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A Brief History of Old Age Assistance Programs
The first state law was passed in Arizona in 1915 by an initiative act, which abolished almshouses and established old age and mothers’ pensions in their stead. However, it was worded so loosely that it was declared unconstitutional on account of its vagueness. In the same year Alaska passes a law, providing assistance to its aged pioneers. This law, though it has been amended on different occasions, is still in effect at the present time. No action was taken by any state until 8 years later, in 1923. In that year three states, Montana, Pennsylvania, and Nevada, passed old age assistance laws, but only one of them, that of Montana, has remained in the statute books. In 1925 the Nevada state legislature passed a bill repealing the 1923 law, and putting another one in its place. The Pennsylvania law was declared unconstitutional in 1924 on the basis of the state constitution, which prohibited the legislature from making appropriations for charitable, benevolent and educational purposes. Pennsylvania proceeded immediately to take steps to amend its constitution, but it was not until 1931 that the amendment passed the legislature. Since this amendment had to be re-enacted in 1933 and then submitted to a referendum vote for approval, it was not until 1934 that Pennsylvania secured action. Thus the decision of the court deferred legislation for ten years in Pennsylvania.
Ohio, too, took some first steps in the year 1923. The question of old age pensions was submitted to a referendum vote, but it was decided adversely by a vote of almost 2 to 1. By 1925 the movement had gained considerable impetus. Although only Wisconsin passed a law which has remained effective since that time; there was much activity in a number of the states. California passed a law, which, however, was vetoed by the Governor. Bills were introduced in the legislative sessions of Illinois, Indiana, Kansas, Maine, Michigan, Minnesota, New Jersey, Ohio, and Texas. In Indiana and Illinois the bills passed the lower house, but were not acted upon by the upper chamber. In four states, Colorado, Minnesota, Pennsylvania, and Utah, commissions were appointed. In 1926 one law was added, that of Kentucky. In the same year, the Washington Legislature approved a bill, which was vetoed by the Governor. In 1927 Maryland and Colorado passed bills.
At the end of 1928, after six years of agitation, there were only six states and one territory which had made provision for their aged. They were Colorado, Kentucky, Maryland, Montana, Nevada, Wisconsin and Alaska. All the state laws were of the optional type, i.e., they left the adoption or rejection of an old age assistance system to the discretion of the counties. For this reason these laws had very limited effect only. In these six states, there were slightly above 1000 pensioners, and these were found almost exclusively in Montana and Wisconsin, the former having 884, the latter 295 old people on their pension rolls. The total amount spent by the six states in 1928 was, in round numbers, $200,000.
From 1929 on, the trend in the pension legislation has been toward making the adoption of the old age assistance systems mandatory upon the counties. This type of legislation proved much more effective, especially when it was accompanied by a provision by which the state shared in the expense of the county. Of this latter type was the California law which was passed in 1929. In the same year, Minnesota, Utah and Wyoming passed laws, which did not provide such state assistance, although those of Utah and Wyoming made the adoption of the system mandatory upon the counties. In 1930 the Massachusetts and New York laws were passed, which not only were of the mandatory type but also provided for the state sharing in the expense of the locality.
In 1931 and 1933 the state legislatures were very active in the field of old age pensions. It is estimated that 100 bills were introduced in the legislatures of 38 states in 1931. In that year five new laws were enacted in Delaware, Idaho, New Hampshire, New Jersey, and West Virginia. Of these all except the West Virginia law were of the mandatory type, but only Delaware and New Jersey provided for state funds. Colorado and Wisconsin amended their laws making them mandatory upon the counties as well as making state funds available for the purpose of old age assistance.
Ten more laws were added in 1933, in Arizona, Indiana, Maine, Michigan, Nebraska, North Dakota, Ohio, Oregon, Washington, and Hawaii. With the exception of Hawaii, they were all mandatory upon the counties, and in Oregon and Washington the state does not share in the expenses of the locality. Arkansas passed a law in 1933, but it was declared unconstitutional by the state supreme court. Iowa and Pennsylvania passed mandatory laws in 1934, the state sharing the entire cost. By the end of 1934, twenty-eight states and two territories had passes old age assistance laws.
Unfortunately, the plans were quite limited, and inconsistent from state to state. As summarized in the final report of the Old Age Security Staff to Chairman Edwin E. Witte, the state plans included the following features and restrictions:
- All but Arizona and Hawaii refused to make payments to older people who had children or relatives who could support them.
- Most limited assistance to elderly people who were age 65 or older, but quite a few set the limit even higher, at age 75.
- Most required that beneficiaries must have been citizens and residents of the state for 15 years, some had even longer residency requirements than that.
- Many required that the beneficiary must transfer to the pension authority any property they possessed before any payment would be made.
- Most had property and income caps to limit eligibility, generally a maximum of $3,000 in property and $300-$365 a year in income.
- Most required that benefits would be denied to anyone who gave away property in order to qualify for public assistance.
- Most required that a lien be placed on the estate of the beneficiary to be collected upon their death.
- Most required that recipients be “deserving”, and benefits were denied to anyone who deserted a spouse, failed to support their families, had committed any crime, or had been a tramp or beggar.
- Benefits were denied to inmates of jails, prisons, infirmaries, and insane asylums, although a few permitted the payment of assistance for inmates of a benevolent fraternal institution.
- Most set a cap on monthly payments at $30 a month, although they actually paid about half of that, or $15 a month on average.
The restrictions were so severe and the number of states that actually had launched their plans and committed funds to them were so limited that even in 1935, in the depths of the Depression, there were less than 200,000 people covered under state old-age assistance plans.
Before the 1930s, support for the elderly was a matter of local, state and family rather than a Federal concern (except for veterans’ pensions). However, the widespread suffering caused by the Great Depression brought support for numerous proposals for a national old-age insurance system. On January 17, 1935, President Franklin D. Roosevelt sent a message to Congress asking for “social security” legislation. The same day, Senator Robert Wagner of New York and Representative David Lewis of Maryland introduced bills reflecting the administration’s views. The resulting Senate and House bills encountered opposition from those who considered it a governmental invasion of the private sphere and from those who sought exemption from payroll taxes for employers who adopted government-approved pension plans. Eventually the bill passed both houses, and on August 15, 1935, President Roosevelt signed the Social Security Act into law.
The act created a uniquely American solution to the problem of old-age pensions. Unlike many European nations, U.S. social security “insurance” was supported from “contributions” in the form of taxes on individuals’ wages and employers’ payrolls rather than directly from Government funds. The act also provided funds to assist children, the blind, and the unemployed; to institute vocational training programs; and provide family health programs. As a result, enactment of Social Security brought into existence complex administrative challenges. The Social Security Act authorized the Social Security Board to register citizens for benefits, to administer the contributions received by the Federal Government, and to send payments to recipients. Prior to Social Security, the elderly routinely faced the prospect of poverty upon retirement. For the most part, that fear has now dissipated.
Special note, too, should be taken of the difference between public assistance in Title I of the Act and Federal Old Age Benefits in Title II. The latter is social insurance (which is work-related and a contributory program, and because of the contributory feature carried a contractual right.) The principle; that an insurance benefit is a contractual right and obligatory and does not require evidence of need — which is unqualifiedly true of private insurance and was carried over into the field of social insurance. And unlike public assistance, it was also designed to prevent dependency before it happened. In contrast, public assistance involved neither contributions nor labor force participation, and was and is contingent upon need as determined by a means test. The crucial difference between the two techniques of income maintenance concerned the degree of administrative discretion which governed eligibility and benefits– minimal in social insurance, but paramount in public assistance.
Source: Most of the above information was taken from Old Age Security Staff Report, Barbara Nachtried Armstrong and Staff, 1934, from unpublished studies by the staff of the Committee on Economic Security (CES), Volume II.