Wednesday, September 19, 2007

Poor families on the red-tape diet

Few people like to fill out forms or other paperwork. At a minimum, paperwork is a tedious and time-consuming chore; too often, it can also be frustrating and confusing. In the case of poor families, paperwork can also lead people to lose out on needed food assistance.

Families and individuals who receive means-tested public assistance, like food stamps, are required to fill out numerous forms, supply lots of accompanying documentation, and schedule and participate in in-person or telephone interviews (for example, you could look at North Carolina's 10-page application form for its Food Stamp Program). The purpose behind these forms and procedures is reasonable--program administrators want to ensure that benefits only go to people who are eligible and that people receive exactly the benefits that they need. Nevertheless, the paperwork represents a substantial compliance cost to needy families, especially those with limited reading, writing, and math skills.

The procedures also create some strange incentives with respect to self-sufficiency. Families with earnings typically have to provide more extensive information and do so more frequently than families without earnings. Again, there's a logic to the extra requirements; earnings and hence eligibility can change. Still it's the case that earnings not only cause families to lose benefits but also add to families' paperwork and compliance burden. Not exactly the best way to encourage work.

Marilyn Edelhoch, a research director with the South Carolina Department of Social Services, and I have been looking at these issues for some time. Marilyn's agency gave us access to a large random sample of case records from the South Carolina Food Stamp Program. The records show how long families participate in food stamps before leaving or being kicked off the program. In earlier research, we found that families were several times more likely to stop receiving benefits at the times they were required to complete new paperwork than at other times.

We've just completed a new paper that goes back to these data and examines the reasons that program administrators entered for why the families left. For example, the system records whether families left voluntarily, whether they moved out of state, etc. All of the cases that we examined involved households with children.

The research shows that one-half of the families who lost benefits were dropped from the Food Stamp Program because they failed to re-apply for benefits. Another sixth of the terminations occurred because of incomplete paperwork or missing information. If you put these together, two-thirds of terminations occurred for reasons related to paperwork.

These terminations would not be bad news if many of the families were soon going to lose eligibility anyway. After all, what incentive is there to fill out paperwork if it's just going to show that you're ineligible? Not surprisingly, we find that the chances of being ineligible are higher among households that let their paperwork lapse than among households that stay on the program. However, we also find that the chances of being eligible are higher than those of being ineligible. So it appears that needy and otherwise eligible families are being dropped from the program. The results take us some way toward explaining why nationally about one-third of eligible families fail or decline to participate in food stamps in any given month.

As is often the case in economics, there are stories here about unintended consequences and about trade-offs in public policy. Clearly, states must check people's eligibility for services. However, they can take steps to streamline their paperwork, reducing it to the minimum necessary. States can also take better advantage of automated data available to them. People shouldn't go hungry because of red tape.