Shriver Center: January 2006

Federal Budget Hurts the Poor, Grows the Deficit

2006-07-13T16:23:52Z

The complex and seemingly interminable federal budget battle continues toward a possible conclusion in February. Each house of Congress has passed a “budget reconciliation” bill that includes many different provisions that would resolve the federal budget for federal fiscal year 2006 (October 2005 to September 2006). The most recent Senate version was passed just before Christmas and is slightly different from the version previously passed by the House. Now it must go back to the House for another vote. That vote is currently scheduled for February 1.

The reconciliation bill is a faithful, somewhat scaled-down expression of the Bush administration’s priorities. It contains many budget cuts in important programs, including Medicaid, for low-income people. It also uses that “saved” money from those cuts, plus additional money that the government does not have to provide tax cuts for the wealthiest few, thus expanding the already-record federal deficit. (Details can be found at www.cbpp.org.) Those who oppose the reconciliation bill can and should press their representatives, especially the Republicans who control the outcome, to vote “no” in February.

It is extremely difficult to understand the rationale for this budget. The government has immense and important jobs to do that require adequate funding. These jobs include extraordinary ones such as managing the Iraq and Afghanistan wars, the larger war on terror, and administering hurricane relief. However, many observers say that these tasks are more expensive because of mistakes made by the administration.

On a larger and ongoing scale, poverty in general, and child poverty in particular, is increasing. The incidence of poverty has less and less to do with whether a family’s income comes from employment—the fastest-growing poor population is employed. More and more people, especially employed people, have no health insurance or have inadequate coverage. All health care is becoming prohibitively expensive.

A smart and proactive government role, including investments, is necessary to attack these problems and deliver a measure of support to families experiencing hardship. However, the Bush administration was loyally obeyed (or exceeded) by its congressional allies who proposed a $20,000 a year raise (through tax cuts) to millionaires who each have already received something like $100,000 a year in tax relief under the first Bush budget. Now they want that $100,000 raise be made permanent. As a result of this largesse to the wealthiest, the administration claims the government cannot afford to address important tasks adequately.

There is no moral or values-based argument that can sustain this approach, and none is really offered by its proponents. Indeed, the approach seems closer to a bald and polarizing assertion of power in support of “ours” (businesses and individuals who already have the most money) over, and at the expense of, “theirs” (individuals and families who have less). There seems to be an attempt to turn this assertion of power into a virtue, but it falls flat. There is not much moral difference between the power rationale—“I can do it, therefore I will do it”—and the attempt to turn it into a virtue—“I can do it, therefore I should do it.”

The Bush/Republican budget approach is dressed up not in a values-based argument but an economic one: If those with the most money have more money, then all will be well. We hope they will invest the added money. When they invest, it is theoretically possible that there will be more jobs (although this must remain theoretical— there is no duty or obligation or statistically certain job creation outcome—market forces will decide). If, in the end, there are more jobs, then it is theoretically possible that some of the jobs will pay wages that allow families to escape poverty. A smaller number might receive wages that enable them to support a family. Meanwhile, because we have given away all the money to the wealthiest few, the budget will defund programs that help the working poor make ends meet and satisfy basic needs such as health care.

This is a budget for the economic elite. It is not a budget for the vast majority of working families, and certainly not for the less fortunate among us. It is a budget largely made by those ideologically opposed to a constructive role for government in solving large social and economic problems. People with a different vision and a different moral frame of reference should urge their representatives to vote no on the reconciliation bill.

Let's Talk TANF: Congress on the Verge of Reauthorizing TANF

2006-07-13T16:23:52Z

The federal budget for fiscal year 2006 (October 2005 to September 2006), to be resolved in a “budget reconciliation” bill scheduled for a vote in the House on February 1, would reauthorize the Temporary Assistance for Needy Families (TANF) and child care subsidy programs while adding $1 billion to the annual child care block grant for the next five years. Taken as a whole, the changes are not good for the people who use these programs. The changes are particularly unfair for Illinois, and urging House members to vote “no” on the reconciliation bill is well worth the effort.(See John Bouman’s “Perspective,” in this issue).

Main Changes

The reconciliation bill contains a number of changes in the TANF program. Three of the most important are these:

Under current law, states must have at least certain percentages of their TANF caseloads engaged in employment or approved “work activities” or else face substantial penalties. This work participation rate, however, is reduced by the amount that the state’s caseload has been reduced since 1994. The work participation rate is 50 percent, but in Illinois the caseload reduction credit is so large that the required work participation rate is even smaller than the federally prescribed percentage. This has allowed Illinois’s TANF families to engage at least temporarily in activities other than employment or work; such activities might be attending college or caring for a disabled family member. Under the reconciliation bill, the work participation rate is still 50 percent, but the caseload reduction credit will now be based on 2005. Last year was the low ebb of the Illinois caseload. If Illinois’s work participation rate is based on that caseload, Illinois cannot take advantage of its caseload reduction credit.

Currently states may create separate programs for people for whom TANF is not an appropriate program. States may count the state funds in these programs toward their “maintenance of effort” requirement in TANF (as a condition of receiving the federal TANF block grant, states must promise to maintain their own spending on programs with similar purposes for low-income families). Under the reconciliation bill, the TANF work requirements and work participation rate will apply to these separate state programs. How much this will affect Illinois is not clear yet.

The reconciliation bill requires the federal TANF agency to produce by June 30, 2006, binding regulations, including rules about how states will document the work activities of recipients. While this requirement is not necessarily harmful, it makes for a substantial difference from 1996, when TANF was passed. At that time the states were free for almost two years to implement the program according to their best reading of the statute and informal guidance from the federal agency. Because final rules were not published until 1998, states had time to make the transition to any necessary changes. The implementation of the changes in the reconciliation bill will be on a much faster track, and the federal agency will have much less experience to guide it in drafting the rules.

On funding, the reconciliation bill flat-funds the TANF block grant and allots an increase of $1 billion over the entire next five years for the child care and development block grant. This is far short of what is needed just to provide child care for the expected increase in TANF recipients engaging in the newly required work activities. This increase fails to keep pace with inflation for the families currently receiving subsidies. It is nowhere near the needed amount to provide subsidies to families eligible for but not currently receiving them.

Opposing but Getting Ready to Implement the Bill

The reconciliation bill is far short of what Illinois families need to succeed in the workforce, progress economically, and address periods of family crisis. It is particularly unfair to Illinois. It pins the caseload reduction credit to 2005, a year when Illinois’s historically low caseload led the nation. All the states that lagged behind will be able to get caseload reduction credits. Although Illinois did precisely what the existing TANF law required, Illinois will be penalized. Illinois also has an exemplary child care subsidy program helping hundreds of thousands work and progress economically. Under the reconciliation bill, Illinois will need to devote more state dollars simply to avoid compensating for the cuts in federal funds.

Illinois has some choices. The state knows what is necessary to help people work and to provide fair and promising opportunities. If the bill passes, Illinois has to be ready to implement it in the most productive way. Illinois should get to work immediately to devise implementation choices that will promote better outcomes for families.

For more information, contact John Bouman.

Insecure in Your Own Home: What It Means to Rent in Illinois

2006-07-13T16:23:52Z

Lockouts, forcible entry, and security deposit disputes are common occurrences for Illinois renters, according to a new report called Insecure in Your Own Home: What It Means to Rent in Illinois, released by the Illinois Tenants Rights Working Group. The report calls attention to the experiences statewide of survey respondents who lack the basic consumer protections for safe, stable, and secure housing.

The statewide tenant survey was conducted by the Housing Action Illinois, Lawyers’ Committee for Better Housing, and Sargent Shriver National Center on Poverty Law, all part of the Illinois Tenants Rights Working Group, to determine how best to improve the landlord-tenant relationship and the quality of life for Illinois renters. Typical respondents lived in an unsubsidized property that was not owner-occupied. They had a family size between two and three and made $10,000 per year or less.

The most appalling statistic is the number of people who have been “locked out” of their homes. Lockouts are illegal evictions where landlords take the law into their own hands and oust tenants from their homes without notice or their day in court. One in twelve of the respondents had been locked out at some point. Other experiences of survey respondents were having their rent raised or being evicted as a form of retaliation, being threatened with utility shutoff, landlords entering apartments without permission, and lack of repairs. An analysis shows that nearly half (48 percent) of all respondents experienced at least one of these forms of abuse. A high percentage of respondents did not know the right and responsibilities of tenants (37 percent) and landlords (42 percent).

The report also reveals that renters lack basic consumer protections, with low-income households bearing the brunt of tenant problems. The combination of having too little money to afford a decent home and having some unprincipled landlords taking advantage of that fact forces too many families to live in deplorable conditions or on the streets. “This shows that the affordable-housing crisis makes landlord-tenant issues more relevant than ever,” said Douglas Schenkelberg of the Lawyers’ Committee for Better Housing. “By demonstrating the need for a comprehensive understanding of the landlord-tenant relationship, we can now continue to recommend specific policies that ensure that all Illinois families have access to stable, safe, and secure housing.”

Based on the report’s findings, the Illinois Tenants Rights Working Group is recommending that Illinois

adopt a comprehensive Residential Landlord-Tenant Act;
expand protections against retaliatory evictions;
adopt a statewide property maintenance code;
expand resources for education on landlords’ and tenants’ rights and responsibilities;
increase resources for alternative dispute resolution and legal representation; and
expand the amount of safe, decent, and affordable housing available.

The working group is advocating that policies and resources be increased to educate landlords and tenants alike on what their rights and responsibilities are. Over 25 states including Iowa, Michigan, and Nebraska have enacted legislation that gives tenants stronger protections than those in Illinois, and most of these protections have been in place for some 30 years.

Through a new Residential Tenant Protection Act introduced by Rep. William Davis (D –30th) tenants would be protected against unlawful evictions, in which landlords remove property, change locks, shut off utilities, or engage in other actions to make units uninhabitable and force their tenants out. The Act would solidify the Forcible Entry and Detainer Act as the only proper legal method in Illinois for removing tenants from a dwelling unit if the tenants fail to live up to their end of the rental agreement.

Currently, several municipal ordinances including Chicago’s s protect more than half of Illinois tenants, and parts of the state without home rule authority are unable to protect their residents from these illegal evictions. Representative Davis’s bill intends to protect tenants not currently covered by local ordinances and offer them the same type of rights and remedies as most tenants in Illinois already enjoy.

For more information, contact Kate Walz.

Five New Members Added to the Board of Directors of the Shriver Center

2006-07-13T16:23:52Z

Five new board members will strengthen the administration of the Shriver Center’s national mission. They bring a wealth of expertise to the organization on issues affecting low-income people —financial education, the needs of low-income women, and the barriers to independent living experienced by ex-offenders. “This dynamic group of individuals will also help increase the Shriver Center’s communications with different professional and diverse communities,” said Rita McLennon, executive director of the Shriver Center. The following newly elected members will serve a three-year term beginning in January 2006:

William Beck is a financial consultant and senior vice president of the Smith Barney investment firm. He has been managing individual and corporate accounts and advising clients on their assets.

Fred Cohen is a principal in the Litigation Group at Goldberg, Kohn, Bell, Black, Rosenbloom & Moritz, Ltd. He has extensive experience in litigating patent and trademark infringement matters, class actions, health care matters, business tort cases, e-commerce issues, and state and local tax challenges. Cohen was cocounsel with John Bouman of the Shriver Center in the landmark case Memisovski v. Maram.

Regina Montoya is the chief executive officer of the New America Alliance in Washington, D.C. She develops strategic and tactical plans to fulfill the alliance’s mission of promoting the advancement of the American Latino community with a focus on economic and political empowerment.

Joe Scantlebury is a senior policy officer of the Bill & Melinda Gates Foundation. His policy advocacy grant making in education targets two areas: helping high schools better prepare all students for college, work, and citizenship; and reducing the financial and other barriers to higher education.

Orin Whiting is a principal at Much Shelist and has in-depth experience in commercial litigation, health care law, and government affairs and regulator law as well as products liability litigation and counseling.

Sunny Fischer, executive director of the Richard H. Driehaus Foundation, is the new chairperson of the Shriver Center’s board. Eileen Sweeney of the Center on Budget and Policy Priorities continues as vice chairperson. The other newly elected officers are Hon. Divida Gude, of Atlanta, Georgia, as secretary, and Luis A. Wilmot of AARP/Texas as treasurer.

The remaining members of the Shriver Center board of directors are Sandra Cuneo, Police Assessment Resource Center; Gregory R. Dallaire, attorney at law; Gill Deford, Center for Medicare Advocacy; Bruce G. Iwasaki, Legal Aid Foundation of Los Angeles; LeAlan M. Jones; Ethel Klein, Ph.D., EDK Associates; Marshall Marcovitz; Betty J. Musburger; Grace Allen Newton, Robinson, Curley & Clayton PC; Suzan L. Rayner, M.D., MPH, Schwab Rehabilitation Hospital and Care Network; Catherine Robb; Janice E. Rodgers, Quarles & Brady; Jean Rudd, JR Strategies; Jill Schuker, JAS International Group; and C. Steven Tomashefsky, Jenner & Block.

With SEED, Americans Can Begin Life with a Nest Egg of Their Own

2006-07-13T16:23:52Z

Saving and investing have always been bedrock American values—a way both to get ahead financially and to have something to fall back on in a crisis. Nowadays with easy credit, many Americans have abandoned the savings habit and have lost sight of the economic benefits that accompany thrift. However, SEED (Saving for Education, Entrepreneurship, and Down Payment), a model initiative in Chicago, aims to make sure that all Americans, especially those of lower income, build and nurture their nest eggs.

A measure of the state of personal savings in America is the new “Nest Egg Index” released by A.G. Edwards. The Nest Egg Index ranks America’s 200 top-performing communities based on residents’ personal savings and investing behavior. The index shows the geographic regions where people are succeeding and face the greatest difficulty in building and nurturing their nest eggs.

In Chicago the news is not much better. According to the Nest Egg Index, Chicago ties with Newburgh, New York, for 39th, above the national average but behind neighbors such as Detroit, Des Moines, and Minneapolis-St. Paul.

The Nest Egg Index examines only broad measures of wealth and well-being, such as home ownership, retirement plans, and the proportion of households that save and invest. Anyone who has examined data on wealth and savings knows that the fundamental challenge is the yawning gap between the haves and the have-nots. Moreover, almost 40 percent of all children live in families that are “asset poor”—meaning that, should their source of income dry up, they lack the financial reserves to survive for three months at the poverty level.

Initiatives such as SEED accounts aim to change that for the next generation. At the William M. and Charles H. Mayo Elementary School 75 children have established nest-egg savings accounts that are managed by J.P. Morgan Chase Bank. The SEED accounts are matched savings accounts that start with a deposit of $500, reward accountholders with a match for their own savings, and are restricted to secondary education. Chicago is one of 12 nationwide sites of the SEED initiative—a national experiment to develop, test, inform, and promote matched savings accounts and financial education for children and youth.

The SEED initiative aims not only to help these 75 elementary school students in Chicago establish a nest egg and use it to save toward their dream of college or trade school but also—through the experience of these children and careful research—to make this kind of SEED account a reality for all children in America. Already the Aspire (America Saving for Personal Investment, Retirement, and Education) Act, cosponsored by Sens. Rick Santorum (R-PA), Jim DeMint (R-SC), and Charles Schumer (D-NY), has been introduced in Congress to do just this. Aspire calls for Kids Accounts (Kids Investment and Development Accounts) to be opened for every newborn child in 2007 and beyond, with the goal of encouraging savings, expanding opportunities, and promoting financial literacy. Kids Accounts would be seeded with an initial deposit by the federal government, with progressive matches on private contributions to the accounts, just like the SEED accounts in Chicago.

Announcements

2006-07-13T16:23:52Z

Do You Want to Establish a Bank Branch in a High School?

The Shriver Center is pleased to announce the publication of A Guide to Establishing Bank Branches in High Schools. The new guide describes the inspiration and operation of two high school student–run bank branches in public schools: the Curie Branch of Park Federal Savings Bank in Chicago and the Cardinal Branch of Mitchell Bank in Milwaukee. The Guide includes information on both projects, the partners involved, factors to consider, and the costs and benefits of such a project. The Shriver Center hopes that the Guide will inspire more schools, banks, and others to develop similar projects. The high school bank branch model is part of a national effort to expand financial education, services, and asset-building opportunities to students, families, and communities.

The Shriver Center released the Guide at the New Alliance Task Force National Best Practices Conference last month in Chicago. The Curie Branch project partners include representatives from Curie Metro High School, Park Federal Savings Bank, the Chicago Public Schools, the Federal Deposit Insurance Corporation (FDIC), and the University of Illinois at Chicago’s Center for Economic Education, the Cardinal Bank, and the Office of Thrift Supervision (OTS), as well as private donors. The Shriver Center is interested in opportunities to share information with interested groups in other states. For more information and to receive an electronic copy of the Guide, contact Ian Gardiner (312.368.1033).

Mark Your Calendars!

Illinois Asset Building Group (IABG) Committee Meetings in February!

IABG Policy Committee meeting is scheduled for Monday, February 6, at 1:00 p.m.–3:00 p.m. The committee will be focusing on advancing universal progressive children’s savings accounts.

IABG Coordinating Committee meeting is scheduled for Tuesday, February 21, at 10:30 a.m.–12:00 noon

Both meetings will be held at the Sargent Shriver National Center on Poverty Law at 50 E. Washington Street, Suite 500, Chicago, IL 60602. If you have any questions, please contact Jami Schlafer at 312.368.8575.