CNE Review – August 2022

Published on August 11, 2022 / Leer en español

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In This Issue

The cost of food has been in the headlines recently due to a set of intersecting crises. The still ongoing COVID-19 pandemic; the Russian invasion of Ukraine; supply chain disruptions; and natural disasters have combined to generate an overall spike in food prices. According to the Food and Agriculture Organization of the United Nations, “global food prices were 23 percent higher in May 2022 than they were a year earlier.”

Puerto Rico has not been exempted from this trend. According to the most recent release of the consumer price index for the island, the cost of “general foodstuffs” increased in June 2022 by 10.3% relative to the same month in 2021. We note this increase is probably underestimated due to problems with the construction of the price index for Puerto Rico. In any event, even if it is true that the rate of inflation for food in Puerto Rico is half the rate for the entire world, many households in Puerto Rico were already food insecure prior to the pandemic due to the relatively high cost of living in the island; little local production of basic dietary staples; the requirement to use costly U.S. flag vessels to transport food and other cargo from the U.S.; low wages; and high rates of poverty and income inequality.

This is the context, then, in which Puerto Rican and federal elected officials, members of the Biden administration, and civil society organizations have been advocating for a transition from the Nutrition Assistance Program (“NAP”) currently in effect in Puerto Rico to the Supplemental Nutrition Assistance Program (“SNAP”) currently operating in the 50 states, the District of Columbia, and the U.S. territories of Guam and the Virgin Islands.

As part of that advocacy effort, Congress ordered the Food and Nutrition Service (“FNS”) of the U.S. Department of Agriculture (“USDA”) in 2021 to undertake an update of a 2010 study of the feasibility of implementing SNAP in Puerto Rico. The USDA, in turn, hired two consulting firms, Insight Policy Research and Mathematica, to carry out this update for FNS. The USDA released the final report of the Update to Feasibility Study of Implementing SNAP in Puerto Rico in July 2022 (the “Feasibility Study”).

For years, CNE has advocated for equal treatment in regards to federal programs such as MedicaidSupplemental Security IncomeEarned Income Tax Credit, and a transition from NAP to SNAP. In this month’s CNE Review we take a look at some of the most important findings of the Feasibility Study and analyze their implications for the full implementation of SNAP in Puerto Rico.

Sergio M. Marxuach, Editor-in-Chief

We are excited to announce a new team member

Francis G. Torres
Senior Policy Analyst
CNE Washington, D.C. Office

Francis has been a member of the CNE family for some time. He worked as a Communications and Content Specialist at our D.C. Office, where he learned about Puerto Rico’s most urgent policy problems and helped develop advocacy strategies to shape federal solutions. Francis returns to CNE after earning his Master in Public Affairs degree from the Princeton School of Public and International Affairs. During his time at Princeton, he led a team of MPA students in researching and drafting Puerto Rico’s Moonshot Opportunity: Recommendations for the U.S. Territory’s Economic Future, a policy report commissioned by the Office of the Governor of Puerto Rico and focused on optimizing federal funding for Puerto Rico’s economic recovery. More recently, he served as Master of Ceremonies for CNE’s 2021 Growth Policy Summit.

Francis joins CNE at a crucial juncture for federal involvement in Puerto Rico. He will strengthen CNE’s advocacy, thought leadership, and presence among networks of key stakeholders and decision-makers in Washington, D.C., and help place the Growth Project’s proposals at the center of federal debates on Puerto Rico.

We are certain that he will make significant contributions to the success of the Growth Project, and we’re happy to have him back on the team!

Insights + Analysis from CNE

By Sergio M. Marxuach, Policy Director

Nutritional Assistance in Puerto Rico

Federal nutrition assistance for residents of Puerto Rico began in November 1974 under the old Food Stamp Program (“FSP”). Initially and during the first eight years of the implementation of the FSP in Puerto Rico it functioned just like in the U.S.: all eligible participants received paper coupons which could then be used to purchase food items from certified food retailers on the island.

In 1982, Congress replaced the FSP in Puerto Rico with an annual block grant through the NAP. In general, the capped block grant structure of the NAP has generated discrepancies in eligibility criteria and benefit levels relative to SNAP.

Click here for details on how these discrepancies play out in reality.

Transition to SNAP

The transition from NAP to SNAP would be a complicated and costly process. It will be necessary, among other things, to enact federal and local legislation, issue new regulations, implement new requirements and provide for the operation of several components of SNAP that currently do not operate in Puerto Rico.

Click here for details on the process and costs of a transition to SNAP.

What to Expect Under SNAP in Puerto Rico

According to the Feasibility Study, the following are some of the effects that can be expected if SNAP is implemented in Puerto Rico:

  • Asset LimitsThe implementation of SNAP asset limits would result in a lower number of beneficiaries in Puerto Rico. However, the Feasibility Study states that this effect could be mitigated, at least in part, by adopting broad-based categorical eligibility (“BBCE”) rules. Click here for details.
  • Income Limits –As shown in the graph below, income limits under NAP are lower than SNAP’s for households of one to three people. So, everything else being equal, this would mean that a larger amount of smaller households in Puerto Rico would qualify for benefits under SNAP than under NAP. Click here for details.Source: Feasibility Study, p. 37.
  • Work Requirements – Currently there are no work requirements under NAP. The government of Puerto Rico would be required to implement work requirements under SNAP. Click here for details.
  • Several Groups May Lose Eligibility or Receive Lower Benefits – The authors of the Feasibility Study conclude that “further research is needed to determine which NAP participants would be most likely to lose nutrition assistance benefits.” Click here for details.
  • Benefit Calculation – According to the Feasibility Study, “in 2021, in the absence of relief funding, the SNAP maximum benefit was 1.8–2.1 times higher than the NAP maximum benefit.” (Feasibility Study, p. 38) Click here for details.
  • Estimated SNAP Participation in Puerto Rico – The authors of the Feasibility Study found that the number of participating households, individuals, and percentage of covered population would increase under SNAP. Click here for details.

So, what is the bottom line?

On the positive side of the ledger, we find: (1) funding for nutritional assistance would increase significantly under SNAP, from approximately $2.6 billion in FY2023 to $4.5 billion in FY2031; (2) the number of beneficiaries would increase between 9 and 12 percent (depending on the final set of rules adopted); (3) the maximum amount of benefits would increase, in some cases they may actually be double the amount currently available under NAP; and (4) the increased spending in nutrition expenditures would have a positive income multiplier effect on the local economy in both the food retail and the local agricultural sectors as well as a positive impact on overall employment.

On the other side of the ledger, we need to take into account the following: (1) implementation costs could exceed $400 million dollars over a ten-year period, at a time when the Fiscal Oversight and Management Board has been implementing budget cuts across the government; (2) administering SNAP after rollout would cost an estimated $249 million to $414 million, on an annual basis (but FNS would cover approximately 54% of these costs); (3) some groups could lose eligibility for nutritional assistance or qualify only for lower benefits; and (4) the government of Puerto Rico would have to gear up for the implementation of several components of SNAP which currently don’t operate in Puerto Rico.

What about work requirements, are they a benefit or a cost?

While this newsletter is not the venue to fully address this debate, we do note that work requirements appear to be more effective in theory than in practice for several reasons. Click here for a brief analysis.

Regardless of where the government stands in the debate over work requirements, it appears that the benefits of implementing SNAP in Puerto Rico outweigh the costs, provided that adequate measures are taken to try to protect, or reduce the impact on, those who may be negatively affected by the transition from NAP to SNAP. In a transition like the one proposed, there will always be winners and losers, but we must try to minimize the negative consequences that particular groups would face.

On Our Radar...

The National Security Case for Industrial Policy – Industrial policy in the United States has been closely related to the achievement of national security objectives at least since World War II. During the post-Cold War era, however, the U.S. Government’s economic policies encouraged the offshoring of production to help companies maximize profits, even as such policies benefited potential geopolitical rivals, such as China. Now, as the authors of this paper published by the Center for a New American Security argue, “the relationship between American industry and the U.S. government must change. The nature of the U.S.-China strategic competition, one centered on technology, requires a reset in how America’s policymakers and corporate leaders engage. Matters of economic competitiveness and security are increasingly indistinguishable.”

The Strange Economy of 2022 – Economic indicators appear to be out of sync. There is soaring demand and high inflation. Yet GDP in the U.S. has contracted for two quarters in a row. Economists have spent the last couple of weeks debating whether or not the U.S. is in recession. The crux of the matter is, as Ben Casselman explains in this piece for the New York Times, that “Typically, in recessions, the problem is that businesses don’t want to hire and consumers don’t want to spend. Right now, businesses want to hire, but can’t find the workers to fill open jobs. Consumers want to spend, but can’t find cars to buy or flights to book. Recessions, in other words, are about too much supply and too little demand. What the U.S. economy is facing is the opposite.”

The Costs of Kleptocracy – Public sector corruption has been in the local news recently after the arrest of several government officers and persons with close connections to them. This primer from Chatham House explains what is a kleptocracy and the economic and social costs it creates.