Posted on: Monday, March 28, 2005

State's welfare reserve now at $118 million

By Derrick DePledge
Advertiser Capitol Bureau

Thousands of Hawai'i families have been moved off federal welfare since a 1996 federal law created a five-year time limit and urged states to get more people to work.

But while the number of welfare families has declined every year, the amount of federal welfare money given to Hawai'i has stayed about the same, leaving millions of dollars meant for the poor unspent.

The reserve is now at $118 million, touching off a tug-of-war between the Lingle administration and the state Legislature over how the money should be spent.

Advocates for the poor have appealed to the state to be more aggressive about spending the money, pointing to what they see as a growing demand to help people with childcare and job training. But federal restrictions on the use of the money, and concerns about keeping enough in reserve to meet the state's needs if the welfare caseload were to suddenly expand, make it difficult to simply release all of the money to the needy.

Teresa Bill, of the Welfare Employment Rights Coalition, said she understands the reasons for a reserve but believes the money has to get down to the poor.

She also said the size of the reserve was not widely known until right before the legislative session.

"That's another troubling issue," Bill said. "It's been difficult to get any straight answers to find out how much of a reserve there was."

The federal welfare law was designed to break what many policy-makers saw as a permanent welfare state.

In a historic shift, it made welfare more transitional by setting a time limit on federal cash payments to adults and by expecting people to eventually find work.

Nationally, the number of families on federal welfare has dropped from 4.1 million in 1997 to 1.9 million last summer.

In Hawai'i, the number of welfare families fell from 22,300 in 1997 to 9,300 by the end of last year.

States share a $16.5 billion federal welfare block grant, which is partially matched by state money, and have flexibility over how the money is used. States are given fixed amounts of federal welfare money each year and can divert up to 30 percent to childcare and social-service programs or keep some of the money in reserve.

The reserve is allowed as a cushion because the federal government no longer will help pay for additional costs if welfare caseloads unexpectedly swell. The Government Accountability Office, in a 2003 analysis of state reserves, found that some states were concerned about leaving too much federal money unspent because it might signal to Congress that the money is no longer necessary.

Congress envisioned that as welfare caseloads declined, states would have more money to expand or offer new services. The amount of federal welfare money states are holding back may influence how much money federal lawmakers agree to provide in the future.

Congress has yet to reauthorize the law, which expired in 2002 and has been extended for the past few years.

In Hawai'i, state officials spent most of the federal welfare money in the first few years after the law was approved.

But as more people on welfare reached their time limits, the caseload fell and the amount of unspent money mushroomed. The state spent all but $4 million of its federal grant in 1999, but that figure jumped to $14 million in 2000, $43 million in 2001 and $65 million in 2002.

The Lingle administration has moved more of the incoming federal money into childcare and social-service programs, and the state has been tapping greater portions of the reserve over the past few years. But the reserve is still at $118 million.

The state Department of Human Services predicts that Hawai'i's federal welfare caseload will continue to decline over the next few years, as will the caseload for separate welfare and general assistance programs funded entirely by the state.

"We are working as quickly as we can to get this money out there," said Lillian Koller, the state's director of human services.

The federal welfare money does come with restrictions. The grant can be used for any of the law's four main goals: providing aid to needy families, promoting self-sufficiency through job training or marriage, preventing unwanted pregnancies and encouraging two-parent families. But once the federal money is placed into the reserve, it can only be used for direct cash assistance to needy families, limiting the state's flexibility.

Democrats have grilled the Lingle administration for using more than $513,000 in federal welfare money for an anti-drug media campaign and $625,000 to replace state money that was cut from the arts. The administration has said the spending was a creative attempt to reach at-risk and low-income young people.

Auditors from the U.S. Department of Health and Human Services are expected here this week to review whether the state has been spending its federal welfare money properly, and the state could face penalties if it has made any mistakes.

"That money should be spent to assist needy families," said state House Vice Speaker K. Mark Takai, D-34th (Pearl City, Newtown, Royal Summit). "I think the average person on the street would find that spending very difficult to justify."

Now that more people are aware that millions in federal welfare money may be available, the competition is over how to spend the money.

Lingle, in her proposed two-year budget, wants to spend $120 million to increase cash payments and bonuses to needy parents who are returning to work. The governor would also spend $20 million to help parents with preschool and childcare, an initiative that has the support of some key Democrats.

Democrats are moving ahead with bills that would raise the monthly federal cash payments to those on welfare by changing the formula that calculates the payments.

The formula, known as the "standard of need," is now based on a percentage of the 1993 federal poverty level. Basing it on a later year or adjusting it annually would increase payments to the poor.

Koller has warned that raising monthly federal cash payments would trigger increases in state-funded assistance programs, compounding the costs.

Some Democrats who favor raising the payments are also cautious about costs over the long term.

"I think we should raise it if we are able to afford it," said state Sen. Suzanne Chun Oakland, D-13th (Kalihi, Nu'uanu), the chairwoman of the Senate Human Services Committee.

State Rep. Alex Sonson, D-35th (Waipahu, Crestview), the chairman of the House Human Services Committee, said there will also likely be greater legislative oversight of how the Lingle administration handles federal welfare money.

"There is going to be some resolution to this," Sonson said. "We are going to use this money to help the poor."

State Rep. Lynn Finnegan, R-32nd (Aliamanu, Airport, Mapunapuna), said the administration has been more successful at using the money but is bound by the restrictions. "They have started to get a little more creative," she said. "But it's not as easy as just spending the money."

Some social-service providers believe the federal limits on welfare have led to more pressure on state and local services for the poor and can be linked, if only anecdotally, to an increase in the number of homeless families.

Joseph Hoffman, in written testimony to the House last week in support of higher cash payments, said he has reached his five-year federal time limit on welfare and is homeless.

But he asked lawmakers to increase the payments anyway so others might benefit.

"I have learned a great deal about the system and how it can work for the people and against the people," he wrote.

Reach Derrick DePledge at ddepledge@honoluluadvertiser.com or 525-8070.

• • •