NCPA - National Center for Policy Analysis

States Restrict Welfare Buying

July 11, 2012

Under a new federal law, all states must prevent the use of cash benefits in liquor stores, gambling establishments and adult entertainment businesses by 2014. States that fail to establish policies face cuts in federal support, yet many states are finding the laws difficult to implement and enforce, says USA Today.

  • Currently, 10 states have passed such laws that prohibit the use of assistance cash for spending on liquor, cigarettes, strip clubs, gambling and guns.
  • Additionally, according to the National Conference of State Legislatures, at least 14 more states are considering such laws.
  • Such laws are spurred by anecdotal and empirical evidence of welfare recipients withdrawing thousands of dollars from ATMs in casinos, liquor stores and strip clubs.

These laws seek to force assistance recipients to use dollars on goods for which they are intended. While food stamps are provided for the purchase of food, welfare cash is supposed to be for non-food necessities. To support this need, ample federal and state funding is provided.

  • Last year, 4.4 million people received cash benefits ranging from $200 to $1,000 a month, paid by federal and state governments.
  • The federal government share was more than $16.5 billion.

In response to the federal mandate and subsequent legislative action on the state level, enforcement programs are responding that the law is difficult to police.

  • There is little that enforcement measures can do to prevent welfare recipients from withdrawing cash in an innocuous location and spending that cash elsewhere.
  • Additionally, those goods prohibited from purchase can be purchased in tandem with necessities, making the purchase as a whole appear legitimate.

In Massachusetts, clients must pay back misused money, and store owners who knowingly let welfare recipients spend the money on prohibited items can be fined up to $1,000. However, even this unique measure hasn't resulted in any progress toward a solution.

Source: Marisol Bello, "States Restrict Welfare Buying," USA Today, July 9, 2012.

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