Virginia officials warn HR 1 changes could cost state up to $360 million annually; agency launches 'SNAP Forward' to cut error rate

State Department of Social Services officials warned the Joint Money Committee that federal changes under HR 1 will both tighten Supplemental Nutrition Assistance Program eligibility and shift substantial costs to Virginia unless the state sharply reduces SNAP payment errors.

Carl Ayers, principal deputy commissioner for DSS, said HR 1 narrowed eligible noncitizen categories, expanded the community-work requirement for able-bodied adults without dependents (ABAWDs), raised the age at which work requirements apply and removed several exemptions. He added that the federal SNAP education grant (SNAP‑Ed) was eliminated nationally and that carryover funds will allow Virginia’s nutrition-education program to operate only through federal fiscal 2026.

Ayers told the committee that two changes carry large fiscal effects for the Commonwealth:

- Administrative match: the federal share of SNAP administrative funding will change from 50% federal / 50% state/local to a 75% federal / 25% state match for administrative costs effective Oct. 1, 2026 (Ayers said this shift increases state administrative obligations by roughly $90,000,000).

- Benefit match tied to error rate: beginning Oct. 1, 2027, states may be required to contribute part of SNAP benefit payments depending on their federal quality-control (QC) error rate. Ayers said Virginia’s QC error rate for the most recent federal fiscal year is 11.5% (up from 9.81% previously). Using three‑year average benefit payments of about $1,800,000,000, he said a 15% maximum match would imply up to $270,000,000 in additional state cost; combined with the administrative shift, that yields a potential annual exposure of about $360,000,000 in a worst‑case scenario.

"I have been directed to get our program under 6%," Ayers told the committee, describing a directive from the governor to reduce the state's QC error rate to avoid the match.

How the error rate is calculated and what DSS is doing

Ayers explained QC mechanics: the federal QC process uses a statistically valid sample of SNAP cases (about 1,020 active cases annually plus roughly 680 negative-action cases). QC flags an improper payment when payment differs from correct benefit by a federal threshold (about $58). Improper payments can arise from agency or household reporting errors; Ayers said roughly 40% of recent errors were the result of household nonreporting or misreporting rather than agency processing alone.

To lower the rate, DSS launched an initiative called "SNAP Forward." Measures described to the committee include:

- Engaging a vendor (KPMG) on a short-term contract to conduct root-cause analysis and targeted file reviews for 20 local departments that account for more than half of SNAP recipients. - Aligning program rules and QC practice so front-line eligibility decisions match later federal reviews. - Conducting intensive training (Ayers said the department has done more than 40,000 trainings in recent weeks) and implementing new supervisor-review standards. - Issuing an RFI and receiving more than 35 vendor proposals for technology tools, including automation and AI, to identify likely errors proactively and flag cases before they move into QC. - Exploring public-private partnerships to expand local capacity and creating potential incentive funds to reward performance reductions in error rates.

Ayers said some previously used exemptions and self-attestation practices have been curtailed to reduce QC exposure. He emphasized that the QC problem is national and not unique to Virginia and that the state’s structure — 120 locally administered departments — means small-sample variability can make local error rates appear volatile.

Committee context and timing

DSS officials and the governor’s office said the timing of the federal changes makes the issue urgent: administrative-match changes take effect Oct. 1, 2026, and benefit-match consequences tied to QC performance would begin Oct. 1, 2027. Because the federal QC baseline is rebased annually, Ayers said the state must achieve sustained reductions in error rates, not a one‑year fix.

The deputy commissioner also told the panel that SNAP benefit issuance for October had been made before the federal funding lapse and that, to date, operations had continued without interruption for October; DSS warned that prolonged federal funding disruptions beyond October could require different contingency actions.

Ending

Ayers summarized the department’s work as a combination of policy alignment, intensive training, targeted vendor assistance and technology adoption aimed at reducing payment errors and avoiding potential new state fiscal obligations under HR 1.