June 20, 2012

The Supplemental Nutrition Assistance Program (SNAP, formerly known as food stamps) does a lot to help out low-income American families — 46 million Americans participate in the program, half of whom are children. This means there’s lots of money in SNAP — thanks to the weak economy, SNAP expenditures increased from $30 billion in 2007 to $72 billion last year.

SNAP is regulated as part of the Farm Bill, and as this year’s bill is being debated in Congress, much attention has been focused on cutting some food assistance for poor Americans.

But whose food assistance won’t be cut? The big corporations that profit off SNAP.

As Michele Simon writes in her recent paper “Food Stamps: Follow the Money,” “While much attention has focused on how farm subsidies fuel our cheap, unhealthy food supply, SNAP represents the largest, most overlooked corporate subsidy in the farm bill.”

Simon outlines how three different powerful industries profit from SNAP: food manufacturers like Coca-Cola and Kraft; food retailers like Walmart; and big banks, including J.P. Morgan Chase, which work with states to administer benefits.

While SNAP is a federal program, USDA and the states work together to administer the program. States contract with banks, who authorize payments (Electronic Bank Transfers or EBTs) from the Federal Reserve to retailers. J.P. Morgan Chase has contracts in half the states “indicating a lack of competition and significant market power,” according to Simon. How much are these deals worth? In New York, one seven-year deal originally gave the bank $112 million for its services, but was recently amended to add another $14.3 million.

How did J.P. Morgan Chase end up with such sweet deals in so many states? Lobbying, of course. The company lobbied USDA in 2011 specifically on EBTs and in 2008, the last time the Farm Bill was renewed, it lobbied both the House and Senate on five different provisions of the farm bill.

Who else administers EBTs? Northrop Grumman, better known as a defense contractor, oddly has multimillion dollar contracts with Montana and Illinois. Affiliated Computer Services (a Xerox subsidiary) runs 13 state systems and Fidelity National Information Services has another 11.

Thanks to weak transparency rules, we’re not able to determine just how much corporations benefit from these contracts, but large amounts are at stake and it appears that much of this money is going to enrich the administrators at the expense of SNAP’s beneficiaries. Simon estimated that in Florida J.P. Morgan Chase made $123 million from fees over five years — a 50 percent increase over the original contract. In New York, the state paid over $100 million in fees to the bank over five years.

The entire report is worth a read, especially if you’re interested in food politics.