Navigating the Impact of H.R. 1 on SNAP

The passage of H.R. 1 has disrupted the Supplemental Nutrition Assistance Program (SNAP) with the most sweeping structural changes and strict administrative penalties seen in a generation. From sharp federal funding cost-shifts to tightened eligibility parameters, the Arizona Department of Economic Security (DES) has been forced to rapidly overhaul our process to administer vital nutrition benefits. Yet, amid this nationwide disruption, Arizona is continuing to navigate this new normal. Thanks to early implementation strategies to tackle payment error rates and streamline operations, the state is beginning to see crucial signs of progress: backlogs are clearing, and after months of sharp decline, SNAP caseloads are finally stabilizing.

SNAP Payment Error Rate: Why It Matters

Ensuring accuracy in our eligibility determinations has always been important. The passage of H.R.1 in July 2025 established a new benefit cost sharing penalty effective FFY 2028, which begins October 1, 2027.

States with a payment error rate (PER) below 6% in either FFY 2025 or FFY 2026, will not be required to pay any cost share, while states with a PER of 6% or higher will pay up to a maximum of 15% of SNAP benefits issued in the state. For Arizona, an error rate at or above 6% could result in an annual penalty up to $300 million. Our primary goal is to bring the FFY 2026 PER (ending Sept. 30, 2026) under 6% to safeguard 100% federal funding. 

Federal Fiscal Year (FFY) 2025 Payment Error Rate (PER) 

On June 24, 2026, the United States Department of Agriculture (USDA) released the official PER for FFY 2025 showing an increase to 10.8% from 8.84% in FFY 2024. Below are several critical items to consider in understanding the PER:

• The official PER is a lagging performance indicator. The official FFY 2025 PER published by USDA reflects policies and eligibility work that occurred before H.R. 1 and before our 2025 efforts could influence the PER. This rate does not reflect the actions taken by DES in response to the requirements imposed by the federal government.
• 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 before H.R. 1’s burdensome requirements. 
• Because H.R. 1 was passed well into the federal fiscal year, our team had less than three months remaining in FFY 2025 to apply the new policies and processes. 
• PER is a measure of overpayments and underpayments; not an indicator of fraudulent activity. This is a measure of accuracy in determining a household’s eligibility and the amount of benefits they can use for groceries.
• Arizona’s FFY 2025 PER is near the national average of 10.62%. Ongoing quality improvement efforts are expected to result in an FFY 2026 PER below the national average. 

Reducing Error Rates

In FFY 2028, when the benefits cost share becomes effective, states can use either their FFY 2025 or FFY 2026 PER as the basis for the penalty calculation. DES has made significant progress toward reducing the FFY 2026 PER under 6%. The official FFY 2026 error rate will not be available until June 2027. 

Implementing Federal Requirements While Securing the Future of SNAP in Arizona

DES moved quickly to implement federal H.R. 1 requirements for SNAP, but that came at a heavy cost. We understand the impact the new federal requirements have on millions of Arizonans who benefit from SNAP, not only the individual recipients but their communities, retailers and our state as a whole. DES is actively managing these new quality and eligibility requirements to ensure the long-term stability of SNAP in Arizona.

We are working to improve timeliness for eligible Arizonans, while maintaining these hard-won PER gains. While critical system modernization is vital to our success, our frontline staff has been – and continues to be – the true backbone of this effort. 

Addressing the PER

Arizona took immediate action on error reduction efforts after H.R. 1 became law. Strategies include, but are not limited to:

• Increasing documentation requirements to support the accuracy of claimed expenses and reported income. For instance, if a third-party source shows a client starting employment that has not already been reported, the Department sends a request for information regarding the new employment.
• Introducing continuous income monitoring, matching SNAP caseload information against employer-reported data to help identify cases that may be over the income threshold. 
• Implementing a preauthorization review process to proactively resolve application errors and provide real-time feedback to eligibility staff.
• Investing in improved systems and technology to streamline operations, such as automated discrepancy flags, alerts, and system task automation.

Caseload and Compliance

Arizona has made strides in a short time to implement the new requirements of H.R. 1., which initially resulted in a significant caseload decline. The decrease in Arizona’s SNAP caseload reflects Arizona’s diligent implementation of H.R. 1,  including updated able-bodied adults without dependents (ABAWD) exemptions and geographic waiver criteria, changes to non-citizen eligibility, and quality assurance improvements to avoid state cost sharing. 

Balancing compliance with federal changes and improving program access for eligible Arizonans, we are now seeing an increase in caseload as projected, signaling that the height of the federal disruption is behind us. As reflected in our May 2026 Statistical Bulletin, 451,762 individuals received SNAP in May, an increase of 16,566 individuals since April 2026. 

As other states fully implement the provisions of H.R. 1 and Arizona’s caseload stabilizes, we expect differences in caseload decline between states to more closely align.

Operational Improvements and Service Delivery

The implementation of H.R. 1 triggered unprecedented call volumes and administrative hurdles, creating real barriers for applicants needing interviews. The federal government shutdown at the end of 2025 also disrupted services and exacerbated the situation. To meet this surge head-on while balancing the dual federal mandates of quality and timeliness, DES is deploying both immediate operational fixes and long-term strategic measures. Our goal is to protect taxpayers from fiscal penalties through accurate eligibility decisions while ensuring families face fewer delays.

To eliminate bottlenecks, DES launched a new call-back process and deployed dedicated phone kiosks in local office lobbies. These efforts are further supported by a transition toward a more service-oriented lobby model that emphasizes real-time application entry and immediate verification assistance upon a customer's arrival. In July, we will expand this capacity through a public-private partnership, adding prerecorded scheduling guidance and increasing our ability to assist with document uploads and general inquiries.

With investment from Governor Hobbs, Arizona continues to increase SNAP benefit eligibility staffing capacity. We have expanded capacity by allowing staff to work overtime on weekday evenings and weekends.

As new staff and technology upgrades come online, we expect continued improvements to application processing timeliness. By focusing on administrative solutions, improving accuracy, and reducing the PER now, we are safeguarding the program for those who qualify, ensuring SNAP remains a stable resource for vulnerable Arizonans.

Frontline

Our frontline teams have dedicated themselves to navigating an incredibly complex system to serve the families who need it most. H.R. 1 raised the stakes and the workload. Federal changes made a complex program even more challenging—demanding more documentation, rigorous verification, and stricter accuracy requirements, all while staff worked tirelessly to deliver aid without delay.

We have aggressively pursued opportunities to invest in new technology, streamline processes, and increase capacity so our teams can fulfill their mission efficiently and impactfully. We remain committed and focused on supporting our frontline teams, ensuring continued success in providing critical assistance to eligible families.

Looking Forward

This work is furthered by the recently passed Arizona FY2027 Budget, signed into law by Governor Hobbs, which underscores our commitment to protecting critical assistance. It provides an additional $10.8 million in funding to help manage increased SNAP eligibility workloads resulting from new requirements in the federal H.R. 1 law, and to continue efforts to reduce the Payment Error Rate. By investing in necessary infrastructure and administrative measures, this budget helps Arizona to efficiently deliver benefits while meeting federal SNAP quality mandates and avoiding financial penalties.

To streamline operations, DES is also investing in modern systems and technology. Replacing the decades-old legacy SNAP mainframe is costly but necessary. By transitioning these processes into the DES A-to-Z portal, the Department will dramatically improve application processing and service delivery for both clients and staff.