Despite law, Colorado doesn’t block welfare withdrawals at liquor stores, casinos

By Arthur Kane | Watchdog.org

For nearly two decades, Colorado law has prohibited the use of welfare cards at casinos and liquor store ATMs, and in 2012 federal law also required states to have policies prohibiting the withdrawals. But in the past two years at least $489,000 in taxpayer money has been withdrawn in exactly those Colorado locations, Watchdog.org found.

The Colorado Department of Human Services, which manages the program, knows about the withdrawals but hasn’t punished recipients who violate the law or blocked the use of cards at casino and liquor store ATMs.

Welfare recipients withdrew about $340,000 in taxpayer cash at liquor store ATMs and another $149,000 at the state’s casinos in the past two years, according to a Watchdog.org computer-assisted analysis of a welfare ATM database. State law doesn’t require liquor license holders or casino owners to monitor patrons who use their ATMs so store, casino and bar owners haven’t done anything wrong.

But the state is required to prohibit the transactions, and CDHS provided a letter with the database CD that shows state staff clearly knows about the violations of state and federal laws.

“Please note that fewer than one per cent of the transactions detailed occurred in prohibited locations for an amount less than one percent of the benefit dollars accessed,” wrote CDHS spokeswoman Liz McDonough.

State and federal law doesn’t say it’s okay to allow withdrawals in prohibited locations if the amount is only a small portion of the roughly $85 million in annual cash benefits taxpayers provide to Colorado welfare recipients.

“Clients shall not be allowed to access cash benefits through the electronic benefits transfer service from automated teller machines in this state located in licensed gaming establishments … or retail establishments licensed to sell malt, vinous, or spirituous liquors,” Colorado law says. Additionally, the federal law requires states to prohibit welfare withdrawals in casinos, liquor stores, adult businesses and other locations.

State Rep. Tim Dore, R-Elizabeth, said CDHS needs to enforce the laws.

“They are thumbing their nose at Colorado citizens who pay taxes,” he said. “They say, ‘We aren’t going to enforce it and make sure the cards are used for intended purpose — to make sure there is food on the table.’”

Levetta Love, director of the CDHS Office of Economic Security, said the department recently wrote rules for the federal government on how to stem the prohibited withdrawals and have contacted — though not punished — people who used the cards in prohibited locations. Welfare recipients must agree not to use the card at casinos and liquor stores when they receive the cards, she said.

“No one lost benefits at this time,” she said. “The number of recipients accessing benefits in these locations is statistically insignificant.”

Despite Colorado state law requiring the prohibition of withdrawals since 1996, it appears Colorado human services officials only started to act after passage of the federal law, which would cut welfare grants to the state by 5 percent if state officials don’t implement and report the rules within two years.

“I don’t feel like it’s been on the books for a decade,” Love said when Watchdog.org asked her why the state hasn’t enforced Colorado law that has prohibited the practice for years.

The rules provided to federal officials seem to focus more on informing recipients they could lose benefits if they withdraw tax money at prohibited locations than finding a way to electronically block those transactions.

Love said she understands the benefit cards couldn’t be disabled without the cooperation of the ATM owner, but the state is working with other governments to determine if there’s a way to electronically disable the cards at casinos and liquor stores.

Dore said there has to be a way to block the ATMs at liquor store and casino locations even without ATM owners’ consent. “Other states have figured it out by talking to banks and financial institutions,” he said. “They found a way to do it.”

Colorado’s EBT contractor, JP Morgan Chase, declined comment.

In the past two years, welfare recipients withdrew $144,000 at businesses with tavern liquor licenses, including more than $1,500 at a Denver strip club named Dandy Dan’s, according to state records. Bars aren’t addressed in state law, but appear to be covered as “adult-oriented locations” in the federal legislation.

Some lawmakers tried to specifically include strip bars in a state bill, but it failed. HB11-1058 passed the Republican-controlled House, but the measure was killed in a Democrat-controlled state Senate committee despite having Democrats as the bill’s prime sponsors.

Liquor stores have the largest amount of withdrawals of welfare recipients accessing taxpayer money, the state database shows. Six liquor stores in the Denver metro area account for more than $100,000 in welfare cash withdrawals from their ATMs over the past two years, records show.

One with the largest amount is just down the block from Dandy Dan’s. Welfare recipients withdrew more than $16,000 at Barnum Liquors in the past two years, the state database shows. The largest amount was $20,053 at Tower Landing Liquors in Aurora, the database shows.

CDHS officials have argued that while a person might take out money at a location, he or she doesn’t necessarily use the money to buy booze or gamble.

However, Barnum was near other stores that also had ATMs, and the store doesn’t carry a selection of food products.

Bull Durham Casino in Black Hawk had the most welfare money withdrawn from its ATM for casinos, state records show. Nearly $35,000 was taken out in two years.

JACKPOT? State records show nearly $35,000 in welfare money was taken out at cash machines at this casino in the past two years.

Love said there might be legitimate reasons to take out welfare money at prohibited locations, like a casino worker who lives in a distant casino town that may not have another ATM nearby.

State law doesn’t provide exemptions for those situations, and human services officials seemed more concerned with recipients obtaining the tax money than preventing violations of state and federal law.

“We can’t prevent access to benefits,” Love said.

Dore said he will take up the issue during next year’s General Assembly or ask the audit committee to call for an audit.

“This is definitely an issue in the coming session,” he said. “It’s troubling and it’s offensive to a lot of Coloradans to find out what’s going on.”