Corporate Welfare


April Goméz-Rodriguez with her three children.

July 27, 2011
Santa Fe Reporter


April Goméz-Rodriguez knows what to feed her family of five: olive oil instead of vegetable oil, fish instead of marked-down ground beef. But with a meager income supplemented by food stamps, she can’t always afford to make the right decisions.

“The one thing I get anxious about is going to the grocery store,” she says. “I would pick and choose what I would get. But I wouldn’t limit myself about things we needed, like vegetables and bread. I would make sure we had enough.”

Goméz-Rodriguez and her new husband are supporting three children on two jobs, at which they make a combined $18 per hour but she anticipates that, in the coming months, she’ll lose the federal food stamp benefits that help her pay for those vegetables. She’s now returning to a full-time job as an accounting specialist at an Albuquerque country club and soon will have to report a higher income to the state than when she was on unpaid maternity leave.

“I believe it’s a system that keeps you screwed or screwed,” Goméz-Rodriguez says. If you’re poor, she explains, “They might help you. But if you make too much, you don’t get help.”

The “they” in this scenario is the US Department of Agriculture, which administers food stamp benefits to low-income families and individuals nationwide. But there’s another player with a big stake in the food-stamp industry: JPMorgan Chase.

More than 428,000 New Mexicans rely on an Electronic Benefits Transfer card to access benefits that help pay for their groceries. JPMorgan Chase, the largest provider of EBT services in the country, has managed to turn this plastic lifeline into a thriving business by contracting with state governments to run the EBT program.

New Mexico, along with 25 other states across the country, contracts with the bank to provide EBT card services to participants in the Supplemental Nutrition Assistance Program (SNAP), commonly known as the food stamp program.

The state’s current contract with the bank rings in at $13.7 million dollars over eight years, which amounts to approximately $1.7 million per year for the bank. New Mexico has contracted with JPMorgan Chase since 1998.

The number of caseloads and the projected caseload growth determine the contract price so the greater the number of food stamp recipients, the greater the bank’s contract value.

By a variety of measures, New Mexico is a particularly fertile ground for EBT service providers. According to the US Census Bureau’s most recent figures, New Mexico tied with Washington, DC, for the third-highest poverty rate in the nation: 17.5 percent.

Between April 2010 and April 2011, the state also saw a 21.2 percent increase in the number of food stamp recipients, from 353,748 to 428,732, according to a June 30 USDA report.

JPMorgan’s contract has increased accordingly: On May 12, the bank received a $500,000 bump “to cover increase in caseload,” according to the New Mexico Sunshine Portal. And though EBT contracts aren’t the bank’s only source of income, JPMorgan Chase Bank, National Association, the subsidiary that handles electronic financial services, including EBT contracts, earned a whopping $11.8 billion in net income last year.

Critics of this partnership say JPMorgan Chase’s for-profit model is at cross purposes with a government program designed to help the state’s poorest citizens. They point to the bank’s hand in the foreclosure crisis and $25 billion federal bailout paid with taxpayer money that has left 14 million people unemployed and 44 million dependent on food stamps.

“It is shocking and offensive that they are now profiting from the unemployment that they helped to cause,” Mary Bottari, director of the Real Economy Project with the Center for Media and Democracy, tells SFR. “They get paid more money the higher the unemployment rate goes. There are some services that should not be privatized, and this is one of them.”

Despite these concerns, the company says that “outsourcing” these services actually increases efficiency and cuts costs for states like New Mexico.

“For governments, [EBT cards] are a tool for cost reduction, fraud control, greater accountability and improved services,” a JPMorgan Chase spokesperson who did not give her name says. “In contrast, checks and food stamps are labor-intensive, expensive to issue and replace, easily lost or stolen, and subject to forgery.”

And according to New Mexico Human Services Department Communications Director Matt Kennicott, JPMorgan offers the state a great product.

“[JPMorgan] was awarded the bid by offering competitive pricing and comprehensive services and support,” Kennicott writes in an email to SFR. “They have a vast amount of experience with this service and provide the same service to many other states.”

But critics maintain that the issue isn’t whether JPMorgan can help cut inefficiencies and costs, but rather that its primary interest is its own bottom line. This tension, they say, creates a cycle of government dependence driven by corporate interest.

“I don’t think that these types of government services should be contracted to any for-profit company,” Enrique Cardiel, a volunteer organizer with La Raza Unida Party, tells SFR. “Government is there to serve people. When you give that responsibility to a company whose purpose is to create a profit, you really pervert the whole sense of government being for the people.”

A deepening recession, coupled with a national unemployment rate hovering stubbornly around 9 percent, foreshadows increases in EBT contracts for JPMorgan Chase.

Indeed, the company anticipates a steady growth in food stamp recipients, JPMorgan Chase Managing Director of Treasury Services Christopher Paton told Bloomberg News last October.

That growth is tied to other factors, too. Nationally, approximately 40 percent of food stamp recipients are employed. In New Mexico, 37 percent are but incomes on both the national and state level have been falling since 2008, according to income reports from the Census Bureau. As a result, working families like Goméz-Rodriguez’ still can’t make ends meet.

“This will really impact Raza because it’s a continual exploitation of the poverty we live in,” Cardiel says. Roughly 50 percent of New Mexico food stamp recipients are Latinos.

“This contract is playing on people’s valid complaints and critiques of government to create anti-family and anti-working-class policies,” Cardiel continues. “It is destroying a whole way of life where people can get the support they need to live quality lives.”

Goméz-Rodriguez knows this, and it informs her ultimate goal: to be free of food stamp support once and for all. To that end, she’s currently pursuing a bachelor’s degree in criminology and psychology at the University of New Mexico.

“I’m grateful to be on food stamps, but I can’t wait until the day I don’t have to rely on it,” she says. “One of these days, I hope to get off of it. I don’t want to rely on it forever.”

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