP to document heating and cooling costs is limited to payments of more than $20.

Figure 2 depicts an overview of LIHEAP's role in the SNAP benefit calculation, namely that receiving such energy assistance can result in a larger monthly SNAP benefit. Under the 2014 farm bill's change, it will take greater than $20 in assistance for LIHEAP to have any impact. The discussion after Figure 2 elaborates on the definitions of various deductions used in calculating SNAP benefits, potentially including LIHEAP receipt, and how they interact in the benefit calculation process.

As shown earlier in Figure 1 , the amount of SNAP benefits that an eligible household receives is based, in part, on the maximum benefit and also in part on the household's net income. The SNAP agency computes net monthly income by subtracting certain "deductions" from a household's basic (or gross) monthly income. This calculation is based on the recognition that not all of a household's income is available for food purchases. Thus, a standard portion of income, plus amounts that represent costs such as dependent care expenses or high non-food living expenses, are deducted from the gross income.

For households without an elderly or disabled member, net monthly income equals gross monthly income minus the following deductions, if applicable:

Standard deduction: A "standard" monthly deduction that varies by household size and is indexed for inflation. Every applicant household gets this deduction; Earned income deduction: 20% of any earned income, in recognition of taxes and work expenses; Child support deduction: Any amounts paid out as legally obligated child support; Dependent care deduction: Out-of-pocket dependent care expenses, when related to work or training; and Excess shelter deduction: The amount of shelter expenses (including utility costs, which states may standardize with a "standard utility allowance" (SUA) figure representing average state costs) that exceed 50% of net income after all other deductions. This deduction is capped for households that do not contain an elderly or disabled member. 2014 FARM BILL NOTE: Under prior law, households that receive LIHEAP could automatically qualify for a higher SUA, no matter the amount of LIHEAP received . The higher SUA is based on the assumption that households incur expenses for heating and cooling. Under the 2014 farm bill, without receipt of LIHEAP over $20 per year, households must document heating/cooling expenses another way or risk a reduction from what their benefit amount had been.

For households with an elderly or disabled member, net monthly income equals gross monthly income minus:

The same standard , child support , earned income , and dependent care deductions noted above; Any out-of-pocket medical expenses (other than those for special diets) that are incurred by an elderly or disabled household member, to the extent they exceed a threshold of $35 a month; and An uncapped excess shelter deduction , to the extent such expenses exceed 50% of counted income after all other deductions; 2014 FARM BILL NOTE: Because the excess shelter deduction is uncapped for households with elderly or disabled members, the change to LIHEAP in SNAP benefit calculation has the potential to make a larger difference for these households.

In understanding the role of LIHEAP in benefit calculation, it is key to note that a standard utility allowance (SUA) is not something tangible; instead, it is a number that states use in place of gathering all of an applicant's utility cost and usage information. The methodology and the amounts of an SUA vary by state, and many states have several different utility allowances based upon whether a household incurs heating/cooling costs or not. An SUA often "tips the scale" toward enabling an applicant household to qualify for an excess shelter deduction, which in many cases will result in an increased monthly benefit.

Background on LIHEAP

LIHEAP is a formula grant program under which the federal government gives annual grants to states, tribes, and territories (collectively referred to in this report as "states") to operate home energy assistance programs for low-income households. States may use funds to help eligible households pay for heating and cooling costs, for crisis assistance, and to weatherize their homes. Both renters and homeowners are eligible for LIHEAP. Federal LIHEAP requirements are minimal and leave most important program decisions to the states, including eligibility guidelines, types of assistance provided, and benefit levels.

Regarding eligibility , states may set maximum LIHEAP eligibility for households up to 150% of the federal poverty income guidelines (or, if greater, 60% of the state median income), but they may not go below 110% of the poverty guidelines. States may also choose to make eligible for LIHEAP assistance any household of which at least one member is a recipient of Temporary Assistance for Needy Families (TANF), Supplemental Security Income (SSI), benefits through the Supplemental Nutrition Assistance Program (SNAP) , or certain needs-tested veterans' programs. In terms of benefits , states decide the types of assistance that households receive and the amount. For example, while all states provide heating assistance, only a portion of states provide assistance for cooling. The amount of benefits also varies; in FY2008, the most recent year for which information is available from the Department of Health and Human Services (HHS), the average annual LIHEAP benefit for heating assistance was $293 with a range from $73 to $1,172. HHS does not have data indicating the number of households receiving payments at or below $20.

Unlike SNAP, LIHEAP is not an open-ended entitlement, and funding is not sufficient to assist every household that is eligible for the program. In FY2009, 7.4 million households received heating and/or winter crisis assistance and 900,000 received cooling assistance. The number of households assisted may now be lower. FY2009 was a year in which states received a total of $5.1 billion for LIHEAP, compared to about $3.4 billion in FY2014.

What is "Heat and Eat"?

"Heat and Eat" is a phrase that the low-income and hunger advocacy community has used to describe state and program policies that leverage nominal (as low as 10 cents) LIHEAP payments into an increase in households' SNAP benefits that is larger than the initial LIHEAP payment. In June 2012, the U.S. Department of Agriculture's Food and Nutrition Service (USDA-FNS) surveyed states and determined that 16 states (including the District of Columbia) had implemented or would soon implement "Heat and Eat," and one state provided the standard utility allowance based on LIHEAP application (see Text Box , below).

Part of the rationale for the nominal LIHEAP benefits (vs. more substantive benefits) is that LIHEAP is not an entitlement, and states may not be able to assist every household that is eligible for the program, particularly because the statute requires that states prioritize "households with the highest home energy costs or needs in relation to household income." On the other hand, SNAP is open-ended and the benefits are financed 100% by the federal government, so "Heat and Eat" policies are a net gain for states in times of limited state and LIHEAP resources. Providing increased food assistance would then appear to free up more income for other household expenses.

Are Recipients of These Nominal Payments Ineligible for LIHEAP?

If states adhere to LIHEAP law, then only households that are eligible for LIHEAP qualify for LIHEAP benefits. This involves two determinations: (1) household eligibility based on income or enrollment in another means-tested program (including SNAP), referred to as categorical eligibility and (2) use of LIHEAP funds for a statutory purpose.

Regarding the first determination, there are no separate eligibility criteria for recipients of nominal LIHEAP benefits. Therefore, a household would not receive LIHEAP benefits unless they are eligible for the program based on income or categorical eligibility. In states that use receipt of SNAP to determine eligibility, SNAP participants are eligible for LIHEAP. Otherwise, households would have to meet LIHEAP income eligibility requirements.

Regarding the second determination, the LIHEAP statute provides that states may use LIHEAP funds to provide direct assistance to households in several ways: to help meet "home energy costs" (defined as heating or cooling), to assist in energy crisis situations, for home weatherization, or for services to reduce the need for energy assistance such as needs assessment or counseling on how to reduce energy consumption. CRS is not aware of the way in which states with nominal LIHEAP payments determine whether households have need of LIHEAP for the statutory purposes. Payments to households that are not provided for one of these purposes could be inappropriate.

Potential Implementation and Impact of This Change

At this juncture, much is unknown about the implementation and impact of this change; much will depend on USDA-FNS and states' implementation. However, there are some things that can be said based on SNAP benefit calculation rules and other available information. First, this change is expected to affect some households' SNAP benefit amounts, but it will not affect households' eligibility for SNAP benefits. Second, this change is expected to affect states that have implemented "Heat and Eat" policies. Third, within the provisions of the new law, however, states and households may have some options to reduce the impact of this change.

Will This Change Affect Households' Eligibility for SNAP Benefits?

As noted above, subject to USDA-FNS's implementation of the new law, it is not expected that this change will affect households' eligibility for benefits. In other words, if nothing else changed in a household's economic profile, but they had received a 10-cent LIHEAP payment, the household's benefit might be reduced when the household reapplies, though the household would not stop receiving SNAP. This is the case because the excess shelter deduction—for which LIHEAP plays a role—is calculated after eligibility has been determined.

When Will States Reduce Affected Households' Benefits?

Three aspects of "when" are specified in the text of the legislation (Section 4006 of P.L. 113-79 ):

1. Provision takes effect 30 days after enactment: The law says that the amendments in Section 4006 take effect 30 days after enactment of the law. The law was enacted on February 7, 2014. However, this must be read in conjunction with two other aspects of the law. 2. Provision applies to certification periods after the effective date: SNAP households are certified to receive benefits for a period of time, and have to follow state rules for reporting changes, such as changes in household income or size of the household. The period of certification is based on state choices within a federal framework. The new law indicates that when a new SNAP household applies for benefits, if that is 30 days after the law's enactment, the benefits will be calculated based on the $20 threshold rule, but for households already receiving SNAP it will be only when they apply to recertify that their benefit calculation will be subject to the $20 rule. This recertification scenario, though, is subject to a state's decision to delay implementation. 3. States have the option to delay implementation for current recipients: The law gives states the option to delay implementation or reduce its impact for as long as five months after the law takes effect. The specifics of this state option—how USDA-FNS will implement it and how the states will implement it—are not known at this time.

Taken together, this means that for new SNAP applicants , the new rules should take effect 30 days after February 7, 2014. However, for current SNAP recipients , the exact date that they are subject to the new rules (and possible benefit reduction) will depend both on (1) when their current certification period ends, and (2) whether and how their state delays implementation.

Can States or Households Prevent This Change in Law from Reducing Benefit Amounts?

In addition to the option to delay implementation, a state continues to have the option to issue LIHEAP payments greater than $20. Because of the budgetary constraints associated with LIHEAP funds, it seems unlikely that a state would give more than $20 to every household that had been receiving less than $20, but it is an option that is open to states.

If a household can document heating or cooling costs in another way, then the higher SUA can continue to be included in the household's excess shelter deduction even if the household does not receive more than $20 of LIHEAP assistance. Applicants would have to be aware of the need to present utility bills or other documentation.

How Many Will Be Affected, By How Much?

In their cost estimate of the conference agreement, CBO did not release estimates of the number of SNAP-recipient households that would be affected by Section 4006 of the Agricultural Act of 2014. In September 2013, CBO estimated that the House-passed $20-threshold provision in H.R. 3102 would result in 850,000 SNAP-recipient households receiving benefits reduced by an average of $90 per household per month; however, due to later implementation timing of the new law it is expected that fewer will be affected than forecasted in H.R. 3102 .

A policy change could result in a reduction of benefits for some households that either currently receive the excess shelter deduction or receive a higher excess shelter deduction due to LIHEAP payments that are lower than the $20 threshold. The total number will also depend on whether households are able to document their utility costs in other ways.

Other Impacts for Program Administration

Modifying the treatment of LIHEAP in SNAP might create changes in the program application process, but it is difficult to know just what these might be. The "Heat and Eat" states would appear to no longer have any reason to issue LIHEAP payments below the enacted threshold requirement of $20 to SNAP participants, since such sums would neither substantially assist with utility costs nor generate larger SNAP benefits. In addition, compared to a $1 payment, a payment greater than $20 to multiple recipients could strain state LIHEAP budgets.

Further, advocates contend that presenting LIHEAP documentation is an administrative simplification that ensures that eligible households are getting all of the deductions—or at least credit for all the deductions—that such households are due, especially in "Heat and Eat" states where the LIHEAP payment may be communicated to SNAP computer systems through a data-matching process. In the absence of the "Heat and Eat" practice, states could institute other systems or practices to ensure that households are getting all of the deductions for which they qualify.