What the Fiscal Cliff Could Mean for Families

As a result of the Recession, millions of people lost jobs and the poverty rate in the United States rose sharply. People who had been living comfortably were laid off and suddenly became impoverished, and those who were already struggling to make ends meet saw resources becoming even more scarce. While the country continues to slowly recover from the recession, the level of families in need continues to exceed the supports available to meet those needs through the safety-net.  Even for those who qualify for housing vouchers, waiting lists can be years long, as is the case in Washington, DC., where the average wait for a two-bedroom apartment is at least 22 years; children in some households become adults by the time they come off the waiting list, and many families never receive housing support at all. Adding to the burden, food stamps are hardly sufficient to cover the actual cost of meals, especially in urban areas where the cost of living is high. The average benefit amount an individual receives with food stamps is $4.46 a day, but in Washington D.C. an individual’s average total food cost for the day is $10.23.

However, as we’ve mentioned in previous posts, programs for low-income individuals are not just money taken from the government, but money put back in to the economy: food stamps provide states with more revenue and create jobs, and the Earned Income Tax Credit encourages work and is largely lauded as the most successful anti-poverty program.

In addition, health programs such as Medicaid and the Children’s Health Insurance Program are valuable because their coverage of screening and other prevention services reduce the likelihood that people will develop more debilitating and costly health problems in the future—chronic diseases and illnesses that cost the United States billions of dollars each year in missed days at work and lost productivity.

In the current negotiations in Congress on how to prevent the “fiscal cliff”, it is vital that one of the principles in developing solutions be: they cannot increase poverty or income inequality. In order to preserve programs for poor and low-income families, a good balance between revenue increases and spending cuts will be necessary. Unfortunately, entitlement and other programs for low-income people are often an easy target for cuts. Although cutting entitlements may save money in the immediate future, the consequences to families and the long-term consequences to the economy will be much more costly.

There is bipartisan agreement that a total of $4 trillion in deficit reduction is needed to stabilize the debt. $1.7 trillion in savings has already been achieved, through cuts to defense and non-defense discretionary spending enacted by the Budget Control Act. Therefore, Congress now needs to decide where to find an additional $2 trillion in savings.

Important decisions to be made during this lame duck session include:

• The size and ratio of spending cuts to revenue increases
• How to cancel and replace the sequester
• What to do about tax cuts
• What the downpayment on deficit reduction will include.
• Considerations over lowering caps on non-defense discretionary spending, as established under the Budget Control Act
• How to control spending in Medicare and Medicaid
• Determinations of revenue requirements

Preserving programs for low-income individuals is a good investment—for building human capital in terms of health, training and education, for creating pathways to employment, and for reducing poverty and strengthening the middle class.

For more information on the ways that investing in families can be sound fiscal choices for states visit the Policymakers’ Corner or the Policy for Results website.

How Asset Tests Hinder the Goals of Safety Net Programs

It is common knowledge that the way to economic self-sufficiency involves having a bank account and saving your money—not only so that you can eventually buy a house or fund your children’s education, but also to have an emergency fund (enough money to cover living expenses for three months) in case of job loss, health emergencies or other unexpected costs. It is also how people get out of debt and can start building wealth.

This value, saving, is reflected in many states’ economic programs for people enrolled in the Temporary Assistance for Needy Families (TANF) program. Parenting skills classes and job readiness trainings teach the importance of having a bank account and saving money. However, this value is not always reflected in states’ policy regarding eligibility for TANF. Furthermore, the Supplemental Nutrition Assistance Program (SNAP) also has asset tests, which can be different from those for TANF, adding another layer of complexity and inconsistency.

Not only do asset tests counter one of the major goals of the TANF program, it also creates extra work for state administrators and increases the chances for payment errors. There is no federal mandate for states to adopt asset tests, but of the ones that do, they vary widely in which types of resources count toward their asset limits. These resources may include bank statements, car titles, insurance policies and other relevant documents. In some cases, applicants can self-report their assets; in others, a caseworker must verify the assets based on the submitted documents.

 A new report from the New America Foundation, State Asset Limit Reforms and Implications for Federal Policy, describes how some states have reformed their policy on asset limits in their SNAP and TANF programs. Motivated by increasing program costs, threats to program integrity, and the recognition that asset tests are a barrier to long-term self-sufficiency, many states have eliminated asset tests for TANF and/or SNAP. For example, Colorado estimated that eliminating its TANF asset test would result in additional benefits for 44 families, at a cost of $123,000. However, these costs would be offset by greater administrative efficiency; eliminating the asset test would save caseworkers 10 to 15 minutes per “case interaction”, or up to 90 minute for the five or six interactions that typically occur between a client and a caseworker in the first 45 days. The successful policy reforms in Colorado and other states can serve as a useful model for other policymakers who are considering similar changes.

While asset tests were instituted to ensure that assistance is given to the families who need it the most, research has shown that once asset tests are eliminated, program enrollment did not increase significantly. This is due in part to the fact that families that seek assistance and meet the low income requirements are generally asset poor. In addition, the money that states saved in reduced administrative costs more than made up for the slight uptick in enrollment.  

States benefited from eliminating their asset tests in several key ways:

•      Caseworkers had more time and attention for other case management duties
•        Greater administrative efficiency resulted in cost savings
•        Greater streamlining simplified the process for both families and the agency

Asset tests are an example of a policy that while likely created with good intentions, has had serious unintended consequences for families’ efforts to attain financial success. This policy exemplifies the significance of considering the unintended impact of policy on families and highlights the importance of policymaking with a results focus (ensuring that policy is well aligned with intended outcomes). Eliminating asset tests is an important policy reform that policymakers should consider as a step towards encouraging families on public assistance to move towards financial self-sufficiency.

To learn more about connecting policy to results visit PolicyforResults.org. 

Utilizing Technology to Expand Access to Safety Net Services

Yesterday the Coalition for Access and Opportunity, of which CSSP is a member, held a briefing titled “Removing Red Tape: New Strategies for Strengthening the Safety Net” in which a panel described the actions state and local governments are taking to make their safety net programs more effective and efficient. These programs include the Supplemental Nutrition Assistance Program, Medicaid, the Children’s Health Insurance Program, Temporary Assistance for Needy Families, the Child Care and Development Block Grant, and the Low-Income Home Energy Assistance Program.

In the traditional human services paradigm, consumers receive services by walking into a human service organization, meeting in person with a case worker, and either supply the caseworker with their completed forms and supporting documentation, or receive assistance from the case worker in filling them out. The case worker then determines if the consumer is eligible for the benefit. The advantage to this traditional method is that consumers receive individualized support. On the other hand, consumers have to visit multiple agencies to apply for a comprehensive package of services, they often have to wait in long lines, and they are burdened with having to take time off of work, which is risky to their employment status and earnings. In addition, this process leads to heavy administrative costs to the agency.

To address these problems, many states have utilized the Internet and sophisticated software systems and databases to simplify the way consumers access safety net services. In May the Coalition for Access and Opportunity, released a report titled “Moving to 21^st-Century Public Benefits: Emerging Options, Great Promise, and Key Challenges” which examines promising practices across states to propose a new model for modernizing the public safety net to make it easier and less burdensome for families to receive benefits. Its recommendations include changing eligibility rules and procedures to allow for more streamlined enrollment into programs and for retaining eligible individuals for longer.

These eligibility rules changes include—

• Using other programs’ findings to “deem” consumers eligible for assistance without asking one agency to replicate or revise the work already done by a different agency.
• Basing eligibility on prior-year income tax records;
• Providing continuous eligibility by disregarding short-term income fluctuations; and
• Eliminating eligibility requirements that cannot be documented based on data matches. For example, consumers could opt for standardized rather than itemized deductions or disregards, and asset tests could be eliminated for some or all consumers. 

The modernized eligibility procedures include—

• Using data matches, rather than consumer provision of information, to complete application forms and establish eligibility;
• Using electronic case records or data warehouses to serve multiple programs, so that information or documentation already received by one office can be used by others;
• “No wrong door” policies so that data received by one agency is forwarded to other agencies. This would minimize the number of agencies consumers have to physically enter, just to give the same information that they provided to other offices.
• Streamlining renewal by automatically granting continued eligibility based on data matches and by letting families provide missing information over the phone and online; and
• Default enrollment strategies that provide eligible consumers with assistance unless they affirmatively “opt out”.

The success of these policy changes will be determined by how closely policymakers pay attention to the details of their implementation and balance their priorities of saving administrative costs with increasing access to consumers.  Some areas that may require attention include:

• Increased reliance on data must be met with strong security provisions to protect consumers’ privacy.
• Shaping eligibility rules to fit available data means they might disregard factors such as housing costs or asset values, which are factors that could help focus assistance on the people with the greatest need.
• Reforms that address multiple programs need to be carefully structured so that they do not import more restrictive rules into programs that are less restrictive.
• The use of Internet- and telephone-based enrollment pathways must not completely replace the traditional in-person model.  Many low-income people have not filed federal income tax returns and may lack a data trail showing eligibility. Some people may not know how to use the technology or lack the language or literacy skills needed for online applications. Still others may not have access to computers, which is especially a concern for rural and frontier locales. 

Utilizing technology has in some cases led to a dramatic increase in enrollment among those who are eligible, which suggests that the change was successful and merits the consideration of program modernization in other states. However, in the excitement to take advantage of technology to streamline enrollment and minimize administrative costs, it will be important for policymakers to do a thorough assessment of the needs of the low-income populations in their state or district. It is critical that in an effort to better serve low-income families that states do not implement policy and programs that may lead to some consumers falling through the cracks.  Considering the usability and accessibility of technology by different sub-populations is a critical aspect of ensuring that streamlining access leads to the best outcomes for poor and low-income families.