Arizona’s error rate in dealing with food stamp applications has worsened, meaning the state stands to lose hundreds of millions of dollars in federal funding.
The error rate refers to both overpayments and underpayments and is calculated by the U.S. Department of Agriculture, which administers the Supplemental Nutrition Assistance Program.
By the end of fiscal year 2024, Arizona’s error rate was 8.8%, but on Wednesday, USDA put the total error rate for the state at 10.8%.
That includes more than 8.6% in overpayments and almost 2.2% where recipients got less than the amount to which they were entitled.
That is still better than the national rate of 10.6%, but Arizona’s federal funding is in danger.
The issue is a provision in HR 1, the budget bill approved last year by Congress.
It says that states with error rates at 6% or more must start paying some of the cost of the benefits of SNAP. Normally, all benefits are paid for by the federal government.
That penalty hits 5% for error rates up to 8%, 10% when the error rate goes up to 10% — and 15% for rates higher than that. That's where the estimate of a $208 million penalty comes in beginning in the 2027-2028 budget year.
The news about the error rate comes more than two months after it was revealed that a higher percentage of Arizonans have been knocked off food stamps Congress approved HR 1 than any other state in the nation.
Not only that, but the Arizona Department of Economic Security slashed hundreds of thousands of Arizonans from SNAP in an effort to reduce the error rate.
Many of the Arizonans who lost their benefits say they’re still eligible, but DES is making it nearly impossible to complete applications. That’s partly because the agency now requires phone interviews, but it’s difficult for people to get an agency representative on the phone.
Figures from the Department of Economic Security showed that the number of recipients was cut by half, with more than 450,000 losing benefits in the past year, including close to 200,000 children.
In February 2025, close to 920,000 people were getting food stamps.
DES Director Michael Wisehart said the desire to reduce the error rate put more pressure on eligibility workers to do more to screen applicants and make sure they have all the necessary documentation.
DES has said repeatedly that Arizona underfunds the agency.
The new state budget that kicks in July 1 has another $10.8 million for DES, though that is one-time funding for 146 positions within the agency.
But he said all of that came too late to affect the newly released 10.8% error rate, calculated for the period from Oct. 1, 2024 through Sept. 30, 2025.
Still, there is a chance that Arizona could reduce — and possibly even eliminate — that $208 million penalty.
HR 1 is structured so that the final decision on how much Arizona will have to pay out of its own treasury for food stamp benefits in the 2028 fiscal year could be reduced. That's because it will be computed on the lower of the error rates for the 2025 fiscal year — the one with the 10.8% figure — or the one the state manages to attain for the 12 months ending this coming Sept. 30.
A spokesman for DES did not provide any estimates late Wednesday of what is likely to be the error rate for the current federal fiscal year, or even what is error rate right now. And the official figure from the USDA will not be released until June 2027.
DES sent out a statement attributing the USDA’s new error rate to a “lagging performance indicator” that doesn’t reflect all of the policy work the agency has done in the last several weeks.
“This FFY 2025 error rate reflects a sample of SNAP households receiving benefits between October 2024 and September 2025, and because SNAP cases can remain certified for 12 months or longer, many of the errors identified in this sample stemmed from DES practices that were in place long before H.R. 1’s burdensome requirements,” the agency wrote.
The Arizona Center for Economic Progress, which lobbies to put more dollars into public programs, says that the error rate is not necessarily related to fraud or cheating.
“These errors can include cases in which an eligible family received slightly too much or too little assistance because of a processing delay, a mistake by an eligibility worker, incomplete information, or problems with a computer system,” the organization said in a press release on Wednesday.
It also warns that even if Arizona does escape federal penalties, what's in H.R. 1 still will result in higher costs for the state. That's because federal law also shifts more of the responsibility of administering the food stamp program to states, regardless of the error rates.
A preliminary analysis says that should add about $33 million in costs in the 2026-2027 budget year, rising to about $44 million annually after that.
There's a separate question beyond the error rate but one closely tied in: How many Arizonans actually are eligible for the food stamp benefits — the maximum ranges from $298 a month for a single individual to $994 for a family of court — but aren't getting them.
Wisehart said that even before Congress enacted HR 1, DES was hobbled by layoffs, a move the state blamed on other cuts in federal funding.
That came at the expense of eligibility workers. The agency said the number of employees who reviewed food stamp eligibility dropped from 1,370 in July 2024 to 880 last July.
Those COVID funds were designed to address the delays in processing not just food stamp applications but also to deal with those seeking unemployment benefits, another program within DES. But those dollars were temporary.
Wisehart said that efforts by the state to reduce its error rate means changes in how DES screens applicants. And he said that has included things like reducing the ability of the agency to allow people to simply self-attest to certain things like income.
But the fallout in all of that is that more applications have been denied, driving down the number of Arizonans collecting benefits.
That drop in food stamp recipients has, in turn, increased demand on food banks. The Arizona Food Bank Network reported in January that about 720,000 people are visiting food banks each month.
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