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. The funding was shifted to the Department of Revenue to help pay for the state Earned Income Tax Credit (EITC) and to replace $37 million per year of state general purpose revenue (GPR) being used for the tax credits. In fact, even as the state was tapping the TANF funding, the 2011-13 budget substantially cut the credits and the total EITC funding level.
The 2013-15 budget request submitted last fall by the Department of Children and Families (DCF) sought to cut by $37 million the TANF transfer in the second year of the biennium – which would reduce the transfer to just $6 million per year and bolster the capacity of DCF to serve families in need. However the Governor’s bill not only doesn’t do that, it increases the transfer by $27 million per year (bringing it to a total of $70 million per year). The bill does not increase total spending for the EITC, it merely supplants state GPR dollars for the EITC – thereby freeing up funds to use for other purposes, such as the proposed income tax cut.
The state receives about $300 million per year in federal TANF funds. That amount has been frozen since the inception of the block grant 16 years ago, and the funding is now worth 30% less than in 1997. Two years ago, when the state was facing a very sizable deficit, it was less surprising that the state would siphon dollars away from the funding source for helping low-income families. However, now that the state has a healthy budget surplus, it’s very surprising and disappointing that the new budget would take an extra $54 million from that long-frozen block grant.
In future blog posts we’ll look at the consequences of siphoning off the TANF funds, including very substantial reductions in the funding appropriated for Wisconsin Works (w-2) and the Wisconsin Shares child care subsidy program.
Jon Peacock
