CHAPTER 1

Economic Security for Families

Chapter Advisors

Many thanks to the advisors for this section: Claire Dudley Chavez, United Way of Santa Fe County; Scott Miller, Circles USA; Ndem Tazoh Tazifor, NM Economic Development Department;Alvin Warren, W.K. Kellogg Foundation; Peter Winograd, UNM Center for Education Policy Research (retired).


More people in New Mexico live in poverty than in almost any other state. Even middle class families can find themselves struggling to make ends meet. Economic policy efforts in New Mexico often focus on the needs of the business community, with the understandable logic that a stronger business sector creates jobs that will lift people from poverty. Several later sections in this report advance this premise. However, this report asks readers to first focus on the foundation of our society – the family.

“We must find a way to meaningfully engage the fifth of the state’s population that is left out of the modern economy,” commented economist Jim Peach, interviewed for this report. “Our conversation must start there.” [1]

What challenges do New Mexico families face? What causes underlie our poverty rates? How might we define prosperity in the future? And what supports can we consider – today and in the future – to create real changes?

Poverty in New Mexico

About one in five New Mexicans live on incomes at or below the Federal Poverty Level (FPL), making us the second poorest state in the nation. The same measure determines that we have the highest rate of child poverty in the country.[2] When we look at New Mexicans by race and ethnicity, about a third of Native Americans (35%) and almost a quarter of Hispanics (23%) live in poverty, compared with Anglos (at 13%).[3]

“We must find a way to meaningfully engage the fifth of the state’s population that is left out of the modern economy.” -- Jim Peach, NMSU economist

People living in poverty often experience difficulty paying for the basic necessities of life: their homes, food for their families, transportation to and from work, or quality childcare. Nationally, a single person in poverty lives on about $30 a day.[4] Some people in poverty are unemployed. Others work multiple low-paying jobs and can sometimes be too tired to pursue activities (like returning to college/trade school, supervising children’s homework, or preparing healthful meals) that would improve their current – or their children’s future – conditions. In New Mexico, people are also more likely to be poor if they live in rural and tribal areas.[5] In efforts to make ends meet, people may also find themselves with risky debt levels and little or no savings.

Poverty Report Card [6]

Economic Measure NM Percent-ages National Ranking
Overall Poverty 21% 50th
Children in Poverty 29% 51st
Unemployment 7% 34th
Hunger/Food Insecurity 12% 15th
Affordable Housing * 29th
Assets/Savings Trouble[7] 10% 45th
Teen Birth Rate * 50th

* Ranking based on calculation other than percentage.

Measuring and Understanding Poverty Levels

Since the 1960s, our nation has used the FPL to measure whether households have enough money to make ends meet. At the time the FPL was developed, average families spent about a third of their income on food. Researchers reasoned that multiplying a food budget by three would generate a good estimate of the minimum amount of money a family would need.[8] In subsequent decades, household food spending declined (to about 10 percent today).[9] Meanwhile, other expenses – such as housing, transportation, healthcare, childcare and taxes – increased.

These changes prompt some researchers and advocates to question the accuracy of the FPL. They note that it does not take into account regional differences, such as higher housing costs in some parts of the country or lower gas prices in others. The FPL also includes only pre-tax cash wages income, not food stamps, tax credits or other non-cash government benefits. Consequently, the FPL does not measure whether these non-cash government programs are actually making a difference.

In recent years, at least two additional ways to measure poverty have gained attention: The Supplemental Poverty Measure (SPM) and the Self-Sufficiency Standard.

Supplemental Poverty Measure

Based on National Academy of Sciences data, the SPM measures poverty using costs of food, clothing, shelter and utilities. The poverty threshold is adjusted by state or metropolitan area, taking into account regional differences such as housing costs. On the income side, the SPM also includes in-kind benefits (i.e., food stamps or child care assistance), tax credits and medical expenses. These factors are useful if policymakers want to measure government programs’ impact on poverty. The U.S. Census Department began publishing this data in 2012. The SPM is not intended as a replacement for the FPL in determining who is eligible for benefits.[10]

Under the SPM, New Mexico’s poverty rate improves somewhat, to 16 percent, compared with 21 percent under FPL (2014).[11] Because the SPM is relatively new, states are still learning how to effectively use it. Opportunities exist for states to use this measure to improve evaluation of government programs.

Self-Sufficiency Standard [12]

The Self-Sufficiency Standard is a different poverty measure, unlike the others in that it is not conducted by the government. It defines the amount of income necessary for a family to meet basic needs (including taxes) without public assistance. The standard is calculated on a county-basis. It was initially developed in the mid-1990s as a performance measure for the goal of “self-sufficiency” in federal job training programs (now part of the Workforce Investment Act).

States can use this standard to evaluate impacts of current and proposed policy changes (such as food stamps, Medicaid, or tax credits). Nonprofits can use the standard to counsel people, using the county-based data for financial planning and setting family targets to become self-sufficient. Several states have developed online calculators to help people determine what wages they must earn, in their county, to become financially self-sufficient.

The Self-Sufficiency Standard is not a government program, so its deployment in 36 states has occurred voluntarily through foundation funding, public-private partnerships, and research organizations. Each participating state has a lead organization, usually a nonprofit, university or state office. New Mexico does not participate, presumably due to insufficient resources or the lack of a lead organization.

Role of Government Programs

There are multiple government programs that affect the financial bottom line for low-income families. These programs also affect the overall economy of the state. While primarily federally funded, the state plays key roles through management and/or matching funds.

Temporary Assistance to Needy Families (TANF)

In New Mexico, TANF goes by a different name: NMWorks. People used to call this safety net program “welfare.” It provides a monthly cash benefit to low-income families for housing, utilities and clothing. To be eligible, the family must have dependent children and their household income must be below 85 percent of FPL (or about $21,000 for a family of four). Most states, including New Mexico, impose a 60-month maximum time limit – during which time the recipient is often in college or job training programs. The amount of the benefit varies by state and family size. In New Mexico, the maximum monthly benefit for a family of four is $493. The program is federally funded through a block grant to the states, which are required to spend some of their own dollars toward programs for needy families.

Supplemental Nutrition Assistance Program (SNAP)

The SNAP program, previously known as food stamps, is another safety net service. It is a non-cash benefit that enables families to purchase food. It is linked to the general economy because SNAP expenditures stimulate economic activity, particularly during economic downturns.[13] In other words, when more people are struggling, more turn to food stamps, and in turn make food purchases that stimulate grocery, wholesale, and agricultural sectors of the economy. The program has a multiplier effect; every $5 in new SNAP benefits generates up to $9 of economic activity.[14] When SNAP benefits are added to gross income, 13 percent of those households move above the poverty line. [15]

Unlike some programs that require a state match, the federal government pays 100 percent of SNAP benefits. States contribute financially by paying about half of the administrative costs of the program. In FY2014, New Mexico’s investment in SNAP was $30 million and the federal investment was just over $629 million. That translates to about a $20 to $1 federal-to-state investment for food benefits.[16]

SNAP was in the news recently because New Mexico considered imposing a three-month time limit on SNAP eligibility for some residents who are not working or in school, a change that would have affected up to 17,500 people. Supporters of the time limit said the work requirement was a reasonable expectation that increased personal accountability. Opponents said it placed an unfair burden on the unemployed. The change is on hold, blocked by federal court in March 2016.[17]

Child Care Assistance Program

The Child Care Assistance Program (CCAP) subsidizes the cost of child care for low and middle-income families that are working or in school. To enter the program, family earnings must be at or below 150 percent of the federal poverty level (or about $36,000 for a family of four). The subsidy amount varies somewhat by the type of care, and the dollars go directly to the licensed child care provider, not the family. About 17,500 children are served through the $96 million program (or an average of $5,400 per child). The program is financed through a combination of federal and state dollars.

From an economic development standpoint, this program affects employees’ ability to work, employers’ ability to have a reliable workforce, and the bottom line of many licensed child care providers. Further, quality child care is proven to increase students’ school readiness.[18] However, concerns exist if government dollars are used to pay for lower quality care.

Some states are experimenting with reforms to make government-funded child care higher quality, more constant for families, and thus better for the potential employers who rely on a stable workforce. Such legislation recently passed in Colorado, Nebraska and Vermont.[19] A previous New Mexico task force crafted a range of potential reforms to CCAP.[20] It recommended a number of changes to the eligibility criteria so that more low-income families can qualify for and retain stable, quality care.

Medicaid

In New Mexico, Medicaid is called “Centennial Care.” It is the government health insurance program for low-income people. Services include physical health, behavioral health, long-term care and community benefits. Slightly more than half of births in New Mexico are funded by Medicaid. [21] Children are the most likely individuals in a family to receive this benefit, since they qualify if their family’s incomes are at or below 300 percent of the poverty level. For most adults to qualify, incomes must be at or below 133 percent of poverty (or about $32,000 for a family of four). See additional information on Medicaid in Chapter 6 on federal dollars in the state economy.

Cliff Effect

The safety net services listed above directly impact thousands of people in New Mexico, and indirectly impact all residents and the state’s economy as a whole. These programs are intended by provide support on a temporary basis. In some cases, however, the structure of government programs may make it difficult for people to transition off of assistance without hurting their families. Called the “cliff effect,” this situation occurs when low-income families perform well, see their incomes increase enough to put them just over a benefits threshold, and subsequently lose more government benefits than their pay increase can cover.[22]

“These people metaphorically ‘fall off a cliff’ and find themselves in worse financial shape than before,” said poverty researcher Scott Miller when interviewed for this report. “Across the nation, policymakers from the right and left, along with economic researchers, are looking for solutions that honor hard work, advance progress, and transition people off public benefits in a fair way.”

Some states, including Colorado, Illinois and Nebraska, passed legislation to “smooth out” the cliff. Pennsylvania, Maine and Maryland have also considered legislative solutions. Possible solutions in New Mexico or other states follow.[23]

  • Prorate benefit programs to eliminate disincentives to earning more income (essentially, reducing benefits by about the same amounts as increased earnings, rather than in big chunks).
  • Streamline application and eligibility determinations so that people spend their time getting and keeping jobs rather than navigating deadlines and requirements of different government programs.
  • Align benefit programs with workforce and relational support strategies (like the Circles model or the Family Independence Initiative, described below) so that people eventually stabilize and need less from the safety net.

Local Support Networks and Training

Regardless how we measure or regulate poverty, most people agree that the main priority is to reduce, prevent, or best case, eliminate it. We want our families to prosper. But notions of prosperity may vary across different cultures, geographic boundaries or age groups. For example, the City of Albuquerque launched the Plan for Prosperity initiative to create a shared vision for what a prosperous community might look like. It gives citizens the opportunity to share their goals for the city and create consensus on action items.

Another approach is to focus on direct, personalized supports for families, such as the following programs.

Circles Model

What might happen in low-income communities if people had reliable support networks from caring people, each committed to learning from each other and ending poverty? Researcher Scott Miller, founder of Circles USA, leads an effort attempting to achieve that goal.

In his model, a “circle” comprising two or more volunteers meet monthly with the head(s) of a single low-income family. Their goal is to work on solutions to get out of poverty. They share meals, talk through the challenges of daily life and focus on improving self-sufficiency. In the process, they expand social networks and attempt to strengthen education for both children and parents. Practical problem-solving is the goal. For example, in one group, Circle volunteers helped the head of household in their assigned family obtain a donated vehicle so she could get to and from work reliably. The woman with the car then became a volunteer who provided transportation for other Circle participants to get to their own planning meetings.[24]

Evaluation of 151 families in the program revealed an average increase in monthly earned income from $227 to $757, with an average of 10 months for families to stop taking government cash assistance.[25]

Family Independence Initiative[26]

In 2001, the national nonprofit Family Independence Initiative began partnering with low-income families to move them from poverty. The program operates in six cities across the U.S.: Oakland, San Francisco, Boston, New Orleans, Detroit and Fresno.

Organizers believe families can succeed when they have access to connections, choice and capital. Connections, under this model, include a network of family, friends, and colleagues who provide support, information, resources and a sense of accountability. They aim to provide both a safety net and a springboard forward. Choices, under this model, means the volunteers do not tell families what to do; they instead offer an array of self-directed options regarding finances, housing, careers, education or other opportunities. The third element, capital, includes both long-term financial planning as well as small cash payments for completing activities that improve a family’s well-being (i.e., balancing a checkbook, reducing credit card debt, improving grades in school, attending trainings, applying for a new job, obtaining insurance).

The program appears to show results. For example, over a two-year period, families in the Oakland program saw a 27 percent increase in average household income and, over three years, 40 percent had purchased homes.

Financial Literacy

Many people recommend basic training in personal finances, not just for people in poverty – but for everyone. New Mexico House Bill 1205 passed in 2007 making it a requirement for high schools to offer financial literacy as an elective. Across the nation, 17 states require students to take a personal finance course before graduation.[27] Last year, an economic literacy study published by personal finance company WalletHub ranked New Mexico 45th in the nation for financial planning and daily habits.[28] Measured habits included personal savings, having a bank account, sustainable spending practices, and borrowing from “non-bank” entities. Non-bank entities include high interest credit cards, payday lenders, or “predatory” lenders.

A number of programs in New Mexico seek to address the need for increased financial skills including the following:

  • Jump$tart Financial Literacy Coalition is a national clearinghouse and resource organization, with a New Mexico chapter.
  • Making Money Work is a dual-credit, online program offered by Central New Mexico Community College (CNM) to high school and college students.
  • University 101, a course for college freshmen at the University of New Mexico (UNM), includes a component developed by Nusenda Credit Union to help students manage their finances and create a stable financial foundation.
  • Wells Fargo's online financial planning curriculum,handsonbanking.com, has modules for different ages (i.e., youth, adults, veterans, seniors).
  • Individual Development Accounts (IDAs) are matched savings accounts designed to encourage savings, investment and asset accumulation among low and moderate income families. They are typically administered through nonprofit organizations and are tied to financial literacy courses.

In addition to these strategies that help families strengthen their own financial position, entrepreneurship training can help individuals expand the economy and create jobs. These opportunities are addressed in greater detail in Chapter 3. For every one percentage point increase in entrepreneurship in a state, there is a two percent decline in poverty.[29]

Role of Nonprofit Sector in New Mexico Economy

Many of the challenges and possible reforms in this section potentially involve nonprofit organizations. The nonprofit sector in New Mexico comprises over 10,600 organizations, about 7,000 of which are public charities. The sector generates more than $6.5 billion in annual revenues in New Mexico and holds assets of almost $15.7 billion. New Mexico grantmakers’ giving to organizations in the state increased by 11 percent between 2006 and 2009—during the nation’s recession. New Mexico foundations annually give over $68 million. Additionally, New Mexicans give $738 million to charity each year, representing three percent of household income.[30]

The nonprofit sector in New Mexico employs roughly 48,000 people, or 8 percent of the state’s workforce.[31] Although employment data is somewhat dated for the sector, an estimated one in 20 paid workers are nonprofit employees, which comprises more than double the amount in state government, and more than the combination of employees working in agriculture, mining, oil and gas and utilities. Many jobs in the nonprofit sector pay comparatively well. Overall, the average earnings are about 6.5 percent lower than the state average but 66 percent higher than the combined average of retail, accommodations and food services, which are among the largest sectors of the state’s economy.[32]

Options and Intersections

Given information presented in this chapter, there are excellent options for future policy discussions. What are the strengths and weaknesses of the standard method of measuring poverty? What learning opportunities might exist by exploring alternative methods? Should New Mexico take steps to address the cliff effect? What are the pros and cons of individualized family support systems, and how might they compare with, or complement, government safety net programs? What steps might New Mexico take to improve the financial literacy of our people, or should our efforts be directed in other ways? And how do we leverage the existing nonprofit sector to significantly reduce poverty?

These questions are also influenced by other chapters in this report. Obvious intersections exist with efforts to expand entrepreneurship and small businesses, as well as industry diversification to create new jobs. (Ch. 3 & 4) Furthermore, the relationship between poverty and workforce preparedness (K-12 education as well as community colleges and universities) is clear. (Ch. 2) It is also noteworthy that people in rural and tribal areas are more likely to live in poverty than those in urban areas, so the information presented in that chapter is also highly relevant. (Ch. 5)


Chapter Endnotes

Short reference sources below; complete citations in the bibliography.

[1] (Peach 2016)
[2] (U.S. Census Bureau 2015)
[3] (Kaiser Family Foundation 2014) Drawing on U.S. Census Data.
[4] (Economist 2015)
[5] (Index Mundi 2013) Drawing on U.S. Census Data.
[6] (Center for American Progress 2015) Chart includes the 50 states plus District of Columbia.
[7] Based on percentage of population with high-cost, high-risk forms credit such as payday loans.
[8] (University of Washington 2015)
[9] (USDA 2015)
[10] (University of Washington 2016) (U.S. Census Bureau 2012) (U.S. Census Bureau 2013)
[11] (Short 2013)
[12] (University of Washington 2016)
[13] (USDA 2015)
[14] (Hanson 2010)
[15] (Mathmateica Policy Research 2014)
[16] (USDA Food and Nutrition Service 2014)
[17] (NM Center on Law and Poverty 2016)
[18] (UNM Center for Education Policy Research 2015)
[19] (McMahan 2015)
[20] (NM Partnership for Early Childhood Development 2014)
[21] (Kaiser Family Foundation 2010)
[22] (Miller, President, Circles USA 2016) (Fitzpatrick and O'Connor 2015)
[23] (Miller, President, Circles USA 2016)
[24] (Miller 2007)
[25] (Circles USA n.d.)
[26] (New America Foundation 2011)
[27] (Council for Economic Education 2016)
[28] (Klernan 2015)
[29] (W. K. Kellogg Foundation n.d.)
[30] (New Mexico Association of Grantmakers 2012 ), (Independent Sector 2016)
[31] (Independent Sector 2016)
[32] (Bureau of Business of Economic Research 2006)



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