Provisions in the One Big Beautiful Bill Act are scheduled to introduce new financial penalties for states with high error rates in the Supplemental Nutrition Assistance Program (SNAP), commonly known as food stamps. Starting in October 2027 (fiscal year 2028), states that misspend a significant portion of benefits will be required to pay up to 15 percent of those benefit costs. Currently, the federal government pays 100 percent of the approximately $100 billion annual cost of SNAP benefits, while states manage the enrollment and administration.
The legislation includes a specific threshold that allows states to avoid these penalties if their reported error rate exceeds 13.34 percent. According to the Foundation for Government Accountability, this provision provides states with higher error rates more time to implement changes before facing financial consequences. Data from fiscal year 2023 showed Alaska had an error rate of 60.4 percent, prompting Sen. Lisa Murkowski (R-Alaska) to seek the carveout.
Reporting from fiscal year 2025 indicates that several states and the District of Columbia remain above the 13.34 percent threshold, including Alaska, Georgia, Oregon, and Washington, D.C. New Mexico reported an increase in its error rate from 14.6 percent in 2024 to 16.8 percent in 2025. Niki Kozlowski, director of the Income Support Division at New Mexico’s Health Care Authority, described the state's approach as a "balancing act" between controlling misspending and state administrative needs.
The scale of the impact is tied to specific error rate thresholds. States with error rates below 6 percent trigger no penalties, while those between 6 and 13.34 percent face immediate financial liability starting in fiscal 2028. Residents in states like New Jersey, which saw its error rate drop from 14.3 percent to 6.8 percent, may see different administrative priorities than those in states like Illinois or Delaware, where error rates rose to 16 percent and 14.6 percent respectively between 2024 and 2025. The 13.34 percent "loophole" effectively grants a two-year delay to states with the highest levels of misspending.
The knock-on effects include potential changes to how states verify eligibility and process applications, as they seek to avoid these new costs. However, current legislative efforts may alter these timelines; a draft Senate farm bill includes a proposal to delay all penalties by an additional year. What happens next depends on whether this delay is adopted and how states like New York and Maryland—currently just below the 13.34 percent mark at 13.18 and 13.08 percent—manage their programs before the October 2027 effective date.