Policy Basics: The Housing Choice Voucher Program

Living in a safe, stable, and affordable home— defined as costing no more than 30 percent of a household’s income— is foundational to individual and public health. The Housing Choice Voucher (HCV) program is the nation’s major housing rental assistance program helping families living on poverty-level incomes, seniors, and those living with disabilities afford their homes. Housing vouchers are shown to lift people out of poverty, improve long-term outcomes for families and children, and reduce racial inequality. Today, housing vouchers support 10,595 Montanans—equivalent to the entire population of Carbon County— in households across the state.[1]

Due to insufficient funding, only one in four eligible households receives housing voucher assistance.[2] Chronic underinvestment in federal rental assistance programs prevents 15 million Black, Indigenous, and people of color (BIPOC) eligible for assistance from receiving it.[3] Expanding the HCV program would be an essential step towards reducing housing instability for households living on the lowest incomes and correcting our nation’s deep racial inequities.

Background

Millions of households living on low incomes must pay too high shares of that income on housing costs.   Of the total 10.8 million renter households nationwide with extremely low-incomes, 70 percent— 7.6 million households— face severe housing cost burden, paying more than half of their incomes for housing.[4] Due to a long history and ongoing practice of racism and discrimination that limits economic and housing opportunities for communities of color, housing challenges, such as severe housing cost burdens, overcrowding, evictions, and the experience of homelessness, disproportionately fall on BIPOC households.[5]

This racial disparity reflects the impacts of historical and ongoing racial injustice and discrimination in housing, employment, and educational opportunities that have systematically disadvantaged people of color. A primary driver of our nation’s racial wealth gap is decades of racial discrimination of real estate agents, banks and insurers, and the federal government prevented people of color from purchasing homes. This took the form of federal housing policy denying borrowers access to credit in Black communities, physical violence, and covenants banning home sales to Black people trying to live in predominately white neighborhoods.[6] Even as our nation ended many of these overtly racist practices, including through the passage of the 1968 Fair Housing Act, insidious forms of discrimination persist and lock communities of color out of building wealth through homeownership, educational attainment, and opportunities to make equitable wages.

Program Summary

The Housing Choice Voucher program was established in 1974 in Section 8 of the repeatedly amended United States Housing Act of 1937. The Section 8 low-income housing program is two programs: the Housing Choice Voucher program, which are portable subsidies that families can use to rent housing of their choice in the private market, and the project-based Section 8 program, which is rental assistance that is attached to a unit of privately owned housing. The Section 8 program began primarily as a project-based rental assistance program.[7] By the mid-1980s, project-based rental assistance came under criticism for being too expensive and not equitably serving Black households living on low incomes by segregating them in high-poverty areas. Due to these concerns, Congress shifted to providing direct rental subsidies so that people could decide for themselves where they want to live.

Today, the Housing Choice Voucher program under Section 8 is the largest federal low-income housing assistance program, providing over 2.3 million households tenant-based rental assistance.[8] The program has three primary goals:

  • To provide affordable, stable, and safe housing for households living on very low incomes
  • To reduce concentrated geographic poverty; and
  • To improve housing and neighborhood choice for families.[9]

The Department of Housing and Urban Development (HUD) and a network of about 2,170 state and local public housing agencies (PHAs) administer the HCV program.[10] PHAs distribute vouchers to qualified households who then conduct their own housing search. An individual must find an available rental that meets quality program requirements and whose landlord accepts vouchers as payment. The household pays 30 percent of its adjusted gross income towards housing costs. The value of the voucher covers the remaining rent balance up to a limit (called a payment standard) set by the local PHA that is based on HUD’s Fair Market Rent estimates.[11]  When a household receives a voucher, it usually has 60-120 days to find an apartment, though extensions are sometimes possible, or it loses the voucher.

Unlike public housing agencies, tribal nations are not eligible to apply for housing choice vouchers since the passage of the Native American Housing Assistance and Self-Determination Act (NAHASDA) of 1996. NAHASDA provides block grant funds directly to tribal nations to provide affordable housing-related opportunities for eligible households living on reservations and in other tribal areas but restricts tribal nations from accessing many other HUD programs.

Funding

The Housing Choice Voucher program receives discretionary funding in annual appropriation bills in an amount determined by Congress. Unlike other federal anti-poverty programs, like the Supplemental Nutrition Assistance Program, the HCV program is not an entitlement program, meaning that not everyone who qualifies and applies for assistance receives it.

Most PHAs receive voucher renewal funding each year, adjusted for inflation. That amount is capped at the total number of vouchers an agency has been awarded since the start of the program and the cost of the authorized vouchers in use during the prior year— not based on need.[12] Congress also funds incremental vouchers, which are new vouchers that specifically address the housing needs of a particular group, as opposed to vouchers that add to a community’s overall voucher pool.[13] Examples include the Veteran Affairs Supportive Housing program for homeless veterans and the Family Unification Program for families for whom inadequate housing has caused or threatens to cause a child to be removed from their family or prevents family reunification.[14]

Eligibility

Housing Choice Vouchers serve households living in deep poverty. HUD sets income limits to determine eligibility for housing vouchers based on estimates of median income and fair market rents in an area. By law, 75 percent of all new vouchers each year must go to households living on extremely low incomes, defined incomes no more than 30 percent of the Area Median Income or the federal poverty line, whichever is higher.[15] In addition, state and local PHAs have the flexibility to set admission preferences for households that meet specific criteria such as veterans, working families, families fleeing domestic violence, or on an applicant’s housing needs such as those experiencing homelessness.

Attributes of Voucher Assisted Montana Households

In Montana, a two-person household can make no more than $17,300 to be considered extremely low income.[16] To put into context, someone making minimum wage in Montana at 40 hours a week earns only $18,200.[17] Even so, the average yearly income of a voucher-supported Montana household falls below this standard at $12,360.[18]

Among households that would most benefit from rental assistance would be the one in four Montanans living on extremely low incomes or incomes at or below the poverty level. Understandably, these households must pay very high shares of their income on rent— 68 percent pay more than half of their limited incomes to afford their homes.[19] Severely cost burdened households in this situation are more likely than others who pay affordable levels of rent, including those living on poverty level incomes, to sacrifice meeting other essential needs like healthy food and medicine in order to pay the monthly rent.

Today, 5,728 Montana households, which include tenants living with disabilities, families raising children, and senior citizens who live in these households, use a voucher. When disaggregated by race, voucher assisted households reflect the state’s demographics, with white and American Indian or Alaska Native (AI/AN) individuals and families making up the largest share. The most recent data shows that 79 percent households receiving HCVs are white, and 14 are AI/AN.[20]

Value of Housing Vouchers

Housing vouchers can be a powerful tool to address persistent poverty and longstanding racial inequity by directly redressing affordability problems.  When properly implemented, vouchers can stabilize families and give them greater choices about where they live, access to higher-opportunity neighborhoods, and meet their legal obligation to reduce the housing segregation of Black households  and concentrated residential poverty. Multiple studies have found that the voucher program can deliver important, tangible outcomes.

  • Vouchers reduced the number of people living in crowded housing by half and reduced homelessness by three-quarters compared to similar households without housing assistance.[21]
  • Families that relocated to lower-poverty neighborhoods with the help of vouchers experienced better health, higher incomes, and increased college attendance for children whose families moved before they were 13.[22]
  • Vouchers substantially reduce the number of families living in poverty, allowing them to spend more to meet other basic needs like food and medicine.[23]
  • Expanding vouchers to all eligible households would lift 9.3 million people out of poverty and reduce racial disparities. These gains would be most significant among BIPOC populations expanding vouchers would cut the poverty rate for Latinx households by a third, Black households by a quarter, and Asian, Pacific Islander, and American Indian and Alaska Native households by a fifth.[24]

Barriers to Program Success

There is evidence that the HCV program has fallen short of achieving its intended goals. The way the program is designed and administered contributes to the housing choice and mobility challenges that vouchers are meant to redress. Inadequate funding, an area’s rental market and availability of affordable housing stock, and quality of landlord relations all factor into current usage barriers.

Voucher Availability

Housing vouchers are not an entitlement benefit and Congress does not appropriate the level of funds needed for housing assistance. The number of households that qualify for housing vouchers far exceed the number of vouchers available. Due to a shortage of resources, most public housing agencies maintain long wait lists or use a lottery to determine which households can join the waitlist. Many PHAs have closed their waitlists because applications far exceed the number of vouchers they can administer. Households placed on a waiting list typically wait years before receiving a voucher. In Montana, the average wait times for people on a waitlist for an HCV is 25 months.[25] There are more than 5,000 people on a waitlist in Montana, as of January 2020.[26] Many other families cannot get on a waitlist. According to one 2016 survey, over half of agencies were not allowing any additional applicants on their waitlists. Thus, the number of people on voucher waitlists and the length of time to receive a voucher are incomplete measures of the unmet need for assistance because many eligible households do not make it onto a waitlist in the first place.

Source of Income Discrimination

The “choice” component of the Housing Choice Voucher program is not fully realized. Even when a household receives a housing voucher, they still must find landlords that are willing to accept a voucher as rent payment before the voucher expires and goes to someone else. Federal law does not prohibit landlords from discriminating against renters based on their source of payment. In the absence of federal protections against voucher holders, landlords routinely discriminate against renters with housing vouchers, particularly landlords in higher-rent areas with high-quality schools, jobs, and transportation.[27] Explicit or implicit bias continue to undermine housing options for BIPOC households. Only 12 states and 87 local governments have passed source-of-income laws prohibiting landlords from discriminating against voucher holders; Montana is not among them.[28] 

Rent remains unaffordable

Another problem is that voucher amounts can be too low to move a family out of high-poverty, racially segregated neighborhoods. Housing Choice Voucher rental subsidies are capped by a payment standard based on the Fair Market Rent of an area. Payment standards based on area Fair Market Rents are often too low to cover rent in neighborhoods with low poverty, low crime, and strong schools, which perpetuates the racial and social segregation vouchers are intended to mitigate.[29] In Montana, for example, Missoula County’s payment standards mean that someone looking for a one-bedroom rental needs to find one for $849 or less, a two-bedroom rental needs to be $1,076 or less.[30] The rental market in the city of Missoula is one of the most expensive in the state, as well as having very low vacancy rates, and it is challenging for someone living on a very low income to find a place where they do not pay more than 30 percent of their income on rent.

Federal Policy Interventions 

All Montanans deserve a safe, affordable, and stable place to call home. The federal Housing Choice Voucher program is an important tool that we can use to achieve that ideal. There are several actions Congress, HUD, and public housing authorities should take to improve implementation of the HCV program. Making these comprehensive reforms will be a critical step towards achieving true housing choice and mobility.

  • Make Housing Choice Vouchers available to all eligible households by setting federal funding levels based on need.
  • Prohibit landlord discrimination against voucher holders by enacting federal Source of Income Discrimination laws, and incentive landlords to accept vouchers.
  • HUD and public housing agencies set voucher payment standards that are consummate with the local rental market.

Policy Basics: Property Taxes in Montana

The Montana property tax system supports local public services, including schools, roads, and other infrastructure. Residential property owners pay almost half of all property taxes. Every two years, the state undergoes a reappraisal process to update the property values for purposes of property taxes.

Property Taxes Educate Children and Protect Families

State and local property taxes collected in Montana make up approximately 40 percent of our total state and local tax revenue, for a total of $1.8 billion in FY19.[1] The vast majority of these funds are directed toward local governments and schools to invest in public services we all rely on. Eighty-three percent of property tax revenue is invested in local governments, including supporting local schools, services like fire protection, and infrastructure, such as roads and bridges (Figure 1).[2] The state of Montana receives about 17 percent of property taxes through statewide mills – to ensure equitable support of local schools, universities, and technical colleges.[3] 

Families Living on Low Incomes Pay Greatest Share of Income in Property Taxes  

Montana homeowners pay a large portion of total property taxes, representing about 49 percent of all property tax revenue.[4] While property taxes are greater for homes of higher value, the property tax system is still considered regressive, meaning that, on average, households with higher incomes pay a smaller share of their income in property taxes than households living on lower incomes. In Montana, property taxes paid by the wealthiest 1percent of taxpayers represents 1.6 percent of their overall income, compared to 5.3 percent of income for the Montanans living on the lowest incomes (Figure 2).[5]

Property taxes tend to be regressive because they do not take into account a homeowner’s income or ability to pay and because housing costs tend to be larger in proportion to the income of households living on lesser means than households with more wealth.[6] For example, a family making $50,000 a year may own a home costing $150,000, or three times their wages, while a family making $1 million per year may own a home costing $500,000, or half their pay. Therefore, the property taxes paid by the household living on low income will represent a greater proportion of their family income than the property taxes paid by a household with high income.

It is important to remember that property taxes are not limited to property owners. Renters pay a portion of the property taxes paid on rental properties because the taxes are “passed through” by the landlords when setting the rent amount.[7]Both State and Local Governments Play a Role in Assessing Property Taxes

Determining what the property taxes will be on a piece of property is complicated and requires a series of steps. The Montana Department of Revenue is responsible for appraising – or valuing – property in the state to determine the market value.[8] Each taxing jurisdiction – county, city, or school district – uses these values to calculate property taxes.

The Montana Legislature created 15 different classes of property, including residential and commercial property, agricultural land, business equipment, and centrally assessed property.[9] Centrally assessed property is property owned by a company operating as a single entity and connected across county or state borders. This includes things like railroads, telecommunication lines, power lines, natural gas or oil transmission lines, and airlines. Each property within a class is valued in the same manner. For residential property, the market value is the value for which the property would sell between a willing buyer and willing seller.[10] The department uses the sales price of similar properties in the area to determine a value for properties that have not been sold.[11]

The Montana Legislature then assigns a tax rate to each class of property and multiplies that tax rate by the property’s market value to determine the taxable value. The tax rate in 2018 was 1.35 percent for residential property and 1.89 percent for commercial property.[12] Local taxing jurisdictions – cities and counties – apply the mill levies to the property’s taxable value to determine taxes owed. County governments are responsible for collecting property taxes and distributing the appropriate portion of those taxes to the state, cities, school districts, and other taxing jurisdictions.[13] 

Reappraisal Process Critical to Accurately Valuing Property

The Montana Constitution and state law require the Montana Department of Revenue to reappraise all property periodically and value similar property across the state in the same manner.[14] The reappraisal process is an important component in ensuring local governments, schools, and the state are accurately reflecting property values for property tax purposes. Taxing jurisdictions in the state set their budgets and mills based on these updated values. Tax year 2015 began the first year of a two-year appraisal cycle for residential, commercial, industrial, and agricultural property.[15] Forest land remains on a six-year appraisal cycle. The Legislature maintained the tax rates for all classes in the most recent legislative sessions. The impact on individual homeowners depends on market values in their region or county and varies from home to home.

Homeowners Pay the Greatest Share of Total Property Taxes

Property taxes paid by residential homeowners comprise almost half of all property taxes (Figure 4).[16] In fact, Montana homeowners have seen an increase in the share of property taxes they pay compared to other classes of property (Figure 5).[17]

Residential property owners pay a greater share of property taxes, in part because the Legislature has cut the tax rates on other property classes. For example, over the past several decades, the effective tax rate on business equipment has fallen by more than 50 percent.[18] This often results in a shift of tax liability to other property taxpayers over time.[19] The Legislature caps the amount local governments can raise from property taxes.[20] When the Legislature cuts the tax rates for some property classes, the total taxable value in the entire local jurisdiction decreases. When the taxable value goes down, so does the amount of revenue for that jurisdiction. To maintain revenue levels, the local jurisdiction would have to raise its mill levies on all property owners.[21] The increased mill levies are then applied to the remaining property in the jurisdiction, most significantly to residential property. As a result, local revenue remains constant, but the obligation to support local government functions shifts to homeowners and other property owners.While Montana’s local governments and schools rely heavily on property tax for needed revenue, Montana’s effective tax rate for property tax is lower than the national average. Montana generates a large portion of its total taxes from property tax (40 percent), compared to the national average of 31 percent.[22] This difference, however, is due to the fact that Montana does not have a sales tax like most other states. Nationwide, Montana ranks 33rd for its effective residential property tax rate of 0.73 percent. The national median is 1.05 percent.[23]


Property Taxes in Indian Country
 

The taxation of property in Indian Country is often misconstrued as a “loss” of tax revenue. First and foremost, it should be clarified that the tax base was never “lost” as it never existed in the first place. All reservations consist of lands that tribal nations either reserved from their land cessions to the U.S. or lands set aside for their exclusive use via statutes and executive orders. Land owned collectively by the tribal nation, as well as land allotted to individual tribal citizens in accordance with the General Allotment Act of 1887, is called trust land and is held in trust for tribal nations by the federal government. Similar to all other federal property, such as national parks and forestlands, trust land cannot be taxed and is therefore not subject to state or local property taxes.[24]

As a result of the forced allotment of many reservations, there are now parcels of fee land that are privately owned and subject to state and local property taxation. This includes fee land owned by tribal citizens, even when their property is located on their reservation.[25]

To help offset the loss of property taxes that support local public schools, districts located on reservations and other federal lands can apply for federal Impact Aid, also known as Title VII funds.[26] Through Impact Aid, 78 public schools in Montana received nearly $67 million in federal aid in 2019. Sixty-seven of these school districts included reservation land.[27]

The State Provides Assistance for Property Taxpayers Living on Low Incomes 

The Montana Legislature has put in place four distinct programs to reduce property tax liability for some homeowners. The largest of these programs, the Elderly Homeowners/Renter Credit, provides taxpayers age 62 or older with household incomes less than $45,000 an income tax credit to help offset property taxes. The refundable credit is capped at $1,000 and phases out at incomes between $35,000 and $45,000.[28] In 2017, 13,567 Montana seniors with income tax liability received the Elderly Homeowner/Renter Credit.[29]

The state also provides two property tax programs that directly reduce property taxes for certain households. The first, the Property Tax Assistance Program (PTAP), reduces residential property taxes for households with lower incomes. The taxpayer must live in their home for at least seven months out of the year and have incomes below $21,607 for one eligible owner (or below $28,810 for a property with two eligible owners).[30] In 2018, more than 23,000 property taxpayers received assistance through PTAP, nearly a threefold increase since 2006.[31]

The state also provides the Disabled American Veterans (DAV) program, which provides property tax assistance for disabled veterans. The property must be the taxpayer’s primary residence, and a taxpayer qualifies if they are a veteran honorably discharged and paid at the 100 percent disabled rate for a service-connected disability.[32] A spouse of a veteran who was killed while on active duty or who died from a service-connected disability may also be eligible for the DAV program. In 2018, more than 2,500 veterans or family members received assistance through the Disabled American Veterans program.[33]

In 2017, the Legislature created a new property tax assistance program starting in 2018 for long-time property owners where the value of their land is disproportionately higher than the value of their home.[34] The program caps the land value of their primary residence parcel to 150 percent of the improvement value, subject to a minimum per acre value consistent with the statewide average value.[35] To qualify, the owner must live in the property for at least seven months of the year and have owned (or family owned) the property for at least 30 years.

State Budget Cuts Put Strain on Property Assessment Process

The 2017 legislative session resulted in deep cuts to nearly all state agencies, including the Montana Department of Revenue. As a result of lower revenue levels, the governor and Legislature cut approximately $6 million in general fund appropriations from the Department.[36] Within the Department, the Property Assessment Division (PAD) faced the most severe cuts, with the closure of half of all county property assessment offices and a loss in the number of staff positions.[37] Fewer office locations result in people living in rural communities with less access to those who determine property values and set property taxes, which are a significant portion of a households state and local taxes.

Conclusion

Montana’s property tax system provides important funding for education through our local schools, infrastructure like our roads and bridges, and other local services like fire protection. Elected officials, like our state legislators, have a very important role in deciding how our property tax system works. The Department of Revenue’s role to reappraise property in the state ensures a fair system of valuing property for purposes of taxation.

Unfortunately, Montanans living on lower incomes pay a larger share of property tax than Montanans with high salaries. There are further options for improving the fairness of our state property tax system, in addition to those already in existence, such as our property tax assistance programs and a fair, statewide reappraisal schedule. Further connecting income to property taxes would assure that Montanans with lower incomes are not priced out of their homes due to increases to property taxes. Also, continuing to broaden the property tax base rather than passing further exemptions can stop the increasing share of property taxes paid by residential homeowners.

SNAP vs. Block Grants

Forty years ago this Friday, President Carter signed into law the landmark 1977 Food Stamp Act, setting the framework for the modern Food Stamp Program – or, as it’s now known, the Supplemental Nutrition Assistance Program (SNAP).

As Congress continues efforts to pass a federal budget, we anticipate large cuts primarily to programs that serve low- and moderate-income Americans. One of these targeted program is SNAP (Supplemental Nutrition Assistance Program), formerly known as food stamps.

SNAP is staring at a proposed $150 billion cut over ten years in the current House budget resolution. This proposal cuts the nation’s largest anti-hunger program by 30 percent.

After unemployment insurance, SNAP is the most responsive federal program providing additional assistance during economic downturns.  It also is an important nutritional support for low-wage working families, low-income seniors, and people with disabilities living on fixed incomes. If these cuts go into effect, thousands of Montanans would be at severe risk of food-insecurity.

The plan would impose direct program cuts through restricted eligibility or decreased benefit amounts, while also changing the foundational structure of the program. The bulk of the cuts would come from transferring “significant authority” over SNAP to the states. This means block granting the program.

As we have discussed before, block grants may sound like a benign approach to restructuring programs such as SNAP or Medicaid. But make no mistake: when members of Congress talk about block granting SNAP and giving more control and oversight of this nutrition-assistance program to states, it is anything but benign.

What is a block grant?

The idea behind “block granting” is to take a program, such as SNAP (or remember the health care debate and the GOP desire to block grant Medicaid?) and turn it into a consolidated block grant, which means providing states with a fixed amount of funding to run the program.

So what’s wrong with that?

In short, block grants can’t respond effectively or efficiently in an economic crisis or natural disaster. They also create an incentive for states to restrict eligibility in order to use the grant funding to fill other budgetary shortfalls, and often lose value over time if they do not appropriately account for inflation or population growth.

Right now, the federal government pays the full cost of SNAP benefits and splits the cost of administering the program with the states, which administer the program. SNAP responds quickly and effectively to support families and communities during times of increased need, such as job loss, family crisis, medical emergency, or when natural disaster strike. Enrollment expands when the economy weakens and contracts when the economy recovers and poverty declines.

If turned into a block grant, SNAP could not be a responsive program for the most vulnerable, food-insecure people. In the event of a natural disaster, such as the on-going wild fires that we’ve experienced this summer, SNAP would not be able respond when more families’ lives and jobs are disrupted and more households are in need of food assistance.

If need increased due to a disaster or recession, states would have to bear the entire cost of added food assistance themselves or make state budget cuts to stay within the provided federal block grant amount. Montana is already experiencing a significant revenue shortfall and harmful budget cuts across the board. Our state cannot possibly take on the additional cost of food-assistance payments if we cannot currently adequately fund health care services and our public schools.

Block-granting SNAP is a serious threat. As conversations about the federal budget and SNAP continue in Congress, we will be paying close attention to any cuts to this crucial nutrition-assistance program and any proposed structural changes – like block grants – that may ultimately undermine this successful anti-hunger, anti-poverty program that serves thousands of Montana families and children.

What is the Earned Income Credit?

This session, the Montana legislature is considering legislation to create a state earned income credit – the Working Families Credit – to provide assistance for low- and moderate-income working families, modeled after the successful federal Earned Income Tax Credit (EITC). Doing so could help boost incomes for thousands Montana working families. Today we are going to give a little more background on what the EITC is, and how it works.

History

The EITC was first created in the 1970s, but was expanded significantly in the 1980s by President Ronald Reagan, who called it the “best anti-poverty, the best pro-family, the best job creation measure to come out of Congress.” The measure had broad bipartisan support because it improves the lives of low-income families while encouraging work. In 2013, the federal EITC lifted more than 6.2 million people, including 3.2 million children, out of poverty.

How it works

The credit is based on the amount of money that an individual earns, helping to encourage work. The credit begins with the first dollar earned, increasing before reaching a maximum amount where it plateaus, and then tapers off. This model helps to encourage workers to increase their hours and wages, without punishing them for earning too much. The credit also increases with the number of children in a family, maxing out at three children. Low-income workers without children are eligible for a very small credit, but majority of the benefit goes to adults with children.

Figure 1 _EITC. 3-17 (1)

The federal EITC in Montana

In Montana, 80,000 families receive the federal EITC, with an average amount of $2,168. Rural counties especially benefit from the credit – 21 percent of federal households in rural counties receive the EITC, compared to 17 percent in the rest of the state. In 2014, the federal EITC brought in $173 million into Montana’s economy.

State EITCs across the nation

Because the EITC has been so successful at reducing poverty and encouraging work, 26 states and D.C. have enacted state versions set at a percent of the federal credit. The state credit helps to further support for low-income working families.

Montana’s families would likewise benefit from the Montana Working Families Credit. Two bills are making their way through the process – HB 391 and SB 156. Our legislature should act now to help improve the incomes of working families across the state.

Legislative Status Sheet: A Glimpse at Revenue and Spending

This week, the Legislative Fiscal Division (LFD) released the first general fund status sheet for the 2017 legislative session. The status sheet provides a glimpse at where we stand with revenue, projected spending, and the resulting ending fund balance, factoring in actions taken so far by the legislature. Right now, we sit roughly $140 million below the goal of a $300 million ending fund balance. Unless legislators get serious about the need for additional revenue, we could expect even further cuts (on top of the devastating cuts already taken).

Over the past month of session, subcommittees in charge of various parts of the budget have been taking action on the main budget bill – HB 2. These early actions on the budget included deep cuts to nearly all state agencies, including cuts to social service programs for seniors, the disabled, and our most vulnerable families, as well as cuts to higher education that will likely result in double-digit tuition increases for Montana students and families. When factoring both state cuts and corresponding federal dollars we lose, the legislature’s initial actions represent a total $449 million in cuts.

While subcommittees have taken action to add back some funding, most of these additions are “present law adjustments” and are simply a reflection of inflationary needs to continue the current level of services in the next biennium. To be clear: the cuts made in subcommittees will have a serious impact on our communities and families across the state.

The second page of the status sheet provides the general fund balance sheet. It shows that we begin the session with a beginning fund balance of $110 million. As we’ve talked about previously, lower revenue levels than projected have resulted in a much lower beginning fund balance than previously anticipated. The balance sheet then shows the amount of revenue projected to come in during the next biennium. The balance sheet also provides an estimate of expenditures that the legislature has approved thus far. This includes subcommittee action on HB 2, bills on which the legislature has taken positive action, and one-time-only spending approved so far. LFD will update the general fund status sheet on a weekly basis, take into account further changes to HB 2 and bills passing or failing. Right now, when you factor in the projected revenue minus the expenditures passed thus far, we finish the next biennium with an ending fund balance of $159 million.

We are not yet halfway through the session, but Montana families should be concerned about the deep cuts already taken to the state budget and how that will impact our seniors, students, and services vital to our communities. The good news is that there is still time. The Legislature has 49 more days to identify new revenue in the state and restore the deep and potentially devastating cuts they have made to the budget. It is possible in the state of Montana to have a balanced budget, fund the services that help citizens and communities across the state, and leave a healthy ending fund balance. We can do all of this by ensuing that the super wealthy and out-of-state corporations are paying their fair share.

Guest Blog: SNAP Supports a Strong Montana

It can be hard to imagine that thousands of our neighbors struggle with hunger, yet that is the reality for the nearly 140,000 Montanans living in food insecure households. Seniors, families with children, veterans, and even working Montanans aren’t always able to put food on the table, impacting the health, productivity, and academic success of our families and communities.

Our nation’s most important tool to combat hunger is the Supplemental Nutrition Assistance Program (SNAP). LBurhopSNAP fills in the cracks for low-wage workers, making sure they aren’t forced to choose between feeding their families and paying the rent. For kids, SNAP ensures they have nutritious foods outside of school hours, helping them focus and succeed in the classroom. For seniors, SNAP ensures they can fill their prescriptions and still buy enough groceries to remain healthy and independent. And for adults struggling through an unexpected job loss, illness, or other tragedy, SNAP provides an important stepping stone, helping them get through a hard time. Last but not least, SNAP supports our grocery stores, farmers markets, and state economy by bringing our federal tax dollars back to Montana.

That’s why we are concerned by continual attempts to weaken SNAP, at both the state and federal levels.

The first threat at the federal level will be through the upcoming budget resolution process, followed by the reauthorization of the Farm Bill. Congress has yet to develop specific policy proposals so it is crucial to reach out now to express the importance and effectiveness of SNAP. Let Montana’s Congressional leaders know that attempts to cut the program or undermine its foundational effectiveness through block granting or other structural changes are unacceptable.

SNAP is also at risk at the state level. A bill to revise SNAP eligibility, HB 361 sponsored by Rep. Tom Burnett, would make income guidelines even more stringent than they currently are, and would reinstitute a resource limit. Decreasing our state’s gross income test will primarily hurt working families with children, as well as families with high housing costs. Resource limits can be particularly harmful for low-income seniors but negatively impact all families. Numerous studies have demonstrated that having savings and other resources are critical for families trying to get back on their feet. Building assets helps low-income families invest in their future and avert a financial crisis that can push them deeper into poverty. At asset limit discourages savings and forces families to spend down all of their resources before receiving help.

Please speak out against harmful changes to SNAP. Let our lawmakers know that SNAP is one of our most effective and efficient public programs. It is quietly providing dignity and opportunity for thousands of Montanans when they need it most. Denying individuals the ability to access food assistance would have long terms costs on our nation’s health and productivity that are far greater than any immediate budget savings.

Lorianne Burhop, Chief Policy Officer, Montana Food Bank Network

What is the EITC and How Does it Work?

This Wednesday, the Montana legislature will have a hearing on a bill that could help brighten the prospects of working Montana families. The bill is HB 391, a proposal to create a state Earned Income Tax Credit (EITC). So let’s first figure out what exactly the EITC is, and how it helps working Montanans.

The federal Earned Income Tax Credit was first created in 1975, as a bipartisan means of reducing poverty and creating jobs. President Ronald Reagan once said,

“The Earned Income Tax Credit is the best anti-poverty, the best pro-family, the best job creation measure to come out of Congress.”

The federal EITC gives families with incomes between about $39,500 and $53,000 (depending on marital status and number of kids) credit for the taxes they have paid. In 2015, the average EITC was $3,186 for a family with children, raising the family’s wages by about $265 a month. Only families that work qualify, and most families only use the credit for a year or two.

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In HB 391, Montana’s proposed state EITC would be set to 10% of the federal credit.

A state EITC would:

  • Benefit 80,000 families across Montana. Montana’s low-income families actually pay a higher portion of their income in taxes. A state EITC could help even out this disparity.
  • Improve children’s lives. Children see plenty of benefits from the EITC – better health, better school performance, higher rates of college attendance, and even higher earnings for adults.
  • Promote work. With an EITC, the more you work, the higher your refund. This format encourages families to work more hours, meaning better opportunities and higher pay as their careers continue.
  • Strengthen communities. Families use their EITC to buy pay bills, buy groceries, and buy school supplies – pouring money back into their local businesses.

Twenty-six states plus the District of Columbia have already created state EITCs. This year, Montana legislators should make the same move to help support working families and their children.

To learn more about how a state EITC would benefit Montana, read our report here. Be sure to check back tomorrow, when we will talk more about how a state EITC would benefit our children.

Early Legislative Action Threatens Hundreds of Millions of Federal Funding

This week, MBPC released a new report providing an overview of early actions so far on the state budget, and the damaging cuts that have already been proposed. In the first couple weeks of the session, Legislators took early steps to make significant cuts to the state budget, representing more than $449 million in total funds. A good portion of these cuts will be in federal matching funds in critical programs for the state.

Montana’s budget and economy rely heavily on federal funding that assists us in our collective efforts to pave our roads, build and maintain our bridges, prepare our national guard, train our workforce, and help keep vulnerable Montanans safe and healthy in their homes and communities. The bulk of the federal dollars that get appropriated through the state budget fund infrastructure, programs, and services in the Department of Transportation (DOT) and the Department of Public Health and Human Services (DPHHS). These funds are usually under the condition that the state meets certain program requirements and matches the federal funding with a state share. Overall, the state budget is supported by over $4 billion of federal funding, roughly 42% of the entire state budget.

As we’ve written previously, this year state legislators and the governor are facing a short-term but significant drop in state general fund revenue. To deal with this decline, the governor’s proposed budget included a combination of difficult cuts to state services and targeted revenue increases that bring more fairness to our tax system and ensure adequate levels of revenue. Unfortunately, some legislative leaders have indicated a dangerous unwillingness to accept this balanced approach and have instead started the budget process by imposing additional deep, unnecessary, and harmful cuts.

Relying entirely on cuts, preliminary actions by the legislative joint subcommittees have slashed over $190 million in state spending ($114 million general fund; $77 million state special revenue) on everything from services for seniors and people with disabilities to our tribal, two-year, and four-year colleges and universities (likely resulting in doubled-digit tuition increases).

What do these state cuts have to do with federal funding flowing into the state and our communities?

Well, in key portions of the budget, like DPHHS and DOT, a lack of state funding means even more dramatic cuts in federal funding – much deeper than many people realize. So in making their unnecessarily severe cuts to state spending of over $190 million, legislators and Montana will lose out on an additional $254 million in matching federal funds. In total, this hit to the state budget is nearly half a billion dollars.

We know that this is more than just dollars to the state. If not restored, these unnecessary cuts will impact people and communities in every corner of Montana.

For example, DPHHS partners with community providers to run a Medicaid program called Community First Choice, for seniors and people with disabilities who need assistance with daily living in order to stay in their homes and avoid institutional settings like nursing homes. Through Community First Choice, Montanans can get help with activities such as eating, bathing, taking medicine, and getting to medical appointments. When Montana provides these services to the seniors and people with disabilities who need them, the state only has to pay 29% of the cost. The federal government pays for the other 71%. It’s a good deal for seniors who get to stay in their homes and a good deal for taxpayers as people avoid costlier institutional care.

The division responsible for running Community First Choice and other programs and services for seniors and people with disabilities is facing over $17 million in state funding cuts that would be accompanied by almost $34 million in lost federal funds for a total loss of $51 million dollars. These cuts are irresponsible to seniors, the state budget, our communities, and our economy.

This is just one of many examples of essential state services being cut so severely in an attempt to balance the budget. You can read a summary of total cuts adopted by the Legislative Committee in starting motions here.

We know that some cuts will be inevitable. However, as the legislature continues to evaluate the budget, they must look at ways to responsibly raise revenue and minimize unnecessary losses of federal funding.

 

Scorecard reveals Montana families’ financial well-being

Have you ever wondered how you can learn more about how Montana families are faring and what types of solutions are available to support them? Today, we’ll look at a comprehensive tool that sheds light on the financial security of Montana families and policies that could help them better make ends meet.

Every year, the Corporation for Enterprise Development (CFED) releases its Assets and Opportunity Scorecard, measuring the economic security of families in each state and highlighting how policies help or hurt their ability to make ends meet.

There are a number of scorecards and studies out there, but we find this scorecard to be one of the most helpful. It not only provides solid data, but also workable solutions that other states have implemented to help strengthen families’ economic security.

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The scorecard is organized into five categories:

  • Financial Assets and Income
  • Businesses and Jobs
  • Housing and Homeownership
  • Health Care
  • Education

New this year is the policy change map, which let’s you see policy gains and losses in each state.

CFED uses two measures – outcomes and policies – to better understand financial security in each state. Overall, Montana ranks 15th in outcomes. These outcomes measure things like rates of poverty, unemployment, and homeownership. CFED also lists policy opportunities to support families. Over the next week, we will dig deeper into some of the data and policy solutions, but here is a quick overview on how Montana fares:

Financial Assets and Income

Nearly one in six households in Montana are living in poverty, and there remains a large gap between high-wage and low-to-moderate wage earners. Over one-fourth of Montana households do not have a savings account.

Enacting a state earned income tax credit (EITC) is one of the best ways to supplement working parents’ income, helping them to catch up on bills, put food on the table, and rise out of poverty. Eliminating asset tests for programs like Temporary Assistance for Needy Families (TANF) help people focus on saving for the future and achieving self-sufficiency. Finally, tax fairness reforms are key to ensuring that corporations and wealthy Montanans are paying their fair share for the things we all need, like schools, police, and roads.

Business and Jobs

For the second year in a row, Montana scores high with small-businesses. However, almost one-in-three jobs are low-wage. Montana workers report that they feel underemployed – many want to work full-time, but are only offered part-time positions – and unemployment rates are twice as high for workers of color.

Enacting paid family and medical leave would help working parents better balance work and home demands by taking time off to attend to their own health needs or that of a family member without risking their financial security. Increasing unemployment benefits so that workers receive an adequate weekly wage while unemployed would help parents afford the basic needs while they search for long-term work opportunities.

Health Care

With Medicaid expansion just recently up and running, it is not surprising that Montana still ranks low on health care outcomes. Montana has already enrolled over 22,000 individuals in affordable health care coverage. We know expansion will have a significant impact on the uninsured rate, and we look forward to seeing how we will compare in 2017.

We encourage you to visit the scorecard. Play around – it’s a lot of fun! And learn more about how Montana families are doing. Also, please follow us this week as we dig deeper into specific policy issues related to the scorecard.

Expanding temporary disability insurance is one way to provide paid family leave

Think of today’s blog as part two from yesterday. After learning about TDI, you may have the question – what does this mean for paid family leave? And you may also be wondering how exactly states like California, New Jersey, and Rhode Island have been able to implement these programs. With that in mind, lets examine how several states have expanded their TDI programs to provide paid family leave benefits.

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While the 1993 enactment of the federal Family and Medical Leave Act provided a great first step in helping individuals balance work and home demands, many Americans do not qualify for coverage or cannot afford unpaid time off from work. Legislators and advocates have explored options that would provide more than the FMLA and offer paid family leave benefits to workers who need time off to recover from a serious illness, around the birth, adoption, or foster placement of a child, or to care for sick family members. While there are various routes to creating and implementing a paid family leave program, three states – California, New Jersey, and Rhode Island – have expanded their longstanding TDI programs to provide paid family leave insurance.

By building on top of existing TDI structures, California, New Jersey, and Rhode Island have been able to implement paid family leave more efficiently and with fewer costs. In these three states, the same administering agencies that process TDI claims and administer disability insurance benefits are now processing paid family leave claims and administering those benefits. Using already experienced staff has reduced recruitment and training costs.

Additionally, the same financing structure (payroll taxes) used to cover the cost of administering TDI programs and pay out benefits has been altered to also provide funding for paid family leave programs. However, while a combination of employee and employer provided payroll deductions fund TDI programs in some states, only employee payroll deductions are used to cover paid family leave programs, and employers have no direct costs in terms of funding. The cost to workers and the resulting benefits they receive in California, New Jersey, and Rhode Island are included in the table below.

As you can see, we are talking about a relatively low cost to provide a significant benefit to workers and our broader economy. While 45 states do not have TDI programs, this model offers one viable way to finance and implement paid family leave programs. Finally, because California, New Jersey, and Rhode Island built off of their existing TDI programs, workers in all three states now have access to both paid medical and paid family leave benefits.

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