Welfare Reform Block Grant Funds Once Again at Risk in Wisconsin

Tuesday, May 12, 2015 at 5:18 PM by

The Joint Finance Committee will vote Thursday on whether to divert more funds from the federal welfare reform block grant to help finance unrelated parts of the state budget.  The amount of those funds transferred to the Department of Revenue (DOR) has already been increased dramatically in each of the last two budgets.  $62.5 million per year from the Temporary Assistance to Needy Families (TANF) block grant is being used to replace state funding for the Earned Income Tax Credit (EITC), and that maneuver reduces the funding available for important programs to assist vulnerable low-income families.   

According to a Legislative Fiscal Bureau paper (#215) , federal law would allow the state to transfer up to $12.3 million more to DOR in the next biennium, in order to back out state General Fund dollars for the EITC.

Optimally, legislators should decrease the use of TANF funding for the EITC, which is what the Department of Children and Families (DCF) proposed last fall in the budget request they submitted to the Department of Administration.  DCF understands that transferring so much TANF funding to DOR isn’t sustainable.  

Because the Fiscal Bureau estimates that the state could have a TANF balance of as much as $45.5 million at the end of the 2015-17 biennium, using more of it to free up General Fund dollars is very tempting for legislators.  However, the Fiscal Bureau paper contains a number of points that  make a compelling case for not diverting more funds to DOR and reducing the TANF balance:

  • The Fiscal Bureau estimates that DCF will face a TANF structural deficit of $115 million in the 2017-19 biennium – which means that the current commitments of TANF funds are expected to be more than $57 million per year greater than the available funding.
  • Expenditures for child care administration could grow by more than $10 million to comply with recent changes relating to the child care block grant, and that would reduce the TANF balance and also increase the structural deficit in 2017-19.
  • Potential sanctions for failing to meet the federal work participation requirements in Wisconsin Works could also reduce the anticipated TANF balance by as much as $15.7 million.

Since 2010, even though the use of TANF funds for the EITC has been increased dramatically, total spending for the EITC from all sources has been cut by $20 million because the Governor’s first budget sharply cut the credit for families with two or more children.  The cuts illustrate that lawmakers haven’t been helping low-income working families by using more TANF funds to supplant state GPR support for the EITC.  EITC recipients have been harmed by the last two budgets, and diverting even more TANF funds to DOR would cause additional harm to low-income families in future years by creating a severe deficit in the funding available to support child care subsidies and work training programs like Wisconsin Works. 

Unfortunately, few people understand the shell game that is being played, and low-income families are an easy target.  Nevertheless, let’s hope that the arguments legislators often make for fiscal responsibility will deter them from creating an even larger deficit in the funding available for vulnerable families in the 2015-17 budget. 

Jon Peacock

2 Responses to “Welfare Reform Block Grant Funds Once Again at Risk in Wisconsin”

  1. Joanne Brown says:

    Jon, I do appreciate your confidence in the legislators’ interest in fiscal responsibility. But we know that the interest is pretty limited, when they refuse to consider halting implementation of the ag/manufacturing tax credit and accepting the federal Medicaid money. Fiscal responsibility? Meh.

    • Jon Peacock says:

      I wasn’t trying to express confidence; I just wanted to make the point that we often hear from fiscal conservatives that we shouldn’t create structural deficits, so it will be interesting to see if they follow their own advice in this instance. There could also be an even more noteworthy gap between legislators’ actions and rhetoric. If they transfer more TANF funding to DOR and create an even larger structural deficit for the TANF budget, they will be relying on a short-term source of federal funding (the current TANF balance), even as they contend that the federal Medicaid funding provided by the Affordable Care Act isn’t stable enough to count on. While Obama is in office, the Medicaid funding is actually substantially more secure than the TANF balance, which we know is very short-term.