On August 11, the state of New York deposited $140 [image-nocss] million in stimulus money into the individual food stamp and welfare accounts of people on public assistance. Some saw their balance shoot up by a thousand dollars all at once. The idea was that they would use their regular welfare benefits card, which acts like a debit card, to buy the school supplies. There was just one problem, said the report. The letter from the state telling them what the money was for did not arrive until days later. By then, it was too late.
"No one questions the intention of this particular program; however there is an extraordinary distance between the good intention of the program and the implementation of the program," Monroe County's Commissioner of Health Services Kelly Reed told the news outlet.
County Executive Maggie Brooks says social workers were flooded with calls from merchants who were afraid fraud was being committed. "We had different retailers calling us and saying people were coming in with their benefit transaction card, and they are purchasing flat screen TVs, iPods and video gaming systems," Brooks told CBS News. Brooks said she does not blame the recipients, she blames the state for not ensuring the funds were spent for school.
Josh Babin told CBS that the day stimulus money went into the welfare accounts, business at his Rochester cell phone store doubled. And he does not sell school supplies.
Welfare recipients were also free to withdraw the money as cash, said the report. That led to an unexpected run on ATMs across the state. Brenda Smith, manager of a Wilson Farms c-store in Monroe County, said most of her increase in sales when the stimulus funds were disbursed were not in school supplies, but in "prepaid cell or credit cards." She said her store's ATM was cleared out.
Managers of three Wilson Farms stores in Rochester also reported empty ATMs and increases in beer, lotto and cigarette sales, the report said.
Managers of four Tops Markets grocery stores/gas stations in Rochester had similar stories. One store's three ATMs were all depleted by noon on August 11, the report said. The grocery stores saw large increases in customer volumes but only small spikes in sales of school supplies. Sales of candy at the registers increased, as well, said investigative notes obtained by CBS News. So many welfare customers were seeking cash back that the stores implemented a $50 cashback limit.
At another location, the ATM ran out of money on August 11 as well. "Numerous clients came in and purchase minimal items to withdraw the $50 limit and then returned to other cashiers in the store in order to retrieve all the money out of their account," said investigative notes. Another Tops Market reported "500 more customers" but "$4,000 less in sales" than usual. Also, ATM's containing $60,000 were entirely depleted.
Reed said one recipient "had $1,000 dollars on [his or her] card and jumped over a period of a few minutes over 18 lines in a Tops store buying something for 49 cents, for $2, for 50 cents and getting $50 back in cash," each time.
ATMs were also wiped out in hours at many Wegman's grocery stores statewide, and the owner of a Sunoco station described "scenes of panic" at her store, with public assistance customers flooding her ATM. Some of them, she told the news outlet, immediately used the cash to buy cigarettes and beer.
Monroe County investigators sampled the accounts of more than 70 drug and alcohol rehabilitation clients and found more than half of them withdrew their back-to-stimulus funds entirely in cash, the report said.
New York State officials defend the stimulus program saying no matter what welfare recipients purchased with the taxpayer funds, it served to stimulate the economy. State spokesperson for the program, Kristen Proud, said it stimulated the economy. Supporters accused critics of making unfair stereotypes about welfare recipients, said the report. "We have as many examples of families using the dollars for school clothes, school uniforms, school supplies," Proud said when asked about reports of luxury items being purchased with the back-to-school stimulus funds.
In Rochester, the Rev. Marlowe V.N. Washington, Pastor of the Baber African Methodist Episcopal Church, contacted CBS News to say that hundreds of grateful local residents have been helped by the back-to-school funds, and that it is unfair for anyone to assume that they did not spend the money on school supplies. "That is offensive, attacking and mean spirited," Washington told the news outlet. "People need to hear how stimulus funds have benefited American families and not hurt them."
Because debit cards do not list what was bought, state officials said that they will never know how much of the $140 million actually went for school supplies. Those who bought luxury items did not break any laws, because there were no strings attached to the money, said the report.
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