Budget and Spending:

Poverty Determination in U.S. Insular Areas

GAO-10-240R: Published: Nov 10, 2009. Publicly Released: Nov 10, 2009.

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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. 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.

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