Recession’s Divide: Food Stamp Caseload Soars, Welfare Caseload Does Not

Posted by Paul Lopatto, September 13, 2010

In stark contrast to the limited effect of the recent economic downturn on the public assistance caseload, the recession has contributed to a relative explosion in the city’s food stamp caseload. Following years of slow growth, food stamp enrollment began to accelerate in the early part of 2008. The number of New Yorkers receiving food stamp benefits has risen from 1.2 million in January 2008 to nearly 1.8 million in July 2010, an increase of 555,000 or 46 percent. [see graph]

The greater sensitivity of the food stamp program to rising unemployment and falling incomes can also be seen at the national level. Federal statistics indicate that in the two-year period between December 2007 and December 2009 the number of food stamp recipients increased by 41 percent, nearly three times the increase in the public assistance caseload. Part of the reason may be a matter of public perception. As public opinion towards receiving welfare became increasingly negative, the food stamp program has emerged as the more acceptable form of income assistance. Moreover, policy changes that have made food stamps easier to access have also boosted food stamp caseloads.

There appears to be another change developing in terms of public assistance as well. The public assistance caseload and spending on welfare grants for city residents have generally followed a downward trend since welfare reform began in the mid-1990s. That pattern has begun to change.

After rising modestly in the last two years, the Mayor’s budget office projects that total grant expenditures will rise by 19 percent to about $1.6 billion in fiscal year 2010 (final numbers are not yet in for the year, which ended on June 30), and to remain at that higher level for the foreseeable future. While economic downturns are commonly associated with greater demand for social services, what makes the increased grant spending especially notable is that it has very little to do with any increase in the number of welfare recipients.

What’s driving the increased spending? One factor is a state-mandated increase in the basic grant, which covers costs other than rent and utilities. In July 2009 the state increased the basic grant by 10 percent, after it had been frozen for nearly two decades. A similar percentage increase was implemented this past July, with a third round scheduled for July 2011.

While this has pushed up total grant expenditures, city revenues have been spared so far. In order to limit the impact of this mandated increase on local budgets, the state agreed to cover the local share of the incremental costs through 2012, using state and federal funds. Starting in 2013, however, the city will be responsible for its share of the costs, adding significantly to the city’s welfare expenditures from that point on.

A second factor driving the cost increases is the Advantage Rental Assistance program, which provides rent subsidies for up to two years to families and individuals moving out of the city’s shelter system. As the shelter population has increased, the Advantage program has emerged as a key component of the city’s strategy for reducing homelessness. Since it began in 2007, the program has moved roughly 20,000 families from shelters to apartments.

The move out of shelters is coming at a rapidly growing cost. In 2009 the city spent $122 million in total funds on Advantage subsidies—city funds cover roughly a third of the cost with the balance coming from state and federal revenues. Costs are projected by the Bloomberg Administration to have reached $188 million in fiscal year 2010 and rise to $207 million in 2011. City officials have recently moved to limit costs by requiring participants to pay a higher portion of their rent out of pocket, and by increasing the number of hours they must work. These changes may well affect the program’s future growth.

Public assistance outlays in 2010 also were boosted by the Back-to-School grant program, which made use of federal stimulus funds to provide one-time grants of $200 per child for families receiving public assistance or food stamp benefits, to purchase school-related supplies. The city budget included $102 million for Back-to-School grants for 2010; the one-time program did not require any city funds.

Just a small portion of the increase in grant costs can be attributed to an increase in the welfare caseload. As the city’s economy started to shed jobs during the recent economic downturn some observers expected a marked increase in the public assistance rolls as large numbers of the newly unemployed sought out government assistance to replace lost income. In fact, after reaching a low of 334,000 in September 2008, the number of public assistance recipients rose slowly, reaching 358,000 in December 2009, an increase of 24,000 over 15 months. Since then, the caseload has resumed its downward trend, with 344,000 individuals receiving assistance in July 2010.

The limited effect of the recession on the public assistance rolls provides further evidence that city, state, and federal welfare reform policies of the mid-1990s made it more difficult for city residents to access and retain public assistance grants.