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  • Print publication year: 2019
  • Online publication date: September 2019

7 - States Diverting Funds from the Poor

from Part II - States, Federalism, and Antipoverty Efforts


This chapter describes how states and their human service agencies team up with private companies to turn vulnerable populations into sources of revenue. Cash-strapped states have been unwilling to raise sufficient revenue through general taxation and are thus looking for money elsewhere, including schemes that are largely unknown to the public to divert federal aid and other funds from children and the poor. Foster care agencies take resources from children in their care, including Social Security disability and survivor benefits, Veteran’s Assistance benefits if their parents died in the military – and even child support. States use illusory budget shell games to siphon away billions in Medicaid funds intended for children and low-income adults. Juvenile courts maximize revenue by removing children from their homes. To illustrate the interconnections of a sampling of the practices, Anna is introduced, a hypothetical foster child who encounters and is impacted by the revenue strategies in different states. The chapter explains how the state practices are undermining the purpose of government and the intended benefits of fiscal federalism – and how a fundamental realignment is required so that states are true to their purpose, to exist not for themselves but for the good of the people.