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Work-Support Spending Varies Widely Across Nation

Document date: July 10, 2007
Released online: July 10, 2007

Contact: Stu Kantor, (202) 261-5283, skantor@ui.urban.org

WASHINGTON, D.C., July 10, 2007 -- Low-income families in Alaska, Connecticut, Maine, Maryland, Minnesota, New York, Rhode Island, and Vermont received more than $4,000 in work supports per person in 2005, more than double what their counterparts in Idaho, Nevada, and Utah received, an Urban Institute analysis of data for 44 states reveals.

Nationally, federal and state governments spent $3,264 per person on the core work-support programs, which help nonworking parents get jobs and stay employed: 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). Medicaid, SCHIP, and food stamps are available to low-income families regardless of work status; child-care subsidies and the EITC specifically help working families.

State variations, researchers Sheila Zedlewski and Seth Zimmerman point out in “Trends in Work Supports for Low-Income Families with Children,” reflect the characteristics of states’ low-income families and local decisions shaping benefit eligibility and access. States have had far more leeway to define their work supports since 1996’s federal welfare overhaul. The incomes of low-income families top off at twice the federal poverty level. (The poverty level in 2005 was $19,806 for a family of four.)

National and state spending (excluding state EITCs) increased by $23 billion (in 2005 dollars) between 2002 and 2005, rising from $142 billion to $165 billion. In 1996 and 1999, the figures were $111 billion and $113 billion, respectively. Medicaid and SCHIP accounted for 78 percent of the growth since 2002, increasing by $18 billion and spurred largely by higher enrollment due to the economic slowdown, fewer jobs in sectors that typically provide employer coverage, and higher health-care costs.

Federal EITC spending -- the second most important support for low-income working families -- declined by $1 billion between 2002 and 2005 as the number of employed parents decreased. Child-care expenditures also declined by $1 billion. Food stamp spending for families with children rose by $6 billion as family incomes declined and program changes expanded eligibility and program participation, reversing the downward spending trend that began after national welfare reforms were implemented in 1996.

Per person, real spending on child care declined 6 percent between 2002 and 2005, while EITC increased slightly. Per person spending on food stamps jumped 40 percent (from $286 to $412), and spending on health care increased 25 percent (from $1,437 to $1,801).

Variation across the States

Medicaid accounted for much of the spending variation across states, with state and federal governments dispensing an average of $1,660 for each member of a low-income family with children in 2005. Four states with data -- Alaska, Maine, Maryland, and Vermont -- spent nearly twice the national average, while Alabama, Nevada, and Utah spent less than half. (Medicaid statistics were unavailable for Delaware, the District of Columbia, Massachusetts, Montana, Pennsylvania, Tennessee, and West Virginia.) Differences in enrollment, health-care costs, and the availability of employer-provided insurance were behind much of the variation.

Child-care spending ranged from less than $100 per person a year in Nevada and South Carolina to more than $400 in Alaska, the District of Columbia, Massachusetts, Rhode Island, and Wisconsin. Variations reflect state decisions about using federal Temporary Assistance for Needy Families dollars for child care and about investing state money in this area.

Food Stamp spending, which averaged $412 per person in 2005 for low-income families with children, varied less by state than child care. Alaska, the District of Columbia, Hawaii, Kentucky, Louisiana, Maine, Missouri, South Carolina, Tennessee, and West Virginia allocated more than $500 per person, while less than $300 per person was spent in California, Idaho, Kansas, Nevada, and Utah. Some states have comparatively more eligible families at the low end of the income distribution; these families are eligible for higher benefits and more often participate. Also, some states have taken greater advantage than others of new federal options that expand food stamps access.

Federal EITC spending showed the least variation by the states, with about half the states hovering near the national average of $792 per person. EITCs were above $1,000 per person in 2005 in Alabama, Georgia, Louisiana, and Mississippi, all states with relatively low average incomes. Data for 15 of the 17 states with their own EITCs showed that per person spending ranged from $13 in Maine to more than $200 in the District of Columbia, Minnesota, New York, and Vermont.

Looking Ahead

Zedlewski and Zimmerman caution that “child-care subsidies represent a paltry share of the actual cost of care, and the share has declined over the past three years. Families need child-care subsidies even more during weaker economic times to encourage job search and employment.” Because legislative changes in 2005 require more work among welfare parents, states will likely focus more child-care dollars on these families and less on those outside the welfare system.

Policymakers, the researchers say, also need to shore up the unemployment insurance system to cover more adults with relatively low earnings and limited work experience. Many low-income parents do not qualify for unemployment insurance and have little to fall back on when jobs are scarce.

“Trends in Work Supports for Low-Income Families with Children,” from the Urban Institute’s Low-Income Working Families project, is available at http://www.urban.org/url.cfm?ID=311495. The report provides child-care, food stamp, EITC, and SCHIP data for the 50 states and the District of Columbia, 44-state Medicaid data, and statistics for 15 states with state EITCs. Sheila Zedlewski directs the Urban Institute’s Income and Benefits Policy Center, where Seth Zimmerman is a research assistant.

Topics/Tags: | Economy/Taxes | Families and Parenting | Poverty, Assets and Safety Net

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