The Shriver Brief : Poverty Law Commentary & Insights : Sargent Shriver National Center on Poverty Law : Affordable Housing, Healthcare Reform

Today, across the country, a battle rages on—there are those who would use the budget crisis to attack on our values of economic security and opportunity for all. Make no mistake about it, the attack on public sector unions in Wisconsin, New Hampshire, Ohio, Indiana, and many other states across this country is an attack on the middle class—on decent wages, benefits, safe working conditions, and retirement security. The recession has already taken a serious toll on working Americans, with 1.5 million Americans joining the ranks of low-income working families in 2009 alone. Far too many hard-working American families are not able to earn enough money to achieve economic security.

In this time of a fragile economic recovery, where workers have not seen much benefit from the large productivity gains since the end of the recession, we must work together to strengthen the middle class and the American Dream. Instead, some in Congress are seeking to roll back the historic achievement of healthcare reform, and lawmakers in many states are training their sites on ending collective bargaining. Attacking unions is not supported by most Americans, won’t fix state balance sheets, and will undermine the ability of hard-working Americans to achieve economic security. Public sector union members are not overpaid, and are in fact now mostly women, who are increasingly filling the role of the sole breadwinner for their families.

We stand this week in remembrance of Dr. Martin Luther King, Jr., who was assassinated on April 4, 1968. At the time of his death, he was leading the fight for economic human rights—lending his voice and leadership to the Memphis sanitation workers, who sought the right to bargain collectively. Dr. King spent the last years of his life, including his critical year in Chicago in 1966, asserting a broad platform of fundamental human rights: the right to safe housing, the right to work for fair pay, the right to vote, the freedom to bargain, and affordable education to enable individuals to grasp the American Dream.

As we remember his brave legacy, we take on the challenge to strengthen what Dr. King fought for, and what the folks in Wisconsin continue to fight for. This week individuals, organizations, and churches will stand in solidarity with the working people in states where politicians threaten the economic human rights that Dr. King championed.

Please join us. You can find local events in your area here, starting with worship services this weekend, and then events throughout the coming week. In Chicago there will be a rally in Daley Plaza (50 W. Washington) in solidarity with those in Wisconsin on April 9 at 1:00 p.m., starting with a march to the plaza at 12:00 p.m., from the Hyatt Regency Hotel, 151 E. Wacker.

Let’s stand together as one to fight for the whole platform of human rights that Dr. King lived for, and died for.

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Recently, credit conditions have sparked interest in the concept of state-owned banks. The only state-owned bank in the nation, the Bank of North Dakota or BND, was created almost 100 years ago. But the idea is just now catching on. So far in 2011, Oregon, Washington, and Maryland have introduced bills to allow state-owned banks, joining Illinois, Virginia, Massachusetts and Hawaii, each of which introduced such legislation last year.

Most state and municipal governments have assets in rainy day funds earning interest in Wall Street banks. They also borrow from Wall Street at high interest rates when necessary. In contrast, BND, as the depository for all state tax collections and fees, allows the State of North Dakota to leverage its own funds to finance its operations. In addition to providing interest-free government financing, BND invests strategically in areas that commercial banks avoid, earning a return for the state’s general fund while financing projects believed to be crucial to the state’s economic development. It also acts as a bankers’ bank, providing check-clearing and liquidity services for commercial banks in the state. Instead of being insured by the Federal Deposit Insurance Corporation (FDIC), deposits are guaranteed by the general fund of the State of North Dakota itself and the state’s taxpayers. 

There is a fine line between competing and partnering with private banks. States considering opening state-owned banks would have to wrestle their state funds, which have already been deposited in commercial financial institutions, away from the private sector to capitalize the new state-owned bank. To avoid crowding out the private banking sector, BND was designed to partner with commercial institutions rather than compete with them. For example, BND partners with commercial banks by guaranteeing student loans, business development loans, and local bonds. Loans are typically initiated by a local bank, and BND’s role is to share the risk of the loan and buy down the commercial bank’s interest rate. So far, these types of partnerships have been very successful. According to the Public Banking Institute, North Dakota has more community banks per capita than any other state, suggesting that the presence of a state-owned bank could actually help local community banks. Through such risk-sharing arrangements with the state’s bank, community banks can compete with large multi-state banks.

In hopes of securing affordable financing, small business owners have responded positively to the establishment of state-owned banks similar to BND. According to the Seattle Times, 79% of business owners surveyed by the Main Street Alliance of Washington supported Washington’s bill to allow state-owned banks. In fact, over 35% of the businesses surveyed said they could create additional jobs if their credit needs were met.

Considering North Dakota’s economic performance, especially in recent years, it’s easy to see why other states are thinking about opening state-run banks. Last year, North Dakota boasted the lowest unemployment rate in the country, at 3.8% according to the Bureau of Labor Statistics, and the lowest default rate in the country according to the Public Banking Institute. Since 2000, North Dakota’s economy has grown 56%, over 15% faster than the Gross National Product as a whole. While North Dakota’s relative prosperity cannot be linked either directly or only to BND’s impact, there is something to be said about investing taxpayer money in the public good. Unlike commercial banks whose top priority is to maximize shareholder returns, a state-owned bank can concentrate on financing those endeavors that maximize the returns gained by society as a whole. In this era of justified resentment and hostility toward big banks, state-owned banks may be another part of reforming the U.S.’s financial system.

Melanie Jacobs co-authored this blog post.

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On Thursday, March 10^th, Governor Pat Quinn signed the Illinois internet tax law (Public Act 096-1544) which will take effect immediately. This controversial law, which requires online retailers that work with affiliates in the state to collect sales tax on purchases made by Illinois residents and businesses, has been drawing heated debate across America.

A series of U.S. Supreme Court decisions starting in the late 1960s relating to catalog and mail order companies—National Bellas Hess Inc. v. Department of Revenue of Illinois, 386 U.S. 753 (1967) and Quill Corp. v. North Dakota, 504 U.S. 298 (1992)—have precluded states’ internet taxing authority. According to these cases, collecting different state and local sales taxes was too complex, placed an undue burden on catalog and mail order companies, and was an unreasonable restriction on interstate commerce in violation of the Commerce Clause. The Supreme Court therefore held that only states in which a company has a nexus, i.e., the physical presence of retail outlets or distribution centers, can be required to collect sales taxes.

Technology has since made computing sales tax effortless, and so the justification for the Court’s original ruling is gone. In fact, two other Supreme Court decisions—Scripto Inc. v. Carson, 362 U.S. 207 (1960) and Tyler Pipe v. Washington Department of Revenue, 438 U.S. 232 (1987)—have held that an out-of-state seller is deemed to have a nexus through a physical presence in a state if it uses in-state third parties to help establish a market for its goods within the state.

Modeled after a 2008 New York law, the new Illinois law expands the meaning of “physical presence” beyond a warehouse, factory, or office to include marketing or affiliate companies and website operators who earn commissions for guiding consumers to online stores. Since it has long been established that states can require out-of-state sellers to collect sales taxes if they use independent, commission-based representatives to solicit business within the state, New York’s—and now Illinois’s—laws deem a retailer to have a physical presence within the state when it has independent affiliate websites promoting sales on its behalf within the state. Such affiliates place links on their websites to the retailer’s site and receive a commission when someone follows the link and buys something from the retailer.

As states continue to struggle with the effects of the recession, many are exploring options to increase revenue through internet sales tax laws. The Illinois Department of Revenue estimates that it loses between $153 and $170 million in revenue from uncollected internet sales tax. Nationwide, uncollected online sales taxes reached $8.6 billion in 2010. Legislators in at least seven other states introduced similar bills last year, and legislation passed in North Carolina and Rhode Island, but California’s, Hawaii’s, Connecticut’s and Minnesota’s bills were vetoed by their governors.

Amazon currently collects sales tax in New York—but has a lawsuit against the constitutionality of New York’s 2008 legislation—and in Washington, where it is headquartered, and Kansas, Kentucky, and North Dakota, where it has warehouses. Thus far, Amazon’s legal challenge has been unsuccessful, but regardless of its success Amazon may be on its way out of dominance as it continues to build warehouse and fulfillment centers in more locations. Texas’ Comptroller, for instance, recently sent Amazon a $269 million bill equal to four years of sales taxes to Amazon because it has a warehouse in Texas.

In response to the passage of the new Illinois legislation, Amazon notified its Illinois affiliates that it will terminate its contracts with them and stop paying advertising fees to Illinois residents who refer customers to Amazon.com, Endless.com, or SmallParts.com on April 15^th. Overstock also notified its Illinois affiliates that it will cut ties with them as of May 1^st unless the law is repealed or the affiliates move to another state without a similar law. Amazon has also threatened to cancel its 10,000 affiliate contracts in California if California’s third legislative effort in three years to pass legislation (AB 153) is successful. In the meantime, Wal-Mart, Sears, Best Buy and Barnes & Noble have issued public invitations to the any affected affiliates to join their affiliate programs instead, and the Alliance for Main Street Fairness, a brick-and-mortar retailers’ organization, has created a new website to connect terminated affiliates with retailers who already collect online sales taxes.

Amazon’s termination of its Illinois affiliates does not have much impact on Illinois consumers. They can continue to buy directly from Amazon or through affiliate websites despite the fact that Amazon will not be collecting the sales tax. Technically, however, under Illinois’s Use Tax Act customers have always been, and will continue to be, required to pay sales tax whether or not the retailer collects it. Moreover, Illinois recently implemented an amnesty program allowing customers to pay sales and use taxes on past online purchases, between June 30^th, 2004, and December 31^st, 2010, without penalty. Under the amnesty program, which lasts until October 15^th, consumers can pay this tax as part of their Illinois Form IL-1040 income tax.

Read the Shriver Center’s previous blog on the Amazon tax law for more information.

This blog post was coauthored by Ji Won Kim.

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America’s health care law, the Affordable Care Act, turns one year old on March 23^rd. That’s good news for Illinois’s four-year-olds—and forty-four-year-olds, and lots of other Illinoisans too. That’s because the law imposes consumer protections on the hugely unregulated health insurance industry, and promises to cover over half of the uninsured by allowing states to create insurance marketplaces that provide transparent, comprehensive, affordable health plan choices, makes federal subsidies available to ensure middle-class families won’t break the bank to pay for their plans, and expands Medicaid to low-income adults.

Illinois’s leaders have worked hard to build a track record of success on access to health insurance coverage. Democrats and Republicans have put partisan politics aside and worked together to reform Medicaid and to enact consumer protections in the private insurance industry, such as dependent care coverage for young adults. Now it’s time for our leaders in Springfield to again make some critical decisions—this time about how the Affordable Care Act works in Illinois. And we all have a role in ensuring that the law works for Illinois’s families and individuals.

The Affordable Care Act has already delivered important wins for Illinois’s residents. Illinoisans diagnosed with cancer or other serious conditions can no longer be denied care because of annual or lifetime insurance limits and insurers cannot deny coverage outright for children. Parents can keep their college-age children on their family health insurance policies. And Illinoisans with private insurance can get the screenings and check-ups they need to stay healthy, without the out-of-pocket costs that encourage fix-it care instead of health care.

And the Affordable Care Act can deliver even bigger wins for Illinois in the coming years. It authorizes new insurance marketplaces or “exchanges,” to make private insurance work better. Exchange subsidies can make care more affordable for middle-class families. The law authorizes improvements to Medicaid that can make health care a reality hundreds of thousands more Illinoisans who are uninsured today.

But these gains for Illinois’s families and individuals are not automatic. Our leaders in Springfield will make decisions over the next few years that will have consequences for decades to come. They will decide whether Illinois’s exchange provides adequate access to health care for patients, families, and employers in Illinois in a manner that is in the best interest of such individuals, and they’ll decide whether the exchange offers coverage parents can afford.

They’ll decide whether insurance consumer protections actually work and whether Medicaid reaches more uninsured Illinoisans, or whether these individuals will be left behind. And they’ll make dozens of other decisions that will determine how—or even if—the Affordable Care Act works for Illinois.

Every Illinois resident who cares about access to health care can help our leaders in Springfield make the right choices. Policymakers need to hear that it’s time to embrace Illinois’s long-standing tradition of putting access to health care ahead of partisan politics. They need to hear that the cost of failure is too high. They need to hear that they must keep implementation moving forward, and that making the right choices for Illinoisans is the best way to define success.

The Affordable Care Act’s first birthday is the perfect time to send a strong message to Illinois’s leaders. If we get off the sidelines and into the game today, Illinois will be the big winner.

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Workforce development programs are an important part of the nation’s economic recovery and job creation efforts—working with employers to train workers for existing and emerging high-demand jobs. Yet the U.S. House of Representatives recently passed the House Fiscal Year 2011 Continuing Appropriations bill, HR 1, which completely zeros out all funding for Workforce Investment Act (WIA) Adult, Dislocated Worker and Youth state and local employment and training programs, a cut of over $3.6 billion for the coming year (beginning this July). Other programs targeted for deep cuts or elimination include Perkins Career and Technical Education, YouthBuild, Job Corps, green jobs training, reintegration of ex-offenders, and Community Service Employment for Older Americans. HR 1 is now being considered by the Senate. During the week of March 21, members of both the House of Representatives and Senate are scheduled to be home for a District Work Period. Thursday, March 24^th has been identified as “Workforce Day of Action,” to ensure all Members of Congress and their staff are made aware of the importance of the nation’s workforce development system. Employers, workers, educators, providers, and others who understand the value of these programs must join together in this effort.

Nearly 14 million Americans remain unemployed as of February, with over 40 percent unemployed for six months or longer. As of January, more than 633,000 Illinoisans are out of work. Many are unable to return to their prior jobs because those occupations no longer exist; unfortunately, these workers and many others lack the skills and education needed for today’s 21^st century economy.

The workforce development system has faced unprecedented challenges in recent years as demand for education and training skyrocketed during the recession. Over the past program year, the WIA system served over 8.4 million jobseekers in the U.S. and helped 4.3 million gain employment. In Illinois, 173,109 jobseekers were served by the WIA system in the past program year. Since the beginning of the recession in 2007, WIA participation rates in Illinois have increased 25.1% for adults and 24.6% for youth who are seeking employment, education, training and work experience (percent increase calculated from the PY 2007 DCEO IL Workforce Development Annual Report and the PY 2009 DCEO IL Workforce Development Annual Report). Despite funding remaining stagnant at 2008 levels, nationwide WIA participation rates increased 234 percent. 

If HR 1 becomes law, the cuts will result in:

• Closing of 3,000 One-Stop Centers that serve millions of jobseekers in need of career guidance, training, and employment services.
• 276,000 youth will lose access to employment, education, training, and work experiences under WIA youth programs (over 13,000 youth in Illinois); more than 7,000 low-income young people will lose access to services under YouthBuild; 10,000 more will lose access to services under Job Corps.
• Over 14 million students enrolled in school-based career and technical education programs supported by Perkins will see services and opportunities cut or even eliminated.
• As many as 50,000 low-income seniors will be denied part-time community-service jobs under the elimination of the Community Service Employment for Older Americans program.
• And veterans who receive priority services under WIA will have to find other sites to get the help they need to successfully transition to civilian jobs.

This national effort is led by the National Skills Coalition and others. To prepare for a meeting or site visit with Members of Congress, read the National Skills Coalition’s Workforce Day of Action: How to Prepare memo for more specific information.

The nation’s workforce investment system has played a vitally important role in helping Illinois’ and America’s workers find new jobs or to get the training they need to make career changes in a very tough economy. Today, more than ever, federal policy must support investment in the skills of the American workforce to help support the nation’s economic recovery and job creation efforts. Reducing our investment in workforce development, basic skills and postsecondary education will have an immediate impact on jobseekers looking to increase their skills for available jobs, and on employers seeking skilled workers.

Now is not the time to eliminate the nation’s primary system for getting people back to work. Tell your Members of Congress where you stand on workforce development cuts. Click here to contact your Illinois Senators at their district office. Click here to contact your Illinois Representative at their district office.

For more information, contact Wendy Pollack, Director of the Women’s Law & Policy Project.

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Part 2: The President's 2012 Budget 

In addition to the continuing continuing resolutions being passed by Congress, policymakers are now turning their attention to the 2012 budget. The House is expected to release a proposal soon. And the President has released his proposal for the fiscal year 2012 budget.You can check out the White House proposal in a visual format with the New York Times’ interactive budget graphic, and find highlights and analysis in our prior blogpost. Without careful analysis and a balanced approach, deficit-reduction efforts could have unintended and unwanted consequences. The economic recovery, our nation’s fiscal health, and the well being and economic security of American families all rest in the balance. In a recent post, we laid out four principles that should guide our budget cutting. Briefly, they are:

• Evenly Balance Spending Cuts and New Revenues; Austerity Is Not the Answer
• Evenly Balance Defense and Non-Defense Discretionary Spending
  
• Avoid Making Low- and Moderate-Income Households Worse-Off
  
• Make Wise Investments in the Future--to Ensure the Economic Recovery and Economic Security for All Americans
  

 Here’s how the President’s proposed budget stacks up by our principles:

Currently, the President’s 2012 proposal is to reduce the deficit with two-thirds cuts, and one-third new revenue. The budget should go further to eliminate inefficient corporate tax loopholes and governmental subsidies. By increasing revenue in responsible ways, we will reduce the need to make drastic and unwise cuts, such as the President’s proposal to slash the Low Income Home Energy Assistance Program. And the budget must share the burden of cuts more equitably. Currently, the budget calls for zero real growth in military spending, but that’s only a 5% reduction from the 2011 request.

Wisely, the President’s budget invests in our future in several ways. It increases funding for K-12 education, provides short-term spending on surface transportation that will create jobs, and long-term investments in innovative technologies and policies that will sustain our recovery. Additionally, the Obama Administration has proposed a $100 million dollar “Pay for Success Bond” program in his fiscal year 2012 budget. If carefully implemented, social impact bonds are a promising development. This funding mechanism allows the funder (which could be private foundations or the government) to pay for innovative social service provision entirely or largely based on whether the providing organization meets agreed-upon performance measures. That spurs effective, efficient programs, and ensures that those programs that don’t work end. 

We need to make cuts to control the federal deficit, but doing so blindly will cost jobs and destabilize the fragile economic recovery. Austerity is not the answer. We must be fiscally responsible and still fulfill our responsibility to the most vulnerable in our society. By investing in education and training and funding innovation, we will have a stronger economy. A stronger economy will increase tax revenues in the future and help balance the budget, while strengthening the middle class and helping Americans make ends meet and pursue the American Dream.

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Poverty law advocates face unique ethics questions. Sometimes these questions are on the front burner; sometimes ethics issues recede as attorneys face the daily crises of keeping people housed, helping clients get orders of protection, or assisting in applications for unemployment insurance benefits. But the ethics questions never go away entirely, and the traditional resources available to resolve the questions often don’t seem entirely relevant. In fact, these resources can seem like they’re written for advocates in a parallel universe.

In 2011 the editorial team at Clearinghouse Review: Journal of Poverty Law and Policy hopes to help advocates find their way through the ethics thicket with contributions in print or online from experienced poverty lawyers who’ve grappled with the myriad ethics issues that arise in representing low-income clients. As part of our regular outreach to readers, Clearinghouse Review conducted an online survey December 2010–February 2011, to find out which ethics questions advocates encounter in their daily work.

We asked seven questions about the ethics issue that readers encounter every day. Those of you who responded said that in day-to-day practice ethics questions most often arose out of “conflict of interest” issues and in determining case strategy when client competence was an issue. The most prevalent conflicts of interest were those between program clients and those between family members. Slightly more than half of respondents stated that they faced unresolved ethical quandaries in their practice, while slightly less than half did not. Two-thirds answering the survey found that the Rules of Professional Responsibility were inadequate in addressing their particular needs, citing the failure to address conflict of interest questions when representation is of limited scope, when the respondent’s legal aid organization is the only recourse for the prospective client, and when the client has competency issues. The substantive areas in which ethical questions arose most often were family law, estate planning and probate, and also housing law.

Survey Responses

A. Ethics Questions Faced. We asked survey respondents to choose from six categories (including “other”) in answering the following question:  “What ethics questions do you see in your practice?”

• 80% chose conflict of interest, with slightly more of those conflicts occurring among program clients (62%) than among family members (58%).
• 69% found “client determination of case strategy when competence is in question” to be an issue.
• 58.3% encountered lack of truthfulness by clients or witnesses in documents or before a tribunal.
• 51.5% found supervisions of lawyers who are less experience, paralegals and nonlawyers to pose ethics issues.
• 18% chose “other” ethical questions.

Respondents who chose “other” ethical questions were asked to specify those ethical quandaries. Many elaborated upon the number one concern cited above—conflict of interest—and cited the difficulty in determining whether to accept a case in the face of a possible conflict when the legal aid organization was the only recourse for the prospective client. Other ethical questions included whether providing information or helpline advice created an attorney-client relationship, and how to interpret rules governing ghostwriting pleadings. Survey respondents also commented on client competency (second in popularity above). Those who commented found that client incompetency—whether arising from mental illness, dementia, Alzheimer’s or something else—was an issue in signing retainers, determining case strategy, or that it often was a source of conflict within families. Also cited were communications with pro se opponents, reporting abusive behavior by attorneys towards indigent clients, and client action that might be illegal.

B. Conflict of Interest. Participants were asked to choose from two categories and “other” in answering: What types of conflict of interest do you see?

• 76% of readers chose conflict of interest among family members.
• 78% of readers chose conflict interest among program clients.
• Close to 10% chose “other” types of conflict of interest.

Readers choosing “other” types of conflict of interest listed conflicts between tenants, facility residents, and co-counseling legal aid organizations. Also cited were conflicts between legal aid organizations and pro bono conflicts panels that have prohibited the legal aid organization from providing legal assistance, but whose volunteer attorneys seek that organization’s help anyway. Conflict among coworkers was also listed as causing ethics questions.

C. Unresolved Ethical Quandaries. Participants were asked the open-ended questions of: Does your program face unresolved ethical quandaries?

Respondents were close to evenly divided on this question:

• 51% said Yes
• 49% said No.

Respondents who said that their program faces unresolved ethical quandaries were asked to be specific. Many  had questions about conflicts of interest between past clients and prospective clients and whether limited-scope representation was enough to create a conflict. Should legal service providers who are the sole resource in the area turn away clients because of conflict of interest concerns? If former clients do present conflict questions, does that mean recurring issues will always be resolved in former clients’ favor? Specific issues cited were:

• Conflicts when an organization has provided limited representation (such as phone information or advice, help with forms) to one client and another client seeking full representation has divergent interests. What are the duties to former clients? Does limited representation create a potential conflict? How long does a past client present a potential conflict?
• Conflicts when an organization has given full representation to a past client and needs to take on a client with opposing interests. What are duties to former clients? This was seen as particularly troubling in family law cases, especially when representing spouses. This was a problem in domestic violence cases as well as in cases where one spouse is represented on a limited issue, such as a consumer issue, and the other spouse seeks representation for a divorce. Other examples were co-tenant family members seeking to evict each other.
• Who is the client when the legal service organization is representing a minor—the parents or the minor?
• When representing clients who are deemed incompetent or have mental health issues, when, if ever, is it okay to make decisions for them? Should you have them sign a retainer? What happens when the client’s family members squabble over the course of action?
• What is the duty of organizations that provide the sole resource in area and are pressured to take all cases?
• What are the requirements in building firewalls?
• How do you balance quantity of case load versus quality of representation?

D. Participants were asked “Do the Rules of Professional Responsibility address the ethical questions that arise in your practice”?

• Two-thirds said Yes
• One-third said No.

Those who answered “no” were asked what changes should be made and to identify additional issues the Rules should address.

1.      Regarding changes, a few respondentscommented that the Rules are ambiguous; one person commented that the rules should not allow different legal services offices to give advice to both parties in a case.

2.      Regarding additional issues that the Rules should address, survey respondents commented that the Rules:

• Do not address issues that arise in the civil legal aid area, in particular that clients may have no alternative to the legal aid organization from which they are seeking representation.
• Do not address high-volume, limited-resource legal aid providers.
• Do not define the term “client.” Many legal aid organizations provide limited representation through hotlines and clinics and online pleadings. Does this limited representation create a potential conflict?
• Do not address issues in which the client has mental health issues, is incompetent due to illness such as dementia or Alzheimer’s, or has a substance addiction. When is it appropriate to get a retainer? Who determines case strategy? What happens when the client is uncooperative? What happens if family members disagree with case strategy?

E. Finally, practitioners were asked “In what substantive areas of your program’s practice do the most ethics questions arise.” Many of those responding mentioned multiple areas of law in which ethics questions arise.

·         Almost half of those surveyed listed family law as an area in which most ethics questions arose. This includes domestic violence as it was sometimes included within family law.

·         Over one-third of those surveyed chose housing law (including landlord/tenant issues, family conflict over housing).

Other areas identified were public benefits/welfare, mental health, incompetency (including third parties calling on “behalf” of a client), and working with persons with disabilities. The following issues were each chosen by one or two respondents: consumer, immigration, medical assistance, education, untruthful clients, torts, tax, and disaster assistance.

F. Respondents were asked to give information about themselves. Thirty-two respondents did so. Of the thirty-two that responded about equal numbers (7) hailed from the Northeast, Midwest and South. Four were from the Northwest and four from California. Twenty-three of twenty-five respondents were LSC-funded organizations.

What’s your experience with ethical quandaries? Does your program have a process for resolving them? We welcome your comments and questions, which will inform our editorial process and help us to develop useful content for future issues of Clearinghouse Review.

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While political pundits reminisce about the month-long government shutdown of 1995-96 as the current budget battle takes place, I can only think of a political cartoon from that time. In December 1995, my local paper ran a political cartoon depicting two homeless men huddled together in front of a fire on a blustery winter day. In that cartoon, a member of Congress walks by and proclaims, “What a relief! For a minute I thought you were burning a flag!” That more than 15-year-old symbol of Congressional disconnect from the real-life challenges facing low-income people still rings true today. As our national poverty rate among children is set to hit a record 25%, the U.S. House of Representatives proposes to cut $61 billion from the FY 2011 budget, representing the largest cut to domestic spending programs in U.S. history.

Among hundreds of programs that help low-income households, H.R. 1 proposes deep cuts to housing programs that prevent homelessness and provide stability to low-income households. H.R. 1 proposes to cut $5.4 billion from domestic housing programs, which could mean fewer available rental vouchers (which help families rent housing in the private market), the loss of 10,000 vouchers for homeless veterans, almost a 70% cut to programs providing affordable housing for the elderly and disabled, a $1.1 billion cut to capital money needed to repair and maintain public housing, and the loss of HOME dollars, which enable local governments to meet local affordable housing needs.

These deep cuts to critical housing programs come at the same time the U.S. Department of Housing and Urban Development released a report, finding that “worst case housing needs” grew by 1.2 million households, or more than 20%, from 2007 to 2009. “Worst case housing needs” are defined as low-income households who pay more than half their monthly income for rent, live in severely substandard housing, or both.

To avoid a government shutdown, the House and Senate must figure out how to fund the remainder of FY 2011 by March 18, 2011. Given the hard lines being taken in this budget battle, more proposed cuts are expected to domestic spending programs, including housing. Campaign rhetoric cannot ignore everyday people and children, who rely upon this Congress and President to protect them from deep poverty and homelessness. In the end, domestic spending cuts that eliminate critical housing programs will not save us money—they will cost us money. Research has shown that homelessness costs us more than paying for programs that prevent/address it. Indeed, a recently published study found that the cost of family homeless programs far is nearly double the cost of the nation’s rental assistance programs. These housing programs deliver real assistance on a daily basis so that seniors, families, and persons with disabilities do not have to choose between medicine, food, and housing. Wake up Congress, put aside this political blustering, and provide the necessary support for our nation’s low-income housing programs.

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Given the recession, it is not surprising that the number of bank branches in the United States decreased for the first time in 15 years last year. Closures have been particularly prevalent in low-income neighborhoods. As banks closed branches in poorer areas in response to shrinking profit margins, they opened new branches in wealthier ones. Between 2008 and 2010, the number of branches in areas with median household incomes below $50,000 fell by 396. During the same period, 82 new branches were added in neighborhoods where household income was above $100,000. Although the American Bankers’ Association has disputed the statistical significance of this data, citing the fact that there are over 95,000 bank branches nationwide, this does not disprove that there is a pattern.  

For example, Birmingham-based Regions Financial, with a pool of only 2,000 branches, closed 107 branches in low- and moderate-income neighborhoods between 2008 and 2010, but closed only one in a high-income neighborhood. Similarly, Bank of America closed 25 branches in lower-income areas while opening 14 in wealthier areas. Citigroup also closed two branches in the poorest areas they served and opened three in the wealthiest. In fact, Citigroup has made very little effort to hide its intention to focus on wealthy markets. At a Wall Street investor conference last November, Manuel Medina-Mora, head of Global Consumer Business, revealed that Citigroup would expand its retail banking primarily in “affluent segments in major cities.”

Branch closures have been more prevalent in low income neighborhoods despite Community Reinvestment Act regulations in place since 1977, requiring financial institutions to serve poor and middle-class credit markets. These regulations also require financial institutions to notify regulators of branch closings. Federal regulators, however, seem to have turned a blind eye to bank branch closure patterns. 

According to John Taylor, President of the National Community Reinvestment Coalition, “You don’t have to be a statistician to see that there’s a dual financial system in America, one for essentially middle- and high-income consumers, and another one for the people that can least afford it.” If bank branches continue to close in low-income neighborhoods, the options available to low-income families will continue to dwindle.

Even after the economy improves and the consequences of the mortgage bust subside, closures are likely to continue in the long run due to increased use of online and automated banking systems. Bank branches in lower-income neighborhoods will be at particular risk because new regulations, including those limiting overdraft fees, have stripped banks of major revenue sources earned from products marketed towards low-income clients. Without brick-and-mortar branches, efforts to foster a “culture of savings” in low-income neighborhoods may have very little impact. Additionally, bank closures in poor areas will most likely increase the use of predatory lenders (check-cashing centers, payday loan providers and pawnshops).

Thus, if regulators continue to be too timid to confront those banks violating the Community Reinvestment Act, if not in fact, then in spirit, access to mainstream credit will continue to be an uphill battle for poor families.

This post was coauthored by Melanie Jacobs.

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Most of us hope that if we become injured, disabled, or too old to care for ourselves, we will be cared for at home. Many studies suggest that it is more cost-effective to care for people who are disabled and elderly in their homes rather than in nursing homes, and advocates for these populations often discuss an emerging civil right to remain at home. Unfortunately, as a class action filed in the District of Vermont on January 18, 2011, by the Medicare Advocacy Project of Vermont Legal Aid and the Center for Medicare Advocacy makes clear, false hurdles are erected throughout the Medicare system that make it difficult for patients to receive care in their homes.

Under the United States Supreme Court’s 1999 ruling in Olmstead v. L.C., patients in nursing homes and other institutions who can safely and appropriately live in their communities are entitled to do so. Finding appropriate service providers and obtaining Medicare coverage remain challenging for many patients, however, and one of the main impediments standing between patients and living at home is the Medicare improvement standard.

As Gill Deford, Margaret Murphy, and Judith Stein of the Center for Medicare Advocacy discussed in their January-February 2010 Clearinghouse Review: Journal of Law and Policy article, How the “Improvement Standard” Improperly Denies Coverage to Medicare Patients with Chronic Conditions, Medicare beneficiaries with chronic conditions who need skilled care—including home health care—are often improperly denied care because of the myth “that coverage of skilled care requires a beneficiary to be improving.” Under this “phony coverage standard” that appears nowhere in the Medicare statute or its implementing regulations, Medicare recipients suffering from a wide array of physical and mental impairments are denied the nursing care, physical therapy, occupational therapy, and speech therapy that they need to remain stable and avoid further deterioration. This standard is routinely applied to Medicare recipients living in hospitals and nursing homes, as well as those who live independently, even when their doctors make it clear that skilled care is necessary to keep the patients from deteriorating. The problem stems, in large part, from unclear Medicare manual provisions that are sometimes more restrictive than the actual regulations, as well as from ongoing confusion regarding the difference between “skilled care,” which is covered by Medicare, and “custodial care,” which is not.

A new class action, Jimmo v. Sibelius, was filed against the U.S. Secretary of Health and Human Services on January 18 by five individual plaintiffs and five national organizations, including the National Multiple Sclerosis Society and Paralyzed Veterans of America. The plaintiffs brought the suit on behalf of a nationwide class of Medicare beneficiaries who have been or will be harmed by the improvement standard. The suit challenges Medicare’s continued use of the improvement standard to deny benefits to Medicare recipients with chronic conditions. The plaintiffs specifically argue that the improvement standard is not included in Medicare law and regulations and, therefore, should not be a consideration when decisions are made about patients’ benefits. (An amended complaint, adding the Alzheimer’s Association, United Cerebral Palsy, and a sixth individual beneficiary as plaintiffs, was filed on March 3).

Jimmo v. Sibelius follows a recent flurry of legal and regulatory activity around the Medicare improvement standard. First, in the fall of 2010, two federal courts examined and rejected the improvement standard. As Robert Pear wrote in the New York Times, federal judges in Pennsylvania and Vermont held that “skilled care may be reasonable and necessary and covered by Medicare even if the person’s condition is stable and unlikely to improve.” The plaintiff in the Pennsylvania case, Papciak v. Sebelius, resided in a nursing home, where she received skilled nursing care, physical therapy, and occupational therapy following hip replacement surgery. Medicare eventually denied coverage for these services, however, because she had “made only minimal progress in some areas, had regressed in other areas, and had been determined to have met her maximum potential for her physical and occupational therapy.” According to Medicare, plaintiff’s lack of improvement meant that plaintiff was receiving “custodial care,” not “skilled care.” By contrast, in Anderson v. Sebelius, the plaintiff was receiving home health services to stay stable after her second stroke and address a variety of other health problems, including hypertension, slurred speech, and type II diabetes. Medicare ultimately denied her coverage as well, claiming the services did not meet Medicare’s coverage criteria. In both cases, albeit in slightly different language, the judges held that Medicare improperly relied upon whether or not the plaintiffs had the potential to improve when denying them coverage. (Coincidentally, the same judge who issued the Anderson decision will preside over Jimmo.) 

Next, on January 1, 2011, new Medicare regulations promulgated by the Centers for Medicare and Medicaid Services became effective. As the Center for Medicare Advocacy announced, the new rules make it clear that “skilled care does include services that are intended to maintain a person’s condition and that no ‘rules of thumb’ should be used to deny care—including rules that require restoration potential.” The new regulations state that decision-makers should review “accepted standards of clinical practice and . . . consider whether a professional is needed for the service to be safe and effective for the particular beneficiary.” Patients and their advocates should not be overly optimistic about the new regulations, however. As Gill Deford noted in a press release about the Jimmo class action, the new regulations are meaningless if service providers ignore them. Deford said “[w]hile we thank CMS for their recent clarification of Medicare coverage for home health services—including physical therapy, occupational therapy and speech-language pathology services—the clarification does not undo conflicting policies and practices.”

Ironically, as Dr. Nicholas LaRocca of the National Multiple Sclerosis Society stated in the Center for Medicare Advocacy press release about the Jimmo case, Medicare’s denial of benefits for services such as home health care and physical therapy can end up being more expensive for the government than providing appropriate therapeutic care. These types of services “help avert physical and cognitive deterioration or maintain optimal functioning,” Dr. LaRocca said. “This deterioration often leads to more intense, more expensive services, hospitalization or nursing care.”

Hopefully, the Jimmo class action will put an end to the use of the improvement standard and move America’s elderly and disabled one step closer to a civil right to live at home. If you, a family member, or a client has been denied Medicare coverage because your health condition is not improving, you may have been denied coverage unfairly. For information about your Medicare rights, contact the Center for Medicare Advocacy at: improvement@medicareadvocacy.org

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Retail giants such as Wal-Mart, Kmart, and Best Buy are jumping on the bandwagon to provide financial services in their stores to millions of unbanked Americans. These retailers are bringing a $320 billion industry of alternative financial services out of the shadow of the formal bank system under the radar of federal regulators.

A 2009 Federal Deposit Insurance Corporation (FDIC) survey revealed that approximately 30 million American households are either unbanked or underbanked. “Unbanked” households are those without a checking or savings account, and “underbanked” households are those that have a checking or savings account but rely on alternative financial services. The unbanked and the underbanked are particularly vulnerable to predatory practices by non-bank check-cashing services, payday loans, rent-to-own agreements, or pawn shops. Susan Ehrlich, President of Financial Services for Kmart, who was recently named to the Federal Reserve’s Consumer Advisory Board, explained that, “if the only viable alternatives for so many consumers are payday lenders and cash-checking operations, there is a lot of room for a national retailer to step in and help them manage their money.” While this seems to be part of the reason why these retail giants are entering the market to provide check cashing services, the main incentive seems to be the hopes that the customer will use some of the cash in the store.

Kmart, for example, is piloting financial centers where consumers can cash checks and pay bills in 23 Kmart stores in Illinois, Los Angeles, Puerto Rico, and Wisconsin. At the beginning of the recession, Kmart reintroduced a layaway program in its stores at Christmastime, and the program was so successful that Kmart began offering it year-round.

Another retailer, Best Buy, has also entered this market, launching a bill-payment service in a handful of markets. According to the FDIC’s survey, while many of the unbanked think that they don't make enough money to warrant a bank account, others simply don't trust banks or come from cash-based cultures. Best Buy’s bill-payment kiosks, operated by Tio Networks, cater to Hispanic shoppers who are often wary of banks. Despite this, many are willing to sign up for complicated cell phone plans at Best Buy, and executives say it was a short step to paying the bills in the store as well.

The biggest player of all retailers offering financial services is Wal-Mart. According to a September 2010 US Banker story, Wal-Mart has MoneyCenters in about 40% of its nearly 3,000 SuperCenters. Through economies of scale, Wal-Mart is able to offer lower fees—$3 for check cashing and another $3 for prepaid cards—than other smaller players that have dominated the market in the past.

Wal-Mart’s presence in financial services is not limited to its own stores. The company’s Sam’s Club subsidiary has a partnership with Superior Financial Group, a nonbank lender, to offer online loans of up to $25,000 to small-business owners at a 7.5% interest rate over 10 years. Moreover, Wal-Mart recently acquired an equity interest in Green Dot, a marketer of prepaid cards that filed an application to be a bank holding company after acquiring Bonneville Bancorp of Provo, Utah. Wal-Mart is also partnering with Jackson Hewitt to offer tax filing advice to in-store consumers.

As more and more retailers are attempting to take advantage of the number of unbanked and underbanked consumers, it is important to note that, while these retailers may offer less expensive, convenient alternatives to check cashiers and payday lenders, ultimately these services will not bring such consumers into the mainstream financial services industry. Instead, programs and products such as Bank On are required. Bank On San Francisco—the first of its kind in America—brought together city leaders, local community organizations, and 15 banks and credit unions to promote available financial products and services to bank the unbanked. As a result, it brought more than 70,000 previously unbanked San Franciscans to the financial mainstream within five years. Now nearly 70 cities/states/municipalities use the Bank On model to provide access to mainstream financial services for low-income consumers. Moreover, the President’s FY 2011 budget proposal included funding for a Bank On USA Initiative, which the U.S. Treasury has begun to develop. This initiative would promote access to affordable and appropriate financial services and basic consumer credit products for underserved households. To ensure that such access occurs we must talk to Congress and ask them to include funding for the Bank On USA initiative in FY 2011.

This article was coauthored by Ji Won Kim.

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