Bill proposal could unravel Maryland’s benefits theft reimbursement program

After passing a first-of-its-kind law last year, Maryland became a national leader in welfare theft reimbursement. The state now refunds stolen food and cash assistance in full without federal restrictions.

But just one legislative session later, that could all be undone even as welfare theft continues at an alarming rate and the government is making little progress to stop it.

House Bill 1434 proposes limiting reimbursements to annually appropriated state funds, which opponents fear could lead to defunding the program entirely.

Last year, the Maryland Department of Human Services and legislators underestimated the financial toll benefits theft could take on Maryland. The $8 million the state thought it needed to refund quickly ballooned to $22 million.

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The department, which regularly touts the reimbursement program as a major accomplishment, has implored lawmakers for support so DHS can find a “fiscally responsible” way to replace stolen benefits.

Some lawmakers and advocates say the bill would instead allow future administrations to abandon the policy and leave theft victims without reimbursement, hampering a law that has reached 30,000 Maryland households.

“When is it the most dangerous time to apply brakes to a car? When it’s raining. I feel like that’s what this bill does,” said Maryland Rise Director Lisa Klingenmaier in a recent bill hearing.

The bill has been picking up steam in Annapolis. Last week, lawmakers moved the bill from the House to the Senate before the crossover deadline. This week, the Senate Finance Committee may decide if the bill makes it to the Senate floor. Legislators already voted the bill through the House Appropriations Committee.

The state has used federal funds for more than half of all reimbursements. Now, with federal dollars drying up in September, and little hope of renewed financial support from Congress, future reimbursements could rely chiefly on state coffers. Funding is likely secured for the next year, with Gov. Wes Moore proposing over $20 million for benefits theft reimbursement in the state’s budget.

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Advocates worry there won’t always be plentiful funding and benefits theft could outpace budgeted dollars. For example, under the proposed law, the state would have been limited to the initial budget of $8 million last year, leaving $14 million of thefts unreimbursed.

“Ultimately, that means a family is then left without the money to afford groceries, to meet their bills, and some really hard financial choices,” said Center for Law and Social Policy benefits expert Ashley Burnside.

Evolving language

As welfare theft swept the nation, Maryland was hit particularly hard. Benefits theft in the state skyrocketed from $90,000 in 2021 to over $22 million in 2023.

To combat this, Maryland legislators passed a more expansive law in April 2023 that would allow theft victims to receive reimbursement in perpetuity.

This February, Del. Robbyn Lewis put forward a revised bill that proposed “authorizing, rather than requiring” benefits theft reimbursement “subject to the limitations of the state budget.”

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Lewis, who also co-sponsored the original reimbursement bill, said the bill would give DHS the discretion to decide who would be reimbursed and for how much.

Lewis said changes like this are common clarifications to new law.

“What I’m fighting really hard to figure out as a legislator is whether or not we can build some sort of dedicated funding stream for the restoration of stolen ... benefits,” Lewis said. “That doesn’t exist yet.”

The initial draft did not mention creating dedicated funding.

By early March, Lewis amended the language after it “attracted a lot of energetic, thoughtful stakeholder engagement,” such as a letter signed by 34 nonprofit groups openly opposing the bill.

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The newer draft now requires the state to reimburse all eligible claims subject to appropriated state funds. It also mandates the social services department to establish a workgroup for creating a dedicated funding stream.

Uncertain entitlement status

“Does this maintain the program as an entitlement?” asked Del. Emily Shetty.

“Yes, it does,” Lewis responded, comparing the program to Medicaid.

Burnside, the social policy expert, said that could be a misleading comparison.

Medicaid is a federal entitlement program funded annually by both federal and state funds. Though state funds can fluctuate year to year, every eligible citizen will receive medical care. In essence, that’s what an entitlement program is, Burnside said, a program where everyone eligible receives the service.

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But that’s not the case for this proposed bill. If funding runs out, then reimbursements would be held until funding is renewed or claims could be disregarded entirely.

“Holding a claim doesn’t let you feed your family,” said the director of economic justice for the Homeless Persons Representation Project Michelle Salomon Madaio, who testified at the hearing.

DHS Secretary Rafael Lopez told lawmakers that stopping benefits theft is too big an issue for Maryland alone. He called it a national problem involving sophisticated criminal enterprises spanning the entire country.

“The point of all of these things are we cannot act fast enough to continue to reduce the theft, but need the federal government to be our partner,” Lopez said.

There also is likely no more federal funding for the program since Congress passed its annual spending bill last week without money set aside for reimbursements. With a deadlocked U.S. legislature, Lopez told state lawmakers, the situation leaves DHS having to “plan prudently” for the “the potential sunset of federal government funds.”

Lopez told lawmakers that the department is actively working with federal law enforcement, namely the Central Intelligence Agency, the Federal Bureau of Investigation, and the Secret Service, to investigate these crime rings and bring thieves to justice.

One reason benefits theft continues is that common security features used in the financial sector haven’t been implemented.

Consumer credit and debit cards have encrypted chips that shield them from skimming devices at ATMs or other card readers. Electronic benefits cards don’t have these chips, leaving them more vulnerable. DHS attributes the bulk of welfare theft to skimming.

The state has a request for proposal out to contractors to install chips onto EBT cards; however, it could take months to update the cards, Lopez said in a hearing.

In an effort to stem thefts, DHS launched a card-locking feature that freezes all transactions on the card.

However, the security feature has had slow adoption, according to Maryland Hunger Solutions advocate JD Robinson. He said in a bill hearing that his clients often forgo card-locking because they struggle to maintain a regular internet connection or don’t have access to a smartphone.

“However, despite all of these implementation features, theft can still occur, which is why it’s paramount we maintain the law as it is, guaranteeing a full reimbursement to families and households,” Robinson said.

Correction: This story has been updated to correct the spelling of Ashley Burnside’s first name.

Brenna Smith

brenna.smith@thebaltimorebanner.com