MILLER: Fed cuts pass the buck to Illinois

The costs to Illinois’ government because of the new Republican congressional budget reconciliation law will be steep.  

However, the state has some time to prepare itself, and possible Democratic gains in the US House and Senate next year might be able to reverse or mitigate some of the steepest cuts to food security and healthcare programs before the vast majority of them take effect after the 2026 elections.  

In the interim, Gov. JB Pritzker could also lower some of the state’s direct fiscal impact with a big administrative effort – a fact that has been glossed over in pretty much all news coverage so far.

Without substantial changes to the state’s administration, Illinois’ share of increased mandated costs for the Supplemental Nutrition Assistance Program might total $788 million a year – money the state clearly does not have.

Gov. JB Pritzker claimed last month that the SNAP proposal would cost Illinois $1.2 billion a year, but his projection was based on the US House’s proposal. The Senate version, which passed the House, scaled back that number.  

The reductions don’t begin until the 2028 federal fiscal year (which starts October 1, 2027), so the state has a chance in the meantime to improve matters on its end, and that effective date is almost a year after the 2026 midterm elections. 

If current trends continue, Illinois will have to pay 15 percent of the total SNAP benefit costs, which, according to the governor’s office, would be $705 million a year.  

The reason the state is on the hook for 15 percent of benefit costs is because of its high SNAP payment error rate, which stood at 11.56 percent in fiscal year 2024, according to the US Department of Agriculture. The state’s error rates for underpayments to SNAP beneficiaries was less than one percent, but its overpayment error rate was 10.6 percent.

The new federal law requires that states with SNAP payment error rates of ten percent or higher must pay 15 percent of SNAP benefit costs. The state will struggle mightily to afford that, so lots of people may lose their food aid if things don’t change.  

Eleven states, including New York and New Jersey plus the District of Columbia, had higher error rates than Illinois, but 38 had lower error rates.  

If Illinois could reduce its error rate to above 8 percent but below 10 percent – on par with states like Michigan, Ohio and Texas – then it would pay 10 percent of benefit costs, or $470 million a year.

Reducing Illinois’ error rate to a recent 15-year average of what the Food Resource and Action Center says was 7.1 percent, would make its annual penalty five percent of benefit costs – or $235 million a year.  

And if Pritzker’s administration could decrease the error rate below 6 percent, then the state would face no additional state penalties at all.  

Illinois achieved those lower error rates five times between 2011 and 2017. Eight smaller states, including Wisconsin, had error rates below 6 percent in FY24.  

Unless the law is changed, reducing the error rate has to be done or it’s gonna eventually cost the state a fortune and/or result in huge numbers of people missing out on aid.

Gov. Pritzker frequently touts his administrative prowess, so this gives him a measurable opportunity to prove it. But he doesn’t have much time because the first increased SNAP payment will be based on the state’s performance during federal fiscal year 2026, which begins this October. The state needs an all hands on deck approach to this problem.

The new law also requires states to pick up the tab for 75 percent of SNAP administration expenses, which will cost the state an extra $83 million a year, according to the Greater Chicago Food Depository. States currently pay half the expenses.  

However, regardless of Illinois’ error rate, the state’s SNAP outlay could very well be lower than $708 million because the new federal law will likely result in significantly fewer SNAP recipients, mainly due to work requirements. If history is any guide, up to a quarter of recipients could lose some or all of their benefits without any actual corresponding increase in employment.  

Illinois will have to work hard to make sure people don’t fall through the paperwork cracks, but that will also mean it’ll cost the state more money to pay a portion of their benefits unless it manages to get its error rate under control.

Rich Miller also publishes Capitol Fax, a daily political newsletter, and CapitolFax.com.