Part of the budget bill’s strategy for closing the deficit while freeing up money for highways and tax cuts is to transfer $37 million per year from the federal block grant known as Temporary Assistance for Needy Families (TANF). The budget and budget repair bills reduce by $111 million over three years the TANF funding that is available for intended purposes like the Wisconsin Works program (W-2) and child care subsidies for low-income workers.

Under federal law, TANF funding must be used for programs serving low-income families. One permissible use is to fund a state Earned Income Tax Credit (EITC). Both the budget and budget repair bills increase the TANF being used for the state EITC from $6.7 million to $43.7 million per year. That wouldn’t be objectionable if the funding were being used to increase the credits, but it is used instead to supplant $37 million per year of state funding for the credit. In fact, the biennial budget reduces the state share of funding for the EITC by even more than the amount of TANF funding transferred into the EITC appropriation, resulting in significant cuts in the credits for families with two or more children.

This is the net effect of the TANF funding shift and the EITC cut:

• A reduction of $56.2 million in EITC funding compared to projected cost to maintain the program in the 2011-13 biennium, resulting in a tax increase for more than 150,000 low-wage workers.

• A decrease of $111 million (over three fiscal years: 2011, 2012 and 2013) in the amount of TANF funding available to support programs like W-2, child care subsidies and transitional jobs.

• $111 million of state revenue lapsed to the General Fund, to help close the deficit while still having money for new tax breaks and increased highway spending.

What makes this supplantation of $37 million per year an even more damaging blow for needy Wisconsin families is that the federal funding level for the TANF block grants to states has been frozen since 1997. Over the last 14 years, those block grants have lost about 25 percent of their value. As a result, there isn’t enough TANF funding for the programs that funding stream is intended to support.

The effects of the $111 million reduction in available TANF funding, coupled with the 14-year freeze in the federal funding allocation, can be seen in many policy changes in the budget. For example, DCF is gaining the authority to begin waiting lists for child care subsidies; W-2 benefits are being cut by $20 per month; and W-2 agencies will be able to turn away applicants they deem to be “job ready,” even if they have been unable to find a job via a thorough search.

“At a time when the recession has caused such hardship for so many families, the state shouldn’t be siphoning off federal welfare reform dollars and reducing support for jobless parents,” said Ken Taylor, executive director of the Wisconsin Council on Children and Families.

Jon Peacock

Tomorrow—Way #4: Funding Cuts and Big Policy Changes in Policymaking Authority for Wisconsin Shares Jeopardize Working Families’ Access to Quality Child Care

About the series: “31 Ways in 31 Days” is a series of posts to the WCCF blog exploring the recently-passed biennial budget’s impact on children and families in Wisconsin. Each day in July, we are posting a description of one way the budget will affect kids and families, with an eye toward what should be done going forward to help improve outcomes and move us closer to the goal of making Wisconsin a place where every child has the opportunity to grow up, learn, and thrive in a safe, healthy, economically secure home and community.