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September 29, 2015

Federal spending on children: What’s up? What’s down?

September 29, 2015

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Spending on K-12 education, early education and care, and child-related nutrition and social services fell in 2014, while spending on children’s health increased, according to the ninth annual Kids Share report, released today.

Many of the programs that were cut, such as Head Start, are “discretionary spending” programs, subject to annual appropriations. Since 2011, these programs have also been subject to automatic spending reductions and tight caps on discretionary spending under the Budget Control Act of 2011 (BCA). In contrast, program areas that saw increased funding were generally exempt from the BCA.

The squeeze on education and early care under the BCA

When my colleagues and I compared children’s programs that are subject to the BCA and its automatic spending reduction and caps with exempt programs, we noticed quite a difference: spending on children’s programs constrained by BCA declined by $2.3 billion between 2013 and 2014, while spending on exempt programs increased by $1.4 billion.

Federal spending on children

Of course, the BCA is not the only difference between these two sets of programs. Even before 2011, programs now exempt from BCA grew faster than programs subject to BCA. Yet the BCA appears to be putting further downward pressure on discretionary spending on children, with federal K-12 education, Head Start, child care assistance, and the Special Supplemental Nutrition Program for Women, Infants, and Children (WIC) among those caught in the squeeze last year.

Medicaid, SNAP benefits, dependent and survivor’s benefits under Social Security, SSI benefits for disabled children, and many other mandatory spending programs are exempt from the BCA, as are refundable tax credits. Spending declined for some of these programs in 2014, with the largest decline in SNAP benefits (formerly known as food stamps). In this case, lower spending reflects the economic recovery, which has finally led to a decline in SNAP caseloads after a long period of growth. In addition, a temporary increase in SNAP benefit amounts, initially adopted under the American Recovery and Reinvestment Act of 2009, has expired. 

Despite the SNAP decline, children’s spending for BCA-exempt programs overall is up slightly, driven by growth in spending on Medicaid. Economy-wide health costs continue to rise faster than inflation, and the estimated number of children enrolled in Medicaid has grown. The growth in Medicaid spending was enough to essentially offset the declines in other areas. 

What does the future look like?

Projections from the Kids Share report suggest that these trends will continue into the future. Health spending on children is projected to continue rising over the next decade, although less rapidly than health spending on adults. SNAP caseloads, and thus SNAP funding levels, are projected to continue to decline. The BCA caps remain in effect through 2021, so funding levels for education, early education and care, social services, training, and housing programs will continue to be squeezed. Excluding health care, fewer dollars will be spent on children in 2025 than in 2014.   

One way to reverse the trends would be for Congress to prioritize spending on early education and care, K-12 education, and other children’s priorities above other discretionary spending programs. However, competition among priorities will be tough, with spending on non-defense appropriations expected to fall to its lowest level in five decades as a share of national income.

Alternatively, Congress could enact more far-reaching budgetary reform, replacing the existing caps on defense and non-defense discretionary spending with a new budget deal that provides a better solution to the structural imbalance between mandatory spending and revenues.

Teacher Shanel Sommers looks over the work of one of her third-graders at KIPP Thrive Academy, a new school in what had been the closed Eighteenth Avenue School, Sept. 9, 2015, in Newark, N.J. (AP Photo/Mel Evans)

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