California Welfare Cards Can Be Used in Many Casino ATMs

Times review finds that in more than half of the state's casinos and gaming rooms, welfare recipients can get cash from state-issued EBT cards.

By Jack Dolan Los Angeles Times

June 24, 2010

LOS ANGELES -- California welfare recipients are able to use state-issued debit cards to withdraw cash on gaming floors in more than half of the casinos in the state, a Los Angeles Times review of records found.

The cards, provided by the Department of Social Services to help recipients feed and clothe their families, work in automated teller machines at 32 of 58 tribal casinos and 47 of 90 state-licensed poker rooms, the review found.

State officials said Wednesday they were working to determine how much money had been withdrawn from casino ATMs by people using the welfare debit cards.

Gov. Arnold Schwarzenegger, who learned of the issue when asked to comment for this story, promised to take immediate action.

"We have instructed our vendors to prohibit these cards from being accepted at ATMs located in casinos and card rooms," Schwarzenegger spokesman Aaron McLear said Wednesday. "It is reprehensible that anyone would use taxpayer money for anything other than its intended purpose."

Administration officials said the social services agency contract's with a private ATM network to handle the electronic transfer of benefits to people on welfare, and hadn't noticed that the taxpayer money was being withdrawn at gambling establishments.

McLear said the system of paying out welfare benefits via bank cards was created under Schwarzenegger's predecessor, Democrat Gray Davis. Since the late 1990s most states have adopted this system, which is a viewed as a more efficient way of distributing and tracking government aid.

Schwarzenegger has been wrangling with lawmakers over other efforts to combat waste and fraud in the state's social services programs. He fought back a legislative effort to discontinue fingerprinting of food stamp recipients, a system designed to prevent double-dipping and other abuses.

Casino ATMs account for a handful of the thousands of machines in the contractor's network, and the amount withdrawn from them by welfare recipients almost certainly would comprise a tiny fraction of the state's multibillion-dollar welfare spending. But the issue is likely to come up as lawmakers fight over how best to close their historic budget deficit.

Schwarzenegger had already threatened to eliminate the state welfare program in his May budget proposal, and that was before he and his Republican allies in the Legislature knew that the cash could be accessed by people strolling from poker games to blackjack tables.

"In a time when we have a $19-billion deficit, and we're taking a serious look at the future of many safety-net programs, it's appalling to think that welfare beneficiaries can use their cards in a casino," said Seth Unger, spokesman for the Assembly Republican Caucus.

Democratic leaders, who have vowed to protect the state's fraying social safety net, also began calling for reform Wednesday.

"In these tough times, when so many children and vulnerable families depend on the safety net, we have to make sure food stamps and other services are being used the way the people of California intended them to be," said Shannon Murphy, spokeswoman for Assembly Speaker John A. Pérez (D- Los Angeles). "Other states have closed this loophole, and the Assembly will work with the Schwarzenegger administration to make that happen."

The casinos are listed on a Department of Social Services website that allows welfare recipients to search for addresses of ATMs where they can withdraw cash provided under the Temporary Aid for Needy Families program. The monthly grant ranges up to $694; most of the ATMs impose a withdrawal limit of about $300 per day.

The Times compared the addresses on that website with lists of tribal casinos and state-licensed poker rooms published on the California Gambling Control Commission's website.

It's not clear which casinos are most frequently patronized by welfare recipients because social services officials denied a January request from The Times for data showing transaction information from all of the ATMs in their network. Department lawyers argued that federal law prohibits the state from releasing financial information about merchants who accept cards issued to welfare recipients.

Those cards, known as Electronic Benefit Transfer cards, look and work just like ordinary debit cards. They allow welfare recipients to access two accounts: the cash offered so needy parents can provide a home for their children while they train for better jobs, and an electronic version of food stamps that comes with rules governing where and how the benefits can be spent.

The cash benefits, however, can be withdrawn and spent just about anywhere.

The Capitol Casino, which occupies a pair of small rooms a few blocks from the legislative chambers in Sacramento, appears on the social services website showing where clients can get money. Each room has an ATM: one is so close to a poker table that a player with long arms could lean back and withdraw cash without leaving his chair; the other is a few steps from the blackjack table.

At the Casino Royale on the outskirts of Sacramento, the first thing patrons pass as they walk to the gaming floor is the ATM with a sign next to it saying, "Exceed your ATM daily limit here!!"

Faye Stearns, a part-owner of Casino Royale, said she had no idea people on welfare could withdraw taxpayer dollars from the machine, and would not oppose a measure to prohibit it.

"I'm sure we wouldn't want to be taking money from children," Stearns said. "The adults? Hey, that's their problem. But kids? No."

The cash portion of California's welfare benefits comes from the Temporary Assistance for Needy Families program. Each year, California gets $3.7 billion from the federal government for the program, while state and local governments kick in an additional $2.9 billion.

The state of New Mexico and at least one company that supplies ATMs to the gaming industry have already taken steps to make sure their machines in casinos reject welfare benefits cards.

"I think it makes social sense," said John Monforte, executive director of the New Mexico Gaming Control Board. "There's a balance with gaming. There are wonderful things [casinos] do for tribal governments, but the reality is there are also negative social impacts."

Global Cash Access, a Las Vegas firm that provides ATMs and other equipment for more than 1,000 casinos in the United States, started programming their machines to reject welfare cards more than a decade ago.

"Unless a state tells us to allow access to their EBT cards, we will continue to block these cards from being accepted at our devices," said Katie Lever, the firm's general counsel. "It's really easy to do."