New York taps controversial bonus program to preserve SNAP at farmers markets

In the wake of the news that a company responsible for processing EBT payments at hundreds of farmers markets would soon go out of business, New York Gov. Andrew Cuomo announced a plan last Friday to ensure markets can continue accepting SNAP benefits through the end of the market season. Funding for the plan will come from a pot of money allocated to New York as part of a controversial federal program that rewards states for implementing SNAP with low error rates—and one that lawmakers may eliminate in the next farm bill.

According to the New York State Department of Agriculture and Markets, Gov. Cuomo’s agreement with the company, Novo Dia Group, which is expected to be finalized by the end of August, will keep its Mobile Market+ app operational for all states through the end of the farmers market season. After that, a more permanent solution will be needed to allow SNAP participants to continue to shop at the farmers markets that use Novo Dia’s software.

FERN broke the news on July 9 in The Washington Post that Novo Dia, a Texas-based payment processing company responsible for as much as 40 percent of all SNAP transactions at farmers markets, was planning to shut down on July 31. In the wake of that news, many elected officials and advocacy groups urged the USDA to find a solution for SNAP processing at markets.

The funds for Gov. Cuomo’s temporary fix will come from a $12 million SNAP performance bonus that New York received in 2015, says the state’s Department of Agriculture and Markets. The 2002 farm bill authorized the bonuses, which the Food and Nutrition Service (FNS) allocates each year to states based on their payment accuracy, error rates, and application processing timeline.

FNS completed rulemaking around SNAP high performance bonuses in 2005 and established a $48 million annual fund for the bonuses. The 2014 farm bill added the requirement that states reinvest the funds in the SNAP program.

But the bonus program could be drastically reduced or eliminated altogether in the next farm bill. The House version of the bill eliminates the state performance bonuses, and the Senate version cuts funding for the bonuses from $48 million to $6 million. The proposed changes come after a multi-year debate about whether states are accurately reporting SNAP error rates, which measure whether the right amount of SNAP benefits are making it to the appropriate households.

The debate was sparked in 2015, when a report from the Office of the Inspector General, and subsequent investigations by the USDA and Department of Justice, found that 42 states had not properly reported the misallocation of SNAP benefits, and that some had misled federal auditors. Wisconsin, Virginia, and Alaska paid over $16 million to USDA in 2017 to settle such issues.

The investigation raised concerns that the state bonus program was incentivizing states to adjust their reported error rates to secure more federal funding. The OIG report asserted that the bonus system introduced a “conflict of interest between either accurately reporting the true error rate and incurring a penalty, or finding ways to mitigate errors and receiving a bonus from FNS for exceeding error rate standards.”

But not all experts agree that the bonus program should be gutted. The Center on Budget and Policy Priorities wrote in a July report that the Senate farm bill “goes too far” in stripping the bonus program, arguing that “[i]t’s premature to eliminate bonuses for payment accuracy before giving the agency and states time to address the concerns raised by the OIG report.”