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Page 6 Children and Families -- TANF and Economic Support Programs (Paper #211) 24. The Committee could find that the proposed change would meet federal CCDF regulations, as well as provide for enhance subsidies for participating families, and thus adopt the proposed funding and statutory changes sought by SB 45/AB 50 [Alternative C1]. 25. Instead, the Committee could choose to maintain the phaseout of subsidies using state funding [Alternative C2]. Based on Wisconsin Shares caseload data from DCF, it is estimated that annual funding of $32,000,000 GPR (with an identical reduction in federal funding) could maintain eligibility under the current subsidy phaseout threshold as a state program. 26. Alternatively, the Committee could comply with the changes to federal regulations by repealing the subsidy phaseout and restoring the previously existing exit threshold "cliff" at 200% of the FPL ($53,300 for a family of 3), effectively removing all participants from the program with incomes above that level. [Alternative C3]. Since there would be no eligibility for such families, there would be no family with costs above 7% of their income participating in the program, and thus presumably conforming with federal regulations. It is estimated that Alternative C3 would reduce expenditures by $32,000,000 FED annually.

However, removing this extended eligibility would disproportionally impact children exiting from the foster care system. More than 33% of the children participating above the 200% FPL threshold qualify for child care subsidies because they come from the Title IV-E foster care system. Under current law, foster care children qualify for Wisconsin Shares using their original family's income. If they are permanently placed into a different family, their eligibility is redetermined using their new family's income. As a result, the extended eligibility above the phase-out threshold allows for children exiting the foster care system to continue to receive child care subsidies. 27. The Committee could decide to maintain the subsidy phaseout under current law. The subsidy phaseout was enacted as part of 2017 Act 59 to avoid a cliff effect that would otherwise make participants ineligible due to very small increases in their income. The policy has complied with federal regulations since that time. Absent a clear indication from ACF that the policy cannot conform to federal regulations, the Committee may not wish to repeal it at this time. 28. For example, a viable alternative may be pursued via separate legislation to more specifically define the treatment of subsidies under the phaseout threshold. As discussed, under current law the subsidy is reduced by increasing the family copayment by $1 for every $5 earned above 200% of the FPL. Current law could be altered to maintain the copayment at its current level and instead achieve the same effect by reducing the reimbursement rate. In so doing, the minimum family contribution would remain below 7% of their income. Because families are free to choose more or less expensive child care providers, it may be the case that the ability to use a less expensive provider would be found to comply with the federal rule change.

Expanded Eligibility for Wisconsin Shares 29. Instead of the proposed changes under SB 45/AB 50, the Committee may wish to consider eligibility expansion for Wisconsin Shares. The estimated costs in 2026-27 is shown for several different options in the table below, including changes to: (a) the initial eligibility threshold for being accepted into the program; and (b) the phaseout threshold after which subsidy amount decreases by $1 for every $5 earned above the threshold, under current law.