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Brief #4 in the series "Perspectives on Low-Income Working Families."
Federal and state spending on work supports for low-income families grew between 2002 and 2005, with Medicaid accounting for most of the spending growth. After 2002 states spent less on child care, and federal EITC spending declined slightly as the number of employed parents decreased. Yet, food stamp spending increased as family incomes declined and program changes expanded eligibility and participation. The weaker economy also explained a large share of the increase in Medicaid spending. Differences in the design of programs and needs among families led to wide variation in the amount of support received by families across states.
A slow economy and more demand for public
health insurance coverage have changed the shape
of spending on safety-net programs since 2002.
Government spending on supports directly
connected to parents' work status has declined or
remained flat as the number of parents working
has declined. Other supports available without
regard to work status have increased as more families
found themselves with incomes below the
poverty level. Spending on low-income families
also varies widely across the states.
Four programs—Medicaid and the State
Children's Health Insurance Program (SCHIP),
food stamps, child care subsidies, and the federal
and state earned income tax credits (EITC)—form
the core set of supports for low-income families
in the United States. These programs provide
health insurance, assistance with food purchases,
assistance with child care expenses, and earnedincome
supplements to low-income families that
meet certain eligibility criteria. While Medicaid,
SCHIP, and food stamps are available to low-income
families regardless of work status, child
care subsidies and the EITC are designed specifically
to help working families. The entire set of
supports can offer critical help to parents trying
to move up the ladder from an entry-level job
with low wages and no health insurance to a
compensation level sufficient to support a family
with no help from the government.
The work-support safety net reflects a significant
philosophical shift away from guaranteeing
cash assistance to families largely not working
and toward helping families support themselves
through work. This new philosophy culminated
in the creation of the Temporary Assistance for
Needy Families (TANF) program in 1996. While
TANF still provides cash assistance to lowincome
families for up to five years, it also prepares
families for work. Because TANF is funded
through a block grant (fixed at mid-1990s spending
levels) states have significant flexibility in how
they spend this money.
This brief uses administrative data to show
trends in spending on the four core work-support
programs through 2005. The results update
the 1996–2002 spending trends presented in
Zedlewski and colleagues (2006). The results also
show the variability in work-support spending
across the states in 2005. States' population and
income characteristics lead to variations in the
shares of low-income families that receive support.
Spending variability also reflects states'
choices about their safety-net programs.
Work-support spending continued to grow
steeply after 2002, with Medicaid accounting for
most of the spending growth. The weaker post-2002 economy led to numerous changes in
spending. States spent less on child care, and federal
EITC spending declined slightly as the number
of employed parents decreased. Yet, food
stamp spending increased as family incomes
declined and program changes expanded eligibility
and program participation. The weaker economy,
with fewer jobs offering such benefits as
health insurance, also explained a large share of
the increase in Medicaid spending. Differences in
the design of work-support programs and needs
among low-income families led to wide variation
in the amount of support received by families
(End of excerpt.)
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