TANF Funding Squeeze Creates a Substantial Budget Challenge
The Department of Children and Families (DCF) budget proposes a very large cut in the portion of funding for the Earned Income Tax Credit that comes from the federal welfare reform block grant, which is known as Temporary Assistance for Needy Families (TANF). Specifically, the department’s 2015-17 budget proposes cutting $55.8 million from the TANF funding that gets transferred to the Department of Revenue, which would mean that state General Purpose Revenue (GPR) has to fill the very substantial gap.
Assuming the Walker Administration isn’t planning to cut the EITC, I applaud DCF for wanting to use state funds rather than TANF funds to finance that credit for low-income working families. Unfortunately, the Department of Revenue (DOR) budget proposal doesn’t currently include an increased GPR appropriation for the EITC. Taking both agency proposals together, we have a $55.8 million hole that needs to be filled by state policymakers, and that problem is on top of the other structural budget challenges that have gotten more media attention. Read more
New Federal Money Provides Chance to Close Large Hole in W-2 and Improve Child Care
Wisconsin got some good news from Washington over the last couple of months, in the form of supplemental federal funding for Temporary Assistance for Needy Families (TANF) and additional child care and development funds (CCDF). The plans for using part of that additional funding – $19.8 million from TANF and $3.8 million from CCDF – will be reviewed by the Joint Finance Committee (JFC) on May 6th. (The LFB paper can be found here.)
I’ve written numerous times over the past year or so about the fact that the biennial budget bill made very unrealistic assumptions about declining participation in the state’s welfare to work program, known as Wisconsin Works or W-2. The budget bill cut the W-2 appropriation and siphoned off TANF block grant funding by using it to supplant state funds for the Earned Income Tax Credit. Read more
Despite Using Far More TANF Funds for the WI EITC, Total Spending Declines
Today is EITC Awareness Day, when the IRS works with community organizations, elected officials, state and local governments, schools, employers, and other interested parties to spotlight the Earned Income Tax Credit, and to encourage more eligible families and individuals to apply for the credit. The IRS estimates that one fifth of eligible taxpayers fail to claim and get this important credit.
In recognition or EITC Awareness day, let’s take a look at the Wisconsin EITC, including some recently released data showing the declining value of that credit over the past years, and the role of that decline in adding to the state surplus. It’s also a good time to consider the effectiveness of the EITC as a tool for helping make work pay for low-income families.
New LFB Paper Illustrates Why Tapping TANF Funding Appears Unlikely
The Assembly overwhelmingly approved a bill today that we strongly support, because it is aimed at expanding a program to provide on-the-job training to low-income people. The only catch is that it isn’t funded, and the prospects for funding it don’t look promising anytime soon.
The bill in question is SB 333, which is part of the package of workforce training bills proposed by the Governor in late September. It authorizes expansion of the Transitional Jobs program, which now only operates in Milwaukee. Transitional Jobs was first implemented several years ago as a pilot program, with funding from the federal Recovery Act. Although that came to an end, the 2013-15 biennial budget bill created a new version of it in Milwaukee, which is now called the Transform Milwaukee Jobs Program. It was allocated $9.9 million from the federal welfare reform block grant known as Temporary Assistance to Needy Families (TANF). Read more
Since late spring we’ve been raising concerns that the biennial budget bill cuts funding for the welfare-to-work program known as Wisconsin Works (W-2) based on faulty assumptions. This June 17 paper examines the problem and explains how reducing W-2 spending and shifting federal block grant funds made it easier to cut state taxes in the budget bill.
This week the Walker Administration acknowledged the W-2 shortfall and submitted a plan to the Joint Finance Committee (JFC) to narrow the funding gap by $9.6 million. The plan submitted to JFC by the Dept. of Children and Families (DCF) and Dept. of Health Services (DHS) closes part of the gap by using unallocated federal funding known as “income augmentation” revenues. These funds are received by the state as the federal share of state and local spending for things like Targeted Case Management and the Medicaid HealthCheck program.
A Significant Economic Hit to the National Economy and a Gradually Expanding Erosion of Key Programs
Economists expect the federal government shutdown to have significant adverse consequences for the national economy. This LA Times article reports that some project that even just a two-week partial shutdown will cause a reduction of 0.3 to 0.4 of a percentage point from national economic growth in the fourth quarter. That’s particularly a problem when the economic recovery is already so sluggish that job growth has been barely keeping ahead of population growth.
I worry about those economic consequences, but I am also very concerned about the effects of the shutdown on children and families in our state – especially for low-income and vulnerable families. Fortunately, most federally funded programs for those families will continue at least through October, but the consequences could be very serious for vulnerable families if the shutdown lasts well into the fall. Read more
In a long Q & A format interview in the Capital Times, I described a number of the faults of the 2013-15 budget bill. One of the defects I mentioned in that interview is that the bill employs a “Robin Hood in reverse” strategy for allocating resources. Because the article doesn’t provide much explanation of the reasoning behind that charge, I feel obligated to elaborate.
Actually, I think there is a very broad range of reasons for concluding that the recently enacted budget shifts resources from the poor to the rich. A new Wisconsin Budget Project paper explains ten of those reasons, which are summarized more succinctly below:
1) Diverting federal block grant funds for low-income families – The bill siphons off funding from the federal block grant known as Temporary Assistance to Needy Families (TANF) and indirectly uses those funds to build up the state’s surplus, which helped lawmakers enact larger income tax cuts that primarily benefit the wealthy. Read more
Budget’s Diversion of Funding for Low-income Families Is Based on Faulty Assumptions
When legislators take floor votes this week, they will decide whether and how much to cut spending for the Wisconsin Works (W-2) program, which aids unemployed low-income families, and whether they divert the savings to use for things like tax cuts for the wealthy. The arguments that state budget writers have used to support a W-2 cut are running up against some very inconvenient facts that contradict the Joint Finance Committee’s assumptions.
As I’ve written on other occasions (such as this blog post), the budget bill’s cut in W-2 spending is part of a strategy that siphons off money intended for low-income families – in order to free up General Fund dollars to use for other purposes, such as the proposed income tax cut.
The spending cut was based on the assumption that W-2 participation would decline steadily, beginning well before the start of the new biennium. Read more
Omnibus Motion on DCF Issues Frees Up Additional TANF Funds to Address Recent W-2 Growth
The Joint Finance Committee (JFC) approved an omnibus motion (#364) late today that makes a few improvements in the Department of Children and Families (DCF) budget, but which is nonetheless very disappointing in many important respects. We’ll take a closer look at that motion soon, but here’s an overview of the good and bad news – starting with the positive parts of the motion:
- It cuts state GPR support for the EITC by less than the Governor recommended. His budget would have used an additional $27 million per year of federal TANF funds to replace state funding for the EITC. The motion reduces that funding shift to $19 million per year, thereby not siphoning off as much of the TANF funding to use elsewhere in the budget.
- The motion reduces the cut to Wisconsin Works (W-2) by $18 million, which reflects the fact that W-2 spending has grown by 8.5% since last fall, instead of declining by 5.9 %, as DCF anticipated.
Going, Going, Gone – How the Budget Eliminates the TANF Balance and Shortchanges Low-income Families
Several important aspects of the budget bill’s funding for public assistance programs have received little or no attention:
- The bill siphons off funding intended for low-income families and uses it for other purposes, such as tax cuts.
- The proposed budget eliminates the current $84 million balance in federal funds from the block grant known as Temporary Assistance to Needy Families (TANF), even though spending is being cut significantly for the three major programs financed with the TANF funds.
- The budget may significantly underfund Wisconsin Works (W-2), because participation in the program has grown sharply over the past three months, and the proposed W-2 spending assumes a substantial drop in participation.
A new issue brief released today by the Wisconsin Budget Project explains how the budget has the paradoxical effect of eliminating the TANF balance, even as it makes cuts to the following programs:
- It cuts W-2 funding by $34 million over the next two years;
- It reduces funding for child care subsidies (Wisconsin Shares) by about $35 million; and
- It decreases total spending for the state Earned Income Tax Credit (EITC) by about $16 million.