Nevada for four years failed to block nearly $1 million in welfare cash withdrawals at casinos, liquor stores and strip clubs.
State officials say they are working to comply with a 2012 federal law banning such transactions at automated teller machines, but they also violated Nevada's own plan to stop abuses.
An AMI Newswire analysis of a state welfare database found that since the federal law was enacted, Nevada welfare recipients accessed at least $890,000 in cash benefits at prohibited locations.
Silver State welfare recipients withdrew cash in some splashy places: $11,640 at Lucky Liquors in Reno; $9,560 at prominent Vegas casinos including Aria, Circus Circus, Mandalay Bay and MGM; and $2,740 at Nevada strip bars.
Nevada officials blamed federal foot-dragging and unexpected delays. Federal rules stemming from the 2012 law weren’t finalized until early this year, and Nevada's welfare agency was slow to hire a contractor that could block ATMs at prohibited locations from accepting Electronic Benefits Transfer (EBT) cards.
“Two and half years after Congress passed the law, we were negotiating a contract to block the machines,” said Nevada Department of Health and Human Services welfare administrator Steve Fisher.
The state database, which withholds recipient names, also shows Nevada WIC EBT card-holders accessed benefits in most U.S. states and territories, including expensive destinations such as Hawaii, Guam, and Puerto Rico. Out-of-state withdrawals generally are not illegal unless they are made at prohibited establishments.
Roughly 28,000 Nevada residents are eligible for approximately $20 million a year in cash benefits under the federal Temporary Assistance for Needy Families program, state figures show.
The federal Middle Class Tax Relief and Job Creation Act of 2012 mandates that states “prevent unauthorized spending of benefits” in casinos, liquor stores and venues where “performers disrobe.”
Despite knowing about the ATM withdrawals at prohibited locations for years, Nevada human services officials did not go after recipients who accessed taxpayer cash there. And the law does not require the establishments themselves to police ATM usage.
Businesses where welfare card-holders have withdrawn cash benefits say they don’t have the resources to stop the abuses.
"We wouldn’t accept the cards, but they could go to the ATM and it’s impossible to monitor,” said Brian Minter, who co-owns Vegas’s OG’s Gentleman’s Club – one of the strip bars with welfare withdrawals. “I owned low-income hotels, and I know how terrible the system is, and what they spend their money on.”
Between 2011 and 2014, records show, welfare recipients made three $100 and two $40 withdrawals at the Olympic Garden, which is what the club was called before Minter bought it nine months ago.
In Nevada, a three-person household is eligible for a maximum cash benefit of $383 a month based on income. Recipients can also receive so-called food stamps, limited to approved food items, and other benefits like Medicaid.
The banned withdrawals, typically with hefty surcharges, seem a terrible deal not just for taxpayers but the recipients themselves.
The ATM at Minter’s strip bar charges a 10 percent fee and customers have to agree to a two-drink minimum to access the cash machine area. Other strip bars where Nevada welfare recipients accessed cash have fees as high as 15 percent.
Nevada officials said withdrawals at prohibited locations aren’t a significant problem, pointing out that less than 2 percent of Nevada’s welfare cash benefits, which totaled $108.9 million between 2011 and 2015, were withdrawn at such businesses.
Nevada's banned-withdrawal percentage is higher than that of nearby Colorado, which had less than 1 percent of cash benefits withdrawn from prohibited locations, though Colorado’s total was larger because of a large population. After news stories revealed the prohibited withdrawals in Colorado, lawmakers passed a law requiring welfare officials to stop the transactions.
Many such withdrawals are by recipients working in those locations, said Miki Allard, executive staff specialist at the Nevada Welfare Division.
“We have people who work in casinos and strip clubs and they may take that money out to pay their babysitters,” Allard told AMI Newswire. “There’s no proof the money is being misused.”
The 2012 federal law provides for a 5 percent reduction in grants to states under the Temporary Assistance to Needy Families program if they fail to report the steps they’re taking to block prohibited ATM withdrawals within two years of the law’s passage.
All states complied, with Nevada officials saying it would review welfare transactions quarterly for prohibited locations and send out warning letters to violators.
But the state never acted on that plan, Allard said, switching gears when the state determined it could block the ATMs.
Missouri and other states, with fewer banned location than Nevada, nevertheless acted more quickly to rein in abuses.
“Beginning January 15, 2014, the Family Support Division (FSD) began blocking transactions at prohibited locations,” wrote Sarah Madden, an attorney for the Missouri Department of Social Services. “If a transaction occurs at a prohibited location, the customer will be required to pay back the amount of the purchase.”
Missouri also checks welfare transactions, and if staff members find individuals repeatedly misusing the cards, a different person, or protective payee, is selected to control the money and make purchases for children involved, Madden wrote.
Nevada had a five-year contract with JP Morgan to manage its welfare cards when the 2012 law was passed, said Fisher, the Nevada welfare administrator. That company could not block prohibited withdrawals without modifying individual ATMs, and it was unclear whether the state could have voided the contract to comply with federal law.
In January 2014, JP Morgan decided to get out of the business when the state contracts expired, a company spokeswoman wrote in an email. She declined comment on the Nevada contract.
Nevada then hired a new contractor, FIS.
There is no foolproof way to prevent the sale of an EBT card, Allard said, so there’s a chance some of the prohibited withdrawals were not by the intended recipients. The state monitors the cards for fraudulent activity.
None of the state lawmakers on health and human service committees contacted by American Media Institute returned calls seeking comment.
The Nevada Welfare Division has researched some of the out-of-state withdrawals and found “plausible” reasons for the travel, such as a death in the family, Allard said.
“We have found no evidence to support the idea that welfare recipients are living ‘high on the hog’ on welfare benefits,” Allard wrote in an email exchange.
Casinos often have restaurants, said David Turner, a Reno accountant who chairs the Nevada Taxpayers Association, so the federal law might have been too broad.
“I think it’s good to regulate anyone on welfare,” Turner said. “But too often, I see government regulate with a sledge hammer.”
But Nevada officials wouldn’t be playing down the magnitude of the problem if it affected their own bottom line, said Pete Sepp, president of the National Taxpayers Union.
“Next year, when budget time comes around, would they object to a less than 2 percent reduction in their budget?” Sepp said. “If it’s not that big a deal, they can live with the reduction in funding.”