The “Preemption Problem” – How TANF Blocking Could Get Out of Hand

It’s been about 15 months since Congress passed a bill that included a requirement that welfare cash assistance (TANF) be blocked at ATMs and point-of-sale devices located in liquor stores, casinos and adult entertainment establishments. The law specified that states submit TANF blocking plans to the federal government by 2014 or be subject to reductions in the program’s block grant assistance.

Last April, the U.S. Department of Health and Human Services sought public to understand the challenges states and vendors may have implementing these plans. EFTA wrote DHHS and the Office of Family Assistance in June. HHS has yet to publish any final rule.

Congress did not invent the TANF blocking idea. As in most cases of federal law making, Congress adopted the approach taken in some states (California notably here). Congress must decide during the legislative process whether to preempt the states from passing stronger (and in many cases different) laws than the federal standard. It’s not the chicken and egg debate, but more of a the ceiling and floor debate. With apologies to Bard William Shakespeare, to preempt or not to preempt, that is the question. In the case of TANF blocking, Congress opted to preempt current and future states laws on TANF blocking. Thus, we have a floor and not a ceiling.

Many state legislatures were already well into their respective sessions when the TANF blocking law was enacted last year. So, state legislative action on TANF blocking was light in 2012 at best. However, 2013 has been a different story. State legislatures have had time to prepare for the issue and may have viewed enacted legislation as an important step in certifying to HHS that a TANF blocking plan indeed does exist. That’s all well and good. But, Houston, we are beginning to see a problem.

Certain states have proposed to expand the scope of the current federal law. This makes compliance and operational execution more and difficult and costly for companies who contract with states to deliver Electronic Benefit Transfer (EBT) cards services. Let’s take the case of Indiana. Last year, Indiana passed a law merely requiring signage at ATMs and POS terminals that cash assistance could be not be drawn at the following locations: liquor stores, race tracks, off-track betting sites, casinos, gun stores, nightclubs, bars and bingo halls.

Just recently, Gov. Mike Pence signed into law a bill requiring ATM and POS owners, vendors and third party processors to disable access to EBT benefits at these venues or suffer stiffen penalties (possibly even criminal penalties). To make matters more difficult, the Indiana law is giving a very short (and impossible) timeframe to comply with the law (July 1, 2013). One state greatly expanded the scope the banned locales, imposed harsher penalties and gave an impossible compliance timeframe. One state down and 49 more to go.

I’m not predicting Armageddon here. I’m not suggesting that limiting access to public assistance funds at certain locations isn’t a worthy debate. Legislators and businesses providing EBT services to states serving needy individuals need to be active dialogue on what works best and is most cost-effective. Complying with a patch-quilt of state laws is never easy. There’s a solution out there and it’s not in arbitrary deadlines and stiff penalties.