Tuesday, January 30, 2007

Subsidizing Subsidized Child Care

A key component for getting lower income people into employment is subsidized child care. If there isn't anyone to watch the kids, there isn't any way to go to work.

In other words, state subsidized child care is a deal breaker for welfare reform, particularly for single parent households. And out of the 34,000 families that benefit from the Wisconsin Shares program today, over 90 percent are single parent.

That's why news that funding for the Wisconsin Shares program will be severely cut in the upcoming '07-'09 budget is so alarming.

Rep. Tamara Grigsby (D-Milwaukee) expressed some shock that the upcoming deficit in the Wisconsin Shares program wasn't known in advance. "How did we get to this type of deficit overnight?" she asked.

The easy answer is we didn't -- it's been brewing for much of the past decade.

DWD Secretary Roberta Gassman notes that the deficit is tied to stagnate federal funding. While true, that doesn't tell the whole story, which begins in 1996 when the federal government dramatically altered the funding it gives states for welfare programs by passing the Personal Responsibility and Work Opportunity Act. This act created the program known as TANF, or Temporary Assistance for Needy Families, which provides highly flexible grant funding to states to use for welfare programs.

The following year, 1997, Wisconsin created Wisconsin Shares along with the Wisconsin Works (W-2) program. As Jon Peacock -- research director for the Wisconsin Council on Children & Families (WCCF) -- outlines in an August 2006 paper for a Brookings Institute seminar, the state greatly overestimated the number of enrollees in Wisconsin Shares for the initial years of the program.

This overestimation, among some other things, resulted in a huge surplus in TANF funding by the end of the 1999 fiscal year, to the tune of about $130 million. With the surplus in hand heading into the '99-'01 budget, Governor Thompson and the legislature decided to expand Wisconsin Shares eligibility, lower co-pays for the program, and initiate new programs and services related to W-2.

But here's the real kicker: In addition to using the TANF surplus to fund an expansion of W-2, the state also began at this time to rely more and more heavily on TANF to fund the Wisconsin Shares program as a whole (along with the state's Earned Income Tax Credit), thereby freeing up state GPR money to fund the tax cuts that were enacted in the '99-'01 budget.

Here's how that worked: The state could've received funding for Wisconsin Shares through federal Child Care Development Block Grant (CCDBG) funds, but participation in that program required a state match of 40 percent. In other words, the feds would put up $44 million to cover the costs of the program if the state put up the other $31 million. Rather than take advantage of this offer, though, the state opted in 1999 to pass on the $44 million in CCDBG funds, use the $31 million in GPR funds for other purposes (like tax cuts), and then apply $75 million in TANF funding to cover the Wisconsin Shares program.

Once the TANF surplus was quickly spent down by the end of the '99-'01 budget, Peacock notes that the state began to cut back on the new W-2 programs just as quickly. But a reliance on TANF funding for the Wisconsin Shares program has continued (although Governor Doyle restored about $6 million per year in GPR funding to W-2 as a whole in the '05-'07 budget). According to Peacock, "Child care accounted for 43.9 percent of TANF spending in FY 2004, compared with just 13.9 percent in FY 1998."

And the thing about relying on TANF funding for the Wisconsin Shares program and other W-2 initiatives is this -- it's a flat funding source. In fact, since its inception in 1997, it hasn't even increased with inflation. The total federal funding for TANF was $16.5 billion in FY 1997, and it's $16.5 billion in FY 2007.

Unfortunately, Wisconsin Shares enrollment is not flat and child care costs are not immune to inflation. Back in January 2000, when the state was digging into that huge TANF surplus, just under 18,000 families participated in Wisconsin Shares statewide; as of December 2006, long after the surplus was squandered, that number had increased 78 percent to over 32,000 families statewide.

So, in essence, it was the funding decisions that the state made in the late 1990s -- and failed to reverse in more recent years -- combined with increasing Wisconsin Shares enrollment that sewed the situation the state is facing today.

Sure, flat TANF funding contributed to the problem, but it's not like the state was expecting any increases from the feds -- to be sure, TANF funding hasn't ever increased.

This issue now becomes of matter of prioritization for the governor and the state legislature. And considering how essential it is for working families, particularly single parent, the priority placed on it should be high.

And along with a high budget priority level, Wisconsin Shares deserves to be funded primarily by money that's directly controlled by the state, not at the mercy of eroding federal dollars.

UPDATE: Scott Walker and I agree on something!

1 Comments:

Blogger amzbd said...

Seth,
Thanks for that background info. It's very helpful in understanding the issue and analyzing the proposed solutions.

January 30, 2007  

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