Bad Policy for Kansas; Bad Policy for America

By Randi Hall

Last month, U.S. Senator David Vitter (R-LA) introduced the “Welfare Abuse Prevention Act” (S.1288 [1]), which would limit ATM withdrawals to $25 per day for recipients of Temporary Assistance for Needy Families (TANF) cash assistance. This federal legislation is modeled on a punitive welfare reform law [2] enacted in Kansas earlier this year.

ATM withdrawal limits have severe implications for TANF recipients, diverting funds from struggling low-income families to banking institutions.  While Kansas charges recipients fees for every ATM transaction, a majority of states charge TANF recipients ATM fees after their first or second withdrawals in a given month.

Policies that limit access to TANF cash benefits are driven by stereotypes and misconceptions about low-income families. Nationwide, TANF benefits are low; they are not enough to cover necessities such as housing, transportation, and clothing. For example, a single-parent household with two children in Kansas could receive a maximum of $429 a month in TANF benefits [3], but the fair market rent for a two-bedroom rental unit [4] is $756 a month.  When a family runs out of money before the end of the month, it is not because of poor budgeting choice; there is simply not enough money to cover expenses. In a recent study, [5] TANF recipients described the hardship caused by these fees: “I'm spending money I desperately need on fees instead of diapers, my kid's allergy medicine, toilet paper… It reduces the amount of my cash aid that I can use because most of the places I need the cash don't take EBT cards.” Moreover, recipients may incur late fees on their rent or other bills if they are unable to access funds at the start of the month. In some remote areas, getting to an ATM may require long travel, increasing recipients’ expenses.

ATM withdrawal limits may violate federal requirements mandating that states provide “adequate access” to cash benefits and charge only “minimal fees” for withdrawals. If the U.S. Department of Health and Human Services determines that Kansas is non-compliant, the state could lose its $102 million TANF block grant [6]. Governor Sam Brownback has signed an amendment to the law that allows the Kansas Department of Children and Families to raise or rescind the withdrawal limit. [7] Using this authority, the Department should act swiftly to eliminate ATM restrictions.

CLASP encourages policymakers at the state and federal levels to reject any punitive measure that reduces the value of TANF benefits for low-income families. States should ensure [8] that recipients can access their benefits by:

• Allowing and encouraging direct deposit of benefits;
• Ensuring that recipients may use EBT cards for low-cost or fee-free ATM  withdrawals; and
• Providing clear information on ATM fees and surcharges.

In addition, states can support the economic security of TANF recipients by removing asset limits from the program, promoting savings, and offering financial literacy services.