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Clinton’s Budget Cuts Federal Spending on Welfare Fraud Investigations

July 26, 1993

WASHINGTON (AP) _ President Clinton is quietly scaling back the federal government’s commitment to help states investigate welfare and food stamp fraud, by some estimates more than a billion-dollar problem.

The administration’s plan would force states to pick up a bigger share of the cost of finding welfare recipients who work off the books, hide assets, collect multiple checks or sell food stamps on the black market.

But states, starved for cash and strapped by unparalleled growth in their welfare rolls, say they do not have the money to cover the loss in federal dollars and may have to shrink their anti-fraud programs.

″You will see the ripoff artists and the sleazy subculture that’s trying to rip off this program quickly move to exploit the fact that the states are going to be in tough shape fighting fraud,″ predicts Rep. Ron Wyden, D-Ore., who has spent five years investigating food stamp fraud.

Adds Donna FitzGibbon, president of the Wisconsin Council on Welfare Fraud: ″It’s like leaving the vault at the bank open and hoping nobody walks by and takes the money. Ninety percent won’t, but what about the other 10 percent?″

Even the largest government estimates of fraud are not that high. Congressional officials now peg food stamp fraud at $1 billion a year while the HHS Inspector General found that as early as 1987 fraud in Aid to Families with Dependent Children (AFDC) was a ″billion-dollar problem.″ The government will spend $22.4 billion on food stamp benefits and $23 billion on AFDC benefits this year.

But Robert Greenstein, a former Agriculture Department official who now heads the Center on Budget and Policy Priorities, an advocate for the poor, argues that the government has no good data on the extent of welfare fraud.

Martha Armstrong, president of the United Council on Welfare Fraud, an organization of fraud investigators, estimates that fraud occurs in 5 percent to 10 percent of households on welfare.

″I wouldn’t call it rampant, but you have to be concerned when looking at the amount of benefits paid nationwide,″ said Armstrong.

The federal government now gives the states $3 for every $1 they spend controlling fraud in food stamps and AFDC. Clinton wants to split those costs 50-50.

He also wants to split evenly the costs of computer automation and screening illegal aliens from the welfare rolls. The federal government now covers 90 percent of a state’s automation costs for AFDC, 63 percent of food stamp automation costs, and 100 percent of the cost of the Systematic Alien Verification System.

The House and Senate lowered the matching rates in their versions of the president’s budget-cutting legislation. Lawmakers are negotiating a compromise.

The so-called enhanced matching rates were adopted in the 1980s or earlier to encourage states to establish anti-fraud programs or upgrade their computers.

But now that states have had several years to get the programs going, the administration thinks it is time to bring the matching rate in line with the 50-50 split used for other administrative expenses, says Health and Human Services spokeswoman Melissa Skolfield.

″This does not signal and should not be interpreted as a signal of a reduced federal commitment to fighting fraud,″ she said.

And Greenstein says it is predictable that state bureaucrats would raise the red flag in a bid to save their budgets. But he does not think they will really cut their fraud fighters.

″If a governor proposes to cut (efforts against) welfare fraud, his political opponents will come down on him like a ton of bricks,″ Greenstein says. ″The best way to get attention is to say we won’t do as much on welfare fraud. It’s the right strategy for a state bureaucrat but I don’t believe it.″

States spent $43.6 million last year to investigate food stamp and AFDC fraud while HHS and USDA chipped in another $131.2 million.

The National Conference of State Legislatures says states would have to spend an additional $371 million over five years to cover the loss in federal money for fraud hunting and computerization.

Art Hamilton, minority leader in the Arizona House and president of the conference of state legislatures, has warned lawmakers that the cuts could force states to downsize fraud programs unless their fiscal conditions unexpectedly improve.

″So much money is sloshing about in the system that if you don’t have good oversight it’s just heaven for the ripoff artists,″ Wyden says. ″We should be beefing up, not cutting back.″

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