New York should eliminate asset limits for public assistance recipients

As the Democratic presidential campaign increasingly turns into a contest between a democratic socialist former New Yorker and a billionaire current New Yorker with very different opinions on what to do about America’s large and growing wealth gap, New York should change a policy that discourages those with very little money from moving up the economic ladder. 

Temporary Assistance for Needy Family, more commonly known as welfare, provides cash assistance, childcare, transportation, food and a shelter allowance to eligible low-income families for up to 60 months. The federal government provides funding through a block grant and the state government adds its own funding. States have the discretion to design the program’s rules. Applicants’ income must be below a certain threshold dictated by a complicated set of calculations. In New York, generally, a family of three with children could make no more than $1,459.65 a month and be eligible. In addition, all but eight states limit the amount of money someone can have in the bank. New Yorkers are eligible if the household passes two income tests and the asset limit test which means having no more than $2,000 in resources in the household. Resources include, but are not limited to, bank accounts, cash value in an insurance policy, and retirement accounts. This increases to $3,000 for a household with someone 60 years or older. There are other exceptions like burial plots, and funds for a vehicle replacement, to name a few. Recipients must be a U.S. citizen or have satisfactory immigration status and, if able to work, have a job, be enrolled in an education or training program, or be enrolled in an approved program. 

These rules are a problem for people trying to get ahead in the world, because asset limits deter them from saving money. Savings should be encouraged, not penalized. This asset limit for receiving public assistance should be eliminated, or at the very least raised to $10,000. 

As director of a financial counseling team at New York Legal Assistance Group, a non-profit that provides free civil legal services and financial counseling to people in poverty, I can attest that if all my clients on public assistance had $500, just a quarter of the limit, there would be a lot less strain in their daily lives. I once counseled a client who didn’t have enough money for her childrens’ school supplies. Since she was afraid she would lose her benefits if she had savings in her name, she spent everything down regularly. She came to me because she was having trouble paying back the local loan shark she borrowed from. 

Daily, financial counselors and coaches have to push back on the biggest myth out there: the notion that if you save any money at all while receiving public assistance, including Supplemental Security Income you will lose your benefits.

According to Robin Hood Foundation’s Poverty Tracker, in New York City, 45% of residents cannot pay an emergency expense of $400. 

This is bigger than just education. No amount of financial counseling or coaching could compete with the message of asset limits: Don’t find too much financial stability, or we’ll snatch away this safety net. 

The point of implementing asset limits in 1996 was to prevent the mythical “welfare queen” driving a Cadillac from collecting public benefits, thus incentivizing recipients to find jobs, and using limited public funds for the most needy. But, with unaffordable housing and living expenses far outpacing wage increases, the circle of need has expanded tremendously. New York state needs to stop penalizing people with low incomes for saving money. Eliminating or raising asset limits will not be a panacea, but it is one way to reduce the financial insecurity of many New Yorkers.

Currently, people applying for need-based benefits have to deplete their savings in order to qualify, making it that much harder for them to transition off of public benefits and back into private workforce. Even if they return to work, they may find it difficult to build those savings back up. Without an emergency fund, one large, unexpected expense could send them into a housing crisis and then back on public assistance. 

One concern for removing asset limits is that it will lead to a large uptick of applicants. But research shows otherwise. In 2016, the Pew Charitable Trusts conducted original research to explore what would happen if asset limits were removed. The Pew report showed that among the seven states that had removed asset limits for benefit-eligibility between 2000-2014, there were no statistically significant increases in the number of welfare recipients. It also showed that raising or eliminating asset limits did not affect the number of monthly applicants, and states that change their asset limits from low to moderate or eliminate them see a decrease in their administrative costs. By not having asset limits, programs reduce program churn, the on-again, off-again that occurs when recipients have short-term savings that brings them over the asset limit. This program churn leads to administrative costs when state employees need to process the application and verify income. 

If removing asset limits leads to cost savings and no increase in enrollment, then why does New York still have these rules? Perhaps because poverty is seen by many as a character defect, and the message being sent is that those experiencing poverty won’t work hard enough without sufficient incentive.

Yet Pew posits that the decision to seek assistance is more closely linked to financial conditions, such as unemployment rate, than to the characteristics of an assistance program. This lines up with what we see in the field. Our clients do not want to be on public assistance. They are not lazy. They want access to livable wages, affordable housing and economic opportunity and mobility, but the opportunities don’t always exist.

One small step New York can take to reduce poverty is to eliminate – or, at the very least, raise – the asset limits for those on public assistance. Gov. Andrew Cuomo and the state Legislature can be leaders by adding New York to the list of states that fully support the financial security of low-income residents. They can also support the recently proposed federal legislation (ASSET Act), which would eliminate asset limits for federally-funded means-tested public assistance programs. Public assistance should help people when they need it, not punish them for accessing it.