Income Supports Group

Prepared for PSCI 12: Public Policy and Administration

A Community-Based Learning Course at Drew UniversityIn Partnership with the United Way of Northern NJ, Morris County

May 2011

Savanna Arabi-Katbi, Thomas Baniszewski, Cody Cummings, Nicole Kuruszko & Alexander

Pedinoff

Which income supports are the most cost-effective?◦ Family-Wize, Food Stamps, TANF, EITC

Which are most needed and could work best in Morris County?

Tackling Income Supports

Income support programs, welfare and social insurance programs are typically targeted on the basis of some measures of need, such as income, assets, employment circumstances, and family circumstances.

Tackling Income Supports

It might not be the low wage earner’s fault that they are struggling to pay their bills, because they might be working hard at their places of employment.

However, they might be struggling as it depends upon their skills, needs, and risk of illness, family, as well as personal assets, and their ability to secure employment which depends upon the economy.

Tackling Income Supports

Family WizeCody Cummings

AndAlexander Pedinoff

In 2005, almost 13 percent of the Morris County’s population was uninsured◦ Use hospital emergency visits to access health care

system◦ Unpaid costs incurred represent small percentage of

overall costs of charity health care E.g. hospital admissions, outpatient tests, and clinic visits

Access to health care for ALICE is diminishing◦ Reduction in employer provided health insurance

According to the ALICE report….

Aimed at lowering the costs of prescription drugs for children and families without prescription drug coverage

Families who qualify request the program’s card◦ Present card to participating pharmacies to receive a

discounted rate on prescription drugs Distributed by chapters of the United Way Only requirement for receiving and using the

card is not having prescription drug coverage◦ Getting the card does not cost the applying family

money

Prescription Drug Savings Program

Not a formal health insurance program◦ No governmental involvement.

Discounts only available at participating pharmacies◦ Each pharmacy decides independently whether or not

it will participate Rate of discount varies among pharmacies It is possible that some families do not live within

a reasonable distance of a participating pharmacy

Only offers discounts on prescription drug costs◦ The family must still pay the difference

Limitations

Over 55,000 pharmacies within the United States participate in the FamilyWize program, and accept the card

The average savings is 20% over standard retail prices◦ $9.25 per prescription

Has saved participating families a total of over $190 million

Community Benefits

Only involves discounts, not reimbursements◦ A very cost effective program.

Useful in Morris County◦ Helpful to many college students

Aids those who have health insurance that does not cover prescription drugs

Beneficial to Morris County◦ Does not cost anything to join◦ Does not involve much work to join the program

Effects

Extremely cost-effective Major drug companies participating

◦ Merck, Johnson & Johnson, Pfizer The United Way and affiliates pay nothing to

operate the program◦ Drug companies provide prescription brand name

drugs with discounts 20-30% off original price Generic drug savings over 30% off of their retail

price

Cost Effectiveness

Pharmacies must be in partnership with the United Way and major drug companies◦ Otherwise, purchasing drugs at retail price would cause the

pharmacies to lose money Enrollment in the program provides a reimbursement

check from the drug companies to the pharmacies◦ makes up for difference in prices

Most pharmacies across the nation participate◦ If the local neighborhood pharmacy does not, the Walgreen’s

in the next town probably does http://www.unitedwaylebco.org/Family%20Wize%20pr

escriptions.htm

Pharmacy Benefits

Food StampsSavanna Arabi-Katbi

Goals:◦ Improve nutrition and health◦ Assist low-income families in purchasing food

One in eight Americans receive food stamps◦ More than 355,000 New Jersey households

In New Jersey, known as SNAP (Supplemental Nutritional Assistance Program)◦ Switch to EBT in late 1990s

Prevents fraud Eliminates coupons

Program Overview

Most people receiving food stamps are not on welfare◦ If annual income is below 185% of the Federal

Poverty Level, you probably qualify Family of four can receive up to $668

monthly More people than ever are applying and

receiving food stamps New Jersey receives nearly $91 million

annually for food stamps

Facts and Eligibility

People in Household

Gross Monthly Income Limits

Gross Monthly Income at 185% of FPL

Net Monthly Income Limits

1 $1,174 $1,670 $903

2 $1,579 $2,247 $1,215

3 $1,984 $2,823 $1,526

4 $2,389 $3,400 $1,838

Income Limits For Food Stamps

More children impacted by the need for food stamps as recession continues◦ 9.4% of New Jersey residents live in poverty

1/3 of New Jersey children living in poverty Outrage over proposal to cut food stamp

funding◦ Need funding in order to continue program

16% increase in need for food stamps over past year In 2006, served nearly 27 million nationwide

◦ Cost $30 billion to federal taxpayers

Concerns

Pros and Cons

Limitations on purchases◦ Can also withdraw cash

outside of grocery store Cash benefits

Provides aid to thousands

Limitations on purchases◦ Can also withdraw cash

outside of grocery store Cash benefits

Many people are eligible and do not know it◦ Think they need to be on

welfare

Temporary Assistance For Needy Families(TANF)

Nicole Kuruszko

Fixed block grant Aid to Families with Dependent Children

◦ 1935-1996◦ TANF’s predecessor

American Recovery and Reinvestment Act of 2009◦ Congress created a new TANF Emergency Fund◦ Funded at $5 billion and available to all states ◦ Subsidized employment

States created nearly 250,000 adult & youth jobs

Program Overview

1. Provide assistance to needy families so that children may be cared for in their homes or in the homes of relatives

2. End the dependence of needy parents on government benefits by promoting job preparation, work, and marriage

3. Prevent and reduce the incidence of out-of-wedlock pregnancies and establish annual numerical goals for preventing and reducing the incidence of these pregnancies

4. Encourage the formation and maintenance of two parent families

Four Goals of TANF

WorkFirst NJ- NJ’s Temporary Assistance for Needy Families

NJ one of only a few states that also provides cash benefits and support services to individuals and couples with no dependent children

Services under WFNJ are limited to five years: could be eligible for SAIF

Current Policy & Organizational Landscape

TANF Recipients:• Entire U.S. Population 1999:

6,836,093

• Entire U.S. Population 2008: 3,791,678

NJ 2003: 102,657, 1.20% of state population

NJ 2008: 79,565, 0.92% of state population

Center on Budget & Policy Priorities

1. Time Limit & Eligibility◦ Recipients must work as soon as they have a job ready or no later than

two years after coming on assistance◦ Maximum of 60 months of TANF benefits◦ Accommodates increased need at a slower rate than food-stamps

2. Cost-Effectiveness:◦ Expensive Federal Program:◦ Fourth largest source of federal funding for employment & training

services in FY 2009◦ Fixed block grant

17 states receive supplemental grants

3. Rules and Measure of Success◦ Measure work-program performance by number of participants

extremely high participation quotas and expectations◦ 90% of TANF recipients are women◦ States have broad discretion in some respects

Diagnosis of Policy Problems

Financial reforms◦ Spending cuts◦ Examine the funding level and rules for the program◦ Benefits need to be accounted for in times of inflation/recession

Encourage partnership between agencies◦ TANF and WIA

New Focus on TANF Content◦ Education/ Training Programs◦ Transportation Costs◦ Affordable Housing◦ Elimination of discrimination based on family structure◦ Raise benefits to an adequate level

Policy Alternatives

1. New Focus on TANF content◦ High Deficit spending- hinders implementation of new ideas◦ Administration costs◦ Specialized experts to redefine rules◦ Legislative process, time consuming ◦ Unemployment

2. TANF and WIA partnerships:◦ Pro of partnerships:

Leverage each agency’s relative strength WIA system’s close connections to employers

◦ Con of partnerships: Different program expectations Outcomes are measured differently

Policy Alternatives: Pros and Cons

Earned Income Tax Credit(EITC)

Thomas Baniszewski

Federal government’s largest cash-assistance program for low-income families◦ Centerpiece of anti-poverty programs in the United States◦ 15% of households nationwide qualify for the EITC

Administered through the income tax filing process◦ Reduces potential stigma associated with the program◦ Aids in ensuring high participation

Approximately $43 billion allocated to 22 million families in the United States in 2007◦ Compares to $16.5 billion spent on more traditional

welfare programs like TANF

Context of Policy Issue

Targets families with children◦ Money received increases with the addition of

each child E.g., households with two children earning $15,000

annually could receive $4,824 in federal earned income credits

A childless single filer can receive only one-tenth of this amount $438

Full refundability ensures a substantial addition to income.

Context of Policy Issue (cont’d)

Designed to augment income while encouraging work◦ Tax credit increases with earnings for low levels of household

income◦ EITC is a negative tax on earnings

Often constitutes a significant portion of after-tax wage income Successful in helping the working poor get out of

poverty◦ Encourages work◦ Combined federal and state EITC helps families rise above the

poverty line Estimated to have helped five million people out of poverty in

2005 2.6 million children

◦ Raised the standard of living for low-income households Keeps administrative costs relatively low

Cost Effectiveness

60% of EITC recipient households are single◦ Equal distribution of single households having zero,

one, two or more children Contrasts with two-parent households

◦ majority of receiving households have two or more children

Amount of relief varies significantly across household types◦ Single-parent households with two children receive the

most EITC 15% of annual income

$2,728

◦ Households without children receive much less EITC 6% of annual income

Provides Relief to Families

Has the largest impact on households with children◦ Tax credit much larger for these households

more than seventy-five percent of recipient households have children

Single households represent the majority◦ 60%◦ Tend to be more educated than married EITC

households Contrasts with the general population

Recipient households much less likely to have two earners than non-recipient households.

Effectiveness of the Program

1. Single households◦ Lower credit card balances◦ Late payments on credit cards◦ Less likely to have a checking account

2. Married households with children ◦ Very high late payment frequencies

13% of married households with one child have a late repayment, compared to 5% of non-recipients

Financial Constraints

Contribute to a retirement savings plan◦ Encourages the working poor and other low-income

workers to invest in retirement savings The employer match has not succeeded in

increasing the participation rate of the working poor and other low-income workers

Need to encourage workers to save money Dollar for dollar match

◦ Households should receive as much as they make Put a cap on amount of money allocated to

each household

Policy Alternatives

Conclusions and Recommendations

Great potential in New Jersey Low- and moderate-income workers in Morris

County lost out on more than $123 million in federal and state earned income tax credits in 2009

40% of Morris County residents eligible for tax credits◦ 11,755 tax filers claimed EITC in 2009

$18.7 million to county’s residents who filed Average return of $1,591 Total return would be $141.8 million

Eligible incomes range from $13,460 to $43,352 for a single person or a single person with children From $18,470 for a married couple aged 25 to 64 with no children

to $48,363 for a married couple with three or more children

EITC as Most Beneficial to Morris County

Thirty sites in Morris County that can help taxpayers file for the tax credit◦ Chatham, Whippany, Wharton, Kinnelon, Mount

Olive, Boonton, Chester, and Jefferson Libraries◦ Madison and Chatham Senior Citizen Centers

Easy to Access EITC Help

Print Fliers or brochures in English, Spanish, and in other languages and leave them at Public Libraries, Municipal Buildings, and Senior Citizens.

Print Ads in local Newspapers, for example, Parsippany Patcher, Madison Eagle, etc. to raise awareness.

Send out mailings to past EITC recipients to encourage their families or friends to apply or to potential recipients who failed to apply.

What can United Way Can Do to Expand the EITC?

Ask local religious leaders in the community to spread the message about EITC either through word of mouth, parish bulletins, etc.

Hand out fliers at local schools, explain to students to give these to their parents and make sure that students persuade their parents read them.

What can United Way Can Do to Expand the EITC?

Make sure that brochures and fliers emphasize the following about the EITC;

The program does not stigmatize you Money from the tax credit can be used for

any need of the family or individual Applying, filing, and receiving information

on whether one is eligible is free of charge These centers that are free of charge are

numerous and one is guaranteed to be near you

What can United Way Can Do to Expand the EITC?