State-level policy solutions to the benefits cliff
So, what can be done to ease the benefits cliff? Since the cliff springs from policy decisions, the solution must also be policy driven. Other states are recognizing the cliff’s unintended consequences and are starting to devise solutions to dampen its impact. We’ve outlined some of the solutions below. None are cure-alls, but they do dampen the cliff’s blows by either turning the cliff into a slope or reducing the cliff’s steepness.
North Carolina could use these policies as examples on how it could tackle the benefits cliff:
- As is evident from the benefits cliff simulator, loss of child care subsidies create one of the largest cliffs. To turn this cliff into a slope, Colorado authorized the Colorado Cliff Effect Pilot Program (CEPP) in 2012. Under the program, families that exceed the income threshold can continue receiving subsidies for two years, but they must pay a copay. The copay amount is determined by either income, time, or both; depending on county. For example, the copay grows either as income grows or as the family gets closer to the two year mark.
- South Carolina offers one to two years of transitional child care subsidies for qualifying families who lose child care subsidies due to increased income.
- Another state-level policy aimed at dampening the child care benefits cliff is a child care tax credit that mirrors the federal Child and Dependent Care Tax Credit. It gives households a credit for child care expenses, so the sudden increase in child care costs is partially mitigated by a larger tax refund. Vermont and Colorado currently have such credits.
- Illinois expanded SNAP eligibility from 135% of the federal poverty guidelines to 165% using broad-based categorical eligibility. This expansion does not just push the cliff out further, it lowers the cliff. This is because benefits decline with income, so pushing the eligibility threshold out further gives the cliff more room to turn into a slope.
- TANF programs, called Work First in North Carolina, have no federal asset requirements. States self-impose the requirements and are free to eliminate or raise them. As of 2016, 10 states had no asset limits for TANF.
- State policy solutions often start with a seed. In 2017, the New Mexico state legislature created a task force to study the benefits cliff.
Now that we’ve outlined the benefits cliff and it’s hazards, our next concern might be the magnitude of the effect in Buncombe County. How many people are at risk of falling off the cliff? Creating exact estimates is difficult, but we can look to 2019 US Census data for rough corollary figures.
The graph below displays the number of individuals who are enrolled in Food and Nutrition Services (FNS), those who are below the income level and potentially qualify for FNS (individuals who are “Enrolled in FNS” are included within the “Below Income Level” grouping), and those who are above the income level and do not qualify for FNS. The graph provides three options to visualize Buncombe County residents’ FNS enrollment and income qualification including by total population, household size, race and ethnicity.