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May 23, 2004

Welfare Everywhere

Tom Coyne's piece about the Rhode Island welfare state, which I noted a couple of weeks ago, has drawn an op-ed response from Nancy Gewirtz and Linda Katz (no relation), of the Poverty Institute at the Rhode Island College School of Social Work. Because I share Coyne's assumptions, I thought it worth seeing whether the objections were valid, and what I found was evidence of how difficult it is to dig through the "rhetoric" and "facts" to figure out the truth.

Most glaringly, Gewitz and Katz only address some of the issues that Coyne raises, swinging into gear here:

Rhetoric: We have an expensive welfare system, which attracts more poor people than do other states' systems.

Facts: In 2003 the percentage of the Family Independence Program (FIP) caseload that moved to Rhode Island from another state was the lowest it had been in nine years (5.3 percent of the caseload). Families also leave FIP at a much higher rate than the rate at which they come to Rhode Island: In 2003, 1,130 cases closed because of "out migration," while 747 opened from another state.

The FIP is Rhode Island's version of the federal Temporary Assistance for Needy Families (TANF) program, which each state administers according to its own policies. It is not the entirety of what might be considered to be Rhode Island's "welfare system."

In Rhode Island, FIP participants can collect cash handouts for five years. (Some states only allow two.) I can't find data on migration of poor people from state to state, so I can't comment on those numbers. And I'll assume that the TANF program is not such that families can just move to new states and restart the clock as their benefits run out. However, I will note that it is conceivable that some of the "out migration" (whatever that means), during the year that the U.S. economy began to turn around, is attributable to folks who went elsewhere to work, either when the free money was about to run out or earlier, but transferred their TANF info just in case.

Mr. Coyne's reliance on the National Association of State Budget Officers' (NASBO) report, which ranks Rhode Island third in total cash payments, is problematic. In this category, the report erroneously includes Rhode Island's expenditures for child care and Food Stamps -- costs not included for other states. Thus, Rhode Island's ranking is artificially high. The 2003 Rhode Island Temporary Assistance to Needy Families Act/FIP expenditure cited in the NASBO report is only 1.4 percent of total expenditures: lower than those in Connecticut, Maine and Massachusetts, and tied for 10th in America.

From what I gather from the NASBO report (PDF), the attempt being made is to compare the widely varying programs of the fifty states. Clearly, "erroneous" is opinion; it appears that some costs aren't included for other states because those other states don't offer comparable services. Rhode Island, for example, adds money to the federal Supplemental Security Income (SSI) program. Now, one could say that this extra money isn't included for other states, or one could say that other states' expense for extra money is $0.

If I'm reading it right, according to the NASBO, 19 states give "cash" payments solely within the TANF program. Of those states, only seven pay more through this program than does Rhode Island (which spends more elsewhere), thus moving Rhode Island from third to tenth. Remembering that there are fifty states, that seems a whole lot of waxing to create a moderate shine.

So, first Gewitz and Katz cut out all assistance not included in the FIP. Now, they've whittled away assistance not specifically associated with the TANF. Next, they draw attention away from categories of recipients in order to proclaim the following:

Rhetoric: Rhode Island has the most generous welfare benefits in the nation.

Facts: One could hardly call the FIP cash payment generous: A mother and two children receive $554 a month -- a benefit level that has not been raised in 15 years, reducing purchasing power by 40 percent. This family would receive more in four other New England states: $609 in Vermont, $618 in Massachusetts, $625 in New Hampshire, and $636 in Connecticut.

The folks not included in this analysis are those who have some form of other income. To understand why this matters, consider what looks to be the comparable program in Massachusetts. (The $618 figure doesn't match the number provided at that link, but Gewitz and Katz might have attempted combine payments to those who do and don't live in subsidized housing.) That single mother of two will, indeed, receive $633 per month in Massachusetts if she doesn't live in subsidized housing. However, her income (after certain deductions) is directly subtracted. So, suppose she gets $200 from some other source. In Massachusetts, her monthly cash gift would be $433, with $633 remaining her monthly income.

In Rhode Island, on the other hand, her base benefit would be $554, and the first $170 of additional income isn't counted. Moreover, the cash benefit is only reduced $1 for every additional $2 of income. For the woman making $200, that would result in a $15 reduction. So, this same woman who was capped at $633 in Massachusetts would take home in Rhode Island: 554 + 200 - 15 = $739. And in fact, the percentage of those who benefit from FIP who are working rose from 13.7% in 1997 to 21.3% in 2003 (PDF), which has been at least part of the reason for this change:

Since the Family Independence Program began, in 1997, there has been a steady decrease in Rhode Island expenditures for cash assistance: from $51.5 million, in 1997, to $18.9 million, in 2004. The average cost per case has decreased from $480 in May 1997 to $422 in December 2003.

First, note from the previously linked PDF that the expenditure for cash assistance is apparently up, this year, from $15.5 million in 2003. More significantly, over the 1997–2003 time period, the state's expenditures for its Child Care Assistance Program increased from $18.6 million to $75.2 million. Adding the two programs together, we get $70.1 million for 1997 and $90.7 million for 2003. An increase of just under 30%. This brings us back to my initial objection about the narrow view, because the vast majority of the increase in child care subsidies has gone to low-income families who aren't even participating in the FIP.

In fact, all Rhode Island households earning no more than 225% of the federal poverty level are eligible for child care subsidies, with copays ranging from $0 to $48 per child per week. For a family of four — which mine is about to be — that means annual income of $42,413. According to the U.S. census, the median household income in Rhode Island for 2000 was $42,305. Rhode Island apparently considers half of its families to be "low income."

From a taxpayer point of view, it's also interesting to note that, to encourage child care providers to accept poor children, they get fully paid healthcare. And healthcare opens a whole 'nother stack of taxpayer bills. Every family receiving cash payments from the government is eligible for it. Every family with income up to 185% of the federal poverty level ($34,873 for a family of four) is eligible. And every child under 19 and pregnant woman with household income of 250% FPL is eligible. If the household makes less than 150% FPL, the insurance is free, otherwise there are relatively tiny monthly payments of $61, $77, $92.

This is the hidden bloat. I'm not averse to helping people out when they're facing hard times, and I do believe that some degree of temporary help from the government is a worthwhile investment within a social system that doesn't have assistance built in through other, more cultural, means. But when the poorest of the poor become job insurance for bureaucrats pushing middle-class health- and day-care subsidies, a little more clarity is needed. If Rhode Island's nascent socialism is the right approach, the state ought to proclaim it rather than hide it under selective statistics... although then we'll really be able to watch the influx of poor — and not-so-poor — people.

Posted by Justin Katz at May 23, 2004 2:37 PM