The U.S. Government Accountability Office (GAO) made no specific recommendation in its report “Poverty Determination in U.S. Insular Areas,” but says that “owing to high levels of poverty,” the U.S. territories “rely heavily on need-based federal programs to provide basic services.”

Released on Tuesday, the 37-page report was officially submitted to U.S. Senate Committee on Energy and Natural Resources and the U.S. House subcommittee on Insular Affairs, Oceans and Wildlife— who sought the study.

According to the GAO, two federal agencies publish measures used by some federal programs to determine poverty status and allocate need-based assistance:

• Census Bureau (Census) publishes poverty thresholds— dollar-value benchmarks for determining poverty status; and

• U.S. Department of Health and Human Services (HHS) provides poverty guidelines that are derived from the poverty thresholds.

The approaches used to determine these poverty measures affect, respectively, poverty population statistics and income eligibility of individuals and families for certain need-based federal assistance, says the investigative arm of Congress.

It says the poverty thresholds have been provided since 1970 to apply nationwide and in the insular areas, with no geographic variation. There are separate poverty guidelines for Alaska and Hawaii.

Of particular interest was GAO’s examination of how the Census poverty thresholds and HHS poverty guidelines are determined for the insular areas and considered the possibility of providing poverty thresholds and guidelines specific to the insular areas.

It also identified the implications of extending to the insular areas the approach originally used to determine the Alaska and Hawaii guidelines. It does not give any recommendations.

REPORT SUMMARY

The report says that Census applies the same thresholds for the insular areas as it does for the 50 states, without adjustment for geographic variations in cost of living.

Additionally, the thresholds constructed in the early 1960s did not include data specific to the insular areas— the two data sources for the thresholds, the 1955 Household Food Consumption Survey and the January 1964 cost of the Economy Food Plan, did not cover these areas.

In addition, the Bureau of Labor Statistics’ Consumer Price Index (CPI), which Census uses in adjusting the national thresholds for inflation each year, does not cover the insular areas.

Although HHS issues poverty guidelines for the contiguous states and Washington, D.C., as well as separate guidelines for Alaska and Hawaii, HHS has not issued any guidelines for the insular areas.

According to HHS, in cases in which a federal program using the poverty guidelines serves any of the insular areas, the federal office that administers the program is generally responsible for deciding whether to use the contiguous-states-and-D.C. guidelines for those jurisdictions or follow some other procedure, said GAO.

LACK OF DATA/POVERTY GUIDELINES

According to GAO, the lack of data prevents construction of poverty thresholds for the Insular Areas, but poverty guidelines could be constructed for the territories of American Samoa, Guam, Commonwealth of the Northern Mariana Islands, Puerto Rico and U.S. Virgin Islands.

“Census poverty thresholds specific to the insular areas cannot be constructed from available data,” the report says, noting Census lacks certain insular area information and inflation-adjusted poverty thresholds for the insular areas cannot be constructed with the methodology used to construct the original thresholds.

“If these data were available, it is unclear whether the new insular area thresholds would be higher or lower than the national thresholds,” said GAO. “However, an HHS official told us that applying the methodology used for the original thresholds to the insular areas would most likely produce thresholds lower than the national thresholds,” because in insular areas the food share in total family expenditures is higher.

Increases or decreases in the Census thresholds for the insular areas could, by raising or lowering estimates of the incidence of poverty, have implications for federal programs that use fund-distribution formulas involving poverty, it says.

HHS poverty guidelines specific to the insular areas, reflecting geographic differences in the cost of living, could be constructed by applying the rationale used for Alaska and Hawaii in 1970.

Using this approach, based on OPM’s non-foreign area COLAs, would produce guidelines for the CNMI, Guam, and USVI that are 25 percent higher, and for Puerto Rico 14 percent higher, than the guidelines for the contiguous states and Washington, D.C.

Because no non-foreign area COLA has been defined for American Samoa, this approach could not be used to compute guidelines for that area. This approach would not take into account any differences in consumption patterns between federal employees and insular area poor populations.

GAO also said that the implications of setting higher HHS poverty guidelines for the insular areas vary, depending on the design of the federal program and the program’s reliance on the guidelines.

For example, higher HHS guidelines could affect federal programs that distribute need-based assistance directly to families and individuals in the insular areas, such as the Department of Agriculture’s National School Lunch Program and Supplemental Nutrition Assistance Program (formerly known as the Food Stamp Program).

“However, we did not examine the potential impact on individual income eligibility or the cost effects that might result from extending the approach used for providing poverty guidelines for Alaska and Hawaii to the insular areas,” said GAO.

GAO also points out that higher HHS guidelines also would not affect programs that cap federal spending in the insular areas, such as Medicaid, which is subject to annual funding limits.

“However, if an insular area bases the eligibility of families and individuals for such programs on HHS poverty guidelines, then higher guidelines could affect the area’s use of capped federal funds— for example, by increasing the number of people who are eligible for the programs,” said GAO.

AGENCY COMMENTS

Responding to the GAO report, HHS states that if poverty thresholds for the insular areas could be constructed with the methodology used to construct the original national thresholds, the insular area thresholds would likely be lower than the national thresholds.

HHS presents two alternative methods for estimating poverty thresholds for the insular areas: (1) as a percentage of median family income and (2) based on the responsiveness of poverty thresholds to changes in inflation-adjusted income over time.

According to HHS using these two methods would produce poverty thresholds for different insular areas ranging between 14 and 86 percent of the continental U.S. poverty thresholds.

HHS further points out that it does not advocate lower guidelines for the insular areas but finds it inequitable to have higher guidelines for those areas because of the lower median income in those areas than that of the 48 states.

“We note that applying these alternative methods would result in different levels of access to federal programs for people with the same income living in two areas with different median incomes,” was GAO’s reply. “For example, a family with an income of $10,000 in one of the insular areas would qualify for less federal assistance than a family with the same income in another U.S. jurisdiction.”