Billions in Aid for Poor Sit Idle, Study Says

Billions of dollars in federal anti-poverty aid are accumulating unused in states’ coffers more than three years after a landmark welfare overhaul sharply reduced the number of people receiving public aid, according to a study unveiled Thursday by an anti-poverty coalition.

Forty-five states, plus the District of Columbia, have stockpiled $7 billion of federal funds earmarked to help the poor, with California amassing the biggest such pool--$1.6 billion, the National Campaign for Jobs and Income found.

The study was the first to survey welfare-to-work spending in all the states, including those, like California, that have “devolved” their programs to the counties. Previous studies have not included surpluses building up at the county level and have yielded smaller estimates of the unspent money. The new study is based on statistics provided by the states to the federal government through September 1999.

“It’s a disgrace that these funds are sitting idle or being ill-spent at a time when millions of families aren’t sharing in our nation’s prosperity,” said Peter Edelman, one of three Clinton administration officials who resigned in protest when the welfare overhaul was enacted in August 1996.

But Gretchen Odegard, a senior policy analyst for the National Governors’ Assn., said that while it is true that large surpluses of anti-poverty funds are growing in many states, state officials believe there are valid reasons for holding on to the money.

The drop in America’s welfare caseloads does not mean that they will not rise again, Odegard said. And since the federal government probably will not increase anti-poverty appropriations if caseloads rise, she said, many governors believe that they should carry surpluses now “for a rainy day.”

“We don’t agree that these numbers show a lack of commitment on the part of governors,” Odegard said. “Most governors would argue that they are creating all sorts of innovative things to help move people off welfare.”

The coalition’s findings reinforce recent complaints by Los Angeles-area social activists that Los Angeles County has been sitting on hundreds of millions of dollars that ought to be spent on child care, job training and other programs that could help county welfare recipients succeed as they join the work force.

The county late last year completed a plan for using the money.

Nationwide, the unused billions are building up because, even as the welfare rolls decline, federal anti-poverty money remains fixed by law at 1994 levels. The states have been given ample latitude to devise ways of using the money in the welfare-to-work era, but some have been slow to do so.

In addition, the anti-poverty coalition identified at least six states that have been spending hundreds of millions of dollars in federal funds on activities that it said were only loosely connected to welfare reform’s key stated goal: helping the nation’s poor become self-sufficient.

Texas, for example, used $162 million of the federal money to shore up its general state revenues, the coalition said, despite a budget surplus of $6.4 billion at the time. Kansas, which put its child-welfare system into private hands in the mid-1990s, then suffered large cost overruns, is using $175 million in federal money to “bail out” the program over four years.

Wisconsin, New York, Minnesota and Connecticut were all found to be cutting their own state anti-poverty programs, then using federal money to cover the gaps.

While such diversions appear legal, Edelman said that they amount to “tax breaks to middle- and upper-income taxpayers,” since anti-poverty money was being used to foot bills that would otherwise be paid out of tax revenue.

“This is a serious departure from the intent of Congress,” said Edelman, now a professor at Georgetown University Law Center.

California was not listed among the states diverting federal appropriations to other uses. But in Los Angeles, about 50 anti-poverty activists linked to the coalition staged a rally Thursday, charging that Gov. Gray Davis’ budget bill includes a provision to take back about half of some $500 million in federal anti-poverty money that is earmarked for transfer to the counties.

The money originally was promised as an “incentive payment” to the counties for each welfare recipient who joined the work force. But the state underestimated the number of welfare recipients who would soon have paychecks and says that the resulting multimillion-dollar incentive payment is unsustainable.

Los Angeles County completed its 46-point welfare-to-work plan in November and the details are now being approved by the County Board of Supervisors. The activists said the program risks being cut in half before it even starts.

“Los Angeles County is actually one of the few counties [in California] that now has a plan for how to spend that money,” said Bob Erlenbusch of the Los Angeles Coalition to End Homelessness. “Don’t take the money away!”

He and other participants at Thursday’s rally said that success in the welfare-to-work era is not just a matter of welfare recipients replacing cash benefits with a job. Since people who leave welfare typically start in low-wage, low-skill jobs, advocates say, they need considerable “up-front investment” in the form of transportation, child-care, language training and wage supplements if they are to succeed.