A young mother struggles with an uncooperative fold-up stroller as she grips an even more uncooperative toddler trying to bolt to the door of the bus. Wrapping her five-month-old baby in a thin quilt, she braces against a cold wind gusting down the sidewalk. On the way to the currency exchange to pick up her public aid check, she makes a mental list of the money orders she must buy to pay the bills that must be paid: rent, utilities, phone. By the time she has paid $5.30 to the currency exchange to cash her government check and 50 cents for each of the money orders, the young mother has spent enough to have bought baby food for several days. Expensive as these transactions are to her meager budget, she has few choices but to live in a cash culture.

This scene is fictional but is based on the experiences of thousands of Illinois public aid recipients whose checks are delivered directly to currency exchanges for pickup. According to Doug Dobmeyer, executive director of the Public Welfare Coalition, and verified by Dean Schott of the Illinois Department of Public Aid, the majority of public aid recipients are single mothers with two children. Smart Money, a new program initiated by state Treasurer Patrick Quinn and joined by the Illinois Department of Public Aid with the cooperation of the state Comptroller's Office, will give government assistance recipients a choice in where their checks are sent. Smart Money, says Greg Wass of the Treasurer's Office, is a voluntary program that should make it easier for public aid recipients to deposit their monthly payments directly into their own checking accounts at a bank of their choice.

Wright wants to make sure that support systems are in place so that public aid recipients will not be penalized if something goes wrong

By law, direct deposit has been available to public aid recipients for several years (see Illinois Revised Statutes,1991, ch. 10, sec. 10, par. 10). The impetus now is Treasurer Quinn's encouragement of banks to join the Smart Money initiative. Using the power and persuasion of his office, Quinn has signed up over 600 branches of banks statewide that will offer free checking accounts, with typically 10 free checks per month and no minimum balance, to public aid recipients who deposit government checks directly. The Treasurer's Office will act as a clearing house for questions about the program. It will also direct most of the educational support encouraging recipients to join.

Sen. Miguel del Valle (D-5, Chicago), a strong supporter of electronic banking services for the poor, has tried for several years to limit the amount that currency exchanges can charge for cashing public aid checks delivered directly to the exchanges. Sen. del Valle sponsored legislation (SB1584) last spring that, had it passed, would have limited currency exchanges to charging 90 cents for cashing government checks. Currently, exchanges can charge 90 cents plus 1.2 percent of the face value of a check.

Del Valle believes the Smart Money program will benefit public aid recipients by eliminating the $4 to $7 cost for cashing their checks at a currency exchange, plus the charges for money orders to pay their bills. In turn, del Valle says, the state will save money if recipients are able to make their checks "stretch further."

"This [Smart Money] is not the golden spoon," says Gary Gagerman, president of the Community Currency Exchange Association of Illinois. "Some people cannot even comprehend issuing 15 checks per month because they don't know how to balance their accounts." Sen. del Valle concedes that educating recipients in sound banking practices will be a necessary part of the Smart Money program. However, he feels certain that once people enter the direct deposit program, they will not only save fees paid at the currency exchange, but they will also learn money management skills that will serve them when they enter the job market and participate in mainstream banking services. The Department of Public Aid reports that the average time a person is on welfare is a year and a half.

Jean Anthony of The First National Bank of Chicago believes that public aid recipients who participate in the program can benefit from banks' financial services. At some point, Anthony says, these individuals will need a savings account and other banking services, especially when employed and no longer on public aid. In addition, Anthony says the bank is taking a "responsible social position" in offering the Smart Money program.

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Banks have two main incentives for joining this program: potential new customers and federal nudging. The Treasurer's Office reports that national studies classify as many as 25 percent of the populationas "unbanked," a majority of whom receive government assistance. In Illinois, the Department of Public Aid reports that 735,000 people receive cash assistance. Marian Richter of Bank One, Springfield, says banks are anxious to dispel the myth that banks are "not open or friendly or willing to work with people." Joining the Smart Money program also gives the bank credits under the Community Reinvestment Act (CRA). The CRA is a federal mandate for banks to document efforts to serve their local communities, particularly the low- and moderate-income segments, by making bank services available. Failure to participate in the program could result in delay or denial of approval for a bank to expand or merge.

Gary Gagerman is not convinced of the banks' socialc onsciousness or the federal incentives. "If I was given $50 million in my account to hold on deposit, I would be able to give them [welfare recipients] a dollar each for every check they wrote," says Gagerman. He argues that the banks' main incentive for joining the direct deposit program is the fear of losing state funds. "Realistically, banks do not want the public in their lobbies anymore since deregulation," offers Gagerman. "That's why the check-cashing business has done so well. We're the Seven Eleven of banking. The rates are posted; they're not hidden."

Charges for services beyond the 10 free checks could pose a problem for some public aid recipients. An overdraft at First National Bank of Chicago costs $20, and each check over the 10 free ones costs 50 cents per check plus a $5 service charge. That is just one of the worrisome aspects of the Smart Money program for Lynda Wright, a former public aid recipient and founder of a support group, Welfare Alumni. "If someone makes a mistake in the [public aid] system, and it happens often, I know," says Wright, "what is the recourse [for a recipient]?" Wright says that now that she is part of the mainstream banking system, she can complain. More important, she has economic buffers if a problem takes several days to get straightened out. Wright says welfare recipients, however, are on a "survival need basis" and often don't have those days. Wright points out that nonpayment of a light bill can mean shutoff of services before the next month's cash assistance check arrives. Nonpayment of bills is also cause to lose public housing, and losing public housing can mean losing public aid benefits. Wright wants to make sure that support systems are in place so that public aid recipients will not be penalized if something goes wrong. "Idon't think those kinks have been worked out," saysWright.

Everyone agrees that marketing the Smart Money program will be key to its success. Notification describing the program and including a toll-free number to call for more information went out with the November public aid checks. The Treasurer's Office is planning an educational program in conjunction with the Smart Money program that will include workshops on how to use the direct deposit service and an ATM (automatic teller machine) card, which some banks will offer along with the free checking account. The Department of Public Aid and the banks have information available, but the Treasurer's Office will offer the most aggressive marketing strategy.

Touted for its long-range objective, Treasurer Quinn'sSmart Money program purports to be a link between two segments of society that have heretofore tried to ignore one another, banks and the "unbanked." All parties seem to be in agreement that it will take time and much convincing to convert thousands of people from a cash-driven, instant gratification culture to a mainline check-writing, debit culture. *

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