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New figures from the U.S. Department of Agriculture 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.

The national rate is 10.6%.

A provision in HR 1, the federal budget bill approved last year by Congress, says states with error rates at 6% or more must start paying some of the cost of the benefits of what is formally known as the Supplemental Nutrition Insurance Program or 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 for Arizona 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 people have been knocked off food stamps in Arizona since Congress approved HR 1 than in any other state in the nation.

Figures from the state Department of Economic Security showed that the number of Arizona 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 Arizonans were getting food stamps.

DES Director Michael Wisehart told Capitol Media Services last month that some of that is related to HR 1 — including specifically the mandate to reduce the error rate. That, in turn, put more pressure on eligibility workers to do more to screen applicants and make sure they have all the necessary documentation.

There's another factor, too. "Arizona invests less money than other states in terms of eligibility determination than other states do,'' Wisehart said.

Arizona Gov. Katie Hobbs has moved to deal with that part of the problem, said gubernatorial press aide Christian Slater. He said Hobbs allocated $6.4 million in leftover COVID relief funds to hire more eligibility staff. The new state budget that kicks in July 1 has another $10.8 million, Slater said, though that is one-time funding for 146 positions within DES.

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.

State could still avoid the penalty

Still, there is a chance that Arizona could reduce — and possibly even eliminate — the $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 which error rate is lower: either the error rate for the 2025 fiscal year — 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 the error rate is right now. And the official figure from the USDA will not be released until June 2027.

But the state has shown it can do better: The food stamp error rate for the 2024 fiscal year was 8.84%.

The Arizona Center for Economic Progress, which lobbies to put more money into public programs, says 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 Wednesday.

It also warns that even if Arizona does escape federal penalties, what's in HR 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 2026-27 budget year, rising to about $44 million annually after that.

More applications denied

There's a separate question beyond the error rate, but one closely tied in: How many Arizonans are eligible for the food stamp benefits — the maximum ranges from $298 a month for a single individual to $994 for a family of four — 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 department said the number of employees who reviewed food stamp eligibility dropped from 1,370 in July 2024 to 880 last July.

The COVID funds used by Hobbs for DES were aimed at addressing the delays in processing food stamp applications and also to deal with those seeking unemployment benefits, another program within DES. But those dollars were temporary.

Wisehart said efforts by the state to reduce its error rate mean changes in how DES screens applicants. Those have included things like reducing the ability of the agency to allow people to simply self-attest to certain things like income, he said.

But the fallout 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.