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Funding Principles

Reduce Child Poverty

Funding Principles

FUNDING

In order to ensure that state policies are sustainable it is important to consider ways to both maximize federal and state resources and to utilize public-private partnerships. To that end, there are several opportunities to support state efforts to support children and families living in poverty. For example:

State Funding Strategies

  • Utilize Payroll Taxes. Paid family leave has been funded through payroll taxes in California, Rhode Island and New Jersey. Similar to the way that Unemployment Insurance is financed, states can utilize payroll tax revenue to assist working families and make maintaining stable employment less difficult for working parents of young children.
  • Maximize federal reimbursements. The federal government pays 100 percent of food assistance program benefits. Federal and State governments share administrative costs (with the federal government contributing nearly 50 percent). Alternately, by providing a TANF or Maintenance of Effort-funded benefit that meets the definition of “assistance” under the TANF rules, a state can count these working families towards its work participation rate and boost the rate it achieves. Thus, the approach can help states meet federal requirements and assist in avoiding federal fiscal penalties, while also supporting low-income families as they transition into employment.
  • No-cost legal restrictions. Protections such as a 36 percent cap on small loans require very little new costs because states already have systems in place to monitor and enforce compliance with lending laws. These restrictions may actually save money because they can replace more complicated laws that that apply unique restrictions to different types of lenders.
  • Cost-neutral tax code adjustments. Tax-relief for low-wage working families could be provided at no cost to the state by closing tax loopholes or raising rates in other areas of the tax code.
  • Refundable State Earned Income Tax Credit. In Minnesota, the Minnesota Working Families Credit follows eligibility for the federal EITC and starts the refund at 25 percent of the federal and slowly increases. When the federal EITC phases out, the Minnesota Working Families Credit continues to increase up to about 42 percent of the federal EITC. This change occurred in 1998 when it was discovered that families earning income to move off of welfare experienced no net gain in resources as they earned more, paid taxes and lost their welfare grant, the federal EITC and the state Working Families Credit. Rather than a percentage of the federal EITC, the Working Families Credit is now calculated as a percentage of earned income. 
  • Establish Tax Incentives for Businesses. In Maryland, businesses locating in a Maryland Enterprise Zone may be eligible for income tax and real property credits in return for job creation and investments. Businesses located in one of two focus areas are also eligible for personal property tax credits. Businesses can receive up to $1,500 credit per new employee and $9,000 per employee over three years.

Maximize Federal Funds

  • Child Care Development Block Grants (CCDBG). CCDBG can be used to supplement state general revenue funds for child care assistance for low-income families. Funds may be used for child care services on a sliding fee scale basis, activities that improve the quality or availability of such services, and other activities that realize the goals of the CCDBG. Certain amounts of provided funds must be used for specific purposes: quality expansion; infant and toddler quality improvement; and child care resource and referral, including a national toll-free hotline; and school-age child care activities.
  • Food Stamp Employment and Training (FSET). FSET is a federal program that provides grants to states to provide job training services for food stamp recipients.  In addition, this program also provides unlimited 50 percent federal funding match for additional state and local funds invested in training for this population.  States that access these uncapped matching funds can leverage significant federal dollars to provide expanded job training and related supports to those at the lowest end of the income scale. 
  • Emergency Unemployment Compensation (EUC). EUC provided up to 34 weeks of benefits to eligible jobless workers in every state, and up to 19 additional weeks in states with “high unemployment” for a maximum of 53 weeks. However, EUC has not been extended since the program expired on January 1, 2014, with no phase-out period, which ceased all payments when the program ended.
  • Women, Infants and Children (WIC). WIC is a federal program that provides supplemental nutritious foods, nutrition education and counseling, and screening and referrals to other health, welfare and social services. The program is funded through grants awarded to state agencies. The WIC State agencies award subgrants to local agencies to certify applicants’ eligibility for WIC program benefits and deliver benefits to eligible persons. 
  • National School Lunch Program. Local school districts can apply to their state department of education for permission to participate in the federally subsidized school lunch program. In order to receive federal funding for school lunch programs, states are required to contribute matching funds equal to 30 percent of the federal funds they received in 1980. Since the matching funds are frozen at 1980 levels, state required contributions are often very small relative to the federal reimbursement level.
  • Adult Basic Education. The Adult Education and Family Literacy Act (AEFLA) provides basic reading and math education, assisting adults with obtaining a high school or equivalent degree, and literacy assistance for individuals with limited English Proficiency. The program is incorporated in Title II of the Workforce Investment Act, and the federal government invests approximately $579 million in formula grants to the states according to the number of adults 16 and older not enrolled in school without a secondary degree. States are required to provide a 25 percent matching requirement as well as Maintenance of Effort Funding.
  • Federal funding for EITC outreach and free tax preparation. In 2009, for the first time, the Internal Revenue Service (IRS) made $8 million available to government and nonprofit entities across the nation working to raise awareness of the EITC and provide free tax preparation services for low-income people.  See a list of 2011 grantees in your state. The IRS posts updated information for this funding source on the IRS Community Service website.
  • TANF funding for EITC. Several states use TANF funding to help support state EITCs. TANF funds can be used to support the portion of the EITC that is refunded to TANF recipients. As of 2011, 21 states are using TANF funds to help support the state EITC efforts.
  • Head Start. The Head Start program grantees are required to assure that children receive developmental screenings and are linked to follow-up testing and treatment for children with development delays or suspected disabilities. Head Start and Early Head Start funding can be used to support this requirement in various ways, including trainings for practitioners and building systems of coordination with mental health, Part C and the child welfare agencies.
  • Race to the Top Early Learning Challenge. The Race to the Top Early Learning Challenge the way with ambitious yet achievable plans for implementing coherent, compelling, and comprehensive early learning education reform. Some states have received supplemental grants, bringing the total funding per state to between $10 million and $22 million.
  • Temporary Assistance for Needy Families (TANF). States can use TANF dollars to fund preventive programs, such as assessments, that support children’s healthy social, emotional and behavioral development while reducing out-of-home placement.
  • Community Services Block Grant. The Community Service Block Grant is a formula grant available to states through a Department of Health and Human Services application process. Funds can be used, in part, for strengthening educational opportunities and providing services and activities that help low-income individuals achieve greater participation in the affairs of the community.

Partner with Foundations

  • The Foundation for Child Development (FCD). FCD leads efforts to better understand American children’s quality of life by using social indicators to measure child well-being at the federal and state levels and disseminates their findings through the Child Well-Being Index (CWI) that combines separate sources of national data about American children into a report. The report reflects the overall well-being of children in the United States and how trends in specific areas of well-being have changed each year since 1975. FCD supports the restructuring of preschool through third grade into a well-aligned first level of public education for children (age three to eight). FCD awards an average of 14 grants per year to support research, policy development, advocacy, and communications strategies related to preschool-third grade education. New American Children grants focus on stimulating basic and applied research on children (birth through age ten) living in low-income immigrant families.
  • The W.K. Kellogg Foundation. The Kellogg Foundation provides grants based on their programming framework for educated kids, healthy kids, secure families, and racial equity and civic engagement and invests in efforts to help increase families’ economic and social mobility. The Foundation also connects financial resources and job skills training, so families can be debt-free, pay bills and feel empowered to help their children succeed.
  • The Annie E. Casey Foundation (AECF). The Annie E. Casey Foundation is a private charitable organization dedicated to bettering outcomes for children in the United States through investments in a comprehensive, two-generation approach to help isolated families secure adequate incomes, stabilize their finances, accumulate savings and live in vibrant, economically viable neighborhoods. The Foundation invests in innovative demonstration projects in specific locations that focus on vulnerable populations, such as new immigrants, single parents, individuals formerly incarcerated and families living in communities of concentrated poverty.
  • The Ford Foundation. The Ford Foundation is an independent, nonprofit, nongovernmental organization that awards grants or loans that build knowledge and strengthen organizations and networks on key problem areas and program strategies. The Foundation focuses their work on supporting low-wage workers by promoting workplace policies, expanding opportunities for poor and low-income families to build economic security and improving overall opportunities for low-wage workers to support their families.
  • Open Society Institute (OSI). OSI focuses on the effectiveness of place-based philanthropy and have targeted investments toward some of the biggest challenges facing Baltimore and other urban centers in the United States. OSI programs are dedicated to improving better outcomes for children as well as to revitalizing underserved communities. The Foundation has spent over $90 million in 14 years to support its comprehensive approach to the root causes of poverty and injustice.
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See a description of key stimulus funding and revenue estimates of revenues for each state prepared by the the Center on Budget and Policy Priorities.

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How to monitor inestments: Judge how financing is shifting. Identify how new funding sources are being utilized. Monitor changes in federal funding sources and rules. Re-assess the potential of specific approaches to help achieve better results for children.