Chairman McDermott, Congressman Weller, Congressman Camp, and members of the committee, thank you for the opportunity to submit testimony on establishing a modern poverty measure. 

The mission of the Michigan Department of Human Services (MDHS) is to assist children, families and vulnerable adults to be safe, stable and self-supporting.  We recognize that dealing with poverty is fundamental to our mission, and have begun the process of creating a statewide network to link local poverty reduction efforts to statewide policy initiatives in order to enhance our ability to impact the causes and conditions of poverty in our state.  This network, the Voices for Action Network, will be launched as part of Michigan’s first statewide summit on poverty November 13, 2008.  It is essential that we ensure that all Michigan citizens have access to economic opportunity, and that we all work together to end poverty.  All of us are affected by poverty and all of us have a role to play in relieving its effects and reducing the number of our neighbors blocked from full participation in our economic transformation.  In order to measure the effectiveness of our poverty reduction efforts, we need a common sense poverty measure that includes impact of public programs, and the real costs of work and basic needs.  There is broad consensus on the deficiencies of our current poverty measure, and I will not belabor that point but simply join in the chorus that it is woefully inadequate and must be changed.

State human services agencies have a key role to play in reducing the effects of poverty by administering an array of federal and state programs aimed at assisting individuals and families.  However, because of the limitations of the current poverty measure, many of our efforts to assist families are invisible and have no effect on the poverty rate in our state.  This leaves us vulnerable to the perception that public programs aimed at poverty have failed because they don’t reduce poverty rates even though there is no way to include the impact of these programs in the current poverty measure.  For example, our state is committed to reaching out in creative ways to make sure that every person who is eligible for food stamps is actually receiving them.  We are exceptional as a state in the percentage of eligible persons actually receiving food assistance, and we believe it makes a real difference in the degree to which poverty affects families.  Similarly, Michigan is exceptional in that every community has created a plan to end homelessness, and we are adjusting policies to support these efforts including providing more housing assistance to people in shelters.  These efforts make a real difference but can not affect the poverty measure because housing assistance and food assistance are not considered resources in the current poverty measure.

As many have testified, including Rebecca Blank and Sheldon Danziger from the University of Michigan’s National Poverty Center, it is likely that including food stamps and housing assistance in a poverty measure would actually show the effect public assistance programs have on the real experience of families living in poverty.  This is a common sense approach and gives citizens a clear way to assess the impact of public assistance.  Similarly, other public policies aimed at poverty such as the Earned Income Tax Credit and the Child Tax Credit are linked to quantifiable reductions in poverty for the lowest income levels when included in a poverty measure. 

The cliché that we have “lost the War on Poverty” is based on a circular argument.  We don’t include in our measure the impacts of major poverty policies and then don’t see those impacts when we look at the measure over time.  This creates a “catch-22” in which states struggle to show that our programs help even while the main economic indicator specifically excludes the impact of many of these programs.  This gap between government programs and impact on poverty has widened over time as fewer and fewer dollars are spent on cash assistance.

In addition to the inclusion of resources actually available to families, actual costs incurred by families that are unavoidable in order to generate income are essential components to a common sense poverty measure.  Child care, transportation, and health care costs are not optional for many families; income is dependent on these factors.  Therefore, a common sense poverty measure should include these factors as subsistence factors.  Including these costs will assist in identifing issues that drive the poverty rate up, and design targeted policies to respond.  For example, in the New York experience, their new poverty measure uncovered a higher rate of elderly poverty because of the impact of skyrocketing health care costs among this population leaving more seniors less able to meet basic needs.  Similarly, measuring the real costs associated with work will reveal the impact of rising gas prices on working poor families and help us focus our attention on the large segment of people in poverty who are actively engaged in work but can not meet a basic level of subsistence. 

Ideally, information in the poverty measure would also be linked to key indicators of access to pathways out of poverty such as access to quality early childhood programs, education, and family support services to ensure that families are equipped to prevent inter-generational poverty.  The ability to identify changes in costs related to maintaining work and access to opportunity as part of a poverty measure would provide a consistent, reliable means to identify impact on poverty over time generated by policy initiatives such as Michigan’s Jobs, Education and Training (JET) program which aims to link families to opportunities for long-term self-sufficiency.

Finally, it is essential that responsibility for the poverty measure move from the Office of Management and Budget to a federal statistical agency.  No other economic indicator is similarly entangled. The need for a reliable common sense poverty measure must outweigh political concerns related to fears of a sudden “increase” in poverty due to a switch to a meaningful measure.  There are solutions to ease this concern including standardizing the measure, anchoring the new measure to the current measure for a period of time, and putting processes in place to regularly adjust the measure.  Again, testimony from experts such as Sheldon Danziger from the National Poverty Center indicates that the overall poverty rate may not change significantly using a common sense measure, but that different population subgroup rates might, as has been the experience in New York as they have used a poverty measure with updated resource thresholds. This would give states a better sense of which groups are most effected by changing costs related to work and equip states with more reliable and consistent data on the effect of poverty reduction policies over time.  In the long run, we are far better off dealing with the reality and the implications of these trends for public policies than avoiding the tough choices about how to best reduce poverty.   Designing effective policies to ensure that working poor families have the supports they need to move beyond poverty is essential, not only to these families but for all of us who look forward to the benefits of a transforming economy. 

Thank you for the opportunity to submit this testimony.