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Workers in Crisis: Responding to a Government Shutdown

 

Source: The New York Times

By Laura Christensen-Garcia | Manager of Service Delivery | The Financial Clinic

 

The fact that the government is shut down is probably not news to you. It’s pretty hard not to notice something when even Cardi B posts about it on her Instagram. What might be news is the incredibly sweeping and profound effect that the shutdown is having on hundreds of thousands of people–not just the 800,000 furloughed government employees.

The ripple effects of the shutdown are being felt by people all across the country–from high school students that are unable to complete their FAFSA due to the inaccessibility of records on the IRS website, to victims of identity theft unable to file affidavits on www.identitytheft.gov. This affidavit is used to report fraudulent accounts to businesses, and is often required for them to close fraudulent accounts and remove them from a consumer’s credit reports. Because the website is currently out of commission, people don’t have access to a surefire method of identity theft resolution.

The financial coaches at The Financial Clinic are working around the clock to help our customers navigate the uncharted territory that this shutdown has entered. Many of our customers are low-income to very low-income and rely on public assistance to pay for necessities, such as housing or food. This month, SNAP recipients received their February benefits earlier than usual and were told this is the last payment of SNAP benefits until the government shutdown is resolved. If the shutdown is not resolved soon, the more than 38 million SNAP recipients will have to find other ways to get food – relying on food pantries, support from family or friends, or other means. For people without other options, the situation is dire.

We are, however, unsurprised to find that our resilient customers have already found creative strategies to get through the storm. Financial Coach and Manager of Service Delivery, Justin DeBrosse recently met with a customer who wanted to discuss how to best budget for the frontloading of their February SNAP benefits. The customer worked with Justin to track their Daily Expenses and formulate a plan for next month’s expenses using the Monthly Income & Expense Tracker.

If you are a federal worker, start to apply for unemployment now. CNN reported that unemployment claims by furloughed workers skyrocketed more than 400% in the last week of December. As a result, it may take up to eight weeks to receive your first unemployment check. Moreover, the verification process is tedious and time-consuming–you will need to access and submit pay stubs from your employer (which may be difficult if they’re closed) and will need to prove that you are actively job searching. All unemployment will need to be paid back if you receive back pay for the duration of the shutdown.

For those of you who find yourselves staring down a list of unheard voicemails from debt collectors, your landlord, or your student loan provider, consider prioritizing your bills. Use this tool to assess which bills absolutely must be paid. Because the shutdown is such a public issue, your request to modify a payment plan or pay rent in installments hopefully will not fall on deaf ears. For example, AT&T released a statement on January 9th explaining to consumers that, “as long as the shutdown is in effect, our customer service team will adjust late fees, provide extensions, and coordinate with you on revised payment schedules.” Many loan providers are also offering to re-calculate Income-Based Repayment plans to adjust to changes in income.

In addition to exploring flexible payment plans, many federal workers are also being offered emergency loan products by various financial institutions. USAA Bank, Alpine Bank, and the Transportation Federal Credit Union are offering furlough relief options to furloughed workers through low-interest loans, financial counseling, and the option to skip up to two monthly payments on existing loans. Democracy Federal Credit Union is also offering financial counseling and a short-term emergency loan with 0% interest. Although the majority of low-interest loan options are being offered by credit unions and community banks, some of the big financial institutions, like Chase Bank, are waiving monthly maintenance and overdraft fees. The easiest way to access these benefits is to call the bank or loan provider directly.

Although taking on more debt or changing a payment plan is not a long-term solution, they are quick moves that workers can take to respond to this emergency. In the future, we must collectively work to hold our representatives more accountable to the needs of their constituents, and guarantee that a paycheck is not used as a bargaining chip in a political game.

To learn more about how furloughed government workers, their family members, and other every day Americans are being affected by the government shutdown and are coming together to support each other, check out #ShutdownStories on Twitter.

When the Government Shuts Down, the Vulnerable Suffer the Most

Michael Dedmon | Policy Manager| The Financial Clinic

While a partial shutdown of the federal government dominates the daily news cycle, the real impact on people’s lives can be hard to see because many essential services continue to function – more or less – as normal. For example, the U.S. Postal Service is still running, Social Security payments continue to be made, many Veterans’ services are still available, and federal employees deemed essential like federal transportation safety workers and military personnel continue to report to work each day. But, beneath the surface, this staged political crisis is already generating more significant consequences than many realize, and the risk of a deeper national crisis rises every day the impasse continues.

Up to 450,000 of these government employees won’t be receiving a paycheck this Friday despite working throughout the shutdown, and there are thousands more who have been furloughed while the negotiations over reopening the government continue. Although the majority of the furloughed and all essential employees will receive back pay for the time lost to the shutdown, many staff working for government contractors, like cleaning and food service employees, will not. This loss of income presents a huge risk to these less financially secure employees who already receive significantly fewer protections and are paid much less.

Nearly 80% of Americans report that they live paycheck to paycheck, and over 40% of families lack emergency savings, claiming that coming up with $400 would pose a significant financial burden. Like many workers across the country, federal employees have seen their incomes stagnate in the past decade, allowing them even less flexibility to deal with unplanned instability. This sudden shock to their income will force many of them into tough financial choices like whether they should pay their rent and utility bills or buy groceries. Like so many other households dealing with income volatility, many families will be forced to rely on risky and expensive credit products to make ends meet.  As the shutdown drags on, it’s critical that we not lose sight of the very real impact this disruption has on the financial lives of federal employees and their families, and consider the long-term effects some will feel after the political disputes are resolved.

In addition to these affected employees, a number of vulnerable households across the country that rely on government services will soon start to feel the consequences of the shutdown. The Washington Post reports that the Department of Housing and Urban Development (HUD) is scrambling to prevent the eviction of over 1,000 people receiving support from a federal program that ended on January 1st, and in just weeks, millions of SNAP beneficiaries could face reductions to their benefits. Also, with tax season just around the corner, the IRS is both unable to process tax refunds and will have to delay critical support it provides to nonprofits, like The Financial Clinic, that participate in the Voluntary Income Tax Assistance (VITA) program. The Post has reported that over 90% of Internal Revenue Service (IRS) staff has been sent home without pay just weeks before tax season begins in earnest.

This is especially poorly timed this year as changes to tax law passed by Congress in late 2017 spell a number of important changes that may impact low- to moderate-income (LMI) households this season, including the elimination of the personal exemption, the introduction of new tax brackets, and alterations to the Child Tax Credit. “With the new tax law changes starting this year, VITA customers will be looking to their tax preparer to learn what the changes mean for them. ‘Why is my refund changing?’ Many will not think to ask the question of how will this impact their future refunds.” says Darren Liddell, Director of Program Innovation at The Financial Clinic. “Also, refunds won’t be issued while the government is shut down even though the government will still accept the returns.”

Credits claimed at tax time like the Earned Income Tax Credit (EITC) can make up 12% of some households’ yearly income and present a huge opportunity to get ahead financially, save some money for future goals like education and retirement, or pay down debt. Financially insecure families expect a properly functioning federal government to process their returns and issue their refund just like the IRS expects them to file on time. “We see the biggest rush for VITA services right at the beginning of tax season, so in late January, as many customers want to file as soon as they can,” according to Darren. Families looking to get on top of debt accumulated during the holiday season, make some headway on yearly savings goals, or make education/childcare payments for the semester will be relying on receiving their refund.

The financial pain inflicted on government employees, a looming shutdown of some housing and nutrition programs, and the disruption of the tax season are real consequences that will have a lasting impact on the lives of some of our most vulnerable friends and neighbors. The human impact should be considered with the knowledge that all of it is, in fact, needless, as the shutdown is the result of a manufactured, partisan crisis over a poorly conceived and racially charged plan for border security. We call on all representatives in Congress to fulfill one of the most basic tasks entrusted to them: provide the resources to deliver the critical services Americans everywhere rely on and reopen the government without delay.