How deeply will Minnesotans feel the impact of federal pandemic programs ending?

18 July 2023

WASHINGTON — The pandemic prompted the federal government to open the spigots of spending, implementing dozens of new programs, both massive and more limited, to help Americans in a way Washington, D.C. had never done before.

But those programs have ended or are ending. One of the latest to shutter helped homeowners who were behind on their mortgages, property taxes or had any other housing-related costs that threatened to put them out of their homes.

The U.S. Department of Housing and Urban Development provided Minnesota with about $109 million in Homeowner Assistance Funds. Since the state used that money to develop HomeHelpMinnesota, which was rolled out in May of last year, the state has provided homeowners with $100 million in aid, providing grants of up to $50,000 to homeowners in trouble. According to Minnesota Housing, the state has received 13,059 applications for help and approved 8,090. But the deadline for applications for this program was July 7.

The federal government spent trillions of dollars providing stimulus checks, increased unemployment and food stamp benefits, provided forgivable business loans, rent and student loan moratoriums and funding for dozens of other programs. Now economists, and those who depended on the aid, are unsure about what will happen as the last of the COVID-related programs end this year.

For instance, enhanced benefits for food stamps, officially known as Supplemental Nutritional Assistance Program (SNAP) benefits, ended in May, resulting in smaller payments to beneficiaries, especially the elderly. That clearly had an impact, said Colleen Moriarty, executive director of Hunger Solutions, an anti-hunger nonprofit. The reduction of food stamp benefits, coupled with the expiration of other federal pandemic programs like rental assistance, enhanced unemployment benefits and a federal child tax credit, resulted in dramatic increases in people seeking help at food shelves, Moriarty said.

“There were more and more and more visits,” she said. “(Food shelves) were once an emergency system that just helped people when they had a hard time. Now they visit every month.”

And soon many single people without children will be subject to a pre-pandemic requirement they work, volunteer or receive training for at least 20 hours a week.

Patrick Ness, executive director of Heading Home Minnesota Funders Collaborative, a nonprofit that fights homelessness, said the end of rental assistance and a federal moratorium on rent payments, coupled with the end of the homeowner’s assistance program, is likely to result in a surge in people who have lost the roof over their heads.

The federal rental assistance program, which ended in January, provided $449 million in assistance to 59,100 households in Minnesota.

Now, Ness said, renters are “going back to or exceeding the pre-pandemic eviction rates.” He said the end of the homeowner’s program would have a similar effect, with an increase in foreclosures.

Another large federal pandemic program that has recently expired is a two-year experiment in which the federal government has provided $24 billion to childcare providers – the largest-ever federal investment in childcare. The money helped centers pay teachers and rent and in other ways survive the pandemic, when children stayed home with their parents. But providers say there’s a continued need for help.

More than 3 million children – nearly 71,000 in Minnesota – are projected to lose access to childcare as the full effect of the program’s sunset in June takes effect.

According to The Century Foundation, the program’s expiration will result in the closure of 2,741 day care centers in Minnesota.

“This will have ripple effects for parents forced out of work or to cut their work hours, for businesses who will lose valuable employees or experience the impact of their employees’ childcare disruptions, and state economies that will lose tax revenue and jobs in the childcare sector as a result,” the center said.

As part of its attempt to address continuing needs as the federal government retreats, the  Minnesota legislature has  approved a new state grant programs for childcare providers that may blunt some of the impact.

A decrease in poverty, especially among children

Economists are unsure about the larger impact of an end to federal pandemic spending. But they do know that the trillions of dollars poured into the economy by the federal government lifted many Americans out of poverty, especially the nation’s children.

Angie Fertig, an economist at the Humphrey School of Public Affairs at the University of Minnesota, determined that Minnesota’s supplemental poverty measure fell from 8.6% in 2019 to 5.9% in 2021.

The U.S. Census measures poverty in two ways every year.  The first, called the official poverty measure, is based on cash resources, like welfare. The second, the supplemental poverty measure, includes both cash and noncash benefits and subtracts necessary expenses, including taxes and medical expenses, in determining an individual’s income.

Fertig said the greatest drop was among children, whose supplemental poverty rate fell from 8.1% in 2019 to 2.5% in 2021, and Black Minnesotans whose rate fell from 20.7% in 2019 to 8.3% in 2021.

Meanwhile, the supplemental poverty measure for white Minnesotans fell from 7% in 2019 to 5.4% in 2021.

“The stimulus checks and the child tax credit were a big deal,” Fertig said.

But rent relief, expanded unemployment benefits and other federal pandemic programs also helped, she said.

The state legislature this year approved a number of measures that may lessen the impact of the cutoff of federal dollars,  including a state child tax credit, universal school lunches and a new program of 12 weeks of paid family and medical leave. But, while ambitious, the state programs will not be able to make up for the loss of  all of the federal help Minnesotans have received in the past several years.

For example, looming is the requirement that, beginning Aug. 1, Medicaid patients re-enroll in the program and prove they still qualify.  When the process is completed hundreds of thousands of Minnesotans may lose this coverage because they have found jobs, have increased their income or became eligible for employer-sponsored coverage.

Nevertheless, Fertig said “Minnesota is well positions to keep its low poverty rate.”

“Hardship and poverty is going to bounce up a little bit, but right now I’m optimistic,” she said.

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