By Max Ehrenfreund
May 21, 2015
A dollar bill is a special kind of thing. You can keep it as long as you like. You can pay for things with it. No one will ever charge you a fee. No one will ask any questions about your credit history. And other people won’t try to tell you that they know how to spend that dollar better than you do.
For these reasons, cash is one of the most valuable resources a poor person in the United States can possess. Yet legislators in Kansas, not trusting the poor to use their money wisely, have voted to limit how much cash that welfare beneficiaries can receive, effectively reducing their overall benefits, as well.
The legislature placed a daily cap of $25 on cash withdrawals beginning July 1, which will force beneficiaries to make more frequent trips to the ATM to withdraw money from the debit cards used to pay public assistance benefits.
Since there’s a fee for every withdrawal, the limit means that some families will get substantially less money.
It’s hard to overstate the significance of this action. Many households without enough money to maintain a minimum balance in a conventional checking account will pay their rent and their utility bills in cash. A single mother with two children seeking to withdraw just $200 in cash could incur $30 or more in fees, which is a big chunk of the roughly $400 such a family would receive under the program in Kansas.
“The complexity of functioning in that cash economy as a very poor family is just not a reality that most of us experience day to day,” said Shannon Cotsoradis, the president of Kansas Action for Children in Topeka. “I pay my bills online.”
Since most banking machines are stocked only with $20 bills, the $25 limit is effectively a $20 limit. A family seeking to withdraw even $200 in cash would have to visit an ATM 10 times a month, a real burden for a parent who might not have a car and might not live in a neighborhood where ATMs are easy to find.
“Banks have traditionally not located themselves in neighborhoods that they perceive either to be unsafe, or where there’s no customer base,” said Kristin Seefeldt, a professor at the University of Michigan who studies the lives of low-income Americans. “If that’s the way they’re getting cash, that can be a real chore and a challenge.”
The provision restricting cash withdrawals for poor Americans was an amendment to broader legislation passed in April on what Kansans can do with their welfare payments. The bill, which prevents beneficiaries from redeeming benefits at swimming pools, movie theaters and tattoo parlors, was an example of efforts in several states to restrict what the poor can do with government aid. In Kansas, Gov. Sam Brownback (R) also signed legislation that had the effect of raising taxes on the poor while lowering them for wealthy residents.
But the new provision limiting what the poor can do with their debit cards is causing particular problems for Kansas because it could conflict with federal rules that appear to require that states provide beneficiaries with “adequate access” to their benefits, putting more than $100 million in funding for the program in jeopardy. Brownback told McClatchy last week that he planned to work with administrators in Washington to make sure that money remains available for poor families. It is not clear what that would involve.
Lawmakers said they implemented the provision because they wanted to be sure that beneficiaries weren’t wasting the federal money available through Temporary Assistance for Needy Families, a small program that, unlike food stamps or housing assistance, provides parents and children funds they can use for all kinds of purchases. A single mother with two children is a typical beneficiary, and a family of three in Kansas received an average of $354 a month in 2012, according to the most recent federal data.
About 11,000 households received money through the program in Kansas that year, and a third of recipients were working. The rest have to show they are looking for work to be able to qualify.
The legislature was worried that those receiving benefits might withdraw their entire benefit in cash at once and spent it extravagantly.
“There are actual reports posted as to where the ATMs were that cards were used by Kansas residents,” said state Sen. Caryn Tyson (R), the Ottawa Herald reported. She said that beneficiaries were using their cards “at liquor stores, cigarette shops, strip joints. Casinos was another. There was a $102 [withdrawal] from a person in Colorado at a Rockies baseball game. We don’t know that they spent it on the game, we don’t know what they spent it on, but the ATM was at the Rockies facility. Another one was on a cruise.”
To Cotsoradis, the implication was that poverty results from laziness, waste and bad decisions. “There’s a real value judgment here that doesn’t reflect the reality of being poor in America,” she said.
While some politicians and news organizations have found occasional examples of the poor misusing their public assistance, there’s no clear evidence that it’s a systemic problem or that limiting the recipients’ access to cash would force them to use their money differently.
How the poor pay for daily life
A single mother with two children would receive around $400 a month in Kansas, depending on where they live. The money is credited electronically to a state-issued card. Many use that amount to pay their bills, relying on the separate food stamp program to buy groceries. They might withdraw the money in cash using their card at an ATM and pay for things — whether it’s rent or diapers — in cash.
In Kansas’s system, every withdrawal incurs a $1 fee, and if the beneficiary doesn’t have a bank account, they will have to pay the ATM fee, too. Those fees might be worth it for some families, though, because the card issued by the state of Kansas isn’t like a debit card from an ordinary bank. Ordinary debit cards allow their holders to make purchases for free in stores. In Kansas, beneficiaries get two free purchases a month. After that, they pay 40 cents every time they use the card to buy something.
Those fees add up for people who are already financially constrained. Reliable data on how the poor manage their finances is hard to come by, but a federal survey found that 27.7 percent of households with yearly income under $15,000 and 20.5 percent of black households did not have a checking or savings account. A survey conducted in North Carolina found that more than half of lower-income families without bank accounts were paying their bills in cash.
One way around the fees might be to buy money orders, which about a third of the families without bank accounts in the North Carolina survey used to pay their bills. Postal money orders for amounts up to $500 are available for a $1.25 fee, although beneficiaries in Kansas might have to pay an additional fee if they use their card to buy the order.
That’s small consolation, said Cotsoradis of Kansas Action for Children. “It’s still an unnecessary hurdle for a family that’s already dealing with a lot of hurdles every day,” she said.