Millions of Dollars Designated for Poor Families Are Trapped in Washington D.C.

A relatively unknown section of the February 2009 Stimulus Package contains a $5 billion Emergency Fund for poor families. The fund allows states to receive millions of dollars to help their poor families during the economic recession. However, the funds will not necessarily be distributed to needy families across the U.S. unless certain requirements are met by each state.

 What requirements? They basically include increased expenditures from the same quarter in 2007-2008 on eligible TANF programs like subsidized employment, rent and utility assistance, or back-to-school money for poor families. Since states are struggling to balance budgets, many cannot increase their spending to draw down federal stimulus funds. But the law gives the state an alternative for accessing the money. Third party private donors can give to the poor on behalf of the state. In essence, if a state spends $10 million to help poor families, 20% can be covered by private donations and 80% will be reimbursed by the federal government. So why does it look like millions and maybe even billions of dollars will never leave washington before the program fund expires on September 30, 2010? 

At first, it seems like no strategic donor who wanted to provide humanitarian aid to the U.S. poor would pass up the opportunity to in essence quintuple their donation. The most notable example of one such philanthropist is George Soros. Founder of the Open Society Institute, George Soros, made headlines in August 2009 with a $35 million donation to poor families in New York State. The gift covered back-to-school expenses for poor families struggling in hard economic times. Families that qualified received deposits of $200 per child into their state public assistance EBT accounts.

George Soros’s $35 million gift released an additional $140 million from the federal government. So in total George Soros directed $175 million to help over 850,000 children in poverty prepare for the 2009-2010 school year. Why aren’t more philanthropists following suit?

At Excellence in Giving we had a group of client philanthropists that wanted to recreate the gift to the poor in Texas. According to the stimulus bill, Texas has $243 million that it could receive from the federal government, and the State only plans to draw down around $12 million. So we spent a couple months speaking with State officials, community organizations serving the Texas poor, and representatives from the CBPP and HHS. Our clients decided that providing rent and/or utility vouchers to low-income families who completed a course on financial and family management would be ideal. So we submitted our proposal to the state and federal officials for review.

Unfortunately, the plan was rejected. Requiring a representative from a poor family to attend or to graduate from a financial management or life skills course before receiving the free money was deemed unlawful. The only program that would be approved is the free distribution of money to low-income families in a designated zip code, region, or state. Our donors, our research, and the local community organizations that operate life skills development courses all questioned the lasting impact of giving out money without an educational component and ongoing support from a local community organization. So our efforts came to a halt.

It is unfortunate that $5 billion has been designated to help poor families, but many families will not receive it. Generous donors are being prevented from drawing down the federal funds for their state’s poor if they want to increase its impact with attendant educational programs. Literally millions of dollars are trapped in Washington D.C., and the fund will expire in 10 months. Our submitted plans to inject millions for rent and utility assistance, financial and relational management courses, subsidized employment and vocational skills training have all been denied. Yet, I would imagine that the tens of thousands of low-income families concentrated in West Dallas neighborhoods and Houston wards would have gladly taken the courses or completed the training to receive the financial assistance during this great recession. We can do better. We must do better.