Legislative Fiscal Bureau

One East Main, Suite 301 • Madison, WI 53703' (608) 266-3847 • Fax: (608) 267-6873 Email: fiscal.bureau@legis.wisconsin.gov· Website: http://!egis.wisconsin.govllfb

July 26,2012


Senator Alberta Darling Room 19 South, State Capitol Bob Lang, Director


SUBJECT: Value of Public Assistance Benefits and Tax Credits Available to Hypothetical Family

In response to your request, this memorandum provides estimates of the value of program benefits and tax benefits that are available to a two-person family that includes one adult and one child with wage income equal to the federal poverty level (FPL). In 2012, the federal poverty level is $15,130 for a two-person family, In order to identify programs and tax benefits for which the family would be eligible and to estimate the value to these families, several assumptions are made. First, it is assumed that the family's income is earned in calendar year 2012. Consequently, tax credits available to the family would be claimed in 2013. Second, it is assumed that the child is four years old and is enrolled in child care in the City of Milwaukee. Third, it is assumed that the family does not receive child support. Finally, it is assumed the family lives in a one-bedroom apartment, and pays out-of-pocket costs for rent, including utilities (heat, electricity, and water) of $339 per month. 1. BadgerCare Plus

As part of the state's medical assistance (MA) program, BadgerCare Plus reimburses health care providers for the services they provide to low-income families with dependent children. The program has a variety of eligibility and cost-sharing requirements that depend, in part, on the individual's family income and whether the individual is a child or an adult. ' In this example; both the mother and the child would be eligible for coverage under BadgerCare Plus. Moreover, due to their income level, they would not be subject to monthly premiums under theprogram's current rules, nor would they be disqualified from BadgerCare Plus if they also had access to coverage under employer-sponsored insurance.

For the purpose of this exercise, the value of BadgerCare Plus coverage for the family is assumed to equal the (all funds) cost to the state to provide BadgerCare Plus coverage to the family. The total estimated annualized benefit cost for the family in this.example ($4,740) reflects the average cost of providing coverage for children ($1,500) and adults ($3,240) in the program who do not have access to other forms of major medical insurance. Estimated Annualized Value 2. FoodShare Wisconsin

of Benefit


FoodShare provides federally-funded benefits to individuals and families to purchase food from participating grocery stores and other retailers. This is Wisconsin's version of the federal supplemental nutrition assistance program (SNAP), formerly called the food stamp program. In Wisconsin, households with incomes up to 200% of the federal poverty level qualify for benefits. To determine the benefit amount, 30% of a household's net income (after certain deductions) is subtracted from the maximum benefit amount for a, household of that size. Currently, the maximum benefit for a family of two is $4,404 per year. Estimated Annualized Value of Benefit 3. (WIC) $3,285

Special Supplemental Nutrition Program for Women, Infants and Children

WIC provides certain pregnant or post-partum women, infants, and children under age five, with vouchers to purchase designated foods. Families participating in WIC also receive nutrition education and counseling. Income limits for the program are 185% of the federal, poverty level ($27,991 for a family of two in 2012). Unlike FoodShare, where families may purchase a wide range of foods, WIC limits purchases to foods included in the \VIC "food package." For the family specified in this request, the 4-year-old child would qualify for \VIC, and the family would receive monthly vouchers for set amounts of the following foods: milk, juice, cereal, eggs, fruits and vegetables, whole wheat bread, and a choice of legumes or peanut butter. The dollar value of the food package was estimated using average food price data from the Bureau of Labor Statistics, and the U.S. Department of Agriculture. Estimated Annualized Value of Benefit 4. Wisconsin Shares $477

Wisconsin Shares is the state's child care subsidy program. Under the program, the state subsidizes the cost of child care for qualified families by making payments to the child care provider chosen by the parent. The amount of the subsidy payment varies based on the type of child care provided (licensed group, licensed family, regularly certified, or provisionally certified), the rating of the child care provider (two-star through five-star), the number of

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children in care, and the county or tribe in which the care is provided. The parent is also required to contribute to the cost of child care. The copayment amount is based on income, family size, and the number of children in care. The family would be eligible for a child care subsidy in order for the parent to work fulltime in an unsubsidized job. The following assumptions are made to calculate the estimated subsidy payment amount: (a) child care is provided by a licensed group child care center; (b) the child care provider has a three-star rating; and (c) the child is receiving full-time care. Based on these assumptions, the annual child care subsidy would total $10,972 ($211 per week) and the family's annual required copayment would total $1,092 ($21 per week). Estimated Annualized Value of Benefits 5. Federal Section 8 Housing Assistance $10,972

The Wisconsin Housing and Economic Development Authority (WHEDA) provides housing assistance to low-income persons through federal Section 8. programs. Section 8 assistance may be in the form of: (a) project-based assistance, in which payment is made to property managers on the basis of eligible residents occupying the property; or (b) housing choice vouchers, which a recipient can us~ at any properties that will accept that form of rent payment.


Section 8 project-based and voucher assistance generallyis limited to households with gross income at or below 50% of area median income (A1v:1I). A four-person household is a base for determining income as a percentage of AMI, with one- to three-person households subject to a lower income limit and households of five persons or more subject to higher limits. The median household income for the Milwaukee metropolitan area, as determined by the U.S. Department of Housing and Urban Development (HUD) for federal fiscal year 2012, is $73,200. Rent payments for Section 8 recipients are the greater of: (a) 30% of adjusted monthly income, as described below; (b) 10% of gross monthly income; (c) any designated housing allowance under any welfare programs; or (d) a minimum rent of up to $25 or $50, depending on the type of Section 8 assistance involved. WHEDA reports the most common payment is 30% of adjusted monthly income. Several adjustments to monthly income are required by federal law, most notably in this instance: (a) a $480 annual deduction each for a child under 18, a full-time student, or a disabled person; and (b) child care expenses that allow adults in the household to attend work. , A two-person household with income of $15~130 would be at 20.6% of area median income. The family'S annual adjusted income would be $13,558, after applying deductions of $480 for the child and $1,092 in estimated annual child care co-payments under Wisconsin Shares. The family's expected rent payment, equal to 30% of adjusted monthly income, would be $339. The Section 8 assistance to the family would be the difference between 'the tenant's income-based monthly payment and the predetermined rent for the unit. Rent amounts are established on the basis of the area's fair market rent and may vary somewhat based on local conditions, and are inclusive of

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average tenant-paid utilities such as heat and electricity. For a one-bedroom unit in Milwaukee, with utilities assumed to be included, the HUD fair market rent for 2012 would be approximately $688. The difference between fair market rent and the $339 family's portion of rent would be $349, which would be the amount of RUD's monthly payment to the property manager on the family's behalf. For instances in which utilities must be paid by the tenant, tenants are likely eligible for a utility allowance. The utility allowance varies by location. It is credited to the tenant, resulting in a reduction in the effective rent payment, with the expectation that the amount is used to pay utility costs. If applicable. utility allowances have the effect of changing the balances of rent paid by reducing the tenant's monthly payment and increasing the HUD payment by a corresponding amount. The overall rent amount does not change, however. It should be noted that federal Section 8 housing assistance is subject to availability. As such, if federal housing assistance were not immediately available, the family may be eligible for other assistance in the meantime, such as low-income energy assistance. Estimated Annualized Value of Benefits $4,188


Federal and State Low-IncomeEnergy Assistance

The Wisconsin Home Energy Assistance Program provides federal- and state-funded cash benefits and services including heating assistance and non-heating electric assistance for lowincome households. Heating assistance and non-heating electric assistance are available as onetime payments during the heating season (October 1 to May 15), in most cases paid directly to the utilities of eligible applicants. A household earning no greater than 60 percent of the state median income qualifies for energy assistance if it meets other eligibility requirements. In 2012, this income limitation was $31,802 for a family of two. In addition, an applicant must have financial responsibility for energy costs to receive assistance. Households living in government-assisted or subsidized housing are ineligible to receive energy assistance if the cost of energy is included in the rent or otherwise not paid by the applicant in full. Other eligibility requirements include Wisconsin residence and identity verification (by Social Security Number) for all household members. The benefit that a participating household receives depends on a variety of factors, including household size, income level, primary fuel type, meter type (shared or individual), and actual energy costs. If all other factors are identical, households with lower income levels will receive greater benefits. The following estimate is for a family of two that does not receive housing assistance, resides in a three room apartment (one bedroom, a: kitchen, and a living room), and has heat and electricity included in the rent. The two most common primary fuel types for recipients living in an apartment of this size are electricity and natural gas, with nearly equal numbers using each. The

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benefits for a family of two earning $15,130 annually are listed in the table below, averaged across primary fuel types. Estimated Energy Assistance Heating Assistance Non-Heating Electric Assistance Total Estimated Annual Value of Benefits

$235 See Text Below


The Federal Section 8 housing assistance program (described previously) provides housing' assistance for households meeting certain program criteria. Households receiving Section 8 benefits are generally ineligible to receive Wisconsin Home Energy Assistance Program benefits. Since the value of the housing benefits is greater than the energy assistance benefits, it is assumed that housing benefits, rather than energy assistance benefits, would be provided. It should be noted, however, that until Section 8 assistance is received, a household may still qualify for energy assistance benefits. 7. Federal and State Income Taxes and Refundable Credits

The hypothetical family would not have a federal or state net income tax liability, before considering refundable credits. At the federal level, they would be eligible for a refundable earned income tax credit (EITC) of$3,169 and a refundable additional child credit of$l,OOO. At the state level they would be eligible for a refundable EITC of $127 and a refundable homestead tax credit of $189. These figures are shown below. Although the family would not have a federal or state income tax liability, they would pay other taxes such as federal payroll taxes, federal and state excise taxes, and state and local sales taxes. Federal Income Tax Before Refundable Credits EITC Additional Child Credit Net Federal Tax Liability (Refund) State Income Tax Before Refundable Credits EITe Homestead Net State Tax Liability (Refund) $0 -3,169 -1,000 -$4,169 $0 -127 -189 -$316

It should be noted that changes to the assumptions used in this analysis would yield changes to the types of programs for which these families would qualify, and the estimated value of benefits that would be available to these families. Also, it is important to note that the benefits identified in this memorandum represent a combination of amounts directly received by a recipient and amounts paid to a provider of a service. For those programs in which a service provider

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receives reimbursement from the government, the estimated value of benefits shown is based on the cost of providing that reimbursement. However, different benefit values could be derived based on the amount of program usage by the recipient or choices the recipient might make if the programs did not exist.


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