Decisions regarding cash assistance to low-income families with dependent children by the Democrat Gov. John Bel Edwards Administration have put Louisiana on the hook for new spending commitments in the tens of millions of dollars that may not be sustainable.
Recently, the state’s Department of Children and Family Services announced it essentially would double cash benefits paid for the two programs associated with the federal Temporary Aid to Needy Families program. In Louisiana, DCFS issues TANF benefits through the Family Independence Temporary Assistance Program and Kinship Care Subsidy Program. The former awards money to low-income households that nominally work or prepare for working, while the latter provides cash to household where the head is not a parent but a reasonably close relative.
Until the end of the year, Louisiana will pay one of the lowest FITAP rates in the country, although it is not far below the southern average. Starting in 2022, that rate will jump to the highest in the region and well above that average, settling in around the national average, which for a family of three is $484 monthly. In part, this will offset the relatively low proportion of the total TANF funds the state receives, $163 million in the last year, going to cash assistance, around $13 million, compared to other states; Louisiana spends a much higher proportion on programs and subsidies directly related to child welfare.
Yet that’s not all the new spending planned. Several restarted initiatives discontinued over the past dozen years, plus the FITAP/KCSP increase will add nearly $42 million in annual costs. The latter simply won’t double but will go up about $10 million more because FITAP eligibility occurs as long as the household doesn’t exceed the stipend, so the stipend doubling also makes hundreds of families newly eligible.
Worse, the new spending rests on a shaky foundation, unless DCFS cuts spending on other programs, such as pre-kindergarten subsidies and child protective services which constitute nearly half of federal dollars spent. In order to qualify to use TANF monies, the state must demonstrate a maintenance of effort defined by federal law that last year asked for over $56 million from the state.
In part, that precariousness comes as the MOE sources – counting eligible Earned Income Tax Credit payouts, higher education Taylor Opportunity Program for Students awards and GO Grants, and pre-kindergarten subsidies for those enrolled in nonpublic schools – don’t promise long-term support at the current level. The education components can vary considerably, and state EITC payments only temporarily have increased and will expire hallway before the five-year period DCFS insists it can support the higher TANF payouts. Indeed, the Wuhan coronavirus pandemic increased EITC payouts by three-sevenths, and a decrease from the pandemic becoming endemic and benefits dropping will leave MOE numbers millions of dollars short.
Worst of all, DCFS gave as the primary justification for doubling cash aid the historically high cash reserves in its TANF account. After years of ranging from zero to just a few million, in the last three years it has hit the $40 million to $60 million range. But the most recent $53 million surplus will disappear quickly if the state maintains all the other spending, and that balance is substandard compared to other states, especially on a per capita basis.
And, the benefit raise will create more compliance problems. States also must meet a work-related participation standard of 50 percent of participants but Louisiana, like a number of states, has an effective rate of zero, because states receive credit off the 50 mark on a percentage point-by-point basis for reduction in caseloads since 2005.
Because of that loophole, the state sports the lowest work participation rate of all, with only 3.5 percent of recipient households having a member working or preparing for work (obviously, the no-strings KCSP which spent about $7.8 million last year compared to FITAP’s $5.3 million drives down the proportion). The coming case expansion load will eat into that credit that could require the state to boost that WPR number, and it making much more of an effort to pushing this up – many states at the zero rate have much higher participation rates, where several in the south top 30 percent – not only would address that looming issue but also save the state money by guiding people to employment and off welfare.
For the fiscal year 2023 budget, legislators need to scrutinize the wisdom of this increase. The state’s emphasis in the last quarter-century on minimizing cash payouts in favor of subsidies and programmatic expenditures that decrease the likelihood of dependency (fortunately, FITAP limits participation to 24 of the prior 60 months with a 60-month lifetime ceiling, while KCSP is constrained by children aging out) has allowed dramatic drops in caseloads. The coming increase both threatens to encourage dependency and to make greater demands on the state’s budget in an environment where Louisiana has stagnated economically and experienced out-migration as opposed to most of its regional peers that have succeeded in doing the opposite. The increase simply may be unaffordable and, if so, policy-makers must have the fortitude to diminish or reverse it.
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