Revised March 28, 2003

THE HUMAN COSTS OF CUTS IN MAJOR LOW-INCOME PROGRAMS
CONTAINED IN THE HOUSE BUDGET RESOLUTION

By [1]

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The House Budget Resolution requires various Congressional committees to pass legislation making $265 billion in cuts over the next ten years in entitlement, or “mandatory,” programs.  The Senate budget contains no such provisions.

Approximately 62 percent of these cuts — $165 billion — are slated to come from programs for low-income families and individuals.  These include programs that provide nutrition assistance, income support, health care, and child care to families with children (especially working poor families), as well as to poor elderly individuals and people with disabilities.  These cuts would remain in effect at least through 2013, unless a future Congress enacted another law overturning some or all of them.  (The House Budget Resolution also makes $244 billion in cuts in domestic “discretionary,” or annually appropriated, programs, below the 2003 levels, adjusted for inflation.  The Senate budget contains $159 billion in domestic discretionary cuts.  A number of programs that assist low-income families are discretionary and likely would be affected by these cuts as well.  This report, however, focuses entirely on the cuts to entitlement programs. This report examines the House cuts in entitlement programs.)

Cuts in Low-income Entitlement Programs Under the House Budget

Program

Total Cuts

2004 - 2013

Dollar Cut in the Year When Cuts Would be Deepest

Medicaid

$92.1 billion

$25.2 billion

Supplemental Security Income

$18.5 billion

$2.8 billion

Earned Income Tax Credit
(refundable portion)

$13.8 billion

$2.1 billion

Food Stamps

$12.5 billion

$1.9 billion

Temporary Assistance for Needy Families

$7.9 billion

$1.2 billion

Child Nutrition
(including school lunches)

$5.8 billion

$900 million

Foster Care and Adoption Assistance

$3.7 billion

$600 million

Child Support Enforcement

$2.6 billion

$400 million

Child Tax Credit
(refundable portion)

$2.4 billion

$400 million

Child Care
(mandatory funding)

$1.2 billion

$200 million

Like all budget resolutions, the House budget resolution is a broad blueprint.  It does not provide details or directives about exactly how Congress should achieve these substantial cuts in each of these low-income entitlement programs.  Instead, it directs each of a number of Congressional committees to pass legislation that achieves a specific level of cuts in entitlement programs under that committee’s jurisdiction.  The House budget also shows how these cuts are assumed to be distributed across 20 components of the federal budget, known as budget “functions.”  (The exact amounts of the cuts specified for each budget function are not binding, but they indicate the manner in which the House Budget Committee assumes its budget-cut targets will be reached).

This analysis assumes that all entitlement programs within a given budget function would be cut by approximately the same percentage; we make this assumption because House Budget Committee Chairman Jim Nussle has stated that the entitlement reductions in the House Budget Resolution are generally assumed to be proportional.[2]  A Congressional committee could choose to make a smaller cut (or none at all) in a given program, but then it would have to make deeper cuts in another program or programs under its jurisdiction to achieve the amount of savings it is required to produce.

This report illustrates the magnitude of the cuts that the House Budget Resolution would require in various low-income programs.  It does so by comparing the size of the cuts in these programs with the cost of key components of the programs.  It finds, for example, that in the year in which the required cuts would be deepest:

These examples, as well as additional examples provided in this report, are illustrative.  They are not intended as predictions of exactly how Congress would achieve the cuts called for in the House Budget Resolution.  But they provide a sense of the magnitude of the cuts that would result from the House Budget Resolution.

In coming days, members of the House and Senate will be meeting to craft a Budget Resolution Conference Report that will then be considered by both chambers.  As policymakers consider how to construct a final Budget Resolution, the effects that these low-income entitlement cuts would have on poor households — and particularly on poor families, children, elderly individuals and people with disabilities, who make up the vast bulk of the people served by these programs — should be carefully considered.

 

Food Stamps

The House Budget Resolution assumes that the Food Stamp Program would be cut by $12.5 billion between 2004 and 2013.  The deepest food stamp cuts are scheduled for fiscal year 2010, when they would reach almost $2 billion. 

 

Supplemental Security Income (SSI)

The SSI program provides basic income assistance to low-income elderly individuals and people with disabilities.  Under the House Budget Resolution, the SSI program would be subject to $18.5 billion in cuts over the 2004 - 2013 period if the SSI program received the same percentage cut as the other programs in the same budget function.  The cuts in SSI would be deepest in 2010, when they would total $2.8 billion.

 

Child Care

The federal government provides states with both entitlement funding and discretionary funding for child care through the Child Care and Development Block Grant.  Under the House Budget Resolution, entitlement funding for child care would be cut $1.2 billion over the 2004 – 2013 period if the child care block grant received the same percentage cut as other programs in this budget function.  When compared to the CBO baseline, the reduction in child care entitlement funding would be deepest in 2010, when it would total $200 million.  (Because the House Budget Resolution also calls for substantial cuts in overall discretionary spending, the funding for child care that is provided from the non-entitlement — or discretionary — side of the budget also could be cut.)

Would Some Programs Be Protected From Cuts?

Supporters of the House Budget Resolution sometimes claim that a certain program will be “protected” from cuts under the Budget Resolution.  Although the committees with jurisdiction over these low-income entitlement cuts would have some flexibility about which programs they cut, they would be required by the Budget Resolution to craft legislation (and pass it out of the committee) that achieves a specified level of cuts.  For example, the House Budget Resolution requires the Ways and Means Committee to pass a bill that includes $61.5 billion in cuts.  Some $17.8 billion of this amount could come from a non-controversial extension of expiring customs-related fees.  The remaining $43.7 billion would have to come from cuts in programs under the Committee’s jurisdiction.

The main programs under the jurisdiction of the Ways and Means Committee include Social Security, Medicare, Unemployment Insurance, and a set of low-income entitlement programs such as  SSI, TANF, the child care block grant, foster care and adoption assistance, and the Social Services Block Grant.  The Budget Act prohibits making cuts in Social Security in a budget reconciliation bill, and the Budget Resolution includes an explicit assumption that Medicare will not be cut.  Thus, to satisfy the Budget Resolution, the Ways and Means Committee effectively would be required to impose very large cuts in low-income programs.  The Committee could decide to spare a particular program — such as TANF — but then other low-income entitlement programs would have to be cut more deeply.

Another example concerns Medicaid.  The House Budget Resolution requires that the House Energy and Commerce Committee, which oversees Medicaid, cut $107 billion from programs under its jurisdiction.  The House Resolution also indicates that entitlement spending in Function 550 (Health) is to be reduced by $98 billion over ten years.  Exempting health care for military retirees from the reduction (because it falls under the jurisdiction of the House Armed Services Committee, which is exempt from having to make cuts) and distributing the $98 billion in reductions proportionally over the remaining programs in that budget function yields the estimate that Medicaid will be cut by $92 billion over the FY 2004 - 2013 period.  If the Committee wished to cut significantly less than this $92 billion from Medicaid, it would have great difficulty doing so; it would be hard for the Committee to find other programs from which to obtain sufficient savings for the Committee to meet its budget-cut target, since Medicaid is the only large entitlement program under its jurisdiction.

The $200 million cut represents a reduction in funding below the levels reflected in the Congressional Budget Office “baseline.”  The CBO baseline assumes that child care entitlement funding will be frozen for the next ten years at its current funding level of $2.7 billion a year, with no adjustment for inflation.  Because the cost of the wages and salaries of child care workers (and the cost of renting space for child care centers) rises over time with inflation, the number of child care slots that states can fund would fall each year under the funding levels reflected in the CBO baseline, even if no cuts are made below the baseline levels.

Under the House Budget Resolution, states would be able to provide child care subsidies to 268,000 fewer children in 2010 than can currently be served with child care entitlement funding.  This reflects the effects not only of the $200 million cut in child care entitlement funding under the House budget but also of the long-term freeze on child care funding reflected in the CBO baseline.[5] If child care funding provided on the non-entitlement side of the budget also were cut, the number of child care slots lost would be even larger.

 

 TANF

Under the House Budget Resolution, the TANF block grant would be subject to $7.9 billion in cuts over the 2004 – 2013 period if TANF received the same percentage cut as other programs in the same budget function.  When compared to the CBO baseline, the TANF cuts would be deepest in 2010, when they would total $1.2 billion.

The TANF block grant is used to support a wide array of benefits and services for low-income families.  While the TANF block grant supports basic cash assistance programs for poor families with children, the drop in welfare caseloads in recent years has led states increasingly to direct TANF funds to employment-related services for low-income working families, such as child care programs and transportation assistance.  If each state’s TANF block grant allocation were reduced, states would have to make difficult decisions about which TANF-funded benefits and services to cut.

It should be noted that the TANF reauthorization bill that passed the House earlier this year did not include cuts in either TANF or child care funding (and included some very modest increases).  If the Ways and Means Committee wanted to keep the TANF and child care funding levels approved in the TANF bill the House has passed, the Committee would need to find deeper cuts in other programs under its jurisdiction, such as the Supplemental Security Income program for poor elderly individuals and people with disabilities, the Earned Income Tax Credit, and the Social Services Block Grant.

 

Medicaid

The House Budget Resolution calls for Medicaid cuts totaling $92 billion over the 2004 – 2013 period.  These cuts would be deepest (as compared to the CBO baseline) in 2013, when they would reach $25 billion.

 

Child Nutrition

Under the House Budget Resolution, child nutrition programs would be subject to $5.8 billion in cuts over the 2004 – 2013 period, if these programs received the same percentage cut as the other programs in the same budget function.  The cuts in the child nutrition programs would be deepest in FY 2010, when they would amount to $900 million.

 

Foster Care and Adoption Assistance

Under the House Budget Resolution, mandatory child welfare programs would be subject to $3.7 billion in cuts over the 2004 – 2013 period, if they received the same percentage cut as the other programs in the same budget function.  The cuts to these programs would be deepest in FY 2010, when they would be $600 million.

 

Child Support Enforcement

Under the House Budget Resolution, the child support enforcement program would be subject to $2.6 billion in cuts over the 2004 – 2013 period, if it receives the same percentage cut as the other programs in the same budget function.  The cuts would be deepest in 2010 when they would reach $400 million.

Conclusion

The $165 billion in cuts in low-income entitlement programs in the House Budget Resolution would significantly weaken a range of programs that provide basic assistance to working-poor families, low-income children, the elderly poor, and people with disabilities.  Millions of these individuals and families could have benefits and services upon which they rely reduced, or even eliminated.  The House Budget Resolution would cut programs that assist large numbers of vulnerable families and individuals in order to offset a small share of the cost of large tax cuts that would provide benefits heavily skewed to the nation's wealthiest households.

Endnotes:


[1] The following people contributed to this report: Leighton Ku, Zoë Neuberger, Dottie Rosenbaum, David Super, and Eileen Sweeney of the Center on Budget and Policy Priorities; Jennifer Mezey and Vicki Turetsky of the Center for Law and Social Policy; and Mary Lee Allen of the Children’s Defense Fund.

[2] This analysis assumes that no cuts will be made to the Unemployment Insurance program because Chairman Nussle has stated repeatedly and in writing that this program would not be cut.

[3] This figure was calculated by dividing $2.9 billion by the CBO projection of average SSI benefits in 2010. 

[4] This figure was computed by applying the percentage cut in the SSI program in 2010 to the CBO projection of the average SSI benefit in 2010.  This represents the amount by which the maximum SSI benefit would have to be reduced.  (If the maximum benefit is reduced by $10, for example, then nearly all SSI recipients would receive a $10 reduction in their benefits.)  The projected maximum benefit level under current law — computed by increasing the current maximum benefit level by the projected inflation rate between 2003 and 2010 — and the maximum benefit level after the cut is imposed were compared to the projected federal poverty line in 2010.

[5] States are required to spend a certain level of state funds for child care in order to qualify for their full federal allotment of child care funds.  Because a portion of the federal child care funds require a state match, if federal child care funding were reduced, the amount states are required to spend would be reduced as well.  A $200 million cut in federal mandatory child care funding would result in a reduction in required state spending on child care of $150 million.  Even if states did not reduce their spending by this $150 million, they would have to eliminate 239,000 child care slots under the funding levels in the House Budget Resolution.

[6] These figures were calculated based on the Congressional Budget Office’s projections of the average federal cost of Medicaid services for children and CBO’s projections of the number of children who will be enrolled in Medicaid during 2013.

[7] These figures were calculated based on the Congressional Budget Office’s projections of the average federal cost of long-term care services for elderly and disabled individuals participating in the Medicaid program.

[8] This figure was computed by dividing the level of the cut required in 2010 by a projection of the average annual foster care payment level in 2010.  The projection of the average annual foster care payment is based on data on average annual foster care payments from the 2000 Green Book published by the Ways and Means Committee.

[9] This amount assumes that states do not decrease their spending when federal funds are cut and that states would reduce spending evenly throughout the child support program and is based on states’ average “efficiency” rating which shows that for each $1 spent on child support enforcement activities, $4 in child support is collected.

[10] If states reduced their spending on child support enforcement by the same percentage that federal spending was reduced, child support collections would be expected to drop by about $2.4 billion in 2010. 

[11] See Garfinkel, et al., “Child Support Enforcement: Incentives and Well-being,” Joint Center for Poverty Research, 2000; and Fishman, et al., “Preliminary Assessment of the Association between State Child Support Enforcement Performance and Financing Structure,” Lewin Group, 2000.