President’s Budget Falls Short on Renewing Housing Assistance

March 16, 2012 at 10:19 am

Announcing the President’s 2013 budget for the Department of Housing and Urban Development, HUD Secretary Shaun Donovan said that a key goal is to protect rental assistance for the low-income families that use it.  Unfortunately, the budget falls short for the three largest rental assistance programs, our new analysis shows.  As a result, as many as 55,000 low-income families would risk losing their housing vouchers, and public housing for 1.1 million low-income families would deteriorate due to delayed maintenance and repairs.

These three programs — Housing Choice vouchers, public housing, and Section 8 project-based rental assistance (PBRA) — help 4.5 million low-income households, nearly all of which include seniors, people with disabilities, or families with children.

The budget proposes cost-saving policy changes to shrink the funding gap between what the budget provides and what we think it needs to fulfill its key goal.  We’re all for reforms that improve program effectiveness and cut costs.  And some of the proposals, like enabling the voucher program to help more working-poor families, are sound.   But others are simply bad ideas — particularly raising rents sharply on 500,000 of the poorest HUD-assisted households.   Moreover, HUD’s budget overstates the likely savings from many of these proposals.

Analysis of HUD Requests to Renew Rental Assistance
Program HUD request for 2013 Renewal and operating shortfalls, net of realistic policy-related savings
Housing Choice Voucher renewals $17.2 billion $250 – 440 million
Section 8 PBRA $8.7 billion ~$1.1 billion
Public Housing Operating Fund $4.5 billion $350 million
Total $1.7 – 1.9 billion
Source: Center on Budget and Policy Priorities and HUD.

Using more realistic cost projections and assuming that Congress will not agree to hike rents on the poorest HUD tenants, we estimate that the President’s request is at least $1.7 billion short of the amount needed to sustain rental assistance for current families (see table).

Fortunately, HUD expects revenues for the Federal Housing Administration — which help cover the cost of HUD programs — to rise next year.  That means Congress could boost HUD funding above the President’s level and enable HUD to keep serving as many families as it does now, while still keeping HUD funding well below recent years’ levels.

Why Good Jobs Reports Aren’t Good Enough

March 15, 2012 at 2:56 pm

Like the Roman god Janus, who looks at both the past and the future, my latest post for US News & World Report looks at where the jobs market is coming from and where it needs to go:

Looking in the rearview mirror, the latest jobs report looks OK — at least we’re heading in the right direction.  But looking at the road ahead, we still face a long uphill climb, and it will take a whole string of jobs reports significantly better than February’s to get us back to full employment in any reasonable period of time.

Our chartbook, The Legacy of the Great Recession, tells the story.  The Great Recession (from December 2007 to June 2009) produced an unprecedented jobs deficit and inflicted other serious damage on the jobs market.  The economy has been growing since then, but a large jobs deficit and other symptoms of serious labor market distress remain.

This chart shows why we can’t be complacent about the jobs recovery.  The share of the population with a job plunged to levels last seen in the mid-1980s and has remained there.  This measure captures not only the high unemployment rate but also the fact that people left the labor force in droves during the recession and have largely remained on the sidelines.  Labor force participation rose in February, but only slightly.

Share of Population Without a Job Remains Depressed

Repealing Medicare’s Cost-Cutting “IPAB” Would Be Bad for Beneficiaries

March 15, 2012 at 12:32 pm

The House is scheduled to vote next week on whether to repeal the Independent Payment Advisory Board (IPAB) — a presidentially appointed commission that the health reform law created and that will help slow the growth of Medicare costs.  Our new paper explains why criticisms of IPAB are off-base and why repealing it is a bad idea.

Critics charge that IPAB will ration health care, but that’s false.  Health reform specifically prohibits the board from rationing health care, raising Medicare’s premiums or cost sharing, cutting benefits, or restricting eligibility.  It must focus exclusively on proposals that achieve savings in the payment and delivery of health care services.

In fact, if Congress repeals IPAB, the alternatives will likely prove far worse for Medicare beneficiaries.  In that case, Congress will more likely consider blunt proposals that would shift significant costs to beneficiaries, such as sharply increasing premiums and raising the eligibility age.

Most important, repealing IPAB would fuel efforts to replace Medicare’s guarantee of health coverage with “premium support” — a fixed payment, or voucher, that beneficiaries would use to help them buy private health insurance or traditional Medicare.  This arrangement would achieve budgetary savings by limiting the growth of the voucher to less than the rate of growth of health care costs.  As a result, beneficiaries would have to pay more in premiums or receive less in benefits with each passing year — precisely what health reform directs IPAB to avoid.

TANF Weakening as a Safety Net

March 14, 2012 at 4:17 pm

Many policymakers see the 1996 welfare law’s creation of Temporary Assistance for Needy Families (TANF) as a major success and cite TANF’s structure — a block grant with fixed federal funding but broad state flexibility— as a model for other safety net programs.

But when we analyzed state-by-state data to examine how well states have maintained TANF’s role as a safety net, the results were sobering.  TANF now provides a safety net for relatively few poor families with children.

TANF Weakening as a Safety Net For Poor FamiliesIn 1996, TANF provided cash aid to 68 families for every 100 families with children living in poverty.  By 2010, this “TANF-to-poverty ratio” had plummeted to 27 (see first graph).

TANF-to-poverty ratios have fallen dramatically in all states since the mid-1990s (see second graph):

  • In 1994-95, almost half of the states had a ratio higher than 75.  In 2009-10, none did.
  • In 1994-95, no state had a ratio lower than 25.  In 2009-10, half of the states did.

TANF-to-poverty ratios fell so far not because the number of poor people fell but, instead, because TANF caseloads fell.  From 1994-95 to 2009-10, caseloads declined by at least 27 percent in every state and by over 50 percent in 36 states.  During that same period, the number of families with children in poverty rose by at least 10 percent in over half the states.  But TANF failed to respond to the increased need.

Georgia provides a striking example.  Between 1994-95 and 2009-10, Georgia’s TANF-to-poverty ratio dropped from 98 all the way to 9.  TANF caseloads fell by 85 percent even as the number of poor families rose by 92 percent.  Caseloads fell largely because of state policies designed to make it harder for families to get TANF and easier to remove families from the program.

TANF’s block grant structure contributed significantly to these problems, although TANF’s work requirements also played a big role.  For example, when TANF caseloads fell amidst the hot economy of the late 1990s, states took advantage of the flexibility that the block grant gave them to shift TANF funds to other purposes — in some cases replacing state dollars previously used for these purposes.  But when the need for cash assistance rose during recessions, states generally didn’t reclaim those dollars to aid the growing number of families needing help.

Also, the TANF requirement that states place a certain share of TANF families in work activities gives states an incentive to focus on helping only families with the best chance of finding jobs.  As a result, the families that most need help are often the families that states least want to serve — and states have adopted policies that keep many of them off the rolls.

When Congress renews TANF — which could occur in 2012 — it should address these and other problems to strengthen the program as a safety net for very poor families.

TANF's Role as a Safety Net Has Declined in Every State

Pell Grants on a Downward Slope

March 13, 2012 at 4:41 pm

Pell Grants, which help nearly 10 million low- and moderate-income students afford college, are an important weapon against growing inequality in higher education.  But, as Paul Krugman recently highlighted, they have shrunk considerably over time as a share of college costs.

In December, we explained why Congress’s cuts to the program in fiscal year 2012 were both unnecessary and unwise.  Here’s a revised version of our chart showing the grants’ long-term erosion.

Pell Grants Have Lost Purchasing Power