JFC Cuts GPR Support for the EITC, but Not by as Much as Governor Proposed

Tuesday, May 21, 2013 at 7:13 PM by

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.   (See alternative A.2. in LFB paper #196.) 
  • It increases funding for child support enforcement – providing an additional $4.25 million GPR per year, compared to the Governor’s recommendation (capturing an additional $8.25 million per year in federal matching funds), which is a proposal WCCF endorsed
  • It includes $8.75 million of TANF funds for the Transform Milwaukee jobs program (alternative 2 in LFB paper #199), although that amount is $1.2 million less than the Governor recommended.

Some of the most disappointing parts of the committee’s actions on DCF issues include the following:

  • Wisconsin Shares funding (for child care subsidies) is reduced sharply, pretty much as the Governor proposed, and for the most part the bill squanders a great opportunity to use those savings to address concerns about reimbursement rates (which haven’t risen since 2006) and child care quality.  (See the WI Early Learning Coalition’s recommendations.)  However, the committee did reduce the cuts for Shares by a net of $1.2 million (compared to the Governor’s bill), and when that change is coupled with another reduction in the estimated cost of maintaining the status quo, DCF expects to have $5 million to finally increase rates in the second year.  That would amount to about a  2% increase, on average, if the boost in rates began in July 2014.    
  • The motion assumes that W-2 spending will drop by 1% every month from April of this year through June 2015.   Although that scenario results in a much smaller W-2 cut than the Governor proposed (because it takes recent growth into account), it may be unrealistic to expect W-2 participation to drop that fast.   If the W-2 spending doesn’t drop that fast, the chances of a  Wisconsin Shares rate increase will be reduced. 
  • The amended bill siphons off an additional $38 million of TANF funds by transferring it to the Dept. of Revenue (on top of the large increase for that purpose last session).  Ostensibly, the increase is intended to “strengthen” the EITC, yet total EITC funding is reduced by $16 million in the 2013-15 biennium (based on the preliminary reestimate of the cost of maintaining the program).   
  • By using virtually all of the TANF surplus being carried over from the current fiscal year, state lawmakers are adding roughly $80 million to the structural deficit in the 2015-17 biennium.

You can find the omnibus motion here.

Jon Peacock      

Categories: 2013-15 biennial budget, Blog, ECONOMIC SECURITY, EITC, Joint Finance Committee, STATE BUDGET, TANF, W-2 | Comments Off on JFC Cuts GPR Support for the EITC, but Not by as Much as Governor Proposed

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