Hawai‘i is stronger when we invest in our people so they can better contribute to our economy and community. Low-income workers will be hurt first and most severely by an economic downturn. Polices that target help to these families also keep money circulating through the economy.
Programs that helped the most people get through the Great Recession were the Supplemental Nutrition Program (SNAP), the Earned Income Tax Credit (EITC) and Unemployment Insurance. Medicaid also made an important difference for states with expanded eligibility, like Hawai‘i. Policymakers can relieve the burden placed on local families and stimulate the economy at the same time by investing in the social safety net.
Increase Food & Economic Security
State lawmakers should ask Congress to expand SNAP eligibility and benefits and to prepare for increased enrollment. The supplemental nutrition assistance program (SNAP) is designed to supplement the food budget of low-income individuals and families. SNAP vouchers have a proven track record of reducing poverty for millions of Americans through increased access to nutritious food. Moreover, studies have shown that SNAP is the most effective form of government spending for counteracting recessions.
In a weak economy, every $1 dollar spent for SNAP generates $1.71 in economic activity, according to Moody’s Analytics. The U.S. Department of Agriculture (USDA) also found that SNAP redemptions increased employment rates more than any other kind of government spending. This is because people who get SNAP benefits use them immediately, injecting money directly into the local economy and creating jobs in the process. This effect was most notable in rural areas and during the Great Recession.
SNAP benefits are provided by the federal government. The State of Hawai‘i provides application, enrollment, outreach, and administrative support. The Department of Human Services should prepare to deploy resources needed to accommodate increased SNAP enrollment.
Because recent federal policy changes will make expanding SNAP more challenging, the state should explore flexibility and waivers in addition to asking for Congressional help to reverse these SNAP rules and supplement benefits, as they did under the American Reinvestment and Recovery Act (ARRA). This is good time, too, to take a look at the USDA State Options Report for SNAP to see how else Hawai‘i can make it easier for people to get and keep food benefits without the need for legislative changes at the state or federal level.
Hawai‘i should request federal waivers and create a school closure action plan to provide meals to children when school are closed. Nearly 90,000 of Hawai‘i’s most vulnerable children depend on the free or reduced-price meals that they get at school. Hard-pressed families will have an even harder time now to increase their food budgets.
Hawai‘i’s Department of Education can provide meals to students via the Seamless Summer Option in the event of school closures. Community partners that feed children during the summer via the Summer Food Service Program can also provide meals during school closures. The state should request federal waivers to expedite and ease plans to offer meals to children if schools close. State departments and community partners need to come together to assess capacity and create a plan of action to provide meals to as many children as possible.
Any COVID-19 appropriations should include emergency funds for food banks across the state. With school closures and income reductions, many families, including grandparents raising grandchildren, will need for food assistance urgently.
Increase Refundable Tax Credits for Low-Income Families
The Earned Income Tax Credit (EITC) was cited as one of the most effective programs to help low-income families through the Great Recession. It has no program caps, isn’t dependent on the appropriation of funds, and doesn’t require an application process, being available to eligible families through the tax system.
Researchers found that more people got EITC benefits during the Great Recession, despite increases in unemployment (only working families qualify for EITC benefits). This may have been because, although working families’ incomes fell, they continued to work part-time or because one out of two earner-household remained employed.
During an economic downturn, the EITC program may work best in combination with “job sharing” or the Short-Time Compensation program, which encourages employers to retain worker, even if they have to reduce work hours. Economists have shown that the EITC program contributes $1.24 to economic activity in communities for every $1 spent.
Other refundable state tax credits that target low-income families are the Food/General Excise Tax Credit and the Low-Income Renters Tax Credit. Raising the eligibility limits and increasing the amount of these credits, as proposed in 2020 legislation, would have much the same effect as the EITC. These initiatives would put more money in the pockets of people who need it most and who will keep it circulating through the economy.
The Medicaid program (Med-QUEST, in Hawai‘i) pays for essential health care services for low-income families and for children in households with incomes up to 308 percent of the federal poverty level. Med-QUEST not only contributes to better health for individuals and reduces bankruptcies related to medical care, it also reduces poverty among its beneficiaries.
People without health insurance are especially vulnerable to the spread of coronavirus. They may be reluctant to be tested and treated because of payment concerns. Most uninsured residents are low-income and many are not enrolled in Med-QUEST because they are COFA migrants or immigrants. As an important public health initiative, at least through the pandemic period, the state should enroll low-income residents in Med-QUEST, even if they are not eligible for federal matching funds.
Medicaid is the largest source of federal funding in state budget, contributing $1.8 billion to health care spending in Hawai‘i. For every $1 spent on Medicaid by the state, the federal government contributes $1.13. This investment supports healthcare and health sector jobs, which accounted for 11 percent of all wages in Hawai‘i in 2018. As the second largest type of insurer after employer-sponsored coverage, Medicaid plays a major role in Hawai‘i’s health care economy. Its payments are crucial to health centers and all hospitals, but especially those in rural areas that are part of the state-subsidized Hawai‘i Health Systems Corporation.
Take Advantage of TANF Reserves
Hawai‘i currently has $300 million in unspent funds from the federal Temporary Assistance for Needy Families (TANF) program. This will ensure that TANF cash assistance is available to all eligible families for immediate short-term emergency assistance. Helping the very poorest families meet their basic needs and retain housing is part of the critical public health response of social distancing.
As outlined by the Center on Budget and Policy Priorities, states can be flexible and quick-acting to address COVID-19 needs with TANF funds. For instance, Hawai‘i should consider:
- Creating new COVID-19-specific programs tailored to evolving needs for families at expanded eligibility levels;
- Temporarily suspending work requirements so that parents can stay home with children or sick relatives, especially when work availability is disrupted;
- Temporarily suspending TANF sanctions and terminations;
- Expediting enrollment or re-enrollment;
- Providing an additional one-time payment to all TANF families in this acute time of need; and
- Making more emergency assistance and one-time payments available.