Over the last 20 months, a string of media reports have drawn attention to the "questionable locations" where welfare recipients have withdrawn federal money. Now the government has taken action. Buried in the payroll tax cut extension, which Congress passed earlier this month, is a bill that would cut a state's access to federal funds if it fails to adopt policies that block welfare recipients from accessing their funds in liquor stores, casinos or strip clubs.
Proponents of the measure believe it's critical to curb abuse of taxpayer money. Critics counter that adopting such policies will be an excessive burden on state coffers, and that the bill stigmatizes welfare recipients, the vast majority of whom spend the money on necessities.
Millions Of Dollars Of Potential Abuse
The federal government provides cash support every month to over 4 million struggling Americans, including many single mothers and their children, through Temporary Assistance for Needy Families. The maximum monthly TANF benefit for a family of three is, on average, $428 a month, usually accessed through debit cards known as Electronic Benefit Transfer cards. Recipients are eligible for a total of five years of assistance in their lifetimes.
A series of media investigations over the past two years have found that thousands, and in some cases millions, of dollars have been withdrawn from locations that might suggest the money was used for things other than its mandated purpose: necessities like food, clothing, transportation, personal care products and baby needs.
A Michigan investigation found that more than $12,000 had been withdrawn from one Detroit casino over the course of a year. Fox 5 Atlanta found that $150,000 was accessed in liquor stores, bars and nightclubs in Georgia. King 5 News in Seattle discovered that 13,000 TANF recipients had taken $2 million out at casinos across Washington in 2010. Michigan, Washington and several other states have since taken action to prevent EBT card access at these kinds of locations.
"The abuse of funds on EBT cards must stop," said Rep. Charles Boustany Jr. (R-Louisiana), the bill's sponsor, in a statement. The bill passed Congress with overwhelming support from both parties.
Under the new law, states that fail to implement policies within two years could face up to a 5 percent drop in their TANF funding.
Not A Problem, Not A Solution
The Federal Funds Information for States, which reports on the impact on states of federal policy decisions, says that the few states that have studied the issue have found that less than 0.1 percent of TANF transactions took place at the targeted locations, reports the Stateline website. "This means that states could incur substantial costs to address an issue that does not appear to be a widespread problem," the group said in a February brief.
The Government Accountability Office, at the request of Congress, is currently surveying 10 states to see where welfare benefits are being withdrawn for a report that is expected in May or June.
Other advocates fear that the new law unfairly stigmatizes welfare recipients. "They hinge on the stereotype of welfare recipients as vice-ridden and wasteful spenders of taxpayer money," said the D.C.-based Center for Law and Social Policy, an advocacy group for low-income Americans, in a statement.
The organization further points out that an ATM in a liquor store may simply be the most convenient and cheapest way for many recipients to withdraw assistance. It also criticizes politicians who are focusing on this issue while failing to increase the TANF program, which hasn't been adjusted for inflation since its creation in 1996.
Last year, for the first time since the program's creation, Congress also didn't fully fund the supplement grants that 17 states receive. According to the Center on Budget and Policy Priorities, a nonpartisan think tank, in 34 states the real value of the cash assistance is now at least 20 percent lower than in 1996.
But the bill's proponents nevertheless see it as an important safeguard against waste and fraud. "It protects the public interest," said Boustany, "by ensuring money meant to help Americans get back on their feet is used for that very purpose."
Even with certain ATMs off-limits, however, it's impossible to guarantee how federal money is ultimately spent, when it's given out as cash.
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