Economic Security

Gap between rich and poor in Washington - Third fastest growth in Nation: Incomes of Poorest Families Stagnant Over Past Decade

Remy Trupin — 2009-12-22T04:40:18Z

Jan. 26, 2006 - A new report today found Washington State wealthy families have over seven times higher incomes than low-income families.

How the 2006 Federal Budget Agreement matters to Washington State: Impact on low and moderate-income Washingtonians

Jeff Chapman — 2009-12-22T19:29:13Z

February, 2006 - This brief describes fiscal and policy changes to other key areas included in the budget agreement.

Temporary Assistance for Needy Families (TANF): New federal welfare requirements pose tough choices for Washington

Jeff Chapman — 2009-12-22T19:28:28Z

February, 2006 - The budget agreement makes the most significant changes to the TANF program since it was enacted in 1996 – effectively ending years of debate regarding the program’s reauthorization.

State could do more to support struggling families: Benefit levels have not kept up with the cost of living

Jeff Chapman — 2009-12-22T18:40:11Z

January 2007 - The monthly WorkFirst cash assistance benefit is a key part of the state’s social safety net, but it has not been increased since 1993.

High Interest, Lost Opportunity: Mapping the cost of payday lending in Washington State

Jeff Chapman — 2009-12-23T02:17:57Z

January 31, 2007 - Basic financial services available to lower income families such as cashing checks and short-term loans often come with interest rates that soar well above 300 percent.

View Maps

New revenue projection emphasizes need for investments in economic security

Jeff Chapman — 2009-12-23T20:17:01Z

February 15, 2008 - The official projection of the amount of money the state will raise for the current two-year budget (ending in June 2008) is $423 million lower than it was in November, according to the Economic and Revenue Forecast Council.

Read the update

In Most States, GA-U Fills Gaps in Economic Security and Health Care Systems

Stacey Schultz — 2009-12-16T23:13:07Z

We all hope that if we were ever to face disability, we would have the supports necessary to maintain our economic security. The General Assistance-Unemployable (GA-U) program is designed to help fill that need for thousands of people in our state. It is an essential component of Washington State’s efforts to ensure economic security (pdf) and access to health care (pdf) for all residents.

GA-U provides financial and medical assistance to adults who are unable to work due to disability and are ineligible for other programs. For these adults, GA-U fills gaps that would otherwise exist in our support systems:

Unemployment insurance and workers’ compensation benefits often expire well before longer-term disability benefits become available.
Eligibility for other assistance programs is very limited for adults who do not have children at home, even for adults who are unable to work.

For these Washingtonians, GA-U provides some protection from deep poverty and homelessness that would otherwise not be available.

Governor Gregoire has proposed (pdf) the complete elimination of GA-U, including both financial and medical assistance. Such a decision would have a detrimental impact on the Washingtonians who rely on the program. As shown by a number of studies, it would also add significant costs with regard to health care and public safety systems in the state.*

The proposed elimination would put us out of step with the rest of the country (see map). Most states in the nation recognize the importance of meeting this need. Thirty-one states across the country have statewide GA-U programs with financial and/or medical benefits. Another nine states have GA-U programs available in some counties, but not in others. In total, only 11 states (Oregon, Wyoming, and nine Southern states) do not have comparable programs.

This post is available as a one-page pdf handout.

* For example, see Mancuso, David, Ph.D., and Sharon Estee, Ph.D., Washington State Mental Health Services Cost Offsets and Outcomes: Technical Report, Washington State Dept. of Social and Health Services, Research and Data Analysis Division, Olympia, WA, Dec, 2003 and Wickizer, Thomas, Ph.D., M.P.H., The Relationship between Chemical Dependency Treatment and Criminal Activity among Clients on General Assistance-Unemployable (GA-U), Oct. 2005 (working paper).

We Need a Strong Recovery, Quick

Jeff Chapman — 2009-12-17T01:57:57Z

For workers with lower and moderate hourly wages, the current recession comes at a precarious time. The losses in income that workers are expected to incur now come on the heels of an insufficient recovery from the last recession in 2001.

The graph below shows the growth in average hourly wages for the lower-earning half of the Washington State workforce. Wages are adjusted for inflation.

There are three very different time periods:

BOOM: Low unemployment and robust job growth translated to strong wage growth in the last half of the 1990s.

BUST: After adjusting for inflation, there was no wage growth among lower and moderate wage workers.

BUSTED BOOM: When job growth started to rebound after the 2001 recession, wage growth improved, but stayed very anemic.

We only have comparable wage data through 2008 at this point, but it’s a safe bet that wages are taking another hit. Looking ahead, not only can workers not afford this recession, they can’t afford another recovery like the last one.

* Data is based on analysis of CPS-ORG microdata, following the methodology used in State of Working America. Want more detail? Let me know.

Family Resources and Work Supports: An Online Tool

Jeff Chapman — 2009-12-17T01:58:52Z

Public programs that ensure economic security can have a big influence on family budgets, as evidenced by an online tool that simulates the effects of work supports on the budgets of hypothetical families.

The Budget and Policy Center has partnered with the National Center for Children in Poverty (a think tank based at Columbia University's School of Public Health) on a "Family Resource Simulator" for Washington State. An updated version of the FRS was released this morning.

The Family Resource Simulator demonstrates the impact of work supports such as the Earned Income Tax Credit, child care subsidies, and public health insurance on a family budget. It allows the user to choose a location within the state, a marital status, the number and age of children in the family, debts, and assets. You can also decide which work supports you would like to consider. The calculator comes preloaded with typical expenses for areas such as transportation and health insurance, but also allows you to enter your own assumptions.

When you've entered all your choices, the simulator produces graphs that indicate how public supports would intersect with family budgets and how expenses and resources change as wages increase.

The example below shows the budget for a single mom with two young children living in Pierce County if she had no access to any work supports. According to the calculator, she would have to earn a considerable salary before resources are sufficient to meet expenses (over $50,000).

This next graph considers the same family, but allows access to work supports in cases where the family is eligible.* Under this scenario, resources cover expenses at a much lower income level (about $24,000).

* The two graphs (generated by the FRS) have different scales - the top one goes from $0 to $60,000 and the bottom goes from $0 to $70,000.

Note that the FRS is a public policy analysis tool. It shouldn't be used to determine a real family's eligibility for public assistance.

General Assistance: New Strategies for a Vital Program

Stacey Schultz — 2009-12-21T23:26:09Z

February 11, 2009 - Today the Budget and Policy Center is releasing a new policy brief on Washington’s General Assistance Program, which provides financial and medical assistance to over 20,000 adults with disabilities in the state.

General Assistance: New Strategies for a Vital Program

Stacey Schultz — 2009-12-17T01:59:53Z

Today the Budget and Policy Center released a new policy brief on Washington State's General Assistance - Unemployable (GA-U) program. The paper, entitled, "General Assistance: New Strategies for a Vital Program," outlines the value of GA-U, which offers economic security and health care to over 20,000 working-age adults with disabilities in our state. The Governor has proposed eliminating the program, a proposal that would have a very detrimental effect.

In addition, the paper discusses how GA-U could better serve clients through implementing strategies that will improve outcomes and reduce costs. Included in these proposals are:

Provide a medical home for every GA-U client
Expand coverage for mental health and substance abuse treatment
Improve state facilitation of eligible GA-U clients to federal programs

To read the full text, go here.

Federal Stimulus Supports Washington's TANF program

Stacey Schultz — 2009-12-17T02:12:49Z

The recent federal stimulus package offers states significant financial support for increased investments in economic security for vulnerable families. The American Recovery and Reinvestment Act of 2009 contains provisions for an emergency contingency fund within the Temporary Assistance to Needy Families (TANF) program. TANF is the federal program that supports state welfare programs, which in Washington is known as WorkFirst.

The new federal provisions:
- provide significant, unanticipated money to the state for TANF
- require that states experience increases in TANF caseloads and expenditures to access federal money

While the TANF block grant generally provides states with a fixed amount of money each year, the new emergency fund offers additional money to states that corresponds to increased TANF costs during the recession. The new provisions in the federal legislation are intended to help states respond to the rising need for government assistance during an economic crisis. They provide a very attractive 80 percent reimbursement for the increased costs associated with rising caseloads and innovative programs designed to assist families. (This means that for every 20 cents the state spends, it gets back 80 cents in federal assistance. In dollar terms, for every one dollar spent, Washington would receive four dollars back.)

Washington State stands to gain unanticipated extra federal dollars under this provision, but to take advantage of these funds lawmakers must resist the temptation to cut caseloads or benefits in order to deal with budget shortfalls. A state can only receive the new emergency funds for increased assistance costs if it has increased caseloads and expenditures. In other words, the program must be serving more people now than it did in 2007 - when the average monthly caseload was over 51,000 - and it is projected to do so. The Caseload Forecast Council predicted last November that the state will have close to 59,000 TANF recipients in 2011, a 14.5 percent increase over the June 2008 projection. (See graph) It is highly likely, given the escalating crisis in the economy and unemployment, that these regular assistance caseload numbers will be much higher.

Increased caseloads in Washington State will come primarily from the rising need of vulnerable families during the current economic recession. But additional caseload growth in Washington will also come from the Career Services program that the state recently created to support families trying to work their way off assistance. The state has been planning to expand this program later this year to include working families receiving food stamps. Because expenditures on this program qualify for the 80 percent reimbursement, Washington State is well-positioned to pull in extra federal dollars through the emergency fund for previously scheduled expenditures.

As state lawmakers move forward in the budget-writing process, it is important to consider that reductions in TANF benefits for basic assistance or steps taken to reduce caseloads will mean Washington will lose out on 80 cents in additional federal funding for every dollar that gets cut. Not only would this do harm to our collective effort to provide economic security to everyone in the state, it would also run counter to the purpose of the federal stimulus bill which seeks to increase spending in the overall economy. According to the Center on Budget and Policy Priorities, a Washington D.C.-based think tank, every federal dollar pulled into the state is expected to generate $1.38 in economic activity.

For more information on the TANF provisions in the federal stimulus bill, see this paper from the CBPP. Many thanks to Liz Schott at CBPP for her assistance with this post.

Debunking Myths About GA-U

Remy Trupin — 2009-12-18T19:11:56Z

In these difficult economic times, the General Assistance-Unemployable (GA-U) program is under threat of elimination, when it is needed more than ever. Many people who receive help through GA-U were previously employed until their lives were changed by an accident or illness. It benefits everyone in the state to know that assistance is available if the same were to happen to them or someone they loved.

Leading lawmakers have insisted that Washington State is unique in providing these state-funded benefits and therefore, we can not afford the luxury of continuing the program.

They are wrong on two counts.

First, Washington is not alone in providing general assistance to disabled adults. Our analysis of national data shows that 31 states in the nation provide similar financial and medical assistance. Benefits differ among states and some provide assistance in certain counties only, but the notion that Washington stands alone in helping disabled adults is simply not true.

But what if it were? It used to be that Washington State took pride in its innovative approaches to health care and social services. We stood out as a leader on health care reform years before the nation began addressing the issue of uninsured adults and children. We continued to make strides in this arena when the Legislature passed a bill in 2007 with the impressive goal of ensuring that all children in the state have health insurance by 2010. These are the kinds of public investments that Washingtonians take pride in.

Second, the general assistance program plays a vital role in supporting the economic security and health of Washingtonians. Contrary to some opinions, not all recipients of GA-U will qualify for federal Supplemental Social Insurance (SSI). A 2006 Department of Social and Human Services report found that half of GA-U clients transitioned to SSI between 2003 and 2004. It is not adequate to assume that the federal system will absorb the needs of this population if we dismantle the state program. In addition, there is a significant backlog of applications to the SSI program that renders wait times of up to two years. If there are no state general assistance benefits available, the costs of which are eventually reimbursed to the state, low income people who have very serious health problems will likely deteriorate.

Cutting GA-U out of the state budget will not ultimately save costs to the state. It will simply divert costs to other parts of the budget that cover such areas as emergency rooms visits and public safety. A smarter approach would be to streamline our investments in the program. Our in-depth analysis of GA-U found that the state is likely to save money by providing comprehensive mental health and substance abuse treatment to GA-U clients. The state should also consider a managed care or “medical home” model of health care for everyone in the program and better screening of clients who may qualify for veteran’s benefits.

Clearly the economic crisis at hand is very serious and will require thoughtful consideration of all our options. State leaders should urge Congress to support President Obama’s plan (contained in his budget proposal) to to speed up federal administration of SSI claims, which will help move eligible Washingtonians into permanent disability benefits. But not all GA-U clients will be able to make that transition and the results would be harmful to them and costly to the state. Maintaining the GA-U program aligns us with the majority of states in the country.

Accounting for Medicaid Spending Growth

Jeff Chapman — 2009-12-18T19:11:04Z

Medical assistance has been one of the fastest growing segments of the budget in the last decade, which prompts some in the state to argue for spending cuts in this area. But it is important to understand the reasons for this growth, particularly that our Medicaid investment has grown significantly to meet our commitment to care for Washington’s seniors and people with disabilities.

To understand Medicaid spending, I divided Medicaid beneficiaries into two groups: a) people over age 65 and/or with disabilities, and b) all other low income children and adults. The cost of serving these two groups is quite different. In 2005, seniors and people with disabilities made up 21 percent of Medicaid enrollees, but accounted for 61 percent of categorized spending (Figure 1). Other adults and children make up 79 percent of enrollees, but only 39 percent of spending.

The growth in spending on medical assistance can be understood along these same lines: people over age 65 and/or with disabilities compared to all other low income children and adults. In addition, growth can be evaluated based on changes in enrollment and per-person spending. Using expenditure and enrollment data from the federal Department of Health and Human Services, I broke down nationwide Medicaid spending growth between 1995 and 2005 into the following four categories (also see Figure 2, below):

Enrollment of seniors and people with disabilities: Eligibility guidelines have not changed significantly for this group of people, but the population is aging, medical advancements are extending life expectancy, and economic factors have played a role. This factor explains nearly one-third of the total growth in spending.
Per-person spending on seniors and people with disabilities: The cost of health care and changing benefits have risen significantly for this population, contributing nearly one-third of the national growth in spending. (In Washington State, a shift from institutional care to home and community based care has controlled spending growth.)
Enrollment of other low income children and adults: A growing state and national commitment to expanding access to health care as well as an economic downturn led to enrollment growth, which accounted for 27 percent of total spending growth.
Per-person spending on other low income children and adults: The significant growth in enrollment was offset by the relatively low per-person cost. Growth in per-person spending on this group was lower than health care spending growth in the economy as a whole and only contributed 9 percent of the total spending growth.

Altogether, nearly two-thirds of spending growth is attributable to the 21 percent of Medicaid recipients who are over age 65 and/or have disabilities. A key factor is the high cost of long-term care (including nursing homes and home health services), which accounted for one-third of total medical assistance spending in 2006.

For many people needing long-term care, options are limited. Private long-term care insurance is often prohibitively expensive. Medicare, a social insurance program that all workers pay into in order to receive health benefits upon retirement, does not provide long-term care benefits. Medicaid becomes the only option for many, although because it is only available to the poor, people have to “spend down” their resources in order to become eligible.

This problem is not limited to the current deficit. The overall population is aging, medical advancements are extending life expectancy, and the cost of health care continues to grow. In addition, the state will bear much of the responsibility for long-term care because the federal government has shifted the costs from Medicare (a federally-funded program) to Medicaid (a program in which the state must pay approximately half the cost). This affects Medicaid’s ability to meet its core mission of providing health care to the poorest Americans.

Long-term care must be comprehensively addressed. A federal modernization of Medicare is required as is a long-term financing model to ensure the affordability of long-term care for middle-income families. In the meantime, Washington policymakers must be cautious about reducing the benefits provided to these vulnerable populations.

UPDATE: "The High Cost of Subprime Lending"

Jeff Chapman — 2009-12-18T19:07:22Z

UPDATE: Our report on subprime lending was covered on King 5 yesterday. Click here to watch.

Today, the Budget & Policy Center is releasing a new report on the "High Cost of Subprime Lending in Washington State." We will be blogging on the topic throughout the week. You can read the entire report by clicking here.

In Washington State in 2006, African-American and Hispanic homeowners were most likely to pay a higher premium for their mortgage than whites or Asians.*

The effect on household finances of having a high-cost mortgage can be significant. The cost of a $230,000 mortgage can easily be $600 higher per month, or over $200,000 over the course of a 30-year loan. In the middle of the current housing crisis, having a high-cost mortgage also suggests a higher likelihood of foreclosure.

The graph below shows the share of mortgages that were high-cost in 2006 by the race/ethnicity of the borrower. The differences were stark. Over 40 percent of the mortgages lent to African Americans and Hispanics were high-cost, compared to around 22 percent for non-Hispanic whites and Asians.

It is unlikely that factors such as credit scores, debt-to-income ratios, and loan-to-value ratios can explain a gap of this magnitude. The blue bars show the high-cost mortgage rate for households with high incomes. Even among borrowers whose incomes were twice the area median, 39 percent of African-Americans and 37 percent of Hispanics had high-cost loans.

The difference in loan pricing suggest that the impact of further deterioration in the housing market will likely fall disproportionately on African Americans and Hispanics.

*The federal Home Mortgage Disclosure Act (HMDA) classifies mortgage as “high-cost” based on the loan’s annual percentage rate (APR). The APR is a better measure of the total cost than the contract interest rate alone because it includes points, fees, and other finance charges. Mortgages with APRs above designated thresholds are defined as “high-cost.”