State Line Road, along the border of Illinois and Indiana, defines more than geographic boundaries — it also defines the economic futures of struggling families.
In Illinois, the social safety net (think the Supplemental Nutrition Assistance Program, formerly known as food stamps, and other assistance programs) is designed as a springboard toward financial stability. In Indiana, that safety net can trap families in poverty. This week, the House of Representatives is poised to use the farm bill to compel all 50 states to adopt Indiana’s approach. This setback would be a major blow for low-income families and the agencies that serve them.
Imagine the Smiths in Lansing, Ill. The Joneses live across the street, but in Munster, Ind. Both households are led by a single mother with two children. Both women recently lost their jobs at the same warehouse and have $4,800 in savings. Both are coping but will soon turn to public support since work is so hard to find.
Ms. Jones is likely headed for years in poverty, enmeshed in a broken system — while Ms. Smith may get the short-term support she needs and then leave public assistance for good.
What’s the difference? While Illinois allows low-income families accessing assistance to save, Indiana forces families to choose between saving and getting help. Indiana imposes arbitrary asset limits — a cap on the savings and resources a family can have and qualify for support like SNAP. The House Agriculture Committee recently voted to impose Indiana’s approach nationwide by axing states’ option to raise or eliminate their SNAP asset limits. The Senate rejected a similar amendment. This week, the full House takes up the bill.
Like almost 40 other states, Illinois has eliminated its SNAP asset limit, while in Indiana, a family with more than $2,000 is ineligible for support. If either family needed cash assistance, Indiana would limit the Joneses to $1,000, while Illinois just became the eighth state to allow families to save without a cap.
Ms. Smith will be approved for assistance with $4,800 in the bank. She’ll receive a small supplement each month to buy groceries, allowing her family to maintain a modest savings cushion. The Joneses’ $4,800 disqualifies them. They begin depleting their savings immediately to pay for food. Still struggling a few months later, they reapply and qualify for SNAP — this time with less than $2,000.
The complications don’t end there for Ms. Jones: All SNAP applicants are subject to a vigorous evaluation of their income, expenses and immigration status. But in Indiana, the Jones family must also furnish extensive documentation of their assets, from bank statements to vehicle registrations to proof of lump sum payments or settlements. This red tape is more trouble than it is worth. Since Pennsylvania reinstated its SNAP asset test last year, only 4,000 of 1.8 million applicants have been denied for excess savings. Meanwhile, 17,000 additional families have been disqualified for failing to jump through the hoops correctly.
For administrators, asset tests create a hassle with no payoff. Though the Joneses (like most SNAP applicants) have minimal assets, their eligibility worker must verify each piece of information they provide. Every minute spent on an inconsequential evaluation subtracts from the time caseworkers can spend on valuable activities such as job search assistance. Some states have also found that asset test reform saves taxpayers money by reducing administrative costs.
With a diminished savings account, Ms. Jones is approved for assistance. But a car accident the following month saddles each family with $1,500 in costs. The Smiths pay damages and retain some savings, while the Joneses’ account is drained. Despite a new job, Ms. Jones must turn to payday lenders to cover utility bills and child care. She quickly falls into a debt cycle. Ms. Smith, meanwhile, stays afloat and transitions her family off support as her household returns to financial stability.
This is the story of thousands of families across the U.S. They live within steps of each other, but their prospects for the future are worlds apart.
The SNAP asset limit has become a target of persistent attacks in the farm bill debate. Conservative lawmakers argue that easing access to support fosters dependency. But we know that families cycle on and off assistance. The poverty trap doesn’t come from the existence of programs but from forcing families to live at the margins. Eliminating asset tests enhances a family’s ability to move to financial security and off SNAP. Strict asset limits prevent families from taking the necessary steps to escape poverty and create a needless burden for already strained state agencies. Allowing and encouraging savings should be an essential part of helping families get back on their feet. The Smiths have a better shot in Illinois; it’s clear which approach is better for the nation.
Aleta Sprague is a policy analyst in the Asset Building Program at the New America Foundation.