May 11, 2009: The Stimulus and Poverty: A Role for Foundations in Seizing the Moment, By Olivia Golden, Institute Fellow at the Urban Institute

Over the coming weeks, Spotlight is running a special series that examines how the American Recovery and Reinvestment Act affects low-income Americans.

Previous contributions include:

· “First Steps toward a Strong Antipoverty Policy: New Attention to a Growing Problem“ by Timothy Smeeding

· “The Stimulus and Poverty: Tax and Transfer Programs in the Stimulus Bill” by Daniel R. Meyer

· “The Stimulus and Poverty: Will the Federal Stimulus Bill Protect Public Education from Spending Cuts?” by Andrew Reschovsky

· “The Stimulus and Poverty: President Obama۪s Plan to Expand Health Care Coverage” by Pamela Herd

This is a moment of great risk and great opportunity for low-income families and for policymakers and advocates who care about improving families۪ lives. The risks of this deep recession are huge: lost jobs and incomes, lost homes, lost health insurance, and grave long-term effects on children and youth. Evidence from previous recessions suggests that those at the bottom lose the most and take the longest to recover. Both sustained poverty and the particular risks of this recession, such as homelessness, can inflict damage to children that lasts far longer than the economic downturn itself.

Yet both the economic recovery package and a new political climate more open to federal action in the wake of the financial collapse make possible an important opportunity. The American Recovery and Reinvestment Act (ARRA) invests tens of billions of dollars in low-income families and their children and creates openings for change in policy debates that had been frozen for years.

Much of what policy experts thought they knew about the politically possible has been upended. Take, for example, welfare reform (the Temporary Assistance to Needy Families or TANF program). After more than a decade of flat funding and declining participation by low-income families, ARRA adds to TANF up to $5 billion in incentives for states to reach more families, increase benefits, and create subsidized work programs as a response to the recession. Other examples of new life breathed into a policy area are green jobs, unemployment insurance reform, and early childhood investments, which had been active as a policy and budget issue at the state level but flat funded at the federal level. Early Head Start, which extends Head Start۪s high-quality services down the age spectrum to infants, toddlers, and their families, was approximately doubled by ARRA.

It is crucial not to lose the momentum generated by this moment of opportunity. The policies and investments in ARRA will be revisited this year and next through budget debates and legislative reauthorizations. The policy gains from ARRA could dissipate if its implementation paints a picture of money frittered away, or money never spent.

Five Foundation Investments to Seize the Moment

Foundations can have a pivotal effect on the capacity of federal, state, and local policymakers and advocates to seize this moment. Toward that end, here are five strategic investments that foundations should make.

1. Set the Stage for Change

ARRA and other early legislative actions of this administration and Congress, such as the reauthorization of the Children۪s Health Insurance Program, offer very broad opportunities to build better policies that cut across program areas. For example, ARRA invests in programs that meet the needs of parents in low-income families such as food stamps, unemployment insurance, and Pell grants as well as programs targeted to their children. That two-generation approach is just what families need, but it is rarely reflected in budgets or legislation. ARRA also makes resources available for needs that low-income families face all at once yet are rarely addressed together, such as stable housing, job training, and expanded child care subsidies. But these strengths of ARRA pose a challenge to state and local legislators and agency staff, who have to understand scores of federal programs simultaneously and make funding and program decisions under extraordinarily tight timeframes.

Foundations can play a crucial role here. Modest but timely investments to support working groups, technical assistance, and policy and practice briefs laying out practical options will help federal, state, and local activists and officials see across programmatic lines and respond effectively to ARRA۪s breadth.

2. Track the Damage and the Repairs

Data will be crucial in seizing the moment. Policymakers at all levels need to know what is happening to children and families during the recession and recovery, how states and localities are spending ARRA money, and what the results are. Policymakers and implementers need early and regular information to reassess their initial decisions, solve problems, and spread the news about promising practices and approaches. At the same time, the public and Congress need information about the damage that has been sustained and the use of recovery resources to undo the harm. Telling the story of how funds have been used and what difference they have made is essential to retaining support for the positive reforms begun in ARRA as Congress deliberates about future budgets and legislative reauthorizations.

Foundations can support vital data collection at the local, state, and national levels. Just one example is the Urban Institute۪s proposed Metropolitan Barometer, which will bring the most relevant and timely national data together with state and local information collected by our National Neighborhood Indicators Project partners in metropolitan areas around the country. NNIP participants are nonprofit and public organizations that have several years of experience collecting detailed data that contribute to a sharper picture of family and neighborhood circumstances in their communities.

3. Learn by Doing

State, local, nonprofit, and federal officials are working under extraordinary time pressure as they translate ARRA and other reform legislation into action. Inevitably, they will encounter unexpected problems and find unexpected solutions. To achieve the goals of ARRA and related legislation and fine tune future actions, they will need to understand not only the data but also how particular implementation steps worked in their and other jurisdictions. Without such learning, early mistakes or unexpected obstacles could doom the effectiveness of key ARRA provisions.

This learning will not happen automatically. Few public officials have the luxury to gather information systematically about implementation, reflect on what has worked and what could be done better, or use the lessons of one jurisdiction to contribute to success in another. Foundations can make a major difference by supporting focused, time-sensitive implementation studies that feed information back quickly to support improvements across the country.

4. Stimulate New Policy Ideas

Funders ought to go one step further to seize the opportunity for learning. They should encourage the use of the new information to stimulate innovative policy ideas, not just to refine implementation. To take full advantage of a public outlook more open to federal action and to the idea that any one of us could need government help, funders should be fostering ambitious policy thinking about poverty, child well-being, family stability, jobs, workforce development, and housing. They can do this by supporting thought-provoking papers and forums that take off from ground-level data and experiences, by seeking many imaginative points of view rather than consensus, and by moving fast so some ideas inform congressional decision making in 2010 and 2011.

5. Stimulate Ideas for Rebalancing the Federal, State, and Local Relationships

The recession has made vivid several failures in the way federalism works. The most obvious problem is that federal-state funding relationships intensify recessions rather than ease them. As state revenue falls and need increases, states operating under balanced budget requirements must cut budgets and lay off staff at exactly the wrong time.

Confronted by this evidence, now is the time to look for alternative approaches. Could programs be designed differently, so that instead of ad hoc fixes in a stimulus package, the solutions for recessionary times would be built into the funding formulas? Would other changes in policy roles, structures of accountability and monitoring, and federal, state, and local financing responsibilities help programs work better? Lessons from ARRA۪s implementation could help identify improvements, because of the unique opportunity to compare the results of very different federal-state relationships, such as those in unemployment insurance, food stamps, and TANF.

Here too, foundations have an opportunity to catalyze change with modest investments in analyzing data and generating innovative policy ideas. Without funder attention, the federal, state, and local relationships will be just as ill-designed in the next economic slowdown, creating large and unnecessary hardships for poor families.

Conclusion

Foundations, like states, are suffering from the juxtaposition of great demand and reduced resources. Yet this watershed moment is too important to miss. These five strategies thread this needle. They offer funders the opportunity to leverage policy innovation and significant benefits for low-income families with relatively modest investments and to avoid missing the most significant moment in decades for domestic social policy.

Olivia Golden is an Institute Fellow at the Urban Institute in Washington, DC and a former assistant secretary for children and families at the U.S. Department of Health and Human Services.

This commentary reflects the views of the author and should not be attributed to the Urban Institute, its staff, or its trustees.