The 1st meeting of the Poverty Task Force was held on Monday, September 21, 2009, at 1:00 p.m., in Room 154 of the Capitol Annex. Representative Greg Stumbo, Co-Chair, called the meeting to order at 1:07 p.m., and the secretary called the roll.
Present were:
Members: Senator Brandon Smith, Co-Chair; Representative Greg Stumbo, Co-Chair; Senators Dan "Malano" Seum, Robert Stivers II, Elizabeth Tori, and Johnny Ray Turner; Representatives Linda Belcher, Dwight D. Butler, Leslie Combs, C. B. Embry Jr., Kelly Flood, Jim Glenn, Keith Hall, Richard Henderson, Melvin B. Henley, Mary Lou Marzian, Fred Nesler, Kevin Sinnette, Kent Stevens, Ken Upchurch, Alecia Webb-Edgington, and Addia Wuchner.
Guest Legislator: Representative Tom Burch.
Guests: Dr. James P. Ziliak, Director, Center for Poverty Research, Gatton Endowed Chair in Microeconomics, University of Kentucky; and Dr. Richard Fording, Associate Director, Center for Poverty Research, Professor of Political Science, University of Kentucky.
LRC Staff: DeeAnn Mansfield, Lou DiBiase, Mustapha Jammeh, Carlos Lopes, Gina Rigsby, and John Scott.
Representative Stumbo said that he is very grateful that so many of his colleagues in the General Assembly asked to be a part of the Poverty Task Force. It speaks volumes about the intention of the General Assembly to really and truly tackle a subject that has affected too many Kentuckians for far too long. He stated that if there was any doubt of the need for the task force, it should have been erased earlier this month when the U.S. Census Bureau reported that Kentucky had the fifth highest poverty rate among the states, up from sixth in 2008. This was a two-year average, and it only barely includes the effects of what many are calling the Great Recession. He stated that everyone has seen firsthand how poverty affects us in ways both large and small. For families, it has meant foreclosures and homelessness and more days without a decent meal. For state government, it has meant a Medicaid budget growing by the thousands every month and a shrinking tax base. Representative Stumbo expressed concern that poverty in Kentucky, as wide spread as it is, is still growing faster here than the national average and something needs to be done to turn that around. Representative Stumbo said that there is no secret formula to success. Kentucky needs concrete ways to create better jobs with better pay and help more students finish high school and college. He said that his short-term goal is to be able to say that, by the end of the 2010 Regular Session, most if not all of the task force’s recommendations became law. The long-term goal is to be able to see progress when the U.S. Census Bureau releases the poverty rate figures again.
Representative Stumbo stated that over the next several months the task force will study early childhood education, access to transportation, homelessness, and financial training. He said that he is interested in knowing whether there may be too much overlap in Kentucky’s poverty programs, or if there are areas that need more support, or if education dollars are being put to their best use since so much of the budget goes to this one area. Indiana and Louisiana are on track to cut childhood poverty in half by 2020. Ohio is working on ways to reduce the number of families living below 200 percent of the poverty level. One advantage to Kentucky’s position is there is a lot of room for growth. The Bible tells us that the poor will always be with us, but it also counsels us to reach out to those in need and help them build the kind of life we all want.
Senator Smith said that poverty is a very important subject, and he is glad that the goal of the task force is to make recommendations to the General Assembly. He stated that every person has a different definition of poverty, and a lot of counties do not even realize they have a tremendous poverty issue. The intention is to knock down barriers that divide counties and isolated geography that contribute and promote poverty and to become aware of programs that can help Kentuckians fight poverty. He said that it is difficult to say that we have been successful when there are children and families living in inadequate housing, do not have adequate health care, and are hungry.
A presentation on poverty trends and policy options for Kentucky was given by Dr. James P. Ziliak, Director, Center for Poverty Research, Gatton Endowed Chair in Microeconomics, University of Kentucky; and Dr. Richard Fording, Associate Director, Center for Poverty Research, Professor of Political Science, University of Kentucky. Dr. Fording said that the University of Kentucky Center for Poverty Research (UKCPR) was established in 2002 as one of four federally-funded poverty research centers in the United States. Information about the UKCPR can be found at http://www.ukcpr.org. Research is both national in scope and a thematic emphasis on poverty in the South. The poverty rate measures the fraction of the population with incomes below the poverty line. In 2008, the national poverty rate based on approximately 40 million individuals was 13.2 percent. From 2006 to 2008, Kentucky’s poverty rate of 16.5 percent was based on 700,000 individuals. Based on the most recent data, poverty in Kentucky is much higher among children, individuals with less than a high school education, female-headed families, African Americans, Hispanics, and persons in rural areas.
From 2006 to 2008, Kentucky had the fifth highest poverty rate among all states and the District of Columbia. Since 1970, the Economic Research Service of the USDA defines a county as persistently poor if the county’s poverty rate exceeds 20 percent. From 1979 to 2003, Appalachian Kentucky leads the rest of Appalachia in terms of poverty. Statistics from 1979 to 1999 show Appalachia Kentucky had the highest percentage of students with a high school diploma and at least a college degree. State anti-poverty initiatives between the states have varying structures and goals on poverty reduction targets, but have the initiatives have bipartisanship support.
Dr. Ziliak stated that combating persistent poverty in Kentucky will require sustained, creative solutions focused on long-term outcomes, not least of which robust economic growth is. Increase investment in capital – human, health, financial, and physical – through expanded education, tax modernization with work and saving incentives, health and welfare reform, and infrastructure. These investments are good for all Kentuckians, not just the poor. Pre-K programs have been shown to have long-term payoffs in terms of higher graduation rates, higher employment and earnings, and reduced crime. Targeting families eligible for free and reduced price lunch is likely to yield a higher payoff than universal programs. There is substantial evidence from both the medical profession as well as social science that shows there are tremendous growth changes that occur in the first few years of the child’s life. A lot of the changes occur because of the nutrition and health of the mother and the subsequent health and nutrition programs that the child has available such as the Women, Infants, and Children (WIC) program. Several states have implemented pilot programs on direct nurse home visits. There are periodic visits by a trained professional who visit families from lower-income backgrounds to discuss proper nutrition and cognitive development for the children.
Well known experimental evaluations of Perry Preschool and Chicago Child/Parent Programs show that the preschools have benefit cost ratios in excess of 3. In 2001, Louisiana went statewide with its LA4 preschool program, which is funded with Temporary Assistance for Needy Families (TANF) dollars and made freely available to all children eligible for reduced price lunch, has led to notable gains in early achievement. The goals of KERA/NCLB need to be re-examined to see if they adequately address the drop-out crisis. Research suggests that children age 11 and older fared worse when mothers transitioned to work after welfare. A survey by the Gates Foundation listed several reasons individuals drop out of school: (1) lack of connection; (2) boredom; (3) unmotivated; (4) academic challenges; and (5) family distress. The seeds to drop out are planted early.
Conditional cash transfers allow families to receive a cash grant for children to receive medical check-ups with the stipulation that the children attend school regularly. New York City currently does conditional cash transfers on an experimental basis. New York City has also created internship opportunities for teens. The JOB Corps focus on disadvantaged youth who are disconnected with their families and allow them to receive comprehensive treatment.
Expanded after-school and summer programs have been implemented to help the drop out crisis. There is a fundamental shift in the United States economy toward a skilled workforce, and high school completion is no longer enough. Kentucky needs to expand investment in community colleges and universities, including need-based financial assistance. Then incentivize our graduates to stay and invest in Kentucky. Research suggests that training that focuses on “human capital development” has a higher long-term payoff than “work first” strategies. Recent work done at CBER suggests that Kentucky’s firm relocation subsidy program has some beneficial effects if they incorporate worker training, e.g. through the Bluegrass State Skills Corporation.
The tax system needs to be consistent with the 21st Century economy to provide a more stable funding stream and encourage work and saving. Low-income workers and families can benefit from fundamental tax reform in Kentucky through the state earned income tax credit (EITC), child care subsidies and tax credits, individual development accounts, and automatic enrollment. In 1975, the federal EITC was established as a refundable tax credit and only available to low-income workers who file a tax return. The EITC helps four million families out of poverty each year. In the 1990s, expanded generosity played a big role in raising work among single mothers and lowering family poverty. Twenty-three states plus the District of Columbia supplement the federal EITC with a state EITC. The federal EITC injected $630 million into Kentucky’s economy in 2005. Sixty-two percent of poor families in Kentucky contain at least one worker, and it is estimated that a state EITC could assist over 360,000 working poor individuals in Kentucky. Based on research evidence, the UKCPR recommends that a state EITC be refundable, offer at least a ten percent credit rate tied to the federal EITC, and target all low-income workers.
In 2008 it was estimated that annual infant child care costs were $6,240 for full-time center care and $4,956 for school-age children in non-school hours. This represents 20 percent to 25 percent of an annual income for a single mother. Numerous studies have shown that child care subsidies spur employment, especially among single mothers. The UKCPR projects that a 25 percent subsidy could lift single mother employment in Kentucky to a level on par with single moms in the rest of the United States. The child care assistance could be in the form of a wage subsidy or child and dependent care tax credit.
Microcredit, peer to peer lending, further investment in transportation, broadband and cell connections, especially in rural areas, and environmental issues can improve the long-run economic status of the poor.
There are substantial barriers to health care for many Kentuckians. If it passes, the federal health care reform legislation still might not be enough. From 2006 to 2008, Kentucky ranked 18th in state health insurance coverage rates. Eligibility for the uninsured, the Kentucky Transitional Assistance Program (KTAP), and the Kentucky Children’s Health Insurance Program (KCHIP) need to be expanded. Further outreach efforts need to be made for food stamps, the EITC, and the WIC. Three in ten people are not receiving needed food stamps. Many programs and ideas have limited experience and/or evaluation. Some ideas are new, but most have been evaluated. The UKCPR strongly recommends that the Poverty Task Force include an evaluation component in any new policy initiatives so that they can assess program success and improve policy going forward. The goal is to cut poverty in half by the year 2020.
Senator Stivers asked if the poverty level numbers is a raw dollar figure or weighted for an area or region where someone lives, because the cost of living per area can be drastically different. Dr. Fording said that the poverty thresholds are not adjusted for geographical differences in the cost of living, with the exception of Hawaii and Alaska.
Representative Stevens stated that one of the best things that came out of KERA is the family resource centers. He stated that Kentucky needs to look at more vocational assistance. If someone does not plan to attend college, they will need to be trained for a profession. Kentucky has to do a better job of addressing educational needs, making residents value education, and addressing the lack of education many residents face every day.
Representative Flood asked about the 1993 expansion of the federal EITC that played a big role in raising work among single mothers and lowering family poverty. Dr. Ziliak stated that the 1993 tax reform increased the expansion of the EITC. The EITC works in three phases: subsidy, stationary, and phase-out. Representative Flood asked about the tax modernization and creating a stable funding stream for a state budget so programs can be implemented. She said that a multi-field approach is critical.
Representative Henderson stated that entrenched poverty also involves the local government. If there is a poor tax base, a poor infrastructure, and poor county, there are more poor people. Education is paramount for the solution of ending poverty. He said that the Internet has helped poverty stricken areas. More incentives are needed to attract more businesses to Kentucky. County tax bases have to be changed to help poverty levels.
Representative Henley stated that for the past decade the country has been moving from primarily manufacturing-based economy to an increased service-based economy. He said at the same time Kentucky spends has began to spend more money on tourism. He asked if the UKCPR had considered doing a correlation of the net in shopping counties and the net out shopping counties versus per capita income and poverty levels. He said that we have moved into an era where if a county does not have high speed telecommunication, the more sophisticated industries will not consider locating in that area.
Representative Wuchner said that home visitation is a part of the HANDS program that addresses the zero to three year olds. She asked if there are federal grants available that Kentucky has not taken advantage of. She asked if Kentucky is adequately covering the zero to three year olds with the programs available now and the way the funding comes in from the tobacco settlement, and is there a benefit to extend coverage to four and five year olds. Dr. Ziliak stated he has not seen the statistics that Kentucky is adequately addressing the zero to three year olds. He said that evidence suggests that the zero to three year olds are the critical period for some early interventions within the family, but the four to five year age window is a critical period for cognitive development. Research suggests there is a strong interaction between a person’s health and their ability to achieve in school and these health deficits accumulate over time.
Representative Upchurch stated that we should be concerned about Kentucky, not national figures. He said that we need to know the true numbers of Kentucky’s poverty rate in order to attack the problem from a Kentucky standpoint. Dr. Ziliak stated that according to a 1955 was a survey conducted by the U.S. Department of Agriculture that showed the average American family spent one-third of their after tax income on food. The poverty threshold was established by finding what how much it would cost to buy a minimally adequate nutritive diet and multiply it by three, and adjust it by family size. The threshold is based on the assumption that the American family spends one-third of their budget on food, but the actual average is approximately one-eighth. If the current thresholds were recalculated to adjust for current spending patterns, they would be twice as high. The statistics do allow Kentucky to keep track of how we faired over the past four and a half decades using a very consistent yardstick.
Representative Glenn asked if the poor people had been asked what they think is more important on how to get out of poverty. Dr. Ziliak stated that some studies have been done where families were asked detailed questions to try to get a good handle on how to make ends meet. The studies consistently show that the poor share many of the middle-class values, but barriers need to be removed that would allow them to obtain their goals. The poor want to learn, but they also want to be motivated and challenged. The Gates Foundation survey showed that most regretted dropping out of school and go back and get the General Education Diploma (GED). Someone with only a GED does not make any more on the average than a high school dropout, but it does make them more employable and helps them be able to continue their educational experiences.
Representative Marzian suggested Representative Wayne come and testify to the task force about the EITC. She said that low-income people are preyed upon by banks, because they cannot afford to pay for overdrawn fees or bank fees for just having a checking account. She stated that credit card companies and pay day lending companies prey on the poor. Dr. Ziliak stated that pay day lending companies open a line of credit for low-income families that they may not otherwise be able to obtain, but if a payment is missed, the payment is added on to the loan and the interest rate can rise to as much as 500 percent. He stated that some states have put a cap on interest rates. He said studies show that most low-income families feel more comfortable dealing with a pay day lender than a bank. The pay day lending is a very valuable access, but it certainly deserves close scrutiny. Unfortunately, credit cards are a way for some low-income families to make ends meet, so restriction to them could hurt more than help.
Representative Combs asked why there is more poverty in some areas of the state than others. She said that broadband and a technology infrastructure is an area that is lacking in high poverty areas. She said that she sees the correlations between the lack of technology and education and poverty rates. She stated that stimulus dollars should be used to build the infrastructure regardless of the customer-base, because smaller private companies are not able to put it in all the places it needs to be and companies who have the capital to do it will not because the customer-base is not there. Private enterprise has to be involved. Dr. Ziliak stated that essential technology will affect all families, not just the low income. He said that many services can be delivered over broadband.
Representative Belcher stated that there is a need to expand vocational programs to give students the opportunity to get some good training. She asked who plants the seeds in young children that they are not capable of finishing high school. Dr. Ziliak stated there is no single source but some are family disruption and distress, health, and schools.
Senator Tori stated that it is important to look at poverty data from other states to see where Kentucky ranks and how Kentucky can improve. She stated that low-income families could live better if they are taught how to manage their money.
Representative Hall stated that education is the key. Valuable information can be gathered from family resource centers. He said that a lot of senior citizens live in poverty. Seniors have a hard time deciding to buying prescriptions or food, because they do not have enough money for both. There is a need to look at prescription plans and the catastrophic strain it puts on seniors. Church-based organizations have been a big help for low-income families. He asked why Kentucky went from being ranked eighteenth to fifth since 2001. Dr. Ziliak stated that the average U.S. and Kentucky median income has been flat for a decade, and has even fallen for Kentucky. There has been a fairly robust economic expansion, yet the income situation for families has not improved. While manufacturing and resource attraction has been good and encouraged for the Commonwealth, they are fairly volatile industries. While incomes did not rise, insurance premiums for health care went through the roof. Many firms have been put in a bind by having to choose between giving employees a raise or cover rising health insurance, and many have opted to cover the rising health insurance. Over the past decade, there has been a steady decline in employer-provided insurance. Approximately 58 percent of employers provide insurance. Representative Hall stated that the Kentucky Homeplace program is a great source of information and data. Poverty is a chronic problem that needs to be addressed. There are 54 vocational schools in Kentucky that have not been a priority. While everybody is not going to attend college, they can be trained to be employable.
Representative Henley said that there is a need to emphasize the importance of the Kentucky Homeplace in the 2010 budget process. It is one of the most successful health care programs for the rural poor in the entire United States. He said that broadband telecommunication availability is the first order of priority in the economic war where there are winners and losers. There needs to be more competition in broadband telecommunication technology.
There being no further business, a motion to adjourn at 2:56 p.m. was made by Representative Henderson, seconded by Representative Glenn, and approved by voice vote.