Michigan oversight panel hears that SNAP error rates and new federal penalties could cost state tens to hundreds of millions

Adam Stacy, a policy analyst at the Mackinac Center for Public Policy, told the Michigan House Oversight Subcommittee on State and Local Public Assistance Programs that the states current Supplemental Nutrition Assistance Program (SNAP) error rate of 9.53 percent could expose Michigan to hundreds of millions of dollars in added costs under recently enacted federal changes.

"Currently in the state of Michigan, we have a SNAP error rate of 9.53," Chair Wolford said at the start of the hearing. Stacy and several representatives described how provisions of what Stacy referred to throughout the hearing as the 1 Big Beautiful Bill Act (OBAA) change both the federal-state administrative cost share and the penalties states face if their improper-payment rates exceed federal thresholds.

Stacy told the committee that the federal changes disentangle long-standing arrangements that covered most benefit payments and administrative costs. He said states will be required to assume a larger share of administrative expenses and will face graduated matches if their SNAP improper-payment rates exceed the federal target. "If we're above 6% below 8, we're gonna have to make a match of 5%. If we're 8 to 10%, we're gonna have to do 10%, and 10% or greater is 15%," Stacy said.

Why it matters: SNAP serves roughly 1.5 million Michiganders, about one in seven residents, and the program delivered about $3.2 billion in benefits in fiscal 2024, Stacy said. Under testimony, Michigan currently splits administrative costs roughly 50/50 with federal funds; those administrative costs total about $380 million annually. Stacy said the new federal cost-share will shift to a 75/25 state-federal split and estimated that change would add about $95 million in state costs. Combined with potential penalty matches tied to the error rate, Stacy described a fiscal exposure range between roughly $95 million and $575 million depending on how error rates and enrollment hold.

Stacy explained how the SNAP improper-payment rate is measured: states perform monthly quality-control reviews of case samples, the federal government selects a subsample for review, and the official state error rate is calculated from those findings. He noted the calculation excludes small payment differences under a fixed threshold (currently $57, rising to $58 next year) that the federal government does not count as improper payments. Stacy said final, official error-rate determinations arrive months after the fiscal year end; the committee was told the federal government publishes the official state figure on June 30 following the fiscal year.

Committee members pressed Stacy on causes and remedies. He identified the leading categories of error as income reporting mistakes (which he said account for roughly two-thirds of errors), deduction errors (about 20 percent), and nonfinancial eligibility issues (about 16 percent). In his view, overpayments are the dominant problem nationally, roughly five times more frequent than underpayments.

Stacy proposed operational fixes the state could adopt or accelerate: earlier participation in the SNAP National Accuracy Clearinghouse to reduce dual-state enrollment, a second-review process so a different staffer vets initial eligibility determinations, and stronger front-end training and quality controls. On the clearinghouse he said, "All states have pledged to join by 2026. The federal government has mandated that everybody join by October 2027," and recommended Michigan enroll as soon as technically feasible.

Committee members also sought comparisons with other states. Stacy said eight states were in compliance with the federal 6 percent guideline for the most recent fiscal year (Idaho, Montana, Nebraska, South Dakota, Utah, Vermont, Wisconsin and Wyoming) and that Wisconsins error rate was roughly 4 percent. He also noted Alaska recently had error rates above 20 percent and received federal fines after certification extensions and backlog issues.

What the subcommittee did: The hearing was an educational presentation; there were no committee votes on policy changes. The body did adopt the minutes from its July 24 meeting by unanimous consent at the outset of the session.

Stacy and the representatives emphasized that the official error rate for a fiscal year is determined by the federal review months after the year ends and that Michigan can choose the lower of its two most recent error rates for certain penalty calculations. Michigan Department of Health and Human Services (MDHHS) guidance and federal implementation details remain outstanding, Stacy said; he repeatedly advised the committee that several federal implementation directives tied to OBAA are still under development by the U.S. Department of Agriculture.

The presentation closed with a note about policy priorities: Stacy urged the state to prioritize accuracy in benefit delivery. "For a 10% error rate means that for every dollar that might be in an improper payment, whether it's an overpayment or underpayment, that's a dollar that's not going to those most in need," he said.

Looking ahead: The subcommittee did not take further action at the hearing. Members asked staff to continue monitoring MDHHS guidance and the USDA rulemaking timeline ahead of the federal deadlines for official error-rate publication and for the administrative cost-share change.