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Abstract
Cash welfare and food stamps are means tested: assets and income must fall below set limits for families to qualify. While this ensures that benefits go to the neediest families, asset limits may also discourage asset building. This Opportunity and Ownership fact sheet examines allowance changes for restricted and unrestricted accounts at the federal and state level. It tracks the different allowances for IDAs, food stamps, and welfare programs from 1992 to 2003.
How Have Asset Policies for Cash Welfare and Food Stamps Changed since the 1990s?
Cash welfare and food stamps are means tested:
assets and income must fall below set limits for families
to qualify. While this ensures that benefits go to
the neediest families, asset limits may also discourage
asset building. States can exempt all assets (unrestricted
assets), or they can exempt assets held for a
specific purpose, such as education, a home, or a
business (restricted assets); a car; or an individual
development account (IDA).
Since 1992, states have increasingly supported
IDAs and have allowed specific classes of assets (figure
1). States allowing IDAs went from none in 1992
to 26 in 2003. Similarly, states exempting restricted
assets in their welfare programs went from none in
1992 to 30 in 2003.
Prior to 2002, the Food Stamp Program provided
no exemptions for restricted accounts. But the 2002
Farm Bill provides states the option of exempting
restricted assets, if doing so aligns their food stamp
policy with their welfare or Medicaid policies.
In 1992, federal policy for cash welfare allowed
families to exempt $1,500 in vehicle value from the
asset limit. By 2003, 29 states allowed exemption for
at least one vehicle. Only 3 states exempted the entire
value of a vehicle from Food Stamp eligibility during
the late 1990s, but by 2003, 34 did.
The growth in allowances for restricted assets contrasts
with the erosion in limits on assets not set aside
for a particular purpose. Average TANF unrestricted
asset limits rose in real terms from $1,138 in 1993 to
$2,779 in 1998 but have since been
eroded by inflation, falling to $2,592
in 2003. The Food Stamp asset limit
has eroded in real terms from $2,398
in 1991 to $1,895 in 2003.
It remains unclear how much
disregarding certain assets from
eligibility determinations will affect
decisions to save. People tend to
save toward specific goals, so
increasing allowances for specific
assets, especially those most sought
by individuals, might work to
increase savings even if real
declines in unrestricted asset limits
do the opposite. Research underway
at the Urban Institute will
attempt to examine the net impact
of these combined changes.
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Disclaimer: The nonpartisan Urban Institute publishes studies, reports, and books on timely topics worthy of public consideration. The views expressed are those of the authors and should not be attributed to the Urban Institute, its trustees, or its funders.
