Policy Considerations Relating to Privatization in the Food Stamp Program

The Food Stamp Act requires that state civil servants make all decisions about individual households’ eligibility for benefits. Throughout the program’s history, state civil service admini­stration has been taken for granted. Last year, however, USDA approved a waiver for Florida to partially privatize administration of the Food Stamp Program in several counties. Now, at least two states are developing plans to contract with private entities to take over substantial parts of the eligibility determination process. Flor­ida has decided it does not want to wait for the results of the experiment USDA approved and is seeking ap­proval for a loosely-defined waiver to allow it to solicit bids for pri­vatizing statewide an un­determined num­ber of functions within the eligi­bil­ity determination process. On June 25, USDA expressed receptivity to Florida’s pro­posal but sought additional clarification. Texas has pro­posed to close more than half of its local offices, largely replacing them with kiosks and call cen­ters that would determine eligibility based on materials received over the tele­phone and internet. Apparently some or all of these call centers might be operated by private contrac­tors. Both states are pur­su­ing similar changes in their Medi­caid programs.

These proposals raise significant issues, both for these two states and for the future of the national Food Stamp Program. Over one million people received food stamps in Florida during an aver­age month of 2003, with total issuance that year of almost one billion dollars. Texas’s average 1.9 million food stamp recipients received $1.9 billion in food stamps last year. This year, the states rank fourth and first in the country, respectively, in food stamp issuance. Private con­trac­­tors long have operated some discrete func­tions for the Food Stamp Program: printing food stamp coupons, designing computer software, operating electronic benefit transfer (EBT) sys­tems, managing employment and training programs, etc. No firm, how­ever, has ever had con­trol of the entire program — or, in particular, the decision about whether particu­lar households receive food stamps. When the Food Stamp Program began to convert from paper coupons to EBT, USDA and states recognized that the conversion would be costly, disruptive, and subject to potentially serious unforeseen problems. Accordingly, they moved cautiously to minimize harm to vulnerable recipient families. This deliberate approach stands in stark contrast to the rapid, large-scale im­plementation that Florida and Texas are proposing.

– Center on Budget and Policy Priorities

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