Making Ends Meet: What It Really Takes to Get By in Texas Poverty & Homeless Coalition’s Annual Conference February 27, 2009 Frances Deviney, Ph.D. Texas KIDS COUNT Director

Overview What’s wrong with the official poverty measure? How much is enough? What happens when families don’t earn enough (or a little too much!)? How do you fill in the gaps? How can you use this research in your advocacy for the homeless?

What’s Wrong With the Poverty Measure? Texas Poverty 101 What’s Wrong With the Poverty Measure? http://www.cppp.org/research.php?aid=96&cid=8

What is Poverty? The Idea of Poverty – a condition of deprivation Define = guidelines Count = thresholds

What is Poverty? Quantifying Poverty - technical meaning how many people are officially poor define who is eligible for public assistance Define = guidelines Count = thresholds

What is Poverty? Originally designed to reflect the minimum amount of income that American households need to subsist. Poverty = 3 x cost of food per family size Circa 1960s Updated annually for inflation The U.S. Census Bureau establishes annual income thresholds to measure poverty and estimate the number of poor people. People in families with income below the federal poverty threshold are considered poor. The U.S. Department of Health and Human Services uses these thresholds to set income guidelines, which vary by family size and are referred to as the “federal poverty level” (FPL). FPL is used to determine eligibility for many government programs. Private organizations also use these guidelines to determine eligibility for their services to low-income families. The “federal poverty level” (FPL) - Individuals in families with income below the federal poverty level are considered poor Guidelines reflect the minimum amount of income that American households need to subsist Federal poverty “guidelines” are used to determine eligibility for many federal, state, and local programs Private organizations also use these guidelines to target their services to low-income families

Federal Poverty Guidelines 2007 2009 Family of 2 < $13,690/year $14,570 Family of 3 < $17,170/year $18,310 Family of 4 < $20,650/year $22,050

Nearly 1 of Every 4 Texas Children Lives in Poverty Last Recession Texas ranked 44th in country (2008 National KC book) Source: KIDS COUNT Data Center, Annie E. Casey Foundation 8

What’s Wrong With the Poverty Measure? Significant shifts in household expenses since 1960s No measurement of other household costs Varying rates of inflation for specific expenditures Taxes and benefits not included No provision for geographic variation* No accounting for change in standard of living Food is estimated by the Census Bureau to currently account for only 1/7th (14%) of a family’s spending. 9-2-08 NYT Article by Rachel Swarns (in Poverty folder) Today, however, families typically spend about one-seventh of their income on food, census officials say. Families spend much more on housing, transportation and child care, expenses that are not taken into account by the federal poverty measure. (The measure has remained unchanged aside from adjustments for price increases over time.) Officials also point out that the current measure only counts cash as income. They say a more accurate model would include government assistance like food stamps, housing subsidies and tax credits. Such aid has been devised to help support the poor, but its impact is not calculated by the current measure. “We have done a whole number of things to help low-income families, and it doesn’t show up in the poverty figures,” said Rebecca M. Blank, an economist and senior fellow at the Brookings Institution. “Therefore, we misinterpret the effect of these policies.” *Except for Hawaii and Alaska

Why the Federal Poverty Measure Needs to Change Likely underestimating the number of poor As a result, many low-income workers do not qualify for federal, state, or local aid even though they may earn too little to support their families.

How is Poverty Used?

How is Poverty Used? Current minimum wage = $6.55 $7.25 in July 2009

From Poverty to Family Economic Security What’s acceptable? – Move to thinking about a safe and decent standard of living, not a measure of deprivation Poverty as a measure of costs and supports More reflective of current expenses Assess the impact of anti-poverty reduction measures 9-2-08 NYT Article by Rachel Swarns (in Poverty folder) Today, however, families typically spend about one-seventh of their income on food, census officials say. Families spend much more on housing, transportation and child care, expenses that are not taken into account by the federal poverty measure. (The measure has remained unchanged aside from adjustments for price increases over time.) Officials also point out that the current measure only counts cash as income. They say a more accurate model would include government assistance like food stamps, housing subsidies and tax credits. Such aid has been devised to help support the poor, but its impact is not calculated by the current measure. “We have done a whole number of things to help low-income families, and it doesn’t show up in the poverty figures,” said Rebecca M. Blank, an economist and senior fellow at the Brookings Institution. “Therefore, we misinterpret the effect of these policies.”

Family Budget Estimator (FBE) The Family Budget Estimator (FBE) Project provides a realistic picture of how much it costs Texas families in different areas of the state to meet their basic needs. www.cppp.org/fbe

Online at http://www.cppp.org/fbe/ FBE Overview The FBE estimates family budgets for: 8 different family types 27 metropolitan areas With and without employer-sponsored health insurance Assumes no work supports 432 total budgets! Online at http://www.cppp.org/fbe/

FBE Methodology FBE conservatively estimates the cost of living in Texas metro areas Housing budget based on cost of public housing subsidies. Food budget assumes family will buy bulk groceries, never eat out, and rarely purchase meat. Cost of health insurance based on state ERS coverage (50% of family premium paid) – an unlikely scenario! Does not provide for any debt repayment or savings for a home or education. Also include costs for transportation, medical out-of-pocket, and other basic needs

Employment & Wages FBE estimates necessary household income based upon total basic expenses, taxes, and potential tax credits. For two-parent households, assumes both adults work.

FBE Methodology What does a family’s income need to be to cover all basic expenses and end up at zero at the end of the month?

Monthly Expenses One-Adult, Two-Child Family in Dallas-Plano-Irving MSA Employer-Sponsored Insurance No Employer-Sponsored Insurance Housing $798 $798 Food 356 356 Child Care 927 927 Medical 212 710 Transportation 285 285 Other Necessities 288 356 Total Expenses $2,866 $3,432

Federal Taxes One-Adult, Two-Child Family in Dallas-Plano-Irving MSA Employer-Sponsored Insurance No Employer-Sponsored Insurance Payroll Tax $228 $287 Income Tax 184 300 EITC 10 Child Tax Credit 167 167 Child & Dependent Care Credit 120 100 Taxes and Tax Credits $116 $320

Federal Taxes One-Adult, Two-Child Family in Dallas-Plano-Irving MSA Employer-Sponsored Insurance No Employer-Sponsored Insurance Necessary Monthly Income $2,981 $3,753 Necessary Annual Income $35,776 $45,032 Household Hourly Wage $18 $23 2007 Poverty Guidelines $17,170 $17,170 Percent of Poverty 208% 262%

Total Monthly Expenses for Families in Dallas-Plano-Irving as Percentage of the Federal Poverty Level Note: These budgets are for families where the employer pays 100% of one parent’s health insurance and 50% of premium for spouse and/or dependents. The poverty line is the maximum amount a family can make in a month and still be considered below the 2007 federal poverty level

Major Findings – Necessary Income & Wages Across Texas’ metro areas FBE necessary household income ranges from $12-23 per hour to cover basic expenses for a one-parent, two-child family. Half of all jobs (or 5.6 million) are in occupations with a median wage under $15/hour.

Major Findings – How many are “Making It”? At best, only 39% of one-parent, two-child families can’t cover expenses in Texarkana. At worst, 97% of one-parent, two-child families in Abilene can’t cover expenses. Dallas-Plano-Irving families with LESS than necessary annual income (Without/With) 1A0C = 50.5 / 37.2 2A0C = 15.9 / 9.7 1P1C = 57.O / 42.4 1P2C = 83.2 / 59.8 1P3C = 89.6 / 84.5 2P1C = 26.9 / 17.5 2P2C = 35.0 / 25.9 2P3C = 54.6 / 43.8

Median Income Adjusted to Purchasing Power in 2000 Texas Median Income Increases Slightly, But Purchasing Power on General Decline Median Income Entered median income from given year and calculated “same buying power as” for 2000. http://www.bls.gov/ Median Income Adjusted to Purchasing Power in 2000 Source: KIDS COUNT Data Center, Families with Related Children, American Community Survey, Census Bureau; Data adjusted using inflation calculator from the U.S. Bureau of Labor Statistics 25

Texas Among Worst States for Income Inequality in 2007 http://www.census.gov/prod/2008pubs/acs-09.pdf Compares top quintile (5th) to bottom quintile Source: Gini Coefficients (0=perfect equality, 1 = perfect inequality) from Bishaw, A., and Semega, J. (2008). Income, earnings, and poverty: Data from the 2007 American Community Survey. U.S. Census Bureau.

Texas Has Had the Highest Rate of Uninsured Children in the Nation for 10 of Last 11 Years Fewer businesses in our communities can afford to offer health insurance. 1/2 of uninsured children are eligible for Medicaid or CHIP. Roughly one-quarter (5.9 M) of Texans lack health insurance. Only half of Texans have employer-sponsored health insurance, versus 59 percent nationwide. Only 47 percent of Texas children are covered through their parent or guardian’s employer-sponsored health insurance, versus 59 percent nationwide. From FW Star-Telegram, “Schnurman: Despite lawmakers’ gripes, the stimulus is a big winner for Texas”, 2-18-09 The increase in Medicaid funding alone is expected to total $5.3 billion in the state. That’s enough to prevent cuts to the program that might be coming otherwise and enroll more eligible children, according to the Center for Public Policy Priorities in Austin. “The stimulus includes a federal subsidy for COBRA health benefits, which could be a great aid to unemployed workers. It enables them to keep their health insurance, covering 65 percent of the retail price for up to nine months, and that makes it easier to accept temporary work.” “The subsidy also preserves jobs in healthcare, because more people will continue seeing their doctors if they can keep their insurance. In Texas, about half the residents get insurance through their employers, compared with 60 percent of workers nationwide, so the benefit won’t be quite as large here.” Source: KIDS COUNT State-Level Data Online, Annie E. Casey Foundation 27

Of the 49,000 MORE Uninsured Texas Kids in 2006: Nearly 6 out of 10 live in families with low to moderate incomes Source: 3-year average data (2004-2006 vs. 2005-2007) for children ages 0-18, Current Population Survey, U.S. Census Bureau

Overview of Findings Cost-of-living has outpaced growth in wages/earnings Low-income families earn too little to afford basic needs without work supports Families face juggling act, tough choices Work supports help many families bridge the gap between earnings and expenses, but many needy families don’t receive these supports Cost-of-living has outpaced growth in wages/earnings Low-income families earn too little to afford basic needs without work supports (i.e., public housing, child care subsidy, public health insurance, Food Stamps) Families face juggling act, tough choices – in other words, decent housing may compete with safe child care Work supports help many families bridge the gap between earnings and expenses, but strict eligibility rules, inadequate funding & other barriers keep many needy families from receiving these supports

The Role of Work Supports “Work supports” are public benefits that help low-income families bridge the gap between earnings & expenses earned income tax credits public health insurance Food Stamps child care subsidies housing assistance Work supports are “Means-Tested” – based on the Federal Poverty Level

Work Supports in Texas Highly limited compared to other states Many needy families do not receive assistance: Don’t qualify due to strict eligibility guidelines Qualify for assistance when they have low or no earnings, but become ineligible as income increases is still too low to cover their basic needs. Lack of outreach Inadequate funding Enrollment barriers make the benefits hard to access

Many Texans qualify for assistance but do not receive it.

Work supports don’t always support work How the budget for a single-parent, two-child family is affected by work supports

Current minimum wage = $6.55 Break even at $18/hour Current minimum wage = $6.55 *

Loss of Children’s Public Health Insurance Loss of Food Stamps Start EITC Phase Out Lose EITC at about $17/hr

Loss of Child Care Subsidy

What do we hope FBE will be used for? Changing the debate. Deprivation versus a safe and decent standard of living. Raise public awareness. Policy Change that will increase economic security for all Texans. Planning. Provide a realistic benchmark for program planning and evaluation Changing the debate. What’s acceptable? Poverty is a measure of deprivation; FBE is measure of safe and decent standard of living. Education. Raise public awareness of the hardships faced by families with limited income. Policy Change. Build public support & political will for policies that will increase economic security for all Texans. Planning. Provide a realistic benchmark for program planning and evaluation at the local and state level.

Recommendations: Health Insurance Expand public health insurance Enroll qualified but uninsured children in Medicaid or CHIP Fix broken eligibility system Affordable options for kids above 200% poverty Public HI: Increase efforts to enroll qualified uninsured children in Medicaid or CHIP. About half of Texas’ uninsured children qualify for coverage under these programs. Create new, affordable health insurance options for children in moderate income families (about half of other states in the U.S. have taken a similar step). Private HI: Healthy Texas = proposal for a new coverage program for small employers. The state would cover of some of the high-cost claims reducing risk for insurers and premiums for consumers. sliding-scale discount for the high risk pool = make the insurer of last resort more affordable for low- and moderate-income families. strengthen oversight by TDI = allow TDI to reject excessive insurance premium rates. EITC: Call 2-1-1 (option #1) to locate a Community Tax Center that offers free tax preparation See CPPP’s web site for EITC materials: http://www.cppp.org/research.php?aid=742

Recommendations: Health Insurance Exercise all options in federal economic stimulus package to provide health care to uninsured/unemployed Texans through both public and private coverage Improve Texans’ ability to get private coverage Invest in new coverage options like Healthy Texas, create a sliding-scale discount for the high risk pool (SB 879), strengthen oversight by TDI Public HI: Increase efforts to enroll qualified uninsured children in Medicaid or CHIP. About half of Texas’ uninsured children qualify for coverage under these programs. Create new, affordable health insurance options for children in moderate income families (about half of other states in the U.S. have taken a similar step). Private HI: Healthy Texas = proposal for a new coverage program for small employers. The state would cover of some of the high-cost claims reducing risk for insurers and premiums for consumers. sliding-scale discount for the high risk pool = make the insurer of last resort more affordable for low- and moderate-income families. strengthen oversight by TDI = allow TDI to reject excessive insurance premium rates. EITC: Call 2-1-1 (option #1) to locate a Community Tax Center that offers free tax preparation See CPPP’s web site for EITC materials: http://www.cppp.org/research.php?aid=742

Recommendations: Increase Economic Opportunity for Texas Families Change Unemployment Insurance policy to make more workers eligible and draw additional $560m in federal funds Secure funding for matched savings programs, including college savings accounts and Individual Development Accounts Make higher education more accessible and affordable Continue minimum wage increases Make higher education more accessible and affordable, including establishing incentives for college savings. Pursue economic development strategies that favor living-wage jobs with benefits Protect consumers from predatory lending. Ensure all eligible Texans receive EITC and other tax refunds/credits for low-income workers Working with Texas Grants working group on financial aid and making sure that additional merit components are not added by coordinating board to the eligibility criteria (e.g., ACT or SAT score, HS GPA). Currently only merit component is completing the recommended HS program. Concern is that highest need, minority students will be discriminated against.

Recommendations: Increase Economic Opportunity for Texas Families Pursue economic development strategies so that wages plus benefits (public or private) cover families’ basic needs Protect consumers from predatory lending Ensure all eligible Texans receive EITC and other tax refunds/credits for low-income workers Continue minimum wage increases Make higher education more accessible and affordable, including establishing incentives for college savings. Pursue economic development strategies that favor living-wage jobs with benefits Protect consumers from predatory lending. Ensure all eligible Texans receive EITC and other tax refunds/credits for low-income workers

Recommendations: Adopt policies to help Texans weather economic recession Use state “Rainy Day Fund” (Economic Stabilization Fund) to stabilize the economy and prevent state budget cuts Exercise all options in federal economic stimulus package to help protect vulnerable Texans during the economic downturn Enact “sin tax” as short-term measure to raise additional revenue and prevent state budget cuts Continue minimum wage increases Make higher education more accessible and affordable, including establishing incentives for college savings. Pursue economic development strategies that favor living-wage jobs with benefits Protect consumers from predatory lending. Ensure all eligible Texans receive EITC and other tax refunds/credits for low-income workers

For More Information on . . . State Budget/Taxes Tax & Budget Primer http://www.cppp.org/files/7/Layout%20booklet.pdf Federal Economic Recovery & Texas http://www.cppp.org/research.php?aid=812&cid=6 Texas’ Budget Needs http://www.cppp.org/files/6/budget%20needs%2010%2015.pdf Continue minimum wage increases Make higher education more accessible and affordable, including establishing incentives for college savings. Pursue economic development strategies that favor living-wage jobs with benefits Protect consumers from predatory lending. Ensure all eligible Texans receive EITC and other tax refunds/credits for low-income workers

For More Information on . . . State Budget/Taxes Paying for a better budget in 2010-2011 http://www.cppp.org/research.php?aid=775&cid=6 Health Care in the 81st Session http://www.cppp.org/research.php?aid=806&cid=6 Comptroller’s Revenue Forecast http://www.cppp.org/research.php?aid=802&cid=6 “Sin” Taxes http://www.cppp.org/files/7/SinTaxes.pdf Continue minimum wage increases Make higher education more accessible and affordable, including establishing incentives for college savings. Pursue economic development strategies that favor living-wage jobs with benefits Protect consumers from predatory lending. Ensure all eligible Texans receive EITC and other tax refunds/credits for low-income workers

For More Information on . . . Health Care Federal Stimulus Options: http://www.cppp.org/files/3/FMAP%20&%20SCHIP%201%2009.pdf What Happened and What Work Remains: http://www.cppp.org/files/3/HlthCare_08_FinalScreen.pdf Expand public insurance: http://www.texaschip.org/pdf/TCC%20Principles%20-%2081st%20Legislature.pdf Tools to Increase Private Coverage: http://www.cppp.org/research.php?aid=769 Continue minimum wage increases Make higher education more accessible and affordable, including establishing incentives for college savings. Pursue economic development strategies that favor living-wage jobs with benefits Protect consumers from predatory lending. Ensure all eligible Texans receive EITC and other tax refunds/credits for low-income workers

For More Information on . . . Workforce/Economic Development State of Working Texas http://www.cppp.org/files/2/SoWT2008.pdf Unemployment insurance www.cppp.org/files/2/UI%20Labor%20Day%20343.pdf Promoting prosperity http://www.cppp.org/files/2/Workingtexas.pdf ETIC http://www.cppp.org/research.php?aid=814&cid=8 Continue minimum wage increases Make higher education more accessible and affordable, including establishing incentives for college savings. Pursue economic development strategies that favor living-wage jobs with benefits Protect consumers from predatory lending. Ensure all eligible Texans receive EITC and other tax refunds/credits for low-income workers

For More Information on . . . Workforce/Economic Development Minimum wage http://www.cppp.org/research.php?aid=695&cid=2&scid=3 College Savings Accounts http://www.cppp.org/files/2/collegesavings325.pdf Income inequality http://www.cppp.org/files/2/incomeinequality324.pdf Predatory Lending http://www.cppp.org/research.php?aid=754&cid=2&scid=2 Continue minimum wage increases Make higher education more accessible and affordable, including establishing incentives for college savings. Pursue economic development strategies that favor living-wage jobs with benefits Protect consumers from predatory lending. Ensure all eligible Texans receive EITC and other tax refunds/credits for low-income workers

Contact Information Frances Deviney, PhD Texas KIDS COUNT Director deviney@cppp.org (512) 320-0222 ext. 106 Sign up to receive notice of our work at: www.cppp.org 48

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