Iowa bill to curb welfare spending at strip clubs lacks teeth

DES MOINES – New legislation introduced by the Iowa Department of Human Services would bar welfare recipients from using the taxpayer money they receive at strip clubs, bars and casinos and make the misuse a fraudulent act.

But it fails to address how the department plans to enforce the proposed law or the consequences violators would face.

Instead, the legislation gives the department broad discretion in deciding how best to comply with the new federal regulations that prompted the proposal.

And that has some lawmakers worried.

FREE RIDE: Investigations in other states have revealed the abuse of TANF funds, with recipients spending welfare dollars at strip clubs, liquor stores and adult retail shops.

“The guidelines are loose,” said state Rep. Beth Wessel-Kroeschell, a ranking member of the House Human Resources Committee, which reviewed the bill. “This one came very late. The chair of that committee is (Rep.) Linda Miller, and I know she said she wanted the language tightened up before taking it to the full floor.”

Miller, a Republican, did not return phone calls and emails seeking comment.

Congress passed legislation in 2012 that requires states to adopt rules to prevent those receiving family assistance benefits from using them at strip clubs, bars, casinos and liquor stores. Those that fail to comply by 2014 risk losing 5 percent of the federal dollars they receive to fund the program, which is meant to provide low-income families with basic necessities.

For Iowa, which received $131 million in fiscal year 2011, it would mean a loss of $6.6 million a year, according to state records. The lost funding would have to be made up by either lowering recipient benefits or reallocating state dollars to fill the gap.

The federal requirements came after media reported misuse in other states.

The New York Post, for example, found dozens of withdrawals that were made at ATMs inside porn shops, bars that had a history of violence and liquor stores.

Another review by New Mexico Watchdog in November showed much of the same in that state: money meant to help needy families being used at stores selling booze, cigarettes and adult entertainment.

Iowa officials currently don’t track where welfare recipients use the benefits they receive under the state’s Family Investment Program. They claim federal banking laws prohibit them from accessing that information from the company Iowa contracts with to provide the cards, said Roger Munns, spokesman with the state Department of Human Services.

When asked how the department plans to resolve the issue in light of its proposed legislation, Munns wrote in an email, “I addressed privacy and banking regulations in earlier messages.”

Iowa Watchdog in January requested a month’s worth of transactions, including the location, date and amount, but was denied the information by state officials, who cited the banking regulations. Watchdog is now in the process of challenging the denial.

In regards to the department’s current legislation, Munns said the state will have more details on how it plans to track transactions once it receives further guidance from federal officials. Those who are caught misusing taxpayer money would be liable for the amount fraudulently used and have to pay it back, he said

“Pending federal regulations are expected to inform states about what actions are required or are optional with respect to complying with the federal law,” Munns wrote in his email. “The department has no ability or authority to track transactions made by FIP (welfare) recipients.”

Contact Sheena Dooley at dooley@iowawatchdog.org. Sheena Dooley is the Iowa bureau chief for Watchdog.org, where this story first appeared.