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Children and Families -- TANF and Economic Support Programs (Paper #211) Page 5 to the 55th percentile; (c) $12,400,000 in 2025-26 and $12,900,000 in 2026-27 to raise rates to the 50th percentile; or (d) $6,900,000 in 2025-26 and $7,200,000 in 2026-27 to raise rates to the 40th percentile [Alternative B3]. 19. The Committee could decide that a change in funding is unnecessary for several reasons, and choose to take no action on this budget item [Alternative B4]. First, the Committee could decide that other priorities should be addressed prior to increasing reimbursement rates, such as funding the copayment waivers and the cost to continue the program under current law. Second, the Committee could find that there is insufficient data to determine funding levels needed for a rate increase, since DCF only recently implemented changes for the copayment waiver for families at or below 100% of the FPL and for full-time/part-time authorizations. The issue could be revisited at a later date when DCF has obtained Wisconsin Shares payment and caseload data under the program modifications in SB 45/AB 50, similar to the rate increase occurring in January, 2019. Third, DCF currently is able to increase rates if there is underspending in the program, similar to the October, 2018, rate increase. Fourth, the funding increase in the bill for child care subsidies is the most significant contributing factor to the structural imbalance in the TANF program. As discussed in LFB Paper 210, under the bill with the modifications the Committee has made to date, ongoing TANF-related program expenditures are estimated to exceed ongoing revenue by approximately $145.7 million in 2026-27, which may require increased revenues or program reductions in TANF-funded programs in the 2027-28 biennium. Replace Subsidy Phaseout with a 150% FPL Copayment Waiver and 7% Income Copayment Cap 20. Under current policies, DCF sets copayments via a schedule that sets copayments to $0 for families at or below 100% of the FPL ($26,650 for a family of 3 in 2025) and that increase to up to 7% of income at 200% of the FPL ($53,300 for a family of 3 in 2025). 21. For families in the phaseout threshold under Wisconsin Shares, their copayment is increased by $1 for every $5 they earn above 200% of the FPL. Families are free to choose a child care provider that charges more or less than their subsidy amount. If the provider costs more than the subsidy, then the family would owe the difference (plus their copayment amount). 22. The recent federal rule changes and accompanying guidance do not specify whether a subsidy phaseout in order to avoid a cliff effect from abruptly terminating eligibility at an exit threshold is allowable under the 7% income cap on copayments. 23. In order to comply with the 7% of income copayment cap, SB 45/AB 50 would provide $22,705,500 in 2026-27 to implement a Wisconsin Shares policy that would both: (a) increase the copayment waiver from 100% of the FPL to 150% of the FPL; and (b) limit a participating family's out-of-pocket expenses to be no more than 7% of family income. As part of the change, SB 45/AB 50 would repeal the subsidy phaseout. Instead, copayments would be set to $0 until the family's income reaches 150% of the FPL ($39,975 for a family of 3), and after that threshold is reached, the copayments would increase up to the 7% income maximum as the family's income increases to the exit threshold of 85% SMI (at which point they would no longer be eligible for the program). Further, AB 50/SB 45 would provide $19,400 FED in 2025-26 for information technology changes needed to implement the changes.