The federal Food Stamp Program is intended to help low-income individuals and families obtain a more nutritious diet by supplementing their income with benefits to purchase food. FNS pays the full cost of food stamp benefits and shares the states’ administrative costs—with FNS usually paying 50 percent—and is responsible for promulgating program regulations and ensuring that state officials administer the program in compliance with program rules. The states administer the program by determining whether households meet the program’s income and asset requirements, calculating monthly benefits for qualified households, and issuing benefits to participants, usually on an Electronic Benefits Transfer (EBT) card. The program is usually administered out of an assistance office and, oftentimes, assistance offices also offer other benefits, including Temporary Assistance for Needy Families (TANF), Medicaid, and child care assistance. Figure 1 outlines the general steps a household must take to participate in the Food Stamp Program and how each step occurs. Eligibility for participation in the Food Stamp Program is based on the Department of Health and Human Services’ poverty guideline for households. In most states, a household’s gross income cannot exceed 130 percent of the poverty guideline (or about $1,654 per month for a family of three living in the contiguous United States) and its net income cannot exceed 100 percent of the poverty guideline (or about $1,272 per month for a family of three living in the contiguous United States). In addition, most states place a limit of $2,000 on household assets, and basic program rules limit the value of vehicles an applicant can own and still be eligible for the program. Other factors affecting benefit levels include size of household, income level, shelter expenses, child care costs, and child support payments. (Eligibility requirements are less stringent for households with elderly or disabled members.) Participants must also periodically recertify by documenting their continued eligibility for program benefits. In fiscal year 2003, the Food Stamp Program issued more than $21 billion in benefits. In September 2003, more than 22.7 million individuals participated in the program. This is an increase from the same month in 2002, when the Food Stamp Program provided benefits to almost 19.8 million Americans. As shown in figure 2, the increase in the average monthly participation of food stamp recipients in 2003 continues a recent upward trend in the number of people receiving benefits. The decrease in number of recipients from 1996 to 2001 can be explained, in part, by the passage of the Personal Responsibility and Work Opportunity Act of 1996 (PRWORA), which toughened eligibility criteria and made certain groups ineligible to receive benefits, and had the effect of un-tethering food stamps from cash assistance. In some cases, this caused participants to believe they were no longer eligible for food stamps when TANF benefits were ended. In addition, studies have suggested that the economic growth in the late 1990s played a major role in the decrease of recipients. Since 2000, that downward trend has reversed, and stakeholders believe that the downturn in the U.S. economy, coupled with changes in the program’s rules and administration, has led to an increase in the number of food stamp recipients. Although the total number of food stamp recipients is still below the 1996 level, since February 2001, the number of recipients has increased over 30 percent. Despite this increase, it remains the goal of FNS and several states to increase participation in the program among eligible families, while maintaining program integrity. FNS’s fiscal year 2000 strategic plan makes it a goal of the administration to improve the rate of food stamp participation among all eligible people to 68 percent by 2005. According to FNS officials, eligible immigrants, elderly Americans, and members of working families are the major subgroups targeted to increase participation. The administration has chosen to focus on participation among working families, in part, because of the increased emphasis placed on the need for work supports such as food stamps, the Earned Income Tax Credit (EITC), and child care and transportation subsidies—since PRWORA. In addition, the Farm Security and Rural Investment Act of 2002 (the 2002 Farm Bill) included provisions intended to encourage participation among underserved groups, including working families, and simplify program administration. For example, the 2002 Farm Bill gave states the option to maintain food stamp benefits at a consistent level for a transition period for individuals who left TANF to go to work. The 2002 Farm Bill also made it possible for FNS to provide financial awards to states with higher or improved performance in program administration. In response, FNS has targeted improving program participation in addition to its existing focus on payment accuracy and lowering error rates. The food stamp error rate was 8.26 percent in fiscal year 2002, the lowest in the program’s history. In the last few years, working families have become a greater proportion of the overall food stamp participant population. As of fiscal year 2002, about 40 percent of those individuals receiving food stamps were members of households with earnings, up from about 33 percent in 1997. As shown in figure 3, this increase occurred at the same time that the proportion of food stamp recipients receiving TANF declined dramatically. This can be explained, in part, by the fact that when TANF recipients leave that program, they may still be eligible for food stamp benefits. Thus, if TANF recipients leave that program because they have found employment, they can continue to receive food stamps until their income increases enough to disqualify them from the program or until they are no longer eligible for other reasons. Because of the increase in the proportion of food stamp participants who are living in households with earned income, serving low- income working families has taken on an increased importance for the Food Stamp Program in recent years. A lower percentage of food stamp-eligible individuals in working families received food stamp benefits than those in eligible nonworking families, and certain family characteristics are associated with the likelihood of participation. In September 2001, the most recent data available, the participation rate of likely food stamp-eligible individuals in households with earnings was estimated to be approximately 52 percent. At the same time, estimated participation among members of eligible nonworking families was almost 70 percent. Despite their lower participation rate, the average participating working family received a larger benefit than the average nonworking family. The amount of food stamps a working family is eligible for appears to be one of the major factors associated with the participation of working families, with those families eligible for larger food stamp benefits more likely to participate in the program. Other characteristics that are associated with the likelihood of food stamp receipt among working families include family size, amount spent on shelter, and the marital status of the head of household. Finally, working families that receive unearned income through other government assistance programs are more likely to receive food stamps than those with no unearned income. In September 2001, an estimated 52 percent of individuals in eligible working families participated in the Food Stamp Program, according to an analysis done for FNS. In the same month, the participation rate among all eligible individuals was estimated by FNS to be 62 percent, and the rate among members of nonworking families was almost 70 percent. As shown in figure 4, the participation rate among working families has been relatively constant in recent years—hovering around 50 percent—and it has consistently been lower than the rate among nonworking families. Among the families that receive food stamps, working families get larger benefits than nonworking families. In 2002, working families that participated in the Food Stamp Program received, on average, $210 a month in food stamps per household, according to information collected by FNS. This amount is more than the $159 average benefit received by households with no earned income. The fact that working families received more benefits, on average, than nonworking families is, in part, due to family size. In general, the larger the family size, the larger the family’s benefit. Working food stamp families have an average of 3.2 persons per household, as opposed to nonworking families that receive benefits, which average fewer than two persons per household. In addition to household size, household income level also affects benefit level, as do other factors such as cost of shelter, child care costs, and child support payments. While it is true that the amount of food stamp benefits that a working family is eligible for decreases as the family’s gross income increases, there is not an immediate drop-off in benefit level as income increases, nor is there a one dollar drop in benefits for every additional dollar in income earned. To demonstrate the effect of additional earned income on working families that receive food stamps, FNS provided us with an example of how earnings might impact a hypothetical family consisting of a single mother with two children. Figure 5 shows estimates of the amount of food stamps for which this family would be eligible given varying monthly income levels. Our data analysis shows that there are several characteristics that are associated with an eligible working family’s likelihood of participating in the Food Stamp Program. To determine the family characteristics that contribute to the likelihood of program participation for eligible working families, we analyzed a database produced by Mathematica Policy Research, Inc., of likely eligible working families based on the March 2001 Current Population Survey (CPS). This is the most current data available. Table 1 shows the differences between participating working families and those we estimate are eligible but not participating in 2000, the last year for which information was available. Some characteristics are associated with the increased likelihood of participation. For instance, food stamp participation was more likely among working families that were eligible for a larger amount of food stamp benefits; specifically, each $100 increase in monthly benefits for which families were eligible increased the likelihood of participating in the program by approximately 30 percent. Working families with young children—under 5 years old—in the household were also more likely to participate than likely eligible working families without young children. Other characteristics are associated with the reduced likelihood of participation.