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.
Upping the Ante on an Act 10 Tactic (of Tapping TANF) Helps Free up Funds for Tax Cuts
The “budget repair bill” signed by Governor Walker two years ago today contained a number of significant changes that didn’t get a lot of attention at the time, since they were overshadowed by the tumultuous debate about the collective bargaining measures. One of those was a budget shell game that removes $37 million per year from the federal block grant known as Temporary Assistance for Needy Families (TANF).
The two-year anniversary of the signing of Act 10 is a timely opportunity to take note of that maneuver because the Governor is proposing to double down on that strategy in the 2013-15 budget. His proposed budget bill increases the size of the TANF transfer by $27 million per year.
As we explained in a WCCF blog post in July 2011, the budget repair and biennial budget bills reduced by $111 million over three years the TANF funding available for intended purposes like the Wisconsin Works program (W-2) and child care subsidies for low-income workers. Read more
Klein Crafts a Compelling Case to the Contrary
In the Washington Post’s Wonkblog today, Ezra Klein asks whether Republican lawmakers can make substantial cuts in federal funding with little in the way of adverse consequences by simply converting those programs into block grants. Klein uses the track record of federal welfare reform funding (TANF) to challenge the notion that block grants can be the fiscal equivalent of a silver bullet that will allow Congress to simultaneously slash taxes for the rich and reduce the federal deficit.
TANF is the acronym for Temporary Assistance for Needy Families, which is the federal block grant that was created about 15 years ago to replace the old welfare system (Aid to Families with Dependent Children). TANF has been getting a bit more attention in recent weeks because Paul Ryan and other Republicans are citing it as a huge success that justifies block granting other key social services for disadvantaged families, such as Medicaid and food stamps. Read more