Economy Bytes: Effect of State and Local Budget Cuts on Homelessness

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Report | July 28, 2011

Files: PDF | 319 KB | 2 pages

In the third installment of the Homelessness Research Institute’s (HRI) Economy Bytes series, the intersection between state and local budget cuts and homelessness is examined. Many states and localities are cutting the budgets of their homeless assistance programs in fiscal year (FY) 2012, which is elevating vulnerability and putting more and more people at risk of experiencing homelessness.

While budget circumstances provoke cuts to targeted homeless assistance programs, cuts are also being made to mainstream social service programs, cash assistance, and employment programs that directly affect homelessness. These cuts elevate the vulnerability of poor people and low-income workers, which heighten the risk of homelessness and, ultimately, these cuts may likely lead to increased homelessness.

This brief focuses on two budgetary program areas that, when cut, can lead to increased homelessness vulnerability: public cash assistance programs, such as Temporary Assistance to Needy Families (TANF), and public sector jobs. This brief also describes data analysis that identifies states where people face cuts to these two program areas in the same states where people are already at increased risk of homelessness due to worsening economic and demographic conditions.

Cuts to Public Assistance and Public Sector Jobs
While the national economy is slowly recovering, state and local fiscal conditions remain hindered by the Great Recession of 2007 to 2009. State and local budgets are different from the federal budget in that almost all states and local governments are required to maintain a balanced operating budget. The balanced operating budget requirement means that there is a direct relationship between state and local revenues and expenditures. State revenues and expenditures recovered between FY 2010 and FY 2011, but still remain 6 percent below FY 2008 (see Figure 2). Experts predict persistently poor state and local conditions, especially now that federal assistance funds from the American Recovery and Reinvestment Act of 2009 are nearly finished. In this fiscal climate, state and local budgetary actions can significantly reduce capacity to address increasing homelessness.

Public cash assistance is a vital safety net that keeps many poor families from experiencing homelessness. Despite the increased need, 24 states plus Washington, DC made cuts to public assistance programs (such as TANF) in FY 2010 and FY 2011. Additionally, public sector jobs, including those of education workers, safety and protective service workers, and health workers, provide the only source of stable income to many families.

Significantly, major cuts to public sector jobs (over 400,000 public sector jobs were cut between August 2008 and early 2011) have led to higher unemployment and diminished wages. In fact, in FY 2010 and FY 2011, 34 states used public sector job reduction strategies to reduce or eliminate budget gaps.7 Loss of income and jobs can strain personal financial safety nets and force people into living in precarious doubled up household situations, or into shelters. These budgetary actions increase vulnerability among people and put them at risk of experiencing homelessness.

Elevated Vulnerability among States Where People are Already at Increased Risk of Homelessness
Research indicates there are a number of economic and demographic factors that relate to homelessness, including unemployment, housing cost burden, foreclosure, lack of health insurance, and people doubling up for financial reasons. In previous research, HRI calculated the state rate for each of the five economic and demographic factors above and identified states where people are at increased risk due to the existence of multiple risk factors in their states. Approximately half of all states fit this definition of increased risk of homelessness.

In order to better understand the relationship between state and local budgets and homelessness, analysis was conducted on the intersection between rates of homelessness, multiple risk factors for increasing homelessness, and cuts to public sector jobs and public assistance.

For this analysis, a state is considered to have an elevated level of vulnerability if it has a homelessness rate higher than the national rate, multiple risk factors for increasing homelessness, and cuts to either public sector jobs or public assistance. Analysis identified nine states with an elevated level of vulnerability: Arizona, California, Colorado, Florida, Louisiana, Michigan, Nevada, Oregon, and Washington, DC.

Among these nine states, a state is considered to have the highest level of vulnerability if it made cuts to both public sector jobs and public assistance. There are four such states: Arizona, Louisiana, Oregon, and Washington, DC (See Figure 3). While the recessionary economy has increased vulnerability in all states, analysis shows these states are most vulnerable. All states, however, need to ensure that budget mechanisms are in place during such economic downturns to counter the cyclical nature of the economy so that vulnerability can best be contained.

The circumstances surrounding the fiscal health of state and local governments present policymakers with difficult decisions to make for FY 2012 and, soon, difficult decisions to make in FY 2013. While federal funding levels have risen, this has occurred in the face of decreased funding at the state and local levels. At the same time there has been an increase in the number of people in need of homeless assistance.

This dynamic where homeless assistance programs are seeing an increase in demand at the same time that capacity is decreasing presents a real challenge to federal, state, and local efforts for ending homelessness. Many of the states and localities that have passed FY 2012 budgets will also face mid-year budgetary decisions in FY 2012.

During these budgetary decisions, policymakers must balance the budgetary pressure realities with the necessity to keep the people in their communities from experiencing additional vulnerability and from increasing risk of homelessness. To prevent additional vulnerability and minimize risk of homelessness in their jurisdictions, policymakers should be cautious with budget decisions that affect public assistance and public sector jobs, and policymakers should avoid cuts to homeless assistance programs.