Congress closes 'strip club loophole' for welfare recipients

TUESDAY, FEBRUARY 28, 2012
Congress closes 'strip club loophole'
By Pamela M. Prah, Stateline staff writer


SOCIAL POLICY BEAT

States are now required to prevent welfare recipients from using ATM machines in casinos, liquor stores and strip clubs to spend or access their benefits. The new policy was tucked in the payroll tax cut bill that Congress passed earlier this month, which also extended the Temporary Assistance for Needy Families (TANF) or welfare block grant through the end of the fiscal year.

The needy generally get welfare payments and other public assistance on debit cards known as Electronic Benefit Transfer (EBT) cards, rather than checks. States now will have to adopt policies to block welfare benefits from being used in any EBT transaction in liquor stores, casinos, gaming estalishments or adult entertainment or risk losing federal funds. The U.S. Department of Health and Human Services will spell out exactly what kind of policies states must implement.

Supporters of the new requirements point to several news accounts as evidence that too many welfare recipients were accessing and using their welfare benefits at “questionable locations.” A 2010 Los Angeles Times investigation, for example, found that $1.8 million in TANF funds were withdrawn in casinos and $12,000 was accessed in strip clubs.

The Times' series of articles prompted then-Governor Arnold Schwarzenegger to issue an executive order requiring welfare recipients to promise to use cash benefits only to “meet the basic subsistence needs” of their families and ordering state officials to crack down on welfare fraud.

In Georgia, Fox 5 in Atlanta found that $150,000 in TANF cash was accessed in liquor stores, bars and nightclubs, and a probe in Michigan discovered that more than $87,000 in TANF cash had been withdrawn from a Detroit casino over a 12-month period These were among several examples that U.S. Representative Dave Camp, chairman of the U.S. Ways and Means Committee, listed to demonstrate the need for the change.

“In plain language, welfare benefits could no longer be accessed at any of these facilities,” Republican U.S. Congressman Geoff Davis of Kentucky said.

Advocates for the low-income say the new restrictions are unnecessary and stigmatize struggling families. “The idea that TANF recipients are using their cash benefits on gambling sprees or drinking them away may make for sensational headlines but is not based on facts,” the Washington, D.C.,-based Center for Law and Social Policy, an advocacy group, said in a statement. A parent may withdraw funds to pay rent at an ATM located in a liquor store simply because it is the lowest-cost or most convenient ATM, the group says.

States that fail to employ policies within two years could face a 5 percent cut in their annual TANF funding. For states like California, that could mean losing $183 million from its $3.7 billion annual share or Wyoming could lose $925,000 of its $18.5 million share, according to a state-by-state analysis from the Federal Funds Information for States.

In addition to possibly losing federal money, states are concerned with the costs associated with the new requirements. This includes identifying the ATMs in question and keeping updated lists, says FFIS, which provides fiscal information to state leaders. Given the fluid nature of ATMs, this could be a challenge.

FFIS said a few states have studied the use of welfare electronic benefits at bars and casinos and found a very small percentage (less than 0.1 percent) of TANF transactions occurred at these locations. “This means that states could incur substantial costs to address an issue that does not appear to be a widespread problem,” FFIS said in a February brief.

Congress also has asked the Government Accountability Office to look into whether the TANF program is vulnerable to fraud, waste and abuse. As part of this work, GAO is surveying 10 states and looking into the location of where welfare benefits are accessed and type of retailers, FFIS said. The report is expected this May or June.

- From http://www.stateline.org/live/details/st…

11 comments

  • newmark
    13 years ago
    Because they are too stupid to hit an ATM at a convenience store on the way?
  • inno123
    13 years ago
    Everybody jumps to the wrong conclusion. For example the LA Times article mentioned in the article made a specific reference to withdrawls at Sam's Hofbrau. For those who have not been there Sam's is in an industrial area where there are many workers and some shopping but almost no retail so the ATM in Sam's is the closest to quite a number of part time and temporary workers, not to mention the part-time dancers and waitresses at Sam's itself. Yet the conclusion they jumped to was that people were getting lap dances with their welfare money.
  • deogol
    13 years ago
    Why not simply cut off the card if it is used in this way? Why promote more spending on already bankrupt states, not to mention more "lists."
  • gatorfan
    13 years ago
    Damn now where do I cash my check
  • Ermita_Nights
    13 years ago
    This actually passed? I thought it was a joke. I said it before, but in Detroit you can't buy food anywhere except at a liquor store. There are no grocery stores left.
  • Alucard
    13 years ago
    "ATM machines in casinos, liquor stores and strip clubs"

    IMHO anyone using an ATM in 1 of those sites has a screw loose. Use your own Bank's ATM or cash a check at your Bank or withdraw from your Savings Acct at your Bank.
  • rrbill
    13 years ago
    A good reason to avoid SC ATMs--they have ridiculous high fees, often a percentage of the draw.
  • Book Guy
    13 years ago
    The high fees are a good reason not to use them (my bank waives competitor-bank ATM fees by refunding into my account the same amount as the fee; and, so far, they've been foolish enough to do the same for private-ATM fees on the same principle). But what I'm wondering is, how many employees (a.k.a. dancers) at strip clubs are also welfare recipients and now actually have to think ahead a bit about which ATM to use. I bet some of the single mothers are going to get caught up short on this one.

    Come to think of it, I did notice that the ATMs in my favorite strip club were rearranged and out of service in an odd manner over the last few days. They'd work on credit cards but not on bank cards, for instance, and they were plugged in and lighted up but sometimes they keyboard would act as though it lacked power and wouldn't register keystrokes. Strangeness. Maybe that has something to do with this? Nah, no effin' WAY the strip club was on target with the schedule THAT accurately ...
  • jackslash
    13 years ago
    Another bullshit law by bullshit politicians. The politicians love to get publicity and attack "sin", but they have no interest in addressing real problems. The amount of welfare money wasted in strip clubs is insignificant compared to our real social and economic problems.
  • Ermita_Nights
    13 years ago
    Jack: Nonsense. We have the best politicians money can buy.
  • deogol
    13 years ago
    "IMHO anyone using an ATM in 1 of those sites has a screw loose. Use your own Bank's ATM or cash a check at your Bank or withdraw from your Savings Acct at your Bank."

    A lot of these people don't have bank accounts...
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