NCPA - National Center for Policy Analysis

New Electronic System Helps Some States Nab Food-Stamp Scams

April 17, 2000

Food-stamp recipients who cheat by selling their benefits cost federal taxpayers between $815 million and $1 billion annually, officials estimate. But a new system called "electronic benefit-transfer," or EBT, which allows recipients to pay for their groceries with state-issued debit cards rather than paper stamps, could curb the practice of selling the coupons for cash.

  • Between 1998 and 1999, 6,873 persons were disqualified from food-stamp benefits because they engaged in the scam.
  • However, just two states were responsible for catching 89 percent of those identified -- with Maryland catching 3,000 and Texas disqualifying 2,966, according to a General Accounting Office report.
  • Out of a survey of 28 states and the District of Columbia, 13 states and the District disqualified at least a few people -- but the remaining 15 states didn't remove anyone at all from the program.
  • Those states were Alabama, Alaska, Colorado, Connecticut, Georgia, Hawaii, Idaho, Massachusetts, New Hampshire, North Dakota, Oregon, Pennsylvania, Rhode Island, South Dakota and Vermont.

The scam involves recipients selling their stamps to store owners -- often at a 50 percent discount. The unscrupulous owners then redeem the stamps for full value. But with the EBT system, anomalies such as mom-and-pop groceries doing $100,000 in food stamp operations a month can be identified by computers and the operation shut down.

Already 70 percent of food stamps are delivered electronically and all states have until Oct. 1, 2002 to switch to the EBT system.

In 1999, the program issued $16 billion in benefits to some 18 million people.

Source: Cheryl Wetzstein, "Maryland, Texas Lead Crackdown on Food-Stamp Program Cheaters," Washington Times, April 17, 2000


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