California’s limits on welfare debit cards inspire U.S. response

Welfare recipients nationwide would be barred from using their government-issued debit cards at casinos, strip clubs and liquor stores under a bill to be introduced Wednesday by leaders of the U.S. Senate Finance Committee.

A co-sponsor of the measure says he was inspired by the fact that nearly $5 million in cash benefits issued in California and meant to help struggling families feed and clothe their children, was spent or withdrawn from ATMs at casinos and poker rooms between January 2007 and May 2010.

Tens of thousands of dollars in Temporary Aid for Needy Families assistance was accessed or spent with the debit cards at Los Angeles-area strip clubs in the same period.

The Times last year detailed all of those transactions, prompting immediate changes in the state’s network of ATMs that accept Electronic Benefit Transfer cards.

The cards, which provide recipients access to federal as well as state cash, were also used in tourist destinations, including the Las Vegas Strip, a remote Hawaiian island that is home to two Four Seasons resorts and on cruise ships leaving from ports around the globe, The Times reported.

“This bill will hopefully put an end to egregious abuses that have happened in many states, not just California,” said co-author Sen. Orrin G. Hatch (R-Utah). Under the measure, states would have two years to demonstrate compliance with the bans or face a 5% cut in the federal contribution to their welfare programs, Hatch said.

The bill has bipartisan backing: Sen. Max Baucus (D-Mont.), chairman of the Senate Finance Committee, is also listed as an author.

Advocates for the poor noted that the money identified by The Times represents less than 1% of the total spending of CalWorks, the state’s main welfare program. And they called the new proposal mean-spirited.

“These measures come from a place of wanting to smear the names of low-income people who are looking toward the [welfare] program to help end hunger and homelessness,” said Jessica Bartholow, a spokeswoman for the Western Center on Law and Poverty.

Adding a layer of federal restrictions could make it more difficult for states to react on their own when they want to reform their welfare systems, Bartholow said. “California used its flexibility last year to swiftly address issues raised in the articles.”

After The Times reports appeared, former Gov. Arnold Schwarzenegger ordered ATMs in casinos and state-licensed poker rooms removed from the network that accepts the state debit cards.

He later ordered removed from the state’s ATM network any machines located in other businesses he deemed “inconsistent with the intent” of the assistance program. Those included strip clubs, massage parlors, medical marijuana dispensaries and bars.

Stores that sell only alcohol have also been stricken from the state network. But if alcohol businesses also sell food, they can remain in the network, provided that federal inspectors approve. The Hatch-Baucus bill would allow a similar exemption, particularly for businesses located in neighborhoods where access to other grocery stores is limited, Hatch said.

Across the country, state legislatures have begun to restrict welfare card use for purposes other than caring for dependent children. In Pennsylvania, it is a misdemeanor to buy alcohol with an Electronic Benefit Transfer card. In Arizona, it is illegal to buy lottery tickets with them.

In California, pending legislation would put Schwarzenegger’s executive orders into law, making them more difficult to overturn. The proposal, AB 493 by Assemblyman Henry Perea (D-Fresno), is scheduled to be heard in the Appropriations Committee on Wednesday.

Federal regulations already prohibit the use of food stamps to buy alcohol or tobacco.

jack.dolan@latimes.com