Kansas could lose millions for limiting welfare recipients to $25 at ATMs

A first-of-its-kind provision barring welfare recipients in Kansas from withdrawing more than $25 a day from an ATM might violate federal law and could jeopardize the state’s federal funding if not amended.

The Social Security Act requires states to ensure that recipients of Temporary Assistance for Needy Families “have adequate access to their cash assistance” and can withdraw money “with minimal fees or charges.”

At stake is about $102 million in TANF block grant funds that Kansas receives every year from the federal government.

The state’s controversial ATM limit was added as an amendment to a welfare overhaul bill signed in April by Gov. Sam Brownback, a Republican. The new law also bans welfare recipients from spending their benefit money at certain places, including movie theaters, massage parlors, cruise ships and swimming pools. And it sets stricter eligibility requirements and shortens the amount of time people can receive assistance.

Brownback said in an interview Friday that he is aware of the possible conflict with federal statutes and that the affected state agencies in his administration are working to fix it.

The governor said he’s open to raising the limit if necessary to comply with federal policies.

“We’ll work with them. It’s a joint program,” Brownback said. “We’ll do what we have to do to work with the federal partnership.”

He stressed that the $25 limit didn’t originate with his administration.

The legislative history shows the original bill was submitted to the Legislature by the Kansas Department for Children and Families, the state agency that administers welfare in Kansas. That version didn’t have any cap on daily ATM withdrawals.

The House committee that first worked the bill inserted a $60 limit. The amount was cut further on the Senate floor to $25 with the adoption of an amendment by Sen. Caryn Tyson, a Parker Republican.

No other state has enacted legislation imposing a $25 limit on the maximum amount of cash that welfare recipients can withdraw from an ATM.

“The $25 limit is uncharted territory,” said Liz Schott, senior fellow at the Center on Budget and Policy Priorities, a Washington, D.C., think tank.

Schott pointed out that ATMs don’t permit withdrawals in $5 increments, so people would only be able to withdraw $20. And they would have to pay any fees charged by the banks on top of a $1 fee assessed by the state for all ATM withdrawals.

“The question is, given the transaction fees and the limit, when you put those two together,” Schott said, “is that a reasonable access to assistance?”

That’s the question the U.S. Department of Health and Human Services will have to answer. States routinely submit any changes to their welfare policies and procedures to HHS for review.

“These amendments must meet the requirements of the federal law, so we work closely with each state throughout the review process,” said Laura Goulding, a spokeswoman for HHS’ Administration for Children and Families.

Specifically, the review will examine Kansas’ cap on ATM use against two paragraphs in Section 402 of the Social Security Act. Those provisions require states to guarantee welfare recipients “adequate access” to their benefits and “access to using or withdrawing assistance with minimal fees or charges.”

If deemed not in compliance with those statutes, a state could potentially forfeit its federal grant money.

The Kansas Department for Children and Families will work with HHS to ensure that the state is in compliance with federal laws, said department spokeswoman Theresa Freed.

“If they give us any guidance that we’re not (in compliance), then we’d take necessary action,” Freed said. “We want to ensure we receive continued funding.”

Meanwhile, Kansas lawmakers are scrambling to come up with a legislative fix before the end of the session.

Republican Sen. Michael O’Donnell from Wichita is working on a bill that would address the problem by raising the ATM withdrawal limit to $60 per day.

“The Senate president (Susan Wagle) is on board with it and (on Thursday) we had a meeting with the governor’s chief of staff,” O’Donnell said. “We’re making sure that this is something that the governor’s office and the Department of Children and Families are going to support.”

O’Donnell not only voted for the original welfare bill, but he introduced it on the floor of the Senate. He also voted for the amendment that capped ATM withdrawals at $25.

He said he would have strongly opposed the amendment had he been aware that it might contradict language in the Social Security Act, a copy of which had been sent to him by a reporter Thursday.

Because the $25 limit came as a floor amendment, O’Donnell said, it wasn’t thoroughly vetted through the usual committee process.

“I hadn’t researched it enough,” he said. “If I had known now what I knew then, I would have fought it stronger.”

At the time, O’Donnell raised concerns that the $25 limit might conflict with federal regulations and tried to offer an alternative number. He asked the amendment’s sponsor, Tyson, to withdraw her amendment, but she argued that the Senate should vote on it and then fix it in conference that reconciles differences between House and Senate bills.

Despite his concern, O’Donnell voted for it and the amendment was successfully attached. The next day, the House signed off on the bill without ever going into conference.

During six hours of contentious debate on the welfare overhaul, Democratic Sen. Oletha Faust-Goudeau of Wichita offered a compromise amendment that would have raised the limit to $50 from $25. It was voted down. O’Donnell was one of the only Republicans to support that amendment.

Faust-Goudeau said in an email Friday that she would prefer to eliminate the limit, but she is willing to support O’Donnell’s compromise bill to fix the issue by increasing the maximum withdrawal to $60.

Tyson could not be reached for comment.

Sen. Tom Holland, a Baldwin City Democrat, said he would support legislation reducing barriers set up by the original welfare bill, which he said is “horrible the way it is.”

But Holland questioned whether simply raising the withdrawal limit to $60 would fix the problem.

“I’d want to make sure we’re not just introducing less onerous roadblocks by raising the limit to $60,” he said. “We need to have a discussion about what is the appropriate amount.”

About 15,000 people are on the welfare rolls in Kansas this year, down from about 17,600 last year.

The most cash a family of four can receive is $497 a month in high-cost, high-population counties, according to the HHS data. In rural counties, the maximum cash assistance for a family of four is $454 per month.

This story was originally published May 16, 2015 at 7:01 PM with the headline "Kansas could lose millions for limiting welfare recipients to $25 at ATMs."