Last year’s One Big Beautiful Bill Act (OBBBA) gave states a choice: Either limit improper payments in their Supplemental Nutrition Assistance Program (SNAP, the program formerly known as food stamps) or start sharing in the cost of paying for those benefits, which were previously covered entirely by the federal government. SNAP payment error rates have been steadily climbing in recent years, raising concerns over waste and program integrity. The cost share requirement will incentivize states to reduce their payment errors.
After a major revision in how states calculate payment errors, the error rate averaged just over 6 percent in 2017. In 2025 (the most recent data year), the average payment error rate nationwide was 10.6 percent, and states including New Mexico, Alaska, and Washington D.C. had error rates above 16 percent. The new law requires that, unless states keep payment error rates under 6 percent, they will have to pick up between 5 to 15 percent of SNAP benefit costs aside from special exclusions during the first two years of implementation.
The new cost-sharing requirement does not apply until SNAP’s FY2028 benefit payments (which start on October 1, 2027), but it is based on their payment error rates for FY2025 or FY2026 (unless a state receives a temporary exemption). This provides states with time to plan for how they will cover their share of SNAP benefit costs if necessary.
Some critics of the requirement have offered a novel argument against these changes. Instead of motivating better operations and improved program integrity, they claim some states might pull the plug on SNAP altogether. Here’s a recent review by scholars at the Brookings Institution:
We have examined the harms that will result from OBBBA ending the guarantee of full federal funding for SNAP benefits. As we, the Congressional Budget Office, governors, officials in states like Alabama and Arizona, and other analysts have concluded, the state cost shift will likely lead some states to exit SNAP altogether while other states will restrict eligibility, cut benefits, or make it harder for eligible residents to enroll in SNAP. (emphasis added)
SNAP caseloads are down 13.5 percent since May 2025, likely reflecting both OBBBA policy changes and an overdue drawdown from pandemic growth. Even though a handful of states have suggested they might exit SNAP rather than cover their share of benefit costs, we find those claims extremely unlikely for two reasons. First, ending SNAP altogether means the state would lose substantial federal funding. Second, hunger and food insecurity among low-income households in these states would increase, demanding a state response.
How big are these federal subsidies? Even in the states with the highest error rates, the federal share of SNAP benefit costs will remain larger than in other safety net programs that split costs between federal and state taxpayers. For example, the lowest possible federal share of SNAP benefit costs (85 percent for states with an error rate greater than 10 percent) will exceed the highest share in federal medical assistance offered in Medicaid (83 percent in the US Virgin Islands and outlying territories). Furthermore, the federal share of Medicaid costs is only 50 percent for a fifth of the states. In other words, even if all states were liable for the maximum cost share of 15 percent, they would still pay a significantly smaller share of SNAP benefit costs than they pay for Medicaid.
SNAP will also remain significantly more generous to states than the former Aid to Families with Dependent Children (AFDC) program replaced under the 1996 welfare reform law. Back then, scholars at the Center on Budget and Policy Priorities praised AFDC for its generosity to states and resulting financial incentives to maintain benefits:
Under the prior law, the federal and state governments shared in the cost of providing AFDC benefits and financing welfare-to-work programs. States contributed between 20 percent and 50 percent of these costs…. This financing structure provided states with an important incentive not to reduce state resources for these programs; if a state withdrew $1 of state resources from AFDC or work programs, it lost between $1 and $4 of federal funds. (emphasis added)
Under the new SNAP changes, states facing a 5 percent cost share would give up $19 in federal funding for every $1 saved by ending the program. States facing a 10 percent cost share would reject $9 for every $1 dollar spent. Even states facing a 15 percent cost share would reject roughly $6 for every $1 they would have to commit.
Consider Pennsylvania, where Governor Josh Shapiro was one of the signers of a June 2025 letter in which Democratic governors suggested the OBBBA changes create “a significant risk that states have to leave SNAP altogether.” Pennsylvania’s state general fund budget is approximately $53 billion. If the state maintains a 9 percent payment error for FY2026, they may need to fund roughly $380 million in SNAP benefit costs in FY2028 (that is, 10 percent of the $3.8 billion in benefits Pennsylvanians receive per year). That’s not a small amount, but if Pennsylvania instead ended SNAP, it would lose well over $3 billion in federal funds. The state would also have to navigate large spikes in demand for food pantries and other emergency programs due to decreased provisions for families and likely have to lay off current SNAP workers and pay them unemployment benefits as well.
The obvious solution is for Pennsylvania to reduce their SNAP payment error rate to below 6 percent. However, if they are unable, another strategy is to identify the $380 million they would need in FY2028 to cover their cost share (the equivalent of 0.7 percent of their general fund budget). In October 2025, Pennsylvania had $1.8 billion in federal Temporary Assistance for Needy Families (TANF) reserve funds—unspent TANF dollars from prior years, resulting from decades of declines in the state’s cash welfare caseload. TANF money is highly flexible, with broad parameters around spending on low-income families. States previously haven’t had reason to explore whether TANF reserve funds could be spent directly on SNAP benefit costs, which is something implementing regulations could address. But even if disallowed, states might still use TANF reserve funds to support benefits for which the state currently allocates its own funds, freeing those state dollars to cover SNAP costs. For decades, states also have been able to drop their state matching spending on the TANF program to 75 percent of former levels, reflecting significant fiscal space that could be devoted to SNAP benefit costs.
All but one state (New Jersey) recently had TANF reserve funds, while all states have benefitted from the ability to reduce TANF state matching funds over the last three decades. That suggests that, like Pennsylvania, all states have options that could help cover SNAP costs if they are unable to reduce their SNAP payment error rates. Meanwhile, all states would experience strong incentives to reduce SNAP payment errors, thus avoiding new cost share payments in future years altogether.
