In April, legislators in Kansas passed a bill limiting what welfare recipients could do with their benefits. In particular, the law prevents welfare recipients from withdrawing more than $25 a day in assistance from ATMs. Critics say that, given that many poor families pay rent and utilities in cash, the rule makes life more difficult for this vulnerable group. Since every withdrawal incurs a fee, it could also amount to a substantial reduction in benefits.
Whether the $25 limit will go into effect is now unclear. The state has come under intense criticism for its policy, and many lawmakers appear willing to ease the limitations. Yet a chaotic political environment in Kansas is making it hard for the state to address its unresolved issues. Here’s what’s happening in a state that Republican Gov. Sam Brownback, upon coming to office, called a “real live experiment” in red-state governance.
▪ In 2012 and 2013, Brownback approved changes in tax law that had the effect of raising taxes on poor Kansans while lowering them for the middle class and the affluent. The plan reduced income taxes, which are mostly paid by people who make more money, and replaced them with sales taxes, which everyone pays — particularly the poor, who spend a greater share of their income on basic goods and services. (The plan also limited a provision that exempted food from the sales tax.)
▪ The aim was economic stimulus, but any benefits have been modest. “Our new pro-growth tax policy will be like a shot of adrenaline into the heart of the Kansas economy,” Brownback wrote at the time. Yet Kansas’ economy hasn’t done noticeably any better than the states that surround it or the rest of the country. The state’s economy expanded by 1.8 percent in 2013 and again at the same pace last year, compared to annual rates of 1.9 percent and 2.2 percent for the nation as a whole, according to the Bureau of Economic Analysis.
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▪ Meanwhile, lower taxes for wealthier Kansans have left the state scrambling for cash. The legislature, controlled by Republicans, confronted a deficit of $800 million this year. That’s a deep hole, and it took lawmakers a while to agree on how to climb out of it. Some Republicans didn’t want any tax increase at all, but that would mean the state’s agencies would have had to get by on a lot less.
▪ Earlier this session, amid growing concerns about the budget deficit, the legislature addressed another issue. It passed a law codifying new rules on public cash assistance previously imposed by the Brownback administration. These rules required new mothers receiving this category of welfare to return to work three months after giving birth and reduced the lifetime limit to three years (the federal limit is five). Over several years, the restrictions removed a few thousand families from the rolls, according to Kansas Action for Children, an advocacy organization.
The law also placed new restrictions on how the poor could use the money they receive in public benefits. Recipients were forbidden from using their money at strip clubs, on cruise ships, in casinos, on tattoos, on body piercings or on lingerie. (That was despite the fact that consistent surveys suggest that the poor are less likely to spend their money on luxuries and frills than the rest of the population.)
▪ And, in one of the most notable actions that would make life most difficult for the poor, the legislation imposed a $25 daily limit on ATM withdrawals. It goes into effect July 1.
Advocates for the poor saw this as an especially harsh measure because low-income people rely so heavily on cash to manage their finances from day to day. In April, beneficiaries in Kansas took 69 percent of their benefits in cash withdrawals, according to the state. The average transaction was $158.28.
▪ Proponents of the rule say they stand by it. In an interview, state Sen. Molly Baumgardner, a Republican, argued that families that need cash will still be able to get it.
Thirty-one percent of the benefits were withdrawn in cash away from ATMs, for example, at the customer-service desk in a grocery. The limit on withdrawals would not apply to transactions in that category.
“I think there is some value to a daily limit. It helps folks with that financial responsibility, so that you don’t withdraw it all at once and spend it in one day,” Baumgardner said.
▪ At the same time, some backers of the law say they are open to giving the poor more flexibility, said Baumgardner. The lawmaker said she and others would be open to a higher limit than $25, so the poor could withdraw more cash on any given day.
In fact, a state legislative committee that met earlier this month on an unrelated issue — a new tax on health insurance plans — had agreed to raise the limit to $60, said Sen. Laura Kelly, the Democratic whip, who has opposed the restrictions from the start.
“My colleagues have gotten so much flak, not only locally, but nationwide, for that $25 thing,” said Kelly, who was at the committee meetings. “They were called names. They were put up as evil people, mean people, whatever — which is exactly what they were — so they tried to change it.”
The story is complicated, and a bit unclear. According to Kelly’s telling, as part of a joint committee between the state House and Senate about the health insurance tax, lawmakers considered an amendment to increase the ATM limit to $60. But the agreement did not hold and got lost in the shuffle of legislative negotiations, with no clear reason why.
▪ Instead of acting itself on the ATM limit, the committee passed a bill punting the question of a daily limit for cash withdrawals to state and federal bureaucrats.
The federal government provides the cash for Kansas’ poorest parents and children through a program called Temporary Assistance for Needy Families. States that participate are required to make sure that beneficiaries have “adequate access” to their money under the law. Under the new law, the Brownback administration has the authority to raise the limit or eliminate it in order to provide that access.
Yet the secretary of the state’s Department of Children and Families has not made any decision about how she would use her new authority, according to Theresa Freed, a spokeswoman.
▪ The secretary, Phyllis Gilmore, has been a staunch supporter of the legislature’s social policy in the past. “What should receive even greater support than welfare to work policies is a policy that prohibits the use of taxpayer-funded benefits for welfare recipients to spend their cash assistance on luxury items that some taxpayers can’t even afford — such as cruises and trips to the tattoo parlor or nail shop,” she wrote in a Facebook post.
Still, “This agency is certainly not interested in making life harder on individuals,” Freed said, adding that the department was doing what it could to make sure that Kansans were aware of any new rules.
▪ Kansas’s poorest families can now hope for relief from Washington, where officials could intervene and insist on a change in the $25 daily limit. Federal officials could try to force the administration’s hand by threatening to cancel the program in Kansas, in which case the poorest of the poor in Kansas would lose $102 million, the amount the federal government provides annually. Not even welfare’s toughest critics appear to want that to happen.
Kenneth Wolfe, a spokesman for the federal Administration for Children and Families, said in a statement that Kansas hadn’t submitted any new proposals and that he couldn’t comment on any changes the state might make.
▪ What happens next is not clear. As for the state’s budget hole, however, lawmakers have taken action, though it does not appear to address concerns that too much of a burden is being placed on the poor.
After 113 days — the longest legislative session in the state’s history — Brownback and his allies in the legislature won passage of a new tax bill early Friday morning. The bill didn’t restore any income taxes, although it did postpone additional reductions in income taxes that had been previously scheduled.
The bill also further raised taxes on the poor, by raising sales taxes again.
Max Ehrenfreund is a blogger on the Financial desk and writes for Know More and Wonkblog.
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