The One Big Beautiful Bill Act (OBBBA) mandates a $186 billion reduction in SNAP spending over the next decade, leading the USDA to signal that the program will need to be fundamentally restructured to meet that goal. Among the many SNAP policy changes on the table, two provisions carry the greatest weight: a new benefit cost-sharing requirement that forces states with high payment error rates to absorb part of their SNAP benefit costs, and a shift in administrative cost sharing that transfers most operating expenses to states. This blog examines these changes and explains what they mean for Texas—and why the state’s current error rate leaves it exposed to potentially significant financial liabilities.
The Supplemental Nutrition Assistance Program (SNAP) has long operated under a federal–state administrative partnership in which the federal government pays for all food benefits while states administer eligibility processes and share administrative costs. The One Big Beautiful Bill Act (OBBBA) marks a fundamental break from this model. Motivated by high payment error rates nationwide, Congress created a new framework that ties state financial responsibility directly to program accuracy. Under this law, states with error rates above a federally defined threshold must begin paying a share of SNAP benefits starting in FY 2028. For the initial implementation year, FY2028, states may elect to apply either their FY2025 or FY2026 payment error rate when calculating their cost-sharing obligation. Starting in FY2029, USDA is required to use the payment error rate from the third preceding fiscal year to establish the state’s share. Additionally, states will face reduced federal reimbursement for administrative costs beginning FY 2027. Together, these provisions create the first-ever scenario where SNAP payment errors translate into state fiscal obligations.
The SNAP payment error rate is the percentage of total SNAP benefits that were issued incorrectly, either because a household received more than it should have (an overpayment) or less than it should have (an underpayment), based on federal eligibility and benefit rules. These errors are measured by USDA’s Quality Control (QC) system which draws monthly samples from state caseloads and recomputes all eligibility and benefit calculations to estimate the total value of overpayments and underpayments to households by states. The total dollar value of overpayments and underpayments is then divided by the total benefits issued in the sample to produce the overall payment error rate. In FY 2024, the national payment error rate was 10.93 percent, consisting of a 9.26 percent overpayment rate and a 1.67 percent underpayment rate. These elevated error rates prompted Congress to establish a direct link between a state’s payment error performance and its fiscal responsibility for SNAP costs through measures outlined in the OBBBA.
New Federal Rules
Beginning in FY 2028, states whose payment error rates exceed 6 percent must contribute a share of SNAP benefit costs on a sliding scale as shown in Table 1. These costs, or state liabilities, reflect the share of total benefits that states must fund from their own budgets. A state with an error rate between 6 and 8 percent must cover 5 percent of benefit costs, one with an error rate between 8 and 10 percent must contribute 10 percent, and states with error rates above 10 percent will owe 15 percent.
Figure 1. OBBBA State Benefit Cost Sharing Tiers from FY 2028
| Payment Error Rate | State Share of SNAP Benefits |
| < 6% | 0% |
| 6% – <8% | 5% |
| 8% – <10% | 10% |
| ≥10% | 15% |
Figure 2 presents a choropleth map of state SNAP payment error rates based on the FY 2024 Quality Control (QC) report, illustrating how states would fall into the new OBBBA liability tiers if the law had been implemented in FY 2024. The map uses a four-color gradient to show the distribution of error rates across the country. States shaded in light blue have payment error rates below 6 percent (9 states fall into this category) and therefore would face no new financial obligations. Six states in medium blue report error rates between 6 and 8 percent and would fall into the first tier of liability. Similarly, dark blue represents states with error rates between 8 and 10 percent (17 states) fall in the second-tier liability; and the darkest navy/black shading highlights states (21 of them) with error rates at or above 10 percent, the highest-risk category with the greatest potential fiscal exposure.
Figure 2: Payment Error Rates by States, Fiscal Year 2024
Texas in Context: Current Error Rates and Why They Matter
Although Texas’ FY 2024 payment error rate of 8.32 percent places it below the national average of 10.9 percent, it still exceeds the critical 6 percent cutoff that triggers cost-sharing under OBBBA. Because the first year of the cost-sharing calculation (FY 2028) will be based on either the FY 2025 or FY 2026 error rate, Texas faces financial risk if its elevated error levels continue into those years. In other words, unless Texas reduces its payment error rate below 6 percent by FY 2025 or FY 2026, the state will be required to pay a share of SNAP benefit costs beginning in FY 2028.
About 10.1 percent of Texas’ population receives SNAP benefits, less than the national 12.3 percent. Even so, because of Texas’ large population of 31 million and corresponding SNAP recipients of 3.2 million, the financial effects of the cost-sharing mandate are amplified relative to many smaller states.
From Federal Rules to State Liabilities
As said earlier, starting in FY 2028, any state exceeding the 6 percent error threshold must pay a portion of its SNAP benefit costs. These costs, referred to as state liabilities, reflect the share of total benefits that states must fund from their own budgets. SNAP liabilities are calculated by multiplying total SNAP benefits issued in a state by the state’s match percentage. Texas issued approximately $7.5 billion in SNAP benefits in FY 2024. Applying the cost-sharing percentages from Table 1 to this base allows us to estimate the annual exposure Texas faces under different scenarios.
Figure 3 illustrates how Texas’ SNAP benefit-sharing liability changes as its payment error rate moves across the federal cost-sharing thresholds established under OBBBA. The horizontal axis lists the four distinct error-rate brackets that determine state cost-sharing responsibilities: <6%, 6–8%, 8–10%, and >10%. The vertical axis measures the corresponding annual state liability in millions of dollars, ranging from $0 to over $1.2 billion. At its current payment error rate of 8.32 percent, Texas sits just inside the 8–10 percent bracket and would be required to contribute 10 percent of SNAP benefit costs, resulting in a liability of $750 million (10% of $7.5 billion). The bar chart also shows that if Texas succeeds in reducing its error rate below 8 percent, even by a small margin, it immediately moves into the 6–8 percent bracket, cutting the match rate to 5 percent and lowering the state’s liability to $375 million (5% of $7.5 billion).
The figure also highlights the steep fiscal risks Texas faces if its payment error rate worsens. If Texas’ error rate were to rise and cross the 10 percent threshold, it would enter the next federal penalty tier, where the required state match increases to 15 percent. Under this higher bracket, Texas’ liability would surge to roughly $1.1 billion annually. Overall, it is clear that even modest increases in payment-error rates can translate into large, sudden increases in state financial obligations, while reductions in error rates offer equally significant savings.
Figure 3: Liability vs Payment Rates
Administrative Cost Sharing
In addition to restructuring benefit cost-sharing, the One Big Beautiful Bill Act (OBBBA) also changes the way SNAP administrative costs are divided between the federal government and the states. Historically, the federal government has reimbursed states for approximately 50 percent of their SNAP administrative expenses, which include staffing, case management, eligibility verification, IT systems, and customer service infrastructure.
Beginning in FY 2027, OBBBA reduces the federal reimbursement rate of these costs from roughly 50 percent to 25 percent. This means that states must cover approximately 75 percent of their administrative costs going forward. For Texas, this change creates a fiscal shift, given the state's large SNAP caseload and administrative infrastructure. As of FY 2023 (the latest available administrative cost data from the USDA) Texas’ share of the administrative cost for SNAP was $170.1 million. Under OBBBA, the reduced federal match will increase Texas’ administrative spending by an additional $85 million per year. This administrative burden compounds the financial pressure from benefit-sharing requirements.
OBBBA reshaped the financial architecture of SNAP by linking state budgets to program accuracy for the first time in the program’s history. With payment error rates now carrying direct fiscal consequences, Texas could face substantial exposure unless significant improvements are made in eligibility determination, verification, and case management processes. Texas’ current payment error rate places it in the 10 percent benefit cost-sharing tier, and when combined with the sharp reduction in federal administrative reimbursement, the state could be required to absorb nearly $1 billion in annual SNAP-related liabilities beginning in FY 2028.
An additional complexity is that these estimated liabilities assume no changes to the structure of the SNAP program or to Texas’ participation levels. Because the cost-sharing formula applies to total SNAP benefits issued, any increase in caseloads—driven by economic conditions, population growth, or administrative policy—would proportionally increase the state’s financial burden. Conversely, a decline in participation would reduce total exposure. Thus, Texas’ ultimate fiscal responsibility will depend not only on its ability to reduce payment errors below federal thresholds, but also on how participation trends evolve over the next several years.
Given Texas’ constitutional requirement to maintain a balanced budget, the state would need to respond by raising additional revenue, redirecting funding from other services, or enacting policy changes that could reduce SNAP participation or benefit levels. As USDA moves to implement the restructuring of SNAP in decades, the extent to which Texas can adapt will determine whether these reforms become a manageable administrative challenge or a long-term strain on the state’s fiscal capacity.