$69M in California welfare money spent out of state

Thousands of documents show tens of millions of welfare dollars have been spent out of state, some at vacation resorts. The discovery is leading to new legislation to prevent welfare abuse.

One lawmaker is calling for an end to taxpayer-funded vacations, as he calls it, for welfare recipients, but welfare supporters say that is just a political ploy. California already has one of the lowest fraud rates in the country.

Welfare offices in California have been jam-packed during this recession with applicants needing cash assistance for basic needs like food and shelter.

However, under new legislation about to be introduced by Assemblyman Ted Gaines, R-Roseville, welfare recipients may have to start spending their benefits only within the state.

A Los Angeles Times analysis found $69 million was spent outside state lines during a three and a half year period beginning in January 2007 at tourist destinations like Las Vegas, Hawaiian beaches and cruise ships in Florida. Critics call that "taxpayer-funded vacations" at a time when taxpayers can't afford one themselves.

"These are for folks that are hurting, that are out of job, and you see that money is spent on a cruise, then obviously, it's fraudulent," says Gaines.

Benefits are deposited electronically onto welfare cards that are used like a debit card in stores or to withdraw cash at certain ATMs.

The Times analysis found nearly $12 million was spent in Las Vegas, $1.5 million in Florida, $387,908 in Hawaii, and $16,010 withdrawn from ATMs on cruise ships.

But welfare supporters point out $69 million is less than 1 percent of the $11 billion the state gave out during that period.

"When people go on assistance, they're going to have the same kind of life situations come up as anyone else. You're going to visit your sick relative. You're going to go to funerals out-of-state. That's what's going on here," says Mike Herald from the Western Center on Law and Poverty.

The state says accounts aren't normally flagged until out-of-state transactions continue for more than 30 days because recipients aren't supposed to be gone that long.

"The vast majority of our families who are receiving benefits do so in a legal, lawful manner," says John Wagner, Director of the California Department of Social Services. "If someone is withdrawing benefits to feed their kid while they're taking care of an aging grandparent, that's allowed."

Taxpayer groups say it's time to move to a voucher system.

"Giving welfare recipients cash is always risk-inherent," says Jon Coupal from the Howard Jarvis Taxpayers Association.

Another problem is when welfare recipients don't use certain ATMs, taxpayers pick up those extra fees. Last year, the state paid more than $11 million in ATM surcharges, and we'll likely surpass that this year because bank fees have gone up.