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Upside Down-Land: Bitter Harvest

Flatland and The Pitch Explore Who Gets What in Tax Breaks

Illustration of corn field with dollar signs Artwork courtesy of The Pitch
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Kansas Gov. Sam Brownback this past Sunday renewed his call for other states to follow Kansas’ lead and adopt sweeping welfare reforms.

He and New Mexico Gov. Susana Martinez signed a Washington Times op-ed urging fellow governors to reinstate work requirements — widely relaxed during the recession — for low-income families seeking food assistance.

The Sunflower State’s march to “end government dependency” has been under way for some time. In April this year, Brownback signed one of the most restrictive welfare-reform bills in the nation. And he called on other states to follow suit and “promote self-reliance,” in part by barring welfare recipients from spending on such things as ocean cruises and lingerie.

Missouri and 24 other states were already making similar efforts, using similar tactics.

But while lawmakers made a very public display of barring welfare-funded purchases at Victoria’s Secret, a torrent of tax breaks and government subsidies was quietly flowing to wealthy businesses and farmers — including more than $1 million to Brownback and his family since 1995.

Those payments get a fraction of the rigorous oversight that Kansas and Missouri politicians have devoted recently to a few welfare cheats, says Philip Mattera. He’s research director for Good Jobs First, a policy think tank that, according to its website, compiles data “promoting corporate and government accountability in economic development.”

“It’s been a perennial issue and a matter of concern,” Mattera says.

That’s not to say big money doesn’t leak from the multibillion-dollar welfare pipeline. Fraud, waste and mismanagement have always plagued the system. Many on welfare acknowledge that they cheat or know someone who does. Some who cheat are simply playing the system; others say their benefits are so low that they have no choice.

That’s why advocates have long pushed to reboot America’s outdated approach to poverty, with its flawed assumptions and antiquated data. The income guideline defining poverty in the United States dates back to the 1940s, and many services for the poor are still based on multiples of that guideline.

For example, free legal services are available in Missouri to those making up to 125 percent of the poverty limit. For a family of three, that limit is a gross annual income of $20,090, or $1,674 a month, to house, feed and clothe three persons. Someone wanting legal assistance in, say, a landlord dispute, could make no more than $2,092 a month.

“It is ridiculous to believe someone making more than that can actually afford to pay a lawyer out of their own pocket,” says Janice Franklin, who retired recently as the managing attorney at Legal Aid of Western Missouri’s Joplin office.

But the Show-Me and Sunflower states don’t have legal aid in mind when they crack down on the poor. Lawmakers instead insist that welfare recipients are blowing their state dollars on booze and other verboten purchases — and they’re determined to put a stop to it.

To accomplish this, legislators in both states have targeted beneficiaries of one of the best-known poverty programs: Temporary Assistance for Needy Families, or TANF. It helps support about 1.6 million families nationwide, the vast majority of them headed by single mothers. Its benefits are usually less than $400 a month and are available only to the poorest of the poor — people with earnings far below the poverty cutoff line. In Kansas, a single mother with two children cannot qualify for TANF if she makes more than $518 a month. In Missouri, the cutoff is $540.

You’d think that the fuss over TANF would be related to rampant fraud or an overcrowded roster of recipients. But, thanks in part to ever-tightening eligibility guidelines, TANF spending on cash assistance to families with children is actually way down nationwide, including around here. In 2005, the average monthly number of Kansas TANF recipients (total persons, not families) was 44,681. By this year, that number had dropped to about 15,000. Kansas-administered TANF now helps support fewer than 6,000 families (including 10,000 children and 3,300 adults), a 20-year low. There are 25,000 TANF households in Missouri (about 42,000 children and 18,000 adults).

The lower numbers have, in fact, created a sort of windfall for states like Kansas and Missouri.

Because federal block grants have remained steady, even as fewer families have qualified for TANF, states have been diverting up to two-thirds of their TANF grants to other noncash state programs meant to help the poor, such as child care and child welfare.

This could potentially free up state dollars for other purposes, such as filling huge gaps in state budgets. Indeed, federal auditors say TANF has evolved into a “flexible funding stream” that has outrun their ability to adequately monitor how states use all those federal dollars.

What’s more, federal rules allow states like Kansas and Missouri — states with fewer TANF recipients — to spend less money overall on welfare-to-work programs.

In 2001, Kansas spent 5 percent of its federal TANF money on work-related activities, according to an analysis by the Center on Budget and Policy Priorities, a nonpartisan research group working to reduce poverty. (Missouri’s spending on those activities fell from 12 percent in 2001 to 4 percent in 2013.) According to the center’s analysis, which uses the states’ own data, total work-related spending on Kansas TANF recipients dropped to just 3 percent in 2013.

That makes Kansas one of just 14 states spending less than 5 percent of its federal TANF block grant on putting welfare recipients to work — the very reason that legislators say they passed reform efforts in the first place.

Kansas officials slice that pie a little differently, however. A spokeswoman for the Kansas Department for Children and Families says the agency is actually spending 45 percent “more per client” on work-related activities than it did in 2006.

Both statements are probably true, says Liz Schott, a senior fellow with the Center on Budget and Policy Priorities’ Welfare Reform and Income Support Division. But she adds that Kansas officials are “carefully picking their facts here.” Schott asks what happened to all those former TANF beneficiaries who are no longer eligible. She wonders if they got jobs or if they’re now getting by with neither jobs nor TANF payments.

Kansas officials counter that they helped more than 6,000 welfare recipients get back to work last year. The new Kansas TANF restrictions were codified this spring in what state Republicans call the HOPE Act (Hope, Opportunity and Prosperity for Everyone), which Brownback signed in April.

One provision — since dropped because it went awry of federal rules — would have barred TANF recipients from withdrawing more than $25 at a time using their electronic benefit cards.

As Kansas author Sarah Smarsh notes in a July post on “The New Yorker” website, that in turn would have enriched a private company that charges Kansas welfare recipients up to $1 for each transaction (plus ATM fees that average another $3). “It’s hard to think of a more twisted irony than a corporate welfare recipient being paid by state government to oversee a single mother’s access to public assistance funds,” Smarsh writes.

Still in place in the HOPE Act reforms is a long list of prohibited purchases that includes gambling, guns, dirty movies (and sexually oriented adult materials), alcohol, cigarettes, vapor cigarettes, lottery tickets, concert tickets, fortune-telling, sporting events, ocean cruises, bail bonds, tattoos, massages and piercings. Kansans can’t spend their TANF money at nail salons, spas, lingerie stores, video arcades, swimming pools or theme parks, either. A survey by the National Conference of State Legislatures shows that the Kansas list of no-nos is longer by far than any other state’s.

Some state restrictions passed in Kansas and elsewhere were already prohibited under 2012 federal rules, raising the question of whether state legislatures have been more interested in political posturing than guarding against cheating.

“No one disagrees that fraud is a bad thing,” says Patti Prunhuber, a staff lawyer at the Public Interest Law Project, “but barring cruises and swimming seems to me like a rhetorical solution in search of a problem.”

The really important and unfortunate part of the HOPE Act, she adds, is that it reduces TANF eligibility to three years.

As for fraud, it has plummeted alongside the free fall in total number of recipients. The state data that spurred Kansas lawmakers to act in the first place— analyzed and published by a conservative watchdog group — show that only 3 percent of all transactions over a three-month period in 2012 went for “potentially” questionable purchases. That’s about $45,000 out of $1.5 million.

The flagged transactions included a dubious $203 transaction at Johnny’s Tavern, in the Power & Light District. Also counted as questionable, however, was $8,578 in withdrawals from cash-advance and payday-loan operations — places where the state should expect to find people down on their luck.

Two years ago, the U.S. congressional delegations from Missouri and Kansas helped lead a charge to cut spending for another federally funded welfare program: SNAP (the Supplemental Nutrition Assistance Program), commonly referred to as food stamps. SNAP numbers were swelling, and anecdotal stories about food-stamp recipients dining on steak and lobster abounded.

At $75 billion–$80 billion a year, SNAP eats up the largest portion of the $100 billion-a-year Farm Bill. Much of the rest goes to farmers, such as those in the Brownback clan, in the form of crop subsidies and insurance.

But in Midwestern states such as Missouri — and, especially, Kansas — the arithmetic gets turned on its head. That’s because both states have relatively few SNAP recipients compared with the number of farmers.

Kansas ranks 36th among states for food-stamp expenditures, about $395 million in fiscal year 2014, but sixth in the amount of federal subsidies paid annually to farmers — nearly $1 billion.

Since 1995, Brownback — as both a U.S. senator and now a governor — has collected about $50,000 in sorghum, wheat and conservation subsidies for his farm in Linn County.

His father and a brother have received a total of $605,000 over the same period.

His office did not return an e-mail asking for Brownback’s opinion as to whether farm and corporate subsidies get adequate oversight compared with welfare payments.

No one knows for sure how much fraud there is in either program. But some research suggests that fraud in farm subsidies and subsidized crop insurance far outpaces food-stamp fraud.

The Cato Institute, a libertarian think tank, wonders how farm subsidies are still justified when net farm income recently hit a 40-year high. “The biggest scandal with farm subsidies is that they exist at all,” reads a 2009 Cato report.

Farmers, however, are pikers compared with corporate subsidies and tax breaks handed out in Missouri and Kansas.

From 2010 to 2014, for example, Kansas issued $370 million in state grants that allow employers who create new jobs to keep as much as 95 percent of their workers’ state income taxes for up to 10 years. Wichita-based Koch Industries — whose chief owners, David and Charles Koch, backed corporate tax breaks that have left Kansas with a $700 million budget deficit — also has a prominent place at the corporate trough. Data and published reports show that, over the past 15 years, Koch Industries and its subsidiaries have benefited from more than $166 million in tax breaks and subsidies.

Getting a real count on the additional jobs that those subsidies helped create is another matter. But that doesn’t appear to have gotten anywhere near the scrutiny that has surrounded food stamps and cash assistance in recent years.

“The poor could certainly avoid some of their problems with more sacrificial conduct, like avoiding cigarettes and beer,” says one advocate, a lawyer who represents poor clients. “But until you’ve been there, until you’ve been side by side with it, it’s hard to say. Given the graft and corruption among the wealthy, who am I to say?”

This story was produced in collaboration with The Pitch, where it also appears at www.pitch.com. Watch for an on-air discussion with Flatland reporter Mike McGraw and Pitch reporter Steve Vockrodt on KCPT’s “Kansas City Week in Review,” hosted by Nick Haines, this Friday, 7:30pm, on KCPT. These stories are part of KCPT’s “Getting By” series exploring economic, education and health disparity and its impact on Kansas Citians. 

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