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Prof's research reveals California to lose $2.1 billion

June 7, 2005

Image of the State of CaliforniaCalifornia will suffer more than a $2.1 billion loss in federal funding for grant programs that aid the poor in 2005-2006, according to a report produced by economics Professor Michael J. Potepan.

The report, presented to the state Senate Office of Research in Sacramento, describes the misallocation of federal funds due to alleged inaccurate poverty estimates. It proposes to remedy the situation by using a more refined measure.

"People have been working for years to adopt a better poverty measure," Potepan says. "It is widely acknowledged that the existing measure has a lot of methodological and conceptual kinds of problems which may potentially lead to inaccuracy."

The report -- commissioned by the Center for California Studies at California State University, Sacramento -- includes findings that reveal California to be among 23 under-funded states using outdated poverty measurements that the government has used since the early 1960s. With the current system, California's low-income families are at a higher disadvantage than any other state in the country, the report asserts.

Potepan says the current system is a "quick and slick sort of simple device" that does not take into account regional or state variations in housing and other expenses, creating overestimated poverty levels in some states and underestimated ones in others. According to the report, such programs as Medicaid, Head Start, the National School Lunch Program and Temporary Assistance for Needy Families will be either over- or under-funded for years to come.

"Every effort should be made to encourage the Office of Management and Budget and the Bureau of the Census to officially adopt an improved alternative poverty measure to replace the outmoded one," Potepan writes in the report.

His proposed solution is to implement a method developed by the National Academy of Science and Census Bureau, which he believes to be much more accurate.

Potepan says that this method has not yet been put to use because of its high cost and potential political ramifications.

Potepan presented his report to the Senate Office of Research in April. Read the report.

-- Student Writer Lisa Rau with Matt Itelson


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Last modified June 7, 2005 by University Communications