Poverty Determination in U.S. Insular Areas
Gao ID: GAO-10-240R November 10, 2009Owing to high levels of poverty, American Samoa, the Commonwealth of the Northern Mariana Islands (CNMI), Guam, the Commonwealth of Puerto Rico, and the U.S. Virgin Islands (USVI) rely heavily on need-based federal programs to provide basic services. Two federal agencies publish measures used by some federal programs to determine poverty status and allocate need-based assistance: the Census Bureau (Census) publishes poverty thresholds--dollar-value benchmarks for determining poverty status--and the Department of Health and Human Services (HHS) provides poverty guidelines, which 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. The poverty thresholds apply nationwide and in the insular areas, with no geographic variation, while separate poverty guidelines for Alaska and Hawaii, but not for the insular areas, have been provided since 1970. We (1) examined how the Census poverty thresholds and HHS poverty guidelines are determined for the insular areas. In addition, we (2) considered the possibility of providing poverty thresholds and guidelines specific to the insular areas and identified the implications of extending to the insular areas the approach originally used to determine the Alaska and Hawaii guidelines.
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. 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' 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. Census poverty thresholds specific to the insular areas cannot be constructed from available data. Because Census lacks certain insular area information--on the 1955 share of income spent on food, the cost of the January 1964 Economy Food Plan, and a record of CPIs for the insular areas--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. 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, owing to the higher share of food in insular areas' total family expenditures. 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. 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 nonforeign 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 nonforeign 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-10-240R, Poverty Determination in U.S. Insular Areas
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United States Government Accountability Office:
Washington, DC 20548:
November 10, 2009:
The Honorable Jeff Bingaman:
Chairman:
Lisa Murkowski:
Ranking Member:
Committee on Energy and Natural Resources:
United States Senate:
The Honorable Madeleine Z. Bordallo:
Chairwoman:
Henry E. Brown, Jr.
Ranking Member:
Subcommittee on Insular Affairs, Oceans and Wildlife:
Committee on Natural Resources:
House of Representatives:
Subject: Poverty Determination in U.S. Insular Areas:
Owing to high levels of poverty, American Samoa, the Commonwealth of
the Northern Mariana Islands (CNMI), Guam, the Commonwealth of Puerto
Rico, and the U.S. Virgin Islands (USVI) rely heavily on need-based
federal programs to provide basic services.[Footnote 1] Two federal
agencies publish measures used by some federal programs to determine
poverty status and allocate need-based assistance: the Census Bureau
(Census) publishes poverty thresholds--dollar-value benchmarks for
determining poverty status--and the Department of Health and Human
Services (HHS) provides poverty guidelines, which 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. The poverty thresholds apply nationwide and in the insular
areas, with no geographic variation, while separate poverty guidelines
for Alaska and Hawaii, but not for the insular areas, have been
provided since 1970.
In response to your request, we (1) examined how the Census poverty
thresholds and HHS poverty guidelines are determined for the insular
areas. In addition, we (2) considered the possibility of providing
poverty thresholds and guidelines specific to the insular areas and
identified the implications of extending to the insular areas the
approach originally used to determine the Alaska and Hawaii guidelines.
(We also presented this information in a recent briefing to
congressional committee staff; see encl. I for an updated version of
the briefing slides.)
To address these objectives, we reviewed relevant literature on poverty
determination in the United States and the insular areas and
interviewed current and former agency officials. We studied the methods
that were used to develop the Census poverty thresholds for the 50
states and Washington, D.C., and the HHS poverty guidelines for the
contiguous states and Washington, D.C. We also reviewed the reasoning
applied in 1970 in establishing separate poverty guidelines for Alaska
and Hawaii. We considered this approach because these are the only
poverty guidelines that have been established specific to any
geographic areas. The Alaska and Hawaii poverty guidelines are based on
the cost-of-living differential between these two locations and
Washington, D.C., as applied by the Civil Service Commission (CSC)--a
predecessor agency to the Office of Personnel Management (OPM)--in
making cost-of-living pay adjustments (COLA) for federal white-collar
employees in Alaska, Hawaii, the CNMI, Guam, Puerto Rico, and
USVI.[Footnote 2] These adjustments are known as nonforeign area COLAs
and are in the process of being phased out and replaced by locality
pay.[Footnote 3] We conducted our work from January to November 2009 in
accordance with all sections of GAO's Quality Assurance Framework that
are relevant to our objectives. This framework requires that we plan
and perform the engagement to obtain sufficient and appropriate
evidence to meet our stated objectives and to discuss any limitations
in our work. We believe that the information and data obtained, and the
analysis conducted, provide a reasonable basis for any findings and
conclusions in this report.
Background:
Census poverty thresholds. The poverty thresholds were established in
the 1960s as dollar-value benchmarks for measuring poverty:[Footnote 4]
if a family's income is less than the assigned threshold, the family
and each of its members is considered to be in poverty.[Footnote 5]
Since 1968, Census has annually published the thresholds for use in
generating statistics such as national, regional, and state estimates
of Americans in poverty; in 1969, the Bureau of the Budget (the
predecessor office to the Office of Management and Budget) issued a
directive designating the thresholds published by Census as the federal
government's official definition of poverty for statistical
purposes.[Footnote 6] Some federal programs use such statistics in fund-
distribution formulas involving poverty to distribute program funds
among states and other jurisdictions. The thresholds, which vary by
family size and age group,[Footnote 7] apply throughout the 50 states
and Washington, D.C., with no geographic variation. The thresholds for
the base year 1963 were based on the January 1964 dollar costs of the
U.S. Department of Agriculture's (USDA) Economy Food Plan for families
of different sizes, multiplied by a factor of three to reflect--based
on the 1955 Household Food Consumption Survey--the share of food in
total expenditures. Census updates the thresholds for inflation
annually, using the Bureau of Labor Statistics' Consumer Price Index
(CPI).[Footnote 8] Although the methodology used to determine the
thresholds has been subject to debate--for example, regarding whether
the thresholds should be adjusted for geographic variations in cost of
living--it has remained largely unchanged, except for minor technical
adjustments in 1969 and 1981.[Footnote 9]
HHS poverty guidelines. The poverty guidelines--a simplified version of
the Census poverty thresholds--were also established in the 1960s and
are used by certain federal programs, such as Job Corps and Head Start,
in determining the income eligibility of individuals and families for
need-based assistance.[Footnote 10] Like the thresholds, the guidelines
reflect variations in family size but, unlike the thresholds, do not
reflect variations in the age group of the family members. Each year,
HHS issues guidelines for the 48 contiguous states and Washington,
D.C.[Footnote 11] Since 1970, separate guidelines have been issued for
Alaska and Hawaii that are higher than the national guidelines, based
on the federal government's nonforeign area COLAs in 1970 for federal
employees' salaries in those states.[Footnote 12]
Census Uses the Same Poverty Thresholds for the Insular Areas as for
the States, but HHS Does Not Issue Poverty Guidelines for the Insular
Areas:
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. 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' CPI, which Census uses in
adjusting the national thresholds for inflation each year, does not
cover the insular areas.[Footnote 13]
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.[Footnote 14]
Lack of Data Prevents Construction of Poverty Thresholds for the
Insular Areas, but Poverty Guidelines Could Be Constructed for These
Areas:
Census poverty thresholds specific to the insular areas cannot be
constructed from available data. Because Census lacks certain insular
area information--on the 1955 share of income spent on food, the cost
of the January 1964 Economy Food Plan, and a record of CPIs for the
insular areas--inflation-adjusted poverty thresholds for the insular
areas cannot be constructed with the methodology used to construct the
original thresholds.[Footnote 15] If these data were available, it is
unclear whether the new insular area thresholds would be higher or
lower than the national thresholds. 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, owing to the higher share of food in insular
areas' total family expenditures (HHS also made this observation in its
written comments regarding a draft of this report; see encl. III).
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.
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.[Footnote 16]
Using this approach, based on OPM's nonforeign 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 nonforeign area
COLA has been defined for American Samoa, this approach could not be
used to compute guidelines for that area. (See encl. I, table 1, for
indexes derived from the nonforeign area COLAs for Alaska, Hawaii, and
the insular areas.) This approach would not take into account any
differences in consumption patterns between federal employees and
insular area poor populations.[Footnote 17]
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.
* 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.
* Higher HHS guidelines would not affect programs that use fund-
distribution formulas for allocating funds to the insular areas as lump
sums, such as HHS's Maternal and Child Health Block Grant, Community
Service Block Grant, Social Services Block Grant, and Childcare and
Development Fund.[Footnote 18] However, higher guidelines could affect
such programs' distribution of any funds to beneficiaries, if those
funds are distributed to families and individuals whose income
eligibility is based on the guidelines.
* 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.[Footnote 19] 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.
Agency Comments and Our Evaluation:
HHS and Census provided written comments regarding a draft of this
report, which are presented with our responses in enclosures III and
IV, respectively. HHS also provided technical comments, which we
incorporated as appropriate. Following are summaries of HHS's and
Census's written comments and our responses.
HHS's written comments address three main points related to our report.
* HHS suggests that OPM's nonforeign area COLAs are of insufficient
statistical quality to use as the basis for adjusting the poverty
guidelines for geographic cost-of-living differences. Citing as
evidence three studies that consider alternative strategies for
measuring poverty in the United States, HHS observes that none of these
studies refer to the nonforeign area COLAs as a possible data
source.[Footnote 20] However, as we note in our response to HHS's
comments in enclosure III, all three studies are focused on poverty
measurement nationwide and hence could not have considered the
nonforeign area COLAs as a data source, because these COLAs do not
cover the 48 contiguous states.
HHS also states that it does not believe that it would be appropriate
to use the current OPM nonforeign area COLA data to adjust the poverty
guidelines for the insular areas. We considered these data because they
were used in 1970 to construct the Alaska and Hawaii poverty guidelines
and because these are the only poverty guidelines that have been
established specific to any geographic areas. However, we are not
making a recommendation for the use of this approach.
* HHS states that it adapts and updates, rather than determines, the
Alaska and Hawaii poverty guidelines. HHS notes that it inherited the
Alaska and Hawaii poverty guidelines series in 1982 from the Office of
Economic Opportunity, which established these guidelines in 1970. HHS
also notes that it has not consulted OPM documents to derive cost-of-
living data to calculate the guidelines. We changed the wording in the
draft to clarify this point.
* 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 reasons that because median incomes
in the insular areas in 1959 were significantly lower than those in the
states, the share of family food consumption as a fraction of insular
area family expenditures--the basis of the original Census methodology-
-would be higher, leading to a lower poverty threshold. HHS also
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. HHS states that 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 says 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. 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.
Census raises two main issues in its written comments:
* Census urges us to further study the poverty guidelines in the
insular areas before making any recommendations that would increase
those guidelines by a significant amount. We note that we have not made
any recommendations in this report.
* Census suggests that we compare OPM's foreign area COLAs with insular
area housing-cost differentials based on Census data and other sources.
We did not consider alternative approaches for geographic COLAs of the
poverty guidelines, such as the use of housing data; instead we focused
our analysis on the approach used in 1970 to construct the Alaska and
Hawaii poverty guidelines, based on OPM's process for computing
nonforeign area COLAs. We note OPM's process includes a housing cost
component that it adjusts for differences in the quality of housing,
using statistical analysis; OPM then aggregates housing and other types
of expenditures in constructing its cost-of-living index.
We are sending copies of this report to interested congressional
committees, as well as to HHS, Census, and the Office of Insular
Affairs at the Department of the Interior. In addition, the report will
be available at no charge on GAO's Web site at [hyperlink,
http://www.gao.gov]. If you or your staff have any questions about this
report, please contact me at (202) 512-3149 or gootnickd@gao.gov.
Contact points for our Offices of Congressional Relations and Public
Affairs may be found on the last page of this report. GAO staff who
made major contributions to this report are listed in enclosure V.
Signed by:
David Gootnick:
Director, International Affairs and Trade:
Enclosures:
[End of section]
Enclosure I: Poverty Determination in U.S. Insular Areas:
Briefing to Congressional Staff:
May 28, 2009:
Poverty Determination:
Two federal agencies publish versions of the measure used to determine
poverty in the United States:
* Census publishes poverty thresholds to determine the number of people
in poverty. Besides being released to the media each year, these
figures are used for certain need-based federal programs in formulas
for allocating program funds among states and other jurisdictions.
* The Department of Health and Human Services (HHS) provides poverty
guidelines, which are used to determine households‘ and individuals‘
eligibility for certain need-based federal programs.
Census Bureau Poverty Thresholds:
The poverty thresholds”dollar-value benchmarks for determining who is
in poverty”vary by family size and by the ages of certain family
members.
* The thresholds were developed by Mollie Orshansky of the Social
Security Administration. They are based on the January 1964 cost of the
Economy Food Plan for families of different sizes, multiplied by a
factor of three to account for other living expenses; somewhat
different procedures were followed for one- and two-person units. The
factor of three was based on data from the 1955 Household Food
Consumption Survey.
* If a family‘s income”including all before-tax cash income, except
capital gains, and excluding all noncash benefits, such as food stamps”
is less than the threshold, Census considers the family and each of its
members to be in poverty.
The thresholds are applied as benchmarks throughout the United States
with no geographic variation.
Although the Orshansky methodology for developing the thresholds has
been subject to debate, it has remained unchanged except for minor
technical adjustments in 1969 and 1981.
Census updates the thresholds for inflation yearly, using the Bureau of
Labor Statistics‘ Consumer Price Index.
The thresholds are used to generate poverty populations statistics,
which are released to the media each year and are also used in formulas
to allocate certain federal program funds among states and other
jurisdictions.
HHS Poverty Guidelines:
The HHS poverty guidelines are derived from the Census Bureau poverty
thresholds but, unlike the thresholds, do not consider the number of
family members who are children under 18 years of age or whether
certain family units include individuals over 65.
HHS publishes a set of poverty guidelines each year for the 48
contiguous states and Washington, D.C..
Since 1970, HHS has also published separate guidelines for Alaska and
Hawaii that were 25 and 15 percent higher, reflecting federal cost-of-
living allowances (COLA) for salaries of federal employees in those
states at that time.
Certain federal programs use the poverty guidelines to determine
individuals‘ and families‘ income eligibility for need-based
assistance: the higher the guideline amount, the greater the number of
people who are potentially eligible for assistance.[A]
[A] Some of the need-based programs using the poverty guidelines
actually use percentages of the guidelines higher than 100 percent.
Some other need-based programs use dollar figures for eligibility that
are unrelated to the poverty guidelines.
U.S. Insular Areas:
American Samoa, the Commonwealth of the Northern Mariana Islands
(CNMI), Guam, Puerto Rico, and the U.S. Virgin Islands (USVI) rely
heavily on need-based federal programs to provide basic services.
In 1999, the percentage of individuals below the continental-U.S.
poverty thresholds ranged from 23 in Guam”nearly twice as high as in
the continental United States”to 61 in American Samoa.
The approach used to determine poverty affects poverty statistics and
income eligibility of individuals and families for certain need- based
federal assistance in the insular areas.
Research Questions:
How are Census Bureau poverty thresholds and HHS poverty guidelines
determined for the insular areas?
Could poverty thresholds and guidelines specific to the insular areas
be provided, and what would be the implications of extending to the
insular areas the approach originally used to determine the Alaska and
Hawaii guidelines?
Census uses the same poverty thresholds for the insular areas that it
uses for the 50 states.
Census issues the same thresholds for the insular areas as it does for
the 50 states, without adjustment for geographic variations.
Data on the food/income share were not collected by the 1955 Household
Food Consumption Survey for the insular areas.
Data on the January 1964 cost of the Economy Food Plan – the other data
element on which the thresholds were based – were not collected for the
insular areas in 1964.
Although Census uses the CPI to adjust the national thresholds for
inflation each year, the Bureau of Labor Statistics does not collect
price data to construct insular areas‘ CPI.
HHS does not issue poverty guidelines for the insular areas.
HHS has never issued guidelines for the insular areas.
According to HHS, in cases in which a federal program using the poverty
guidelines serves any of those jurisdictions, 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.
Census Bureau poverty thresholds specific to the insular areas cannot
be constructed from available data.
Lacking information for the insular areas on the 1955 share of income
spent on food, the January 1964 cost of the Economy Food Plan, and the
CPI, inflation- adjusted poverty thresholds specific to the insular
areas cannot be constructed using Orshansky methodology.
Without the 1964 cost of the Economy Food Plan or the share of income
spent on food in the insular areas, it is unclear whether thresholds
for the insular areas, if constructed, would be higher or lower than
the national thresholds. However, an official from HHS told us that the
most likely result if the Orshansky methodology could be applied to the
insular areas would be thresholds lower than the national thresholds
due to the higher share of food in insular areas‘ total family
expenditures.
Higher or lower thresholds for the insular areas would raise or lower
estimates of poverty incidence, affecting allocations of need-based
assistance from federal programs that use poverty statistics in
distribution formulas.
The approach used for providing HHS poverty guidelines for Alaska and
Hawaii in 1970 could be extended to the insular areas.
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 would produce higher guidelines”25 percent higher
for CNMI, Guam, and USVI and 14 percent higher for Puerto Rico”than the
guidelines for the contiguous states and Washington, D.C. Because no
COLA is 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.
See table 1.
Table 1: Index Derived from OPM Cost- of-Living Allowances:
Locality: American Samoa;
Index derived from OPM nonforeign area COLA: N/A.
Locality: CNMI;
Index derived from OPM nonforeign area COLA: 125.
Locality: Guam;
Index derived from OPM nonforeign area COLA: 125.
Locality: Puerto Rico;
Index derived from OPM nonforeign area COLA: 114.
Locality: USVI;
Index derived from OPM nonforeign area COLA: 125.
Locality: Alaska;
Index derived from OPM nonforeign area COLA: 124.
Locality: Hawaii;
Index derived from OPM nonforeign area COLA: 123.
Locality: Washington D.C.;
Index derived from OPM nonforeign area COLA: 100.
Source: OPM.
Note: COLA rates shown were published in the Federal Register by OPM on
February 20, 2009 amending subpart B of 5CFR part 591. Rates shown for
Alaska and Hawaii are simple unweighted averages of statewide COLAs. No
COLA is listed for American Samoa; however, OPM defines a post
differential rate for American Samoa of 25 percent. The post
differential is based on extraordinarily difficult living conditions,
excessive physical hardship, or notably unhealthful conditions. The
base is Washington, D.C. Under 5 USC § 5941 nonforeign area COLAs are
limited to 25 percent of basic pay.
[End of table]
Higher HHS poverty guidelines would affect some federal programs.
Higher HHS guidelines could increase the number of individuals and
families eligible for need-based assistance from federal programs that
use the contiguous-states-and-D.C. guidelines as a criterion. (See app.
I for examples of such programs.)
Higher HHS guidelines would not affect:
* federal programs that distribute need-based assistance according to
formulas involving poverty statistics based on Census Bureau poverty
thresholds, or:
* federal programs that cap the distribution of need-based assistance
to the insular areas according to statutorily defined percentages, such
as Medicaid.
Methodology:
We reviewed the relevant literature on poverty determination in the
United States and the insular areas, interviewed agency officials, and
analyzed OPM‘s methods used for cost-of-living pay adjustments.
We did not examine the potential impact of extending to the insular
areas the approach originally used to determine the Alaska and Hawaii
guidelines on individual income eligibility and did not evaluate the
cost effects of this approach.
We conducted our work in accordance with GAO's Quality Assurance
Framework.
Appendix I: Select Federal Programs Using HHS Poverty Guidelines to
Determine Eligibility for Need- Based Assistance in Insular Areas:
National School Lunch Program (and Commodity School Program);
School Breakfast Program;
Special Milk Program for Children;
Child and Adult Care Food Program;
Summer Food Service Program;
Special Supplemental Nutrition Program for Women, Infants, and
Children;
Supplemental Nutrition Assistance Program (Food Stamp Program)[A]
[A] Uses poverty guidelines to determine income eligibility for need-
based assistance in Guam and USVI only.
[End of section]
Enclosure II: Briefing for Congressional Requesters:
Insular Areas' Poverty Rates in 1999:
Guam;
Poverty rate (%): 23.0.
American Samoa;
Poverty rate (%): 61.0.
USVI;
Poverty rate (%): 32.5.
CNMI;
Poverty rate (%): 46.0.
Puerto Rico;
Poverty rate (%): 48.2.
Source: 2000 Census of Population and Housing, U.S. Census Bureau.
[End of table]
Comments from the Department of Health and Human Services:
Note: GAO comments supplementing those in the report text appear at the
end the this enclosure.
Department Of Health & Human Services:
Office Of The Secretary:
Assistant Secretary for Legislation:
Washington, DC 20201:
October 8, 2009:
David Gootnick:
Director, International Affairs and Trade:
U.S. Government Accountability Office:
441 G Street N.W.:
Washington, DC 20548:
Dear Mr. Gootnick:
Enclosed are comments on the U.S. Government Accountability Office's
(GAO) report entitled: Poverty Determination in U.S. Insular Areas
(GAO- 09-1041R). The Department appreciates the opportunity to review
this report before its publication.
Sincerely,
Signed by:
Andrea Palm:
Acting Assistant Secretary for Legislation:
General Comments From The Department Of Health And Human Services
(MIS) On The Government Accountability Office's (GAO) Draft Report
Entitled: Poverty Determination In U.S. Insular Areas (GAO-09-1041R):
The Office of the Assistant Secretary for Planning and Evaluation
(ASPE) appreciates the opportunity to review and comment on the
Government Accountability Office's (GAO) draft report, which examines
the Census Bureau's poverty thresholds and the Department of Health and
Human Services (HHS) poverty guidelines and how they are applied to the
insular areas. The draft report also describes one specific procedure
that could potentially be used to develop thresholds and guidelines
specific to the insular areas”a procedure involving federal employee
cost-of-living allowance figures. ASPE's comments on the draft report
address three main topics: (1) the quality of the federal employee cost-
of-living allowance figures as a possible data base for adjusting the
federal poverty measure; (2) the use of the federal salary figures to
develop poverty guidelines for Alaska and Hawaii in 1966-1970; and (3)
the probability that poverty thresholds for the insular areas
calculated on the same basis as Mollie Orshansky's poverty thresholds
for the continental U.S. would be lower than those for the continental
U.S.
Federal Employee Cost-of-Living Allowances”Not a Data Base of
Acceptable Quality:
Over the decades, there have been several occasions on which poverty
measurement professionals have indicated that they believe that the
federal employee cost-of-living allowance figures are not a data base
of sufficiently good statistical quality to be used in adjusting the
federal poverty measure. The Office of Economic Opportunity (0E0)
employees familiar with the development of the Alaska/Hawaii poverty
guidelines subsequently concluded that the federal employee cost-of-
living allowances were among the data bases that were not of
sufficiently good quality to be used in adjusting the poverty measure.
See comment 1.
0E0 began issuing poverty guidelines in December 1965. The first
poverty guidelines were the same for all 50 states (and the District of
Columbia). In this administrative context, 0E0 decided during the 1966-
1970 period to institute separate poverty guidelines for Alaska and
Hawaii. The new guidelines were 25 percent (Alaska) and 15 percent
(Hawaii) higher than the original guidelines.[Footnote 22] 0E0 never
published any explanation of how or from what source these percentage
differentials were derived. However, a later unpublished memorandum
from three 0E0 employees indicated that 0E0 derived these percentage
differentials from the Civil Service Commission's (CSC) federal
employee pay (geographic) cost-of-living allowance differentials
for Alaska and Hawaii.
In 1976, a federal interagency Poverty Studies Task Force published a
major study on poverty measurement, The Measure of Poverty.[Footnote
23] The Poverty Studies Task Force included two of the 0E0 employees
who knew that 0E0 had used the CSC federal salary figures to derive the
Alaska and Hawaii guidelines. Because of considerable interest in the
general issue of geographic cost-of-living differences, this study
devoted considerable effort to examining this issue. "The conclusion of
this extensive analysis is that although there may be geographic
differences in the cost of living, there is no known way to make
satisfactory geographic adjustments to the poverty cutoffs" (p. 82).
"None of [the] existing data sources [examined] is of sufficient size
and quality to support the kind of detailed analysis that Would be
required to establish valid geographic equivalences [for poverty
measurement]" (p. 49).
Although it has been four decades since 0E0 used the CSC figures to
institute separate guideline figures for Alaska and Hawaii, the Census
Bureau has never used the CSC figures to institute separate poverty
threshold figures for those states.
In addition, in 1995 the Panel on Poverty and Family Assistance
appointed by the National Research Council published a 501-page report,
Measuring Poverty: A New Approach[Footnote 24], with a proposed new
approach for developing an official U.S. poverty measure. The report
included an extensive discussion (pp. 182-203) on how the proposed new
poverty measure should be adjusted for geographic cost-of-living
differences. This discussion did not mention the federal employee cost-
of-living allowance figures as a possible acceptable data source for
adjusting the poverty measure for geographic cost-of-living
differences.
Furthermore, also in 1995 the U.S. General Accounting Office (as it was
then called) issued a report, Poverty Measurement: Adjusting for
Geographic Cost-of-Living Difference (GAO/GGD95-64, March
1995)[Footnote 25]. For the report, GAO identified twelve methodologies
that could potentially be used in adjusting poverty measures for
geographic cost-of-living differences, and presented them to fifteen
experts for their review. None of the twelve methodologies used or
referred to the federal employee cost-of-living allowance figures.
ASPE does not believe that it would be appropriate to use the current
Office of Personnel Management (OPM”the successor to CSC) version of
those figures to adjust either version of the federal poverty measure
for the insular areas.
See comment 1.
Which Agency Used Federal Salary Figures to Develop Separate Poverty
Guidelines for Alaska and Hawaii?
The second paragraph and several other statements throughout the draft
report implicitly refer to adjusting poverty guidelines by the current
OPM federal employee cost-of-living allowance figures as "...the
approach that HHS currently uses to determine the Alaska and Hawaii
[poverty] guidelines." Strictly speaking, that reference is not
accurate.
As noted above, 0E0 used federal employee cost-of-living allowance
figures to institute separate poverty guideline figures for Alaska and
Hawaii during the 1966-1970 period. 0E0 and its successor agency, the
Community Services Administration (CSA), continued to update and
publish the poverty guidelines”including the higher Alaska and Hawaii
guidelines”each year until 1981[Footnote 26] without any explanation of
the higher Alaska and Hawaii guidelines nor any indication that federal
employee cost-of-living allowances were considered again each year in
calculating the Alaska and Hawaii differentials.
When HHS was assigned responsibility for updating the poverty
guidelines in 1982[Footnote 27], the Department calculated Alaska and
Hawaii guidelines using the 25 percent and 15 percent differentials
which it "grandfathered in" from the OEO/CSA guideline series. HHS did
not consult OPM documents to get figures to calculate Alaska and Hawaii
guidelines, and has continued to use the "grandfathered-in"
differentials to calculate Alaska and Hawaii guidelines since 1982. As
a result, the proposal in the GAO draft report to use OPM federal
salary figures to adjust poverty guidelines for insular areas is most
accurately described as an adaptation and update (using today's OPM
figures rather than 1960s CSC figures) of what 0E0 did to calculate
Alaska and Hawaii guidelines.
See comment 2.
Poverty Thresholds for Insular Areas Consistent with Orshansky's
Continental-U.S. Thresholds Would Probably Be Lower, Not Higher:
ASPE believes that if it were possible to construct poverty lines for
the insular areas that were conceptually consistent with the Orshansky
poverty thresholds, those insular area poverty lines would probably be
lower than the poverty thresholds for the continental U.S., not higher.
See comment 3.
In order to calculate poverty thresholds for the insular areas using
the same methodology that Mollie Orshansky used to calculate poverty
thresholds for the continental U.S., it would be necessary to have
economy food plans developed for those areas in 1961, and Household
Food Consumption Surveys for those areas taken in 1955. Such food plans
and such surveys do not exist. However, it is still possible to say
something about what the results of such calculations would probably
be. As can be seen in the table on the next page, median family incomes
for the insular areas for 1959 (the year closest to the dates of the
economy food plan and the Household Food Consumption Survey used) were
significantly lower than median family income for the continental U.S.
It is known from Engel's Law[Footnote 28] that for lower incomes, the
proportion of income spent on food is higher than for higher incomes.
For the continental U.S., the 1955 Household Food Consumption Survey
found that the average family spent about one third of its after-tax
money income on food. By Engel's Law, the corresponding food shares for
the insular areas for (approximately) 1955 would have been
significantly higher than one third. If one assumes (for illustrative
purposes) that the 1955 food share for one of the insular areas might
have been one half, then the corresponding "multiplier" (the figure by
which one multiplies the cost of a food plan to get a poverty
threshold) for that area would have been two, as compared with the
multiplier of three for the continental U.S. This means that the
poverty threshold for that insular area would have been significantly
lower than the threshold for the continental U.S..
Median Family Incomes for the U.S. and Insular Areas-1959[Footnote
29]:
(Alaska): $7,305);
(Hawaii): (6,366);
United States (50 states and D.C.) 5,660;
Guam: 4,549;
U.S. Virgin Islands: 2,243;
Puerto Rico: 1,268;
American Samoa: 770;
Northern Mariana Islands: N/A.
These median family income figures indicate that it is questionable to
assume that it is appropriate to simply take the ad hoc procedure for
developing guidelines for Alaska and Hawaii, and apply it to the
insular areas. Rather than being economically similar to the insular
areas, Alaska and Hawaii had 1959 incomes roughly three to nine times
as high as most of the insular areas; while Alaska and Hawaii had
incomes higher than the U.S. median, the insular areas had incomes
significantly lower than the U.S. median.
One method of developing a rough estimate of poverty lines for the
insular areas would be to simply assume that poverty lines should be
directly proportional to median family income figures”for instance, if
an area's median family income was half of the corresponding figure for
the U.S. as a whole, then the poverty line for that area would be 50
percent of the continental- U.S. poverty line.
See comment 3.
Another method of developing insular-area poverty lines from income
figures would be to make use of findings concerning the income
elasticity of the poverty line.[Footnote 30] For the U.S., there is
extensive evidence”from both "expert"-devised minimum budgets and
"subjective" low-income figures derived from Gallup Poll responses”that
successive poverty lines developed as absolute poverty lines tend to
rise in real terms as the real income of the general population rises.
See comment 3.
Rough-estimate poverty lines for different insular areas based on these
two methods range between 14 percent and 86 percent of the continental-
U.S. poverty line. (These results are in sharp contrast to the poverty
guideline figures for insular areas in the enclosure to the GAO draft
report based on the OPM federal salary figures; those guidelines
figures are between 114 and 125 percent of the continental-U.S. poverty
line.)
See comment 3.
Based on this analysis, ASPE finds no evidence to support the proposal
in the GAO draft report to have poverty guidelines for insular areas
between 14 and 25 percent higher than the 48-state poverty guidelines.
ASPE is not proposing that poverty guidelines for the insular areas
should actually be lowered from the 48-state guideline level. At the
same time, it would seem inequitable to give the insular areas higher
poverty guidelines than those for the 48 states when the standards of
living of the various insular areas are generally so much lower than
that of the 48 states.
See comment 3.
[End of section]
Enclosure III: GAO Comments:
The following are GAO's responses to HHS's letter, dated October 8,
2009.
1. HHS states that the federal employee nonforeign area COLAs published
by OPM are not of sufficient statistical quality for use in adjusting
the federal poverty guidelines. HHS cites as evidence the fact that
OPM's database for the nonforeign area COLAs was not recommended in
studies by the Poverty Studies Task Force in 1976, the Panel on Poverty
and Family Assistance in 1995, and GAO in 1995 as a potential data
source for adjusting the poverty measure for geographic cost-of-living
differences. However, the three studies that HHS cites explored the
feasibility of adjusting the federal poverty measure for geographic
differences in the 50 states. The nonforeign area COLAs' application
has been restricted to the insular areas, Alaska, and Hawaii; these
COLAs have not been developed as a database to be used throughout the
United States.
HHS also states that it does not believe that it would be appropriate
to use the current OPM nonforeign area COLA data to adjust the poverty
guidelines for the insular areas. We considered these data because they
were used to construct the Alaska and Hawaii poverty guidelines in 1970
and because these are the only poverty guidelines that have been
established specific to any geographic areas. However, we are not
making a recommendation for the use of this approach.
2. HHS comments that it adapts and updates, rather than "determines"--
as the draft of our report stated--the Alaska and Hawaii poverty
guidelines. HHS notes that it inherited the Alaska and Hawaii guideline
series in 1982 from OEO, which originally instituted these guidelines
in 1970. We changed the wording of our report to reflect this fact. HHS
also states that it has not consulted OPM documents to get figures to
calculate the guidelines for Alaska and Hawaii. Our report acknowledges
this point in footnote 16.
3. HHS moves beyond discussing whether there are differences in the
cost of living between insular areas and the 48 contiguous states and
focuses on alternative approaches for setting poverty thresholds. HHS
observes that if historical data did exist for the insular areas and
the methodology used to construct the original thresholds were applied,
poverty thresholds for those areas would likely be lower, because
median incomes in the insular areas historically have been
significantly lower than those in the states and, as a result, the
share of family food consumption as a fraction of insular area family
expenditures would be higher.[ 31] We note that although the 1955 food
share in the insular areas might have been higher than in the
contiguous states, it is also likely that if there were 1964 food plans
for the areas, the cost of these food plans would also be higher
because food is imported in those areas. Therefore, the higher cost of
the food plans could diminish the effect of the higher food share in
the insular areas, rendering uncertain the overall level of the insular
areas' specific poverty thresholds.
HHS also provides rough estimates of poverty thresholds based on two
alternative methods. First, it estimates poverty thresholds as a
percentage of median family income. We note that using this approach
would lead to lower poverty thresholds for any state or other
jurisdiction with lower median household incomes. The consequence would
be that families in poorer states or other jurisdictions would have
less access to need-based federal assistance than would families with
the same income in more affluent areas.
Second, it estimates poverty thresholds based on the responsiveness of
poverty thresholds to changes in inflation-adjusted income over time.
We note that under this method, areas with lower median household
income and higher cost of living would have even lower poverty
thresholds than the thresholds established with the first alternative
approach that HHS describes. The consequence would be that families in
poorer areas with higher cost of living would have a further reduction
in access to federal assistance.
HHS states that using these two approaches would produce poverty
thresholds for different insular areas ranging between 14 and 86
percent of the current U.S. poverty thresholds. HHS says 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.
[End of section]
Enclosure IV: Comments from the Census Bureau:
Note: GAO comments supplementing those in the report text appear at the
end the this enclosure.
United States Department Of Commerce:
The Under Secretary for Economic Affairs:
Washington, D.C. 20230:
October 15, 2009:
Mr. David Gootnick:
Director, International Affairs and Trade:
Government Accountability Office:
441 G Street, NW:
Washington, DC 20548:
Dear Mr. Gootnick:
Thank you for the opportunity to provide comments on the draft report
entitled "Poverty Determination in U.S. Insular Areas" (GAO-09-1041R).
We have no comments on the background section of the draft report, as
it appears to accurately describe the development and use of U.S.
poverty thresholds.
We would, however, urge the Government Accountability Office (GAO) to
study the issue of poverty guidelines for the insular areas further
before making recommendations that would increase poverty guidelines by
a significant amount in most of these areas. The 1995 National Academy
of Sciences report, "Measuring Poverty: A New Approach," suggested that
differences in housing costs may represent a viable basis for adjusting
poverty thresholds when more comprehensive inter-area price adjustments
are not available. The reasons for this suggestion include: 1) housing
costs represent a significant portion of poverty budgets; 2) housing
costs tend to differ more across geographic areas than other consumer
items; and 3) housing cost differentials, across geographic areas, are
often available to a greater extent than geographic cost differentials
of other consumer items.
See comment 1.
The 2008 American Community Survey contains information about 2008
housing costs in Puerto Rico, and Census 2000 results include housing
data for Puerto Rico and all of the other insular areas. In addition,
Housing and Urban Development Fair Market Rents are available for most
of these areas. We suggest that GAO should examine these data to
ascertain whether the suggested Office of Personnel Management COLA-
based adjustments seem reasonable in light of housing-cost
differentials based on U.S. Census Bureau data and other sources.
See comment 2.
Again, thank you for the opportunity to comment on this draft report.
Sincerely,
Signed by:
Rebecca M. Blank:
GAO Comments:
The following are GAO's comments on the Census letter, dated October
15, 2009.
1. Census urges us to further study the poverty guidelines in the
insular areas before making any recommendations that would increase
those guidelines by a significant amount. Note that we have not made
any recommendations in this report.
2. Census suggests that we compare OPM's foreign area COLAs with
insular area housing-cost differentials based on data such as the 2008
American Community Survey (ACS), Census 2000, and the Housing and Urban
Development Fair Market Rents. We note the following:
* We did not consider alternative approaches for geographic cost-of-
living adjustment of the poverty guidelines, such as the use of housing
data, because we focused only on the approach used in 1970 to construct
the Alaska and Hawaii poverty guidelines and because these are the only
poverty guidelines that have been established specific to any
geographic areas.
* OPM analysis includes a housing cost component that is adjusted for
differences in the quality of housing, using statistical analysis. OPM
then aggregates housing and other types of expenditures in constructing
its cost-of-living index.
* GAO has identified challenges in the approach used to estimate the
Housing and Urban Development Fair Market Rents and has recommended
ways to improve the accuracy of Fair Market Rents estimates.[Footnote
32]
Enclosure V: GAO Contact and Staff Acknowledgments:
GAO Contact:
David Gootnick, (202) 512-3149 or gootnickd@gao.gov:
Staff Acknowledgments:
In addition to the contact named above, Emil Friberg (Assistant
Director), Gergana Danailova-Trainor, Kathleen Scholl, Thomas McCool,
Marissa Jones, Reid Lowe, and Kathryn Larin made key contributions to
this report.
[End of section]
Footnotes:
[1] According to the U.S. Census Bureau (Census), in 1999, the
percentage of individuals in poverty ranged from 23 in Guam--nearly
twice as high as the continental U.S. poverty rate of 12 percent--to 61
in American Samoa (see encl. II). For more information about reliance
on federal programs in American Samoa, the CNMI, Guam, and the USVI,
see GAO, U.S. Insular Areas: Economic, Fiscal, and Financial
Accountability Challenges, [hyperlink, http://www.gao.gov/cgi-
bin/getrpt?GAO-07-119] (Washington, D.C.: Dec. 12, 2006).
[2] This reasoning does not take into account any differences in
consumption patterns between federal employees and insular area poor
populations. In addition, the OPM nonforeign area cost-of-living
allowances for federal employees are limited by statute to 25 percent
of basic pay.
[3] The U.S. government's nonforeign area COLAs are adjustments to
basic pay for federal white-collar workers based on differences in
living costs between Alaska, Hawaii, and the insular areas (Guam and
the Northern Mariana Islands, Puerto Rico, and the U.S. Virgin Islands)
and Washington, D.C; OPM does not classify American Samoa as a
nonforeign COLA area. To set the nonforeign area COLA rates, OPM
surveys the prices of more than 300 items, including goods and
services, housing, transportation, and miscellaneous expenses, in each
of the areas and in the Washington, D.C., metropolitan area. Under Pub.
Law No. 111-82, National Defense Authorization Act for Fiscal Year
2010, Oct. 29, 2009, the nonforeign COLA will be phased out and
locality pay will be phased in over a 3-year period starting Jan. 1,
2010. The legislation also freezes the COLA rates that are in effect on
the day of enactment of the act. The nonforeign area COLAs are a
different adjustment than annual inflation adjustments (also commonly
known as COLAs). The nonforeign area COLAs also differ from federal
locality pay--that is, comparability payments in addition to basic pay,
with the amount of locality pay based on differences between federal
and private sector pay rates for particular sets of jobs within
particular pay areas. In contrast to locality pay, nonforeign COLAs are
not federally taxed and are not considered basic pay in determining an
employee's retirement benefits, life insurance, or premium pay.
[4] The original thresholds were developed in 1963-1964 by Mollie
Orshansky, an economist working for the Social Security Administration
(SSA). Orshansky used somewhat different procedures to calculate
thresholds for one-and two-person units, to allow for small families'
relatively larger fixed costs.
[5] In measuring poverty, Census considers all before-tax cash income,
except capital gains, and excludes all noncash benefits, such as food
stamps.
[6] Office of Management and Budget, Statistical Policy Directive No.
14: Definition of Poverty for Statistical Purposes (Washington, D.C.,
1978).
[7] For a one-person family unit, Census publishes two separate
thresholds for unrelated individuals younger than 65 years and 65 years
or older. For a two-person family unit, Census publishes four
thresholds based on age: (1) both individuals are younger than 65
years; (2) both individuals are 65 or older; (3) one individual is
younger than 65 years and the other is a related child younger than 18
years; and (4) one individual is 65 years or older and the other is a
related child younger than 18 years. For a family unit of three or more
people, Census publishes 42 thresholds that vary by family size and the
number of related children who are younger than 18 years.
[8] See [hyperlink,
http://www.census.gov/hhes/www/poverty/povdef.html].
[9] A federal interagency committee met in 1980-1981 to revise the
poverty definition. These modifications affected the number of poor and
poverty rate only slightly and were documented in P60-133,
Characteristics of the Population Below the Poverty Level: 1980. See
[hyperlink, http://www.census.gov/hhes/www/povmeas/ombdir14.html].
[10] According to HHS, a number of federal programs use the poverty
guidelines, or percentage multiples of the guidelines, as an
eligibility criterion, while others do not. Agencies that use the
guidelines as a criterion compare them with varying types of income
(e.g., before tax or after tax, gross or net) to determine eligibility.
For more detailed information about federal programs that use the
guidelines for this purpose, see Congressional Research Service, Cash
and Noncash Benefits for Persons with Limited Income: Eligibility
Rules, Recipient and Expenditure Data, FY2002-FY2004, Order Code
RL33340 (Washington, D.C., Library of Congress, 2006).
[11] HHS updates the poverty guidelines at least annually as required
by 42 U.S.C. 9902(2) and publishes the guidelines in the Federal
Register.
[12] In 1970, the Office of Economic Opportunity instituted separate
poverty guidelines for Alaska and Hawaii that are higher than the
continental U.S. (48-state) guidelines--respectively, 25 percent and 15
percent higher than the national guidelines--in view of substantially
higher costs of living in those states (see Federal Register, vol. 35,
no. 70, April 10, 1970, p. 5948). The percentage adjustment of the
poverty guidelines has remained constant since 1970.
[13] The Bureau of Labor Statistics does not collect data to construct
CPIs specific to the insular areas. In addition, the bureau does not
collect data from the insular areas to include in the national CPI
calculation.
[14] See "Annual Update of the HHS Poverty Guidelines," Federal
Register, vol. 73, no. 15, January 23, 2008, p. 3972.
[15] CPIs have been computed periodically for the insular areas by
other sources; however, these CPIs cannot be used to construct
inflation-adjusted thresholds for the insular areas because no 1964
insular area thresholds are available for use as baselines.
[16] The adjustment factors for Alaska and Hawaii guidelines were set
by the Office of Economic Opportunity in 1970; while current COLAs
could be used to update and adjust the level of those guidelines on an
annual basis, the guidelines have not been updated with more recent
cost-of-living data. We considered the approach used in constructing
poverty guidelines for Alaska and Hawaii because these are the only
poverty guidelines that have been established specific to any
geographic areas; we did not examine the universe of possible
alternative approaches to defining poverty guidelines for the insular
areas.
[17] Likewise, the method initially used to establish the guidelines in
Alaska and Hawaii does not take into account any differences in
consumption patterns between Alaska and Hawaii federal employees and
the poor populations in these states.
[18] Some programs that use formulas to distribute funds to the insular
areas base these allocations on total population size rather than on
poverty statistics.
[19] For details on how the annual limits are established, see GAO,
Medicaid and CHIP: Opportunities Exist to Improve U.S. Insular Area
Demographic Data That Could Be Used to Help Determine Federal Funding,
[hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-09-558R] (Washington,
D.C.: June 30, 2009).
[20] U.S. Department of Health, Education, and Welfare, The Measure of
Poverty: A Report to Congress as Mandated by the Education Amendments
of 1974 (Washington, D.C: 1976), available at [hyperlink,
http://www.census.gov/hhes/www/povmeas/pdf/measureofpoverty.pdf];
Constance F. Citro and Robert T. Michael (ed.), Measuring Poverty: A
New Approach (Washington, D.C.: National Academy Press, 1995),
available at [hyperlink,
http://www.census.gov/hhes/www/povmeas/toc.html]; and GAO, Poverty
Measurement: Adjusting for Geographic Cost-of-Living Difference,
[hyperlink, GAO/GGD-95-64] (Washington, D.C.: March 9, 1995).
[21] HHS bases the argument on the empirical relationship discovered by
Engel that poorer families spend a larger fraction of their income on
food than richer families. We note that although the 1955 food share in
the insular areas might have been higher than in the contiguous states,
it is likely that if there were 1964 food plans for the areas, the cost
of these food plans would also be higher because food is imported in
those areas. Therefore, the higher cost of the food plans could
diminish the effect of the higher food share in the insular areas,
rendering uncertain the overall level of the insular areas‘ specific
poverty thresholds.
[22] See Israel Putnam, "Poverty Thresholds: Their History and Future
Development" [November 1970], pp. 277, 280, and 281 in Mollie Orshansky
[compiler], Documentation of Background Information and Rationale for
Current Poverty Matrix [hyperlink,
http://www.census.nov/hhes/www/povmeas/pdf/tp_i.pdf] (Technical Paper I
of The Measure of Poverty), Washington, D.C., U.S. Department of
Health, Education, and Welfare, 1977; and U.S. Office of Economic
Opportunity, "Guidelines for Alaska and Hawaii," Federal Register, Vol.
35, No. 70, April 10, 1970, p. 5948.
[23] See U.S. Department of Health, Education, and Welfare, The Measure
of Poverty: A Report to Congress as Mandated by The Education
Amendments of 1974 [hyperlink,
http://www.census.gov/hhes/www/povmeas/pdf/measureofpoverty.pdf]
Washington, D.C., U.S. Government Printing Office, April 1976.
[24] See Constance F. Citro and Robert T. Michael (editors), Measuring
Poverty: A New Approach [hyperlink,
http://www.census.aov/hhes/www/povmeas/toc.html], Washington, D.C.,
National Academy Press, 1995.
[25] See U.S. General Accounting Office, Poverty Measurement: Adjusting
for Geographic Cost-of-Living Difference ([hyperlink,
http://www.gao.gov/cgi-bin/getrpt?GAO/GGD-95-64]) [hyperlink,
http://www.gao.gov/archive/1995/ge95064.pdf], March 1995.
[26] See Community Services Administration, "45 CFR Part 1060”General
Characteristics of Community Action Programs; CSA Income Poverty
Guidelines," Federal Register, Vol. 46, No. 43, March 5, 1981, pp.
15270- 15271.
[27] See Department of Health and Human Services, Office of the
Secretary, "Annual Revision of Poverty Income Guidelines," Federal
Register, Vol. 47, No. 69, April 9, 1982, pp. 15417-15418.
[28] Ernst Engel, a 19th-century German statistician, formulated the
empirical relationship which became known as Engel's Law: "The poorer
is a family, the greater is the proportion of the total outgo which
must be used for food....The proportion of the outgo used for food,
other things being equal, is the best measure of the material standard
of living of a population." (See Carle C. Zimmerman, "Ernst Engel's Law
of Expenditures for Food," Quarterly Journal of Economics, Vol. 47, No.
1, November 1932, P. 80.)
[29] See U.S. Bureau of the Census, Statistical Abstract of the United
States 1969 (90th Annual Edition), Washington, D.C., U.S. Department of
Commerce, pp. 324 and 814.
[30] See Citro and Michael (cited in footnote 3), pp. 140-141 and 143-
144; and G. M. Fisher, "Is There Such a Thing as an Absolute Poverty
Line Over Time? Evidence from the United States, Britain, Canada, and
Australia on the Income Elasticity of the Poverty Line" [hyperlink,
http://www.census.gov/hhes/www/povmeas/papers/elastap4.html] (Poverty
Measurement Working Paper, U.S. Census Bureau web site), August 1995.
[31] HHS bases the argument on the empirical relationship discovered by
Engel that poorer families spend a larger fraction of their income on
food than richer families (see comments from HHS, footnote 7).
[32] See GAO, Rental Housing: HUD Can Improve Its Process for
Estimating Fair Market Rents, [hyperlink, http://www.gao.gov/cgi-
bin/getrpt?GAO-05-342] (Washington, D.C.: March 31, 2005).
[End of section]
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