New Federal Money Provides Chance to Close Large Hole in W-2 and Improve Child Care
Wisconsin got some good news from Washington over the last couple of months, in the form of supplemental federal funding for Temporary Assistance for Needy Families (TANF) and additional child care and development funds (CCDF). The plans for using part of that additional funding – $19.8 million from TANF and $3.8 million from CCDF – will be reviewed by the Joint Finance Committee (JFC) on May 6th. (The LFB paper can be found here.)
I’ve written numerous times over the past year or so about the fact that the biennial budget bill made very unrealistic assumptions about declining participation in the state’s welfare to work program, known as Wisconsin Works or W-2. The budget bill cut the W-2 appropriation and siphoned off TANF block grant funding by using it to supplant state funds for the Earned Income Tax Credit. That maneuver, which helped lawmakers increase the General Fund and cut state taxes, was premised on the assumption that W-2 spending would decline by an average of 1% per month, starting in April 2013. However, as the following chart illustrates, W-2 participation increased 13% from March through October of last year, before finally starting to decline. 
The current W-2 participation level is 21% above what the budget bill assumed. Although the cost per case is now 2.2% below the level used for the budget calculations and participation is declining by about 1% per month, a continuation of the current trend lines would result in a funding shortfall of about $18 million, which is the amount that the Department of Children and Families (DCF) has requested.
When the budget bill was developed, the state didn’t expect to be eligible for any additional TANF contingency funds, which were set aside by Congress for allocation to states meeting certain conditions during economic downturns. However, Wisconsin has been notified that it will receive almost $30 million in contingency funds during the current federal fiscal year. In addition, the state is receiving $3.8 million more than anticipated this year from federal child care and development funds.
DCF has proposed using those funds for the following purposes, which will be reviewed by JFC on Tuesday:
- Using $18.1 million from the TANF funds for W-2 benefits in 2014-15;
- Allocating $1.1 million for higher-than-anticipated demand for the emergency assistance program;
- Using $630,000 from the increased TANF funds for the CARES information system, which supports public assistance programs.
- Using the $3.8 million increase from the CCDF for a variety of costs relating to administration of the state’s child care programs and to close a hole in YoungStar contract.
The LFB paper indicates that spending for the Wisconsin Shares child care subsidy program is expected to be well below the level assumed in the budget bill, even though that appropriation had been cut sharply from the previous level. The new estimates anticipate underspending of $13.3 million in 2013-14 and $12 million in 2014-15. DCF has indicated that it may use part of those savings to increase child care provider rates, which are finally being loosened after a 7-year freeze.
Thanks to the additional federal TANF funds, the state won’t have to tap the savings from Wisconsin Shares to close the hole created by the unrealistic assumptions about W-2 spending and by the increased supplantation of state GPR funding for the EITC. With luck, that will allow state officials to provide a more meaningful increase in the long-frozen rates for child care providers.
Jon Peacock
