Welfare ATM Use Raising Questions
September 12, 2013 | By Alia Beard Rau | The Republic | Link to article
Arizona's cash-assistance welfare program is intended to help the poorest of the poor feed and clothe their children, and for the most part, it does.
But a small percentage of recipients, who must earn no more than $4,164 a year for a family of three, are using the money to pay for booze, cigarettes, poker games, strippers and travel to places like Times Square, Disneyland and Hawaii, according to Arizona Department of Economic Security records obtained by The Arizona Republic.
State officials will soon begin cracking down on some abuses of the Temporary Assistance for Needy Families Cash Assistance program. A state law that goes into effect today prohibits TANF recipients from withdrawing cash-assistance money from ATMs inside Arizona liquor stores, tribal casinos, strip clubs and dog and horse tracks.
But some state leaders say the law will have little impact. The regulations do not apply to out-of-state ATMS, nor do they ban other questionable locations like bars and nightclubs. Also, any penalties for prohibited withdrawals will be directed at the businesses where the ATMs are located, not welfare recipients.
Impacted businesses have until Feb. 1 to reprogram ATMs so they do not accept the program's electronic benefit transfer (EBT) cards, which function like debit cards.
Thousands of dollars a month are currently withdrawn from machines in liquor stores, strip clubs, and dog and horse tracks, records show, though there is no way to track whether the money was actually spent at these businesses.
For example, state records from April through July show that more than $18,500 was withdrawn from ATMs inside Arizona liquor stores, including multiple withdrawals totaling $2,107.86 at Alamo Liquor in Phoenix and $1,697 from Vs Beer and Wine in Glendale. More than $500 was withdrawn at Arizona strip clubs and $182.50 from Turf Paradise, a horse track.
The money withdrawn at these types of businesses amounts to less than 1 percent of EBT card expenditures, state records say. The vast majority of withdrawals are made at banks, grocery stores, gas stations and convenience stores.
There do not appear to be any withdrawals from ATMs inside Arizona casinos over the past four months, state records say. Arizona casinos for more than a decade have prohibited EBT card withdrawals as part of the tribal gaming compact. Arizona law already forbids using TANF money to buy lottery tickets.
The state places no other restrictions on how or where the money can be spent.
But the data do raise questions about whether people are qualifying who shouldn't be or if other limits are needed.
"(The new law) is a really important thing to do as far as being accountable. And this makes it harder for them," said Rep. Kelly Townsend, R-Mesa. "But it's certainly not going to stop any kind of abuse. I think people know how to work the system."
Thousands of dollars were withdrawn from ATMs inside businesses that do not primarily offer food, clothing, shelter or gas, including bars, nightclubs, nail salons, motels, movie theaters and quick-cash lending establishments.
About $150,000, or 2 percent, of the ATM withdrawals from April through July were made out of state, Arizona records say. A third of that was spent in California, but the withdrawals spanned the country. Withdrawals were made in New York City's Times Square; on the Las Vegas Strip; West Palm Beach, Fla.; New Haven, Conn.; Baton Rouge, La.; Detroit; Chicago; and Kailua, Hawaii.
More than $4,000 was withdrawn from ATMs at out-of-state casinos mainly in Nevada, and $2,500 was withdrawn from out-of-state liquor stores.
National call for change
Arizona's TANF program is among the stingiest in the nation.
It serves fewer individuals - 36,599 people, 26,725 of whom are children - than most states and gives less money on average, based on data from the U.S. Department of Health and Human Services. Recipients on average get $89.25 a month in cash assistance.
The program, which Arizona pays for through a federal grant, costs taxpayers $47.6 million a year.
Arizona also has among the most restrictive criteria to qualify, particularly after lawmakers in recent years reduced the lifetime-benefit limit and began counting the household income of relatives, such as grandparents, who care for a child.
To qualify in Arizona, a family's income must be less than 36 percent of the 1992 federal poverty rate. The amount varies based on the number of family members, but a family of three could earn no more than $347 a month.
Arizona recipients can receive benefits for only 24 months, during which they must look for work, accept any job offers, ensure their children attend school and submit themselves to random drug testing. A child born while the parent is already in the program is not eligible to participate.
Out-of-state and higher-dollar withdrawals raise questions about some recipients' eligibility.
For example, a family of three can receive no more than $278 a month. Plane tickets to Hawaii, where records showed three withdrawals totaling $648.25 from the same ATM location in Kailua, cost more than $600 each.
The data also show several single ATM withdrawals totaling more than $500, including $804 from a Tucson bank and $803 from an Apache Junction bank. At least two withdrawals in excess of $300 each were made at Nevada casinos, and one in excess of $300 was made at the Seattle airport.
In response to media coverage of how some recipients across the country were spending their cash benefits, Congress in 2012 passed a law requiring states to restrict the use of cash-assistance EBT cards at certain establishments. If states don't comply by 2014, they will lose a portion of their federal TANF money.
The Arizona Legislature responded with bipartisan and nearly unanimous support for HB 2205, the law that takes effect today.
"We want the money to go to the kids," said Rep. Kate Brophy McGee, R-Phoenix, who sponsored the bill.
States vary in their enforcement plans. Some, like Arizona, have put the onus on businesses, where withdrawals are prohibited, to reprogram their ATM machines. Arizona businesses could lose their gaming or liquor licenses if they violate the new law.
"The Department of Economic Security doesn't have the authority to regulate businesses or disable ATM machines," said John Bowen, a legislative specialist with the DES. "That would be the responsibility of the business owner."
He said other state agencies that oversee gaming and liquor licenses will incorporate checks of the ATMs into their regular compliance audits.
But the Arizona law includes no penalties for welfare recipients who make withdrawals at banned locations.
Other states penalize TANF recipients if they use their cards at such locations. Idaho, Indiana, Louisiana and Maine make it a crime to use an EBT card at a forbidden location.
Concerns over restrictions
Although restricting how and where TANF cash can be spent has proved popular with state legislatures, there is general agreement that such restrictions do little to prevent abuse.
Nothing in the law prevents someone from making withdrawals elsewhere and spending his or her TANF money at banned businesses, Townsend said. But even if this law has little impact, it moves Arizona in the right direction by restricting how the benefits can be used, she said.
"It's time to rein it in a little," she said. "I think this is Step 1."
Arizona data show ATM withdrawals in recent months that included $202.50 from a Yuma tattoo parlor and smoke shop; $161.99 from a Phoenix smoke shop; $162.75 from a Yuma doughnut shop; $123 from a Peoria sushi restaurant; and $63 from a Tempe bar.
Rep. John Kavanagh, R-Fountain Hills, called spending at liquor stores, bars and casinos "outrageous." He also questioned some of the out-of-state spending, saying that although there may be a good reason for TANF recipients to travel out of state, such as to a family member's funeral, those reasons are likely uncommon.
"Perhaps it wouldn't be unreasonable to put some more restraints on this program," he said.
Other states have added restrictions beyond what Congress is requiring. Colorado and Indiana forbid using TANF money to buy alcohol or guns. Idaho bans tobacco purchases. Massachusetts prohibits transactions at tattoo parlors, gun shops, nail salons, rent-to-own stores, jewelers and cruise ships.
Elizabeth Lower-Basch, policy coordinator with the nonpartisan Center for Law and Social Policy, said that although welfare recipients spending their money in strip clubs, casinos and liquor stores makes eye-catching headlines and popular politics, in reality, it represents a "very tiny, tiny percentage" of TANF spending.
She said considering that the majority of the money in the TANF program goes to children and single mothers, it's possible that money withdrawn from an ATM at a strip club or a casino was taken out by a mother who works there instead of by a patron.
"Is there really evidence there is a problem? No," Lower-Basch said. "But who wants to be the one standing up in their chair saying, ‘I think recipients should able to spend their benefits at liquor stores'?"
Liz Schott, senior fellow with the Washington, D.C.-based Center on Budget and Policy Priorities, agreed there is little evidence that much money is spent at such businesses nationwide. But, she said, restricting where an EBT card can be used is easy to do and could improve the public's confidence that the money is going where it is intended.
"These benefits are so meager and they reach so few people that nobody wants them going to places like check-cashing businesses," she said.
But both she and Lower-Basch said there is concern that laws targeting abuse make it difficult for the truly needy to access their benefits.
"What if you are a housekeeper at a casino and don't have any time or any place except the ATM at the hotel to withdraw your benefits?" Schott asked. "What if the liquor store is the only place you can access your benefits to pay your rent?"
"In low-income neighborhoods, there are not often a lot of banks," Lower-Basch said. "People just run in wherever there is an ATM."
Some say that although these recent legislative efforts are feel-good measures that everyone can support, more attention is needed on bigger sources of welfare fraud.
"It's a step in the right direction, but we don't give out a huge amount of cash assistance per year," said Rep. Carl Seel, R-Phoenix. "There are so many other measures we need to do."
Seel has made welfare "waste, fraud and abuse" one of his primary platforms in recent years, introducing a variety of bills. He has unsuccessfully proposed legislation to require welfare recipients to show photo IDs when using EBT cards for purchases and when using Medicaid services. He said he will introduce that bill again next year. Missouri has such a requirement for TANF recipients.
Seel said state law enforcement also needs to focus on arresting people who fraudulently acquire or misuse benefits.
Michael Tanner, a senior fellow at the Cato Institute, a Washington, D.C., public-policy research organization, said law enforcement and federal prosecutors should focus on big-money fraud, not these small instances of abuse.
He said the vast majority of "big fraud" involves retailers. He offered an example in which someone goes to a store, swipes his card for $50 worth of food stamps and the cashier gives the customer $30 in cash and no food and pockets $20.
"And then there's the even bigger problem of overpayments, where people are collecting more than they should have in benefits, or getting payments when they aren't eligible," he said.
But Tanner said he understands why lawmakers are jumping on the bandwagon to limit where TANF money can be spent. "It's sexy," he said. "People get outraged by it. Lawmakers want to be tough on it. I'm all in favor of being tough on it. Just don't pretend it's going to save you tons of money."
Republic reporter Rob O'Dell contributed to this article.