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Implications of a New Poverty Measure for Program Funding Formulas and Benefits Eligibility

Prepared for the Brookings/Census Bureau Conference on Improved Poverty Measurement

SOURCE: AP/Mike Groll

Dozens of federal and state programs use the poverty measurement as part of the formula to determine who should receive services.

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In any effort to develop an improved poverty measure for the United States, questions arise to how a new measure might affect allocation of federal funds to states and localities, and eligibility for and benefit amounts under federal means-tested programs. The recently filed Measuring American Poverty (MAP) Act, H. R. 2909 directs the adoption of a “modern” poverty measure drawing from recommendations of the National Academy of Sciences. The MAP Act explicitly states that the creation of a “modern” poverty measure under the bill would have no direct effect on allocation of funds or program eligibility and benefits, leaving those issues for subsequent legislative responses on a program-by-program basis if Congress chose to do so. The MAP approach would address the question in the short-run, but there remains a longer-run question: over time, how should a revised measure affect allocation of funds and program eligibility and benefits?

While allocation of federal funds and issues relating to program eligibility and benefits are sometimes treated as presenting a single issue, they are analytically distinct and present different questions. Under current law, a number of federal funding streams allocate funds, in whole or in part, based on the numbers of individuals or households below poverty or some percentage of poverty in a jurisdiction. In addition, a number of programs use a percentage of poverty as a basis for determining program income eligibility. Typically, the Census Bureau’s poverty thresholds are used for calculating the number of people in poverty and poverty rates, while HHS poverty guidelines, a simplified version of the Census thresholds, are often used for determining program eligibility.

This memo:

  • Summarizes how the current federal poverty measure is used in affecting federal funding allocations and program eligibility and benefits;
  • Briefly describes how the “modern” poverty measure under the MAP Act would differ from the current official measure;
  • Explains how the MAP Act addresses the relationship between the “modern” and current poverty measures and program funding formulas and eligibility rules;
  • Identifies and discusses issues that would arise in any efforts to:
    • Use the data concerning poverty rates and numbers that would be generated under the “modern” poverty measure as a factor in allocating federal funds to states and localities; and
    • Use the “modern” poverty thresholds and income-counting rules for purposes of determining program eligibility and benefits.

The principal conclusions are:

  • In the short run, it would be inappropriate to use a “modern” poverty measure for purposes of allocating funds or affecting program eligibility or benefits, both because of the necessarily experimental nature of the new measure, and for the substantive reasons described below;
  • In the long run, if the approach to poverty measurement under the new measure appears superior to that used under the current official measure, it would be appropriate to use the new measure when allocation of funds depends, at least in part, on numbers of those in poverty;
  • If a program elected to use the “modern” poverty measure under the MAP Act or a similar NAS-style poverty measure, it would only be appropriate to use the new thresholds for purposes of benefits eligibility if the program also provided some means to reflect medical- and work-related expenses, as the NAS-based thresholds are premised on allowing subtractions from income for such expenses;
  • Just as under current law, programs often develop their own rules for income-counting which differ from those used by the Census Bureau in calculating poverty rates, programs would likely wish to maintain flexibility to use their own income-counting rules rather than follow NAS-style rules, for a set of substantive and practical reasons described in this memo.

Read the full report (pdf)

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