Federal Social Service Spending Creates a Sense of Entitlement Among Bureaucrats

Last month, the Department of Housing and Urban Development (HUD) suspended funding to the Los Angeles Homeless Services Authority (LAHSA), which quickly sued to block the decision. The controversy raises an important question: to what extent are local bureaucracies entitled to federal funds?

In the 1960s, as the federal welfare state expanded dramatically, critics raised concerns that these generous new programs would foster a sense of entitlement among recipients. Access to welfare had traditionally been guided by the concept of the “deserving” and “undeserving” poor, but this was abandoned in the 1960s. “Need” was the only criterion that determined whether a person was “deserving” of assistance, and entitlement spending ballooned.

HUD appears to have resurrected the “deserving/undeserving” dichotomy with homelessness grants, applying it not to the intended beneficiaries but rather the bureaucracies that distribute it. LAHSA is undeserving of federal funds, according to the department’s press release, due to the “lack of financial management, internal controls, and safeguards against conflicts of interest” that have plagued the organization.

LAHSA’s lawsuit counters that it is deserving of federal funds because 11,000 “formerly homeless individuals and families” need housing assistance. It is noteworthy that LAHSA only pointed to the recipients of homelessness funding who are not counted as homeless, rather than the 73,000 homeless persons in the county. This represents a 10-percent increase in homelessness since 2020, during which time LAHSA received $944 million in federal funds.

In the first place, the conflict highlights the danger of relying on federal funds to provide social services. What the government gives, it can also take away, as the socialist LA councilmember and mayoral candidate Nithya Raman cogently pointed out. “This action by the federal government is exactly what I have been concerned about,” she said, “and why I have pushed for years for the city to build the capacity needed to manage our own contracts, programs and dollars.”

We might also question why taxpayers in, say, Houston, are obliged to finance Los Angeles homelessness programs. Harris County, where Houston resides, ostensibly follows the same “Housing First” homelessness strategy as Los Angeles, yet Harris County has successfully reduced homelessness to around 3,200 people, despite being the third-largest county in the country. Clearly, Houstonians have done a better job at electing responsible officials, yet they are forced to help pay for the failed policies in Los Angeles, where they have no political representation.

LAHSA’s lawsuit contests HUD’s accusations, and California officials have described the decision to pull funding as a partisan publicity stunt. Yet only last year, the LA County board of supervisors voted 4-0 to pull $300 million in funding from LAHSA after a pair of audits castigated the bureaucracy’s lack of transparency, poor financial accounting, and negligent oversight for programs and contracts.

Among the audits’ findings was that LAHSA’s master-lease program, which manages 772 apartments for the homeless, was significantly underwater because nearly a third of the units remained vacant. To cover their obligations for the empty rooms, LAHSA had to divert funding that was earmarked for other programs. The irony of this is staggering. Money that was supposed to benefit the homeless is instead paying for vacant apartments that were also supposed to benefit the homeless.

When poverty programs expanded in the 1960s, many people worried that by treating welfare spending as entitlements, beneficiaries would become permanently dependent on taxpayer support, instead of learning self-sufficiency and financial responsibility. Yet nobody considered that this problem might instead manifest among the local bureaucracies responsible for distributing those funds. Despite all of its widely acknowledged problems, LAHSA’s lawsuit indicates that it feels entitled to federal funds, regardless of its conduct or outcomes.

If LAHSA—or any social service organization—wants taxpayer support, it ought to be accountable for delivering positive outcomes. The federal government does not merely have a right to pull funding from failed bureaucracies; it has a duty to do so.