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Stimulus Funds' Effect on Safety Net will Depend on States July 13, 2009

Stimulus Funds' Effect on Safety Net Will Depend on States

“Is the recovery act the beginning of a new era for the safety net?"

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That was one of the questions raised by Gene Falk of the Congressional Research Service to start off the July 13 luncheon discussion of the 49th National Association for Welfare Research and Statistics conference, which is taking place in Albany, N.Y., July 12-15. The impact of the federal stimulus package — formally, the American Recovery and Reinvestment Act (ARRA) — on programs to help low-income people was the topic of the luncheon plenary. The conference is being co-hosted by the Rockefeller Institute of Government and the New York State Office of Temporary and Disability Assistance.

The answer to whether the stimulus funds create a new and different safety net for the poor does not depend on the federal government's plan, Falk said, but on "the imaginations of folks at the state and local level.”

The stimulus package adds money to such benefits as food stamps, and several speakers at the luncheon said that was a smart area to invest dollars.

“If what we’re trying to do is boost spending, that’s money that’s going to get spent," said Liz Schott of the Center for Budget and Policy Priorities (CBPP), a Washington, D.C.-based think tank.

Carol Olander of the U.S. Department of Agriculture (USDA) agreed, stating that economists estimate $1.50-$2.00 is spent in the local economy for every dollar invested in food stamps. The spending supports industries ranging from agriculture to food processing, Olander said.

ARRA increases by 13.6 percent the maximum food stamp benefit provided — meaning the benefit that goes to the lowest-income Americans. The benefit increase translates to $80 a month for a family of four, Olander said. The unexpected decreases in the cost of food this year could prompt extension of the provision, she said.

In the last three months, the food stamp program has seen an increase of 3 million recipients, Olander said.

As to what is happening with the money in the states, both CBPP and USDA are working to track that, the conference speakers said. Schott said that in Texas, for example, the state has added $15 million to a one-time federal pot of money to provide a $30 back-to-school allowance for each child, upping the allowance to $105 per child.

"It's not a lot of money, but it's money that will get spent in those localities and help those families," Schott said.

Not all changes to safety-net programs have met with widespread support from states. Stephen Wandner of the U.S. Department of Labor spoke about ARRA's reforms to unemployment insurance, prompted by a 30-year decline in participation in the program. States have the right to choose to institute the reforms — and receive federal monetary incentives — or opt out. To date, just 35 states have taken the action required to change their unemployment insurance rules — such as changing state laws to allow more recent wages to be considered in calculating benefits. Others have opposed the reforms for a variety of reasons, including both policy and politics, Wandner said.

ARRA requires the U.S. Government Accountability Office (GAO), the investigative arm of Congress, to look into how the funds are being spent for safety-net programs. The GAO’s Gale Harris wrapped up the session with a summary of some of the spending they will monitor. GAO has asked Congress to consider making more funds available for auditing, Harris said.

Olander said USDA, too, is closely monitoring the spending of stimulus funds on food stamp programs. It is in the process of conducting two studies: One will attempt to find patterns in food-stamp usage and link them to household characteristics. The other will attempt to determine whether more generous benefits make an impact on whether families have a stable amount of food on a regular basis.  

“There is no such thing as a free lunch here,” she said. “There is a lot of accountability and a strong emphasis on transparency for where every one of these dollars is being spent.”  



The Nelson A. Rockefeller Institute of Government, the public policy research arm of the State University of New York, conducts fiscal and programmatic research on American state and local governments. It works closely with federal, state, and local government agencies nationally and in New York, and draws on the State University’s rich intellectual resources and on networks of public policy academic experts throughout the country.