Iowa's Limited Benefit Plan. I. Monthly Patterns of Food Stamp Receipt and Benefit Levels

05/01/1997

In this section, we describe monthly patterns of Food Stamp benefit receipt and benefit levels over time for cases assigned to the LBP.

1. Monthly Patterns of Food Stamp Receipt

Table III.12 shows the monthly pattern of Food Stamp benefit receipt for all cases assigned to the LBP and for the two groups defined by whether the LBP was ever canceled. The patterns in receipt of Food Stamp benefits are broadly consistent with the patterns in receipt of FIP benefits shown in Table III.9. In each month, cases with canceled LBP assignments are more likely than cases with never-canceled assignments to receive Food Stamp benefits. From month to month, there are also smaller declines in the percentage of cases that receive Food Stamps for cases with canceled LBP assignments than for cases with never-canceled assignments.

Table III.12

While never-canceled LBP cases are not eligible for any FIP cash benefits during months 7-12 of the LBP, there is no such restriction on their receipt of Food Stamps. When eligibility for FIP ends in LBP month 7 for never-canceled cases, the incidence of Food Stamp receipt in this group declines slightly, from 45 percent to 42 percent. During the six-month period of ineligibility for FIP benefits, the percentage of never-canceled LBP cases that receive Food Stamps declines gradually from 42 percent to 35 percent. The lack of increased participation in the Food Stamp program among never-canceled cases when they are ineligible for FIP is consistent with the hypothesis that these cases are relatively less disadvantaged. In the first three months of renewed eligibility for FIP following the LBP, receipt of Food Stamps by never-canceled cases remains constant at approximately 35 percent.

2. Food Stamp Benefit Levels and the Safety Net Hypothesis

Food Stamp benefits may provide a safety net, or cushion, for families when their FIP benefits are reduced and subsequently terminated under the LBP. That is, the Food Stamp benefit level may increase, and as a result may offset some of the decline in household economic resources caused by the loss of FIP benefits. While any such increase in Food Stamp income moderates the household's decline in resources, it also dilutes the incentive effects of the LBP.

Since the potential Food Stamp safety net is most relevant to those cases that experience both the reduction and termination of FIP benefits, we focus the present analysis on the subset of LBP cases that experience these two events--these are the never-canceled LBP cases that exhibit a pattern of FIP receipt consistent with the full 12-month LBP term (full-term LBP cases). To determine whether Food Stamp benefits provide a safety net for full-term LBP cases when FIP benefits are reduced and terminated, we examine the average Food Stamp benefit received on a month-by-month basis. We do this in two ways: (1) for the subset of full-term cases receiving Food Stamps in the current month for LBP months 1-12, and (2) for the subset of full-term cases receiving Food Stamps in all twelve months of the LBP. The results are presented in Table III.13.

Table III.13

There is evidence that Food Stamps provide a small safety net. In particular, there are increases in Food Stamp benefit levels for full-term LBP cases when their FIP cash benefits are reduced and terminated, but these increases are modest. For current month Food Stamp recipients, the average Food

Stamp benefit in months 1-3 of the LBP, when FIP benefits are level, is approximately $247. Then, when FIP benefits are reduced in month 4, the average Food Stamp benefit of current month recipients increases by $21 (9 percent) and remains at this higher level during the three months of reduced benefits (months 4-6). Finally, when FIP benefits are terminated in month 7, the average Food Stamp benefit increases by $25 (9 percent), from $271 in month 6 to $296 in month 7. Throughout the FIP ineligibility period (months 7-12), Food Stamp benefits of full-term LBP cases remain consistently higher than in the earlier months of the LBP, although they tend to decline slightly over time.

One potential critique of the above findings is that the observed increases in Food Stamp benefits among current month recipients over the course of the LBP could to some extent be driven by changes in the composition of Food Stamp recipients. In particular, if less needy cases leave the Food Stamp program over time, the remaining Food Stamp recipients would have higher average benefits aside from any safety net effect. The fact that the increases in Food Stamp benefits so closely match the timing of the FIP reduction and termination under the LBP leads us to believe compositional changes are unlikely to be driving the results. To confirm this, we examine average Food Stamp benefits for the restricted sample of full-term LBP cases that received Food Stamps in all twelve months of the LBP. Since the composition of this sample does not change over time, we can gauge whether compositional changes are driving the increases in Food Stamp benefits observed for current month Food Stamps recipients. It appears that they are not. As shown in the last column of Table III.13, the pattern of Food Stamp benefits is the same for twelve-month recipients as for the current month recipients. In particular, benefits are relatively level in months 1-3, increase $29 (11 percent) in month 4 when FIP benefits are reduced, remain level in months 4-6, increase $32 (11 percent) in month 7 when FIP benefits are terminated, and remain higher (though decline slightly) throughout the FIP ineligibility period. Hence, we conclude that Food Stamps provide a modest safety net for some LBP cases.