Revised March 12, 2002

Latest Data Show WIC Program Will Badly Need Supplemental Funding in FY 2002
by Robert Greenstein and Sandra Clark

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In his fiscal year 2003 budget, President Bush calls for sufficient funding to be provided for the WIC program in fiscal year 2003 for the program to be able to serve all eligible women, infants, and children who apply. In action taken last fall, Congress attempted to chart a similar course for fiscal year 2002 and to ensure that rising unemployment and increased need would not result in states having to turn away eligible mothers and children. Unfortunately, it now seems clear that the WIC program lacks sufficient resources to meet this goal in fiscal year 2002. To prevent states from restricting entry into the program and turning away substantial numbers of eligible people, a supplemental appropriation will be needed.

At this time, the best estimate of the increase in WIC food costs per participant for fiscal year 2002 is an increase of 3.44 percent over last year's level. The 3.44 percent estimate, which reflects the latest trends in WIC food costs, is the estimate USDA has just used in determining state need for WIC funds when allocating the $39 million that Congress provided in the Department of Defense appropriations bill enacted in December. In the first three months of fiscal year 2002, WIC food costs are up nearly 4.9 percent over the first three months of last year.

The estimate that WIC food costs per participant will rise 3.44 percent this year represents an increase over earlier projections. The President's budget, which was developed several months ago, assumed a 2.5 percent increase in WIC food costs. More recently, the Department has used higher estimates in the formula for allocating WIC funds. The January allocation of WIC funds assumed inflation of 2.84 percent for FY 2002. In allocating the $39 million in additional WIC funds, this estimate was subsequently revised upward to 3.44 percent based on more recent information. The revised 3.44 percent estimate lowers the projection of the average number of participants that can be served this year, from the 7.50 million figure assumed in the budget to approximately 7.45 million.(1)

The amount of unspent funds carried over from fiscal year 2001 into fiscal year 2002 is low by historical standards and results from the unusual circumstances that occurred near the end of last year. States typically maintain a modest cushion in their budgets to avoid overspending program funds, since they cannot know actual costs for the final months of the fiscal year until after the fiscal year is over. As economic conditions deteriorated toward the end of last year and participation rose, state spending was higher than expected. In addition, food costs per participant rose in the last few months of the year by significantly more states had anticipated. Both of these factors resulted in higher spending in the final months of the fiscal year than states had planned for, which reduced the amount of funds that remained unspent.

This is significant because participation typically rises after January. Average participation for the fiscal year as a whole is usually significantly above the January participation level. Last year, average fiscal year participation exceeded the January participation level by 39,000. In fiscal year 2000, average fiscal year participation exceeded January participation by 67,000.

Furthermore, the need for WIC is expected to increase in the months ahead; unemployment is projected to rise further. Unemployment usually continues to rise for a number of months after a recession officially ends, and economic forecasters expect that pattern to be repeated this year. While the January unemployment rate was 5.6 percent (and average unemployment for the first four months of fiscal year 2002 also was 5.6 percent), CBO projects that the average unemployment rate for fiscal year 2002 as a whole will be 6.0 percent. Similarly, Federal Reserve Chairman Alan Greenspan testified before the House Financial Services Committee on February 27 that the Fed expects the unemployment rate to rise to between 6.0 percent and 6.25 percent before beginning to subside.(3)

These data and projections suggest that average WIC participation this year is likely to be somewhere between 7.55 million and 7.65 million, unless states turn people away or otherwise discourage them from applying.(4) This is consistent with the forecast in the Administration's budget that participation will average nearly 7.8 million in fiscal year 2003. To accommodate this participation, a supplemental in the range of roughly $70 million to $130 million appears to be needed.(5)

In a recent survey by the Center on Budget and Policy Priorities, a number of states reported that they are considering restricting enrollment in coming months due to a shortfall in funds. In the absence of a supplemental, states will likely have to turn away at least 100,000 and possibly as many as 200,000 eligible women, infants, and children.

End Notes

1. The current estimate for average monthly WIC food costs per participant in FY 2002 is $35.38. This is significantly higher than projections used last year to estimate funding needs for FY 2002. Last year, the President's budget estimated average per participant food costs of $34.72 for FY 2002. Based on trends in food costs over the year, the Center on Budget and Policy Priorities subsequently estimated that food costs would be $34.90. This was used as the basis for the estimates of funding needs for FY 2002.

2. The January participation estimate is based on data from 45 states that account for roughly 93 percent of the total WIC participation.

3. Testimony of Chairman Alan Greenspan before the House Committee on Financial Services, February 27, 2002, p. 9.

4. If average fiscal year 2002 participation is 39,000 above January participation, as it was last year, FY 2002 participation should average about 7.55 million. If average participation exceeds January participation by a larger amount and unemployment rises to the 6.0 to 6.25 percent range, as Chairman Greenspan expects, participation could average 7.65 million. (Between fiscal year 2000 and 2001, as unemployment increased from 4.0 to 4.4 percent - or four tenths of one percentage points, WIC participation grew by 110,000. Based on estimates by CBO and OMB, unemployment will increase by a much larger amount between fiscal year 2001 and 2002. CBO projects average unemployment of 6.0 percent for fiscal year 2002, and OMB projects unemployment of 5.8 percent. Based on these projections, it appears that WIC participation could reach 7.65 million in fiscal year 2002 as unemployment continues to rise.)

5. These dollar figures use the per-participant cost estimates in the President's budget, except that the food cost per participant is adjusted to reflect USDA's current estimate that these costs will increase 3.44 percent in FY 2002.