Closing the BBCE Loophole Would Safeguard Food Stamps for the Truly Needy and Save Billions
Key Findings
- The BBCE loophole has allowed more than 5.9 million ineligible individuals to enroll in food stamps.
- States using the BBCE loophole have higher administrative costs.
- Administrative costs increased after states adopted or expanded the BBCE loophole.
- Enrollment is the real driver of administrative costs.
- Closing the BBCE loophole will reduce administrative costs.
Background
Under federal law, eligibility for the food stamp program is intended to be limited to truly needy Americans.1 As such, individuals with financial resources above certain thresholds are ineligible under federal law.2 However, states have been bypassing these federal limits for decades by using loopholes that expand program eligibility to millions of ineligible applicants.3
Some enrollees are determined to be “categorically eligible” for food stamps because they are also enrolled in cash welfare programs, such as the Temporary Assistance for Needy Families (TANF) program.4 Categorical eligibility was designed to avoid administrative duplication within the two welfare programs, as TANF has more restrictive eligibility requirements and TANF enrollees should have already had their income and assets verified.5
However, loopholes created by the Clinton administration and expanded by the Obama administration have allowed states to expand categorical eligibility far beyond cash welfare.6 Indeed, these loopholes have allowed states to deem anyone that has received a non-cash TANF benefit eligible for food stamps, even if this “benefit” is simply receiving a brochure or pamphlet about other welfare programs.7
States use this loophole, known as Broad-Based Categorical Eligibility (BBCE), to bypass the federal asset test and raise income eligibility thresholds for the food stamp program.8 As a result, there are more than 5.9 million ineligible individuals enrolled in the food stamp program who would not qualify without the BBCE loophole.9
BBCE leads to higher per-case costs
Proponents of BBCE often falsely claim that the loophole reduces state administrative costs by streamlining eligibility determinations.10 The Obama administration encouraged states to adopt the loophole in part because it would “reduc[e] the amount of time states must devote to verifying” eligibility.11 Under their theory, caseworkers spending less time making individual case determinations translates into lower costs for taxpayers.12
These false claims focus exclusively on costs per case while ignoring total costs, which are driven primarily by caseload size. Regardless, state-level data confirm that states using BBCE policies have higher administrative costs, even on a case-by-case basis.
In 2023, 37 states and the District of Columbia used the BBCE loophole to eliminate the asset test entirely.13 Those states had total administrative costs that averaged more than $514 per case.14 In states that verified assets, total administrative costs averaged less than $409 per case.15 This means states with no asset test had administrative costs nearly 26 percent higher per case than states that verified assets.16
States that have used the BBCE loophole to raise income limits for food stamp eligibility also have higher administrative costs. In 2023, the 17 states that used the federal income limit for eligibility had average administrative costs of less than $431 per case.17 In states that used the BBCE loophole to expand the income limit, administrative costs averaged more than $515 per case.18 Among the states that maximized the loophole to expand eligibility to the furthest extent possible, administrative costs averaged $552 per case.19 This means states that expanded eligibility to the maximum extent possible through the BBCE loophole had administrative costs roughly 28 percent higher than states using the federal income thresholds.20
BBCE states have higher certification costs
Certification costs—the administrative costs directly tied to eligibility determinations—would be most susceptible to BBCE reducing total administrative costs. Yet the data tell a different story, as states with BBCE policies have higher certification costs per case.
States that eliminated the asset test entirely had federal certification costs of nearly $159 per case in 2023.21 In states that verified assets, federal certification costs averaged roughly $127 per case.22 This means states with no asset test had certification costs nearly 25 percent higher per case than states that verified assets.23
States that use the BBCE loophole to raise income limits also have higher certification costs. In 2023, the 17 states that used the federal income limit for eligibility had average certification costs of $126 per case.24 In states that used the BBCE loophole to expand the income limit, certification costs averaged nearly $161 per case.25 Among the states that maximized the loophole to expand eligibility to the furthest extent possible, certification costs averaged more than $174 per case.26 This means states that expanded eligibility to the maximum extent possible through the BBCE loophole had federal certification costs roughly 38 percent higher than states using the federal income thresholds.27
States that adopted BBCE did not see administrative savings
Despite promises of administrative efficiency and taxpayer savings, BBCE policies have not led to lower administrative costs. An analysis of 35 states that adopted BBCE from 2006 to 2015 found that administrative costs almost universally led to higher administrative costs.28 In more than four out of five states, adopting or expanding BBCE led to higher administrative costs, certification costs, or both.29 Administrative costs rose by more than 10 percent on average after BBCE was adopted—with some states seeing increases of more than 30 percent.30 Certification costs rose in nearly 70 percent of states that expanded BBCE policies, rising by an average of more than nine percent.31
BBCE advocates have long insisted that the loophole reduces the administrative burden, but states with BBCE policies spend more per case on administrative costs than non-BBCE states. However, looking only at administrative costs per case ignores the main driver of states’ overall administrative costs.
Enrollment is the real driver of administrative costs
Advocates of BBCE often tout the myth of reduced administrative savings yet routinely ignore the real driver of administrative costs: enrollment.
An analysis of 2023 data shows that roughly 75 percent of total administrative costs are driven by caseload, not by per-case verification expenses.32 As a result, lower enrollment directly translates into lower administrative costs. If the BBCE loophole were eliminated entirely, those lower caseloads would produce nearly $1.4 billion in administrative savings for taxpayers.33-34 State taxpayers would capture roughly $1 billion of those savings.35
It is theoretically possible that more intensive eligibility verification could cause a slight increase in per-case costs, but this effect has not materialized in states verifying assets or using federal income limits. Nevertheless, even if stronger verification led to higher administrative costs per case, lower caseloads would more than offset those increases. In 2019, for example, the U.S. Department of Agriculture assumed that closing the BBCE loophole could increase administrative costs by $17.50 per case, or roughly seven percent.36 Given that states that have exploited BBCE loopholes have higher administrative and certification costs on a per-case basis, it is unlikely eliminating the BBCE loophole would actually increase costs on a per-case basis. But even if it did raise administrative costs by roughly seven percent per case in states that begin checking assets, the net administrative savings generated from removing ineligible households would still total nearly $800 million per year.37 Every single state eliminating the BBCE loophole would see administrative savings.38
However, increased administrative spending alone is only part of the equation.
Eliminating the BBCE loophole would save taxpayers nearly $110 billion.39 Any changes in administrative costs would be modest compared to the far larger savings generated by removing ineligible participants from the program.
As a result of the One, Big, Beautiful Bill, states will now be responsible for a portion of food stamp benefit costs if their payment error rates are higher than the six percent threshold.40 Eliminating the BBCE loophole would lead to $110 billion in savings for states and taxpayers, as BBCE states have error rates that are one-third higher than non-BBCE states.41 There is also potential for even more savings, as BBCE households account for more than 80 percent of food stamp payment error rates—nearly three times higher than non-BBCE households.42
States that continue to exploit the BBCE loophole are choosing higher error rates, higher costs, and a program that siphons resources from the truly needy at the expense of taxpayers. By eliminating the BBCE loophole, lawmakers can shift the program’s focus away from eligibility gimmicks and reprioritize the truly needy while saving taxpayers billions.
The Bottom Line
States should close the BBCE loophole to safeguard the program for the truly needy and protect taxpayer money.
BBCE advocates have spent decades claiming that the loophole reduces administrative burden, but the data expose that claim as categorically false. States with BBCE policies spend more on administrative costs, not less, and the loophole has enrolled nearly six million ineligible individuals in the food stamp program at taxpayer expense.43 The argument that closing the loophole would raise administrative costs rests on a fundamental misunderstanding of how these costs work: Enrollment drives administrative spending far more than per-case verification does. States should close the loophole and restore the food stamp program to the Americans it was designed to serve.
