Alabama Lawmakers Face Potential Budget Challenges

This week, Alabama lawmakers received a warning about possible changes to the Federal Nutrition Assistance Rules, which could result in over $200 million added to the state budget by 2028.

During a meeting of the Joint Legislative Budget Committee, the Nancy Buckner Committee of Human Resources discussed how federal policy modifications will shift greater responsibility for the Supplementary Nutrition Assistance Program (SNAP) to states in the coming years and the financial implications involved.

“Starting in 2027, administrative fees will be about 50 to 75 percent covered by states and 25 percent by the federal government,” Buckner explained. “That would mean approximately $35 million more than what we’re experiencing now.”

Currently, SNAP benefits are entirely funded by the federal government. However, beginning in fiscal year 2028, Alabama will also be responsible for costs associated with payment error rates. For fiscal year 2024, Alabama’s error rate stood at 8.32%, which, while the best in the Southeast, placed it 16th nationwide.

“For Alabama, that could mean a cost of $173 million, even at an error rate of 24,” Buckner added. “The total increase projected from 2026 to 2028 amounts to $208,694,000.”

Some lawmakers expressed skepticism about these estimates, questioning how such a significant figure could stem from what seemed like a relatively small sample size. Alabama’s 2024 federal review of error rates was based on 1,109 random cases, with 175 cases identified as having errors.

The monetary value tied to these errors was about $36,000, a figure used to extrapolate errors across Alabama’s nearly $2 billion SNAP caseload, leading to a total estimate surpassing $170 million.

Some legislators voiced concerns about using such a limited sample as the basis for determining penalties and budget adjustments of that magnitude.

“You’re reading it correctly,” Buckner affirmed.

Criticism also targeted the federal formula for calculating these rates. The state takes the payment error rate and multiplies it by 1.5. If the result exceeds 20%, the state has to cover more costs as a penalty from two years prior.

“So, if you’re doing poorly, you get rewarded?” questioned Senator Greg Albritton, chair of the Senate General Fund Committee.

“We can’t discuss who created these rules, but it’s just math,” Buckner replied.

Ten states with error rates above federal thresholds may face implementation delays until 2030. Alabama needs to improve its performance to manage costs more effectively.

Buckner indicated that errors were generally the result of both agency mistakes and client failures to report accurately.

“Our statistics show about 48% of errors are from agency oversights, while 52% stem from clients,” Buckner stated.

Alabama utilizes automation via its ASAP program, aiming to reduce staffing expenses, but this has also been linked to errors.

“When caseworkers handle over 3,000 cases each, compared to 550 in other states, the savings are significant,” Buckner said. “However, the error rate can rise as a consequence.”

Agent errors frequently occur when caseworkers fail to adequately document changes within households or overlook necessary documents. Errors can occur from not entering correct income amounts or minor issues like deduction amendments, even if the household’s final benefits are correct.

Client errors often arise when recipients fail to report changes timely, such as relocating, turning 18, or starting a job. Federal guidelines necessitate prompt reporting of such changes, yet many clients either don’t fully comprehend the rules or delay until recertification.

Legislators inquired whether these errors might be construed as intentional fraud, but Buckner clarified that most client errors are not deliberate nor intended to deceive.

Fraud and security issues remain critical for the department. Buckner noted that Alabama recovers roughly $5 million monthly, including significant TANF fraud highlighted by federal authorities.

However, persistent losses and shifting federal obligations to states have prompted some lawmakers to question whether Alabama can maintain the safety and financial stability of the program.

“Seeing that $208 million on the screen is alarming, and it should concern all of us,” said Representative Andy Whitt, R-Harvest.