incorporate these factors into the SNAP benefit formula is less compelling. The committee also identified as an issue affecting the adequacy of SNAP allotments the fact that the annual maximum benefit update occurs following a 16-month lag. The June cost of food is used to update the TFP in October, but then is not updated again until the following October, 16 months later. Because of the impact of inflation and other factors on food prices, this lag in the benefit adjustment can significantly reduce the purchasing power of SNAP allotments.
• Benefit reduction rate—The original assumption underlying the benefit reduction rate is that the average U.S. household spends 30 percent of its income on food. This assumption is outdated and inconsistent with the current average spending pattern across income levels in the United States of about 13 percent of pretax income spent on purchases of all food consumed, both at home and away. Although lower-income households spend a greater portion of their income on food (e.g., 16.8 percent in 2010) compared with higher-income households (e.g., 11.7 percent in 2010), the percentage is still substantially less than the 30 percent assumption currently used or the lower effective benefit reduction rate that results after other parts of the benefit formula have been applied. Evidence suggests that a lower benefit reduction rate more closely aligned with current household spending patterns would likely give households greater incentive to combine workforce participation with the receipt of SNAP benefits by reducing the penalty for working.
• Calculation of the net income deduction—The committee found evidence that several program characteristics used to determine net income and the monthly allotment may not adequately capture the impact of additional extraordinary household costs that reduce the allotment’s purchasing power. Regarding the shelter deduction, considerable evidence shows that a substantial proportion of SNAP households face housing costs in excess of the current cap on the shelter deduction, which results in overestimation of the net income participants have available to purchase food. Deductions allowed for medical expenses for persons older than 60 and the disabled may influence the purchasing power of the allotment for those individuals but do not address out-of-pocket medical costs for nonelderly, nondisabled participants, although more evidence is needed to understand the impact of such expenses on the adequacy of SNAP allotments. Evidence is more limited on whether the current 20 percent earned income deduction is adequate to cover the additional expenses incurred by SNAP recipients who work.