The President’s 2015 Budget: Thoughtful Responses to Poverty

Mar 07, 2014

By CLASP

Supporting low-income Americans is not a single-issue policy agenda. To have a fair chance to succeed, children need a good education, including early education; young people need access to workforce training and post-secondary education; low-income workers need help making ends meet while they move up into jobs that support their families; and, everyone needs a bustling economy that provides plenty of chances for steady work.

The 2015 budget President Obama laid out this week reflects exactly that type of multi-faceted investment strategy.   The proposal has two parts.  First is a base budget, which includes his priorities for discretionary spending within limits included in the Congressional budget agreement from last December.  The base budget also includes other “mandatory” spending and tax proposals not covered by those limits, but that would, in net, bring down the deficit.  In addition, he has offered an Opportunity, Growth and Security Initiative budget, which would fund additional priorities by closing tax loopholes and making other reforms.  These dual proposals outline clear priorities for investments in workforce development, education and training, early childhood and family support programs, youth programs, and employment generation.  The two-part budget package offers both reasonable investments under current budget constraints and a road map to the necessary steps to fundamentally and positively impact the lives of low-income Americans.

The base budget sets out the President’s priorities within the constraints of the spending caps under the Budget Control Act of 2011, as modified by the Bipartisan Budget Act of 2013.  The total discretionary spending level in this budget is $1.014 trillion, $19 billion below the actual spending approved by Congress for FY 2014. It includes targeted expansions of funding in some critical areas, such as early childhood education, youth programs, and enforcement of labor standards, paid for by cuts in other program.   This base budget also specifies mandatory spending and tax improvements for low-income families, including an expansion of the Earned Income Tax Credit to single adults (encompassing youth and non-custodial parents, among others). 

President Obama also offered a vision for investing in America that builds beyond the constrained choices presented by these spending caps.  With his Opportunity, Growth and Security Initiative, he shows that we can make critical investments in creating jobs and making work pay -- and in providing access to quality education from preschool to college to technical training -- without increasing the deficit or slashing key social insurance and safety net programs that benefit millions of Americans.  

Taken together, this budget offers an urgently needed roadmap for investment in key programs, along with a long-term agenda for implementation. Many of its ideas do double duty as immediate budget proposals and as a guide for federal and state lawmakers over the coming months and years as they consider policy changes to diminish inequality and improve the lives of working Americans.

In particular, the budget includes detailed proposals on the following components of an integrated, multi-faceted anti-poverty agenda:

Child Care and Early Education

The President reaffirmed his commitment to expanding high-quality early learning for all young children by proposing investments across birth to five programs in the Departments of Health and Human Services and Education, including child care, home visiting, Head Start and Early Head Start, and pre-kindergarten.  The President called again for his Preschool for All plan proposed in last year’s budget. This includes preschool services for all low- and moderate-income 4-year-olds and an expansion of voluntary home visiting programs financed by an increase in the federal tobacco tax as well as other expansions divided between the base budget and the Opportunity Growth and Security Initiative.

Job Quality, Paid Family Leave, Working Conditions

President Obama’s budget proposal sends a strong endorsement of policies that support working families.  The budget reiterates the President’s support of legislation to increase the minimum wage to $10.10 as soon as possible. He recommends a total of $105 million to support a State Paid Leave Fund, with $100 million in the Opportunity, Growth and Security Initiative and $5 million in the base budget for the paid leave fund. The base budget also strengthens enforcement of existing laws, including the unpaid Family and Medical Leave Act (FMLA), minimum wage, and overtime laws, by calling for an increase of more than $41 million for the U.S. Department of Labor’s Wage and Hour Division.

Earned Income Tax Credit

The President proposes expanding and strengthening the Earned Income Tax Credit (EITC) for low-income childless workers, including non-custodial parents. His budget doubles the maximum credit for childless workers to about $1,000 and increases the income limit to qualify for the credit from less than $15,000 to $18,000. In addition, the President proposes to make the EITC available for young workers age 21 and over (currently it is only available to workers age 25-65) and older workers up to age 67, consistent with the rising Social Security full retirement age. The proposed changes would have a significant impact on low-income workers who do not currently have access to the EITC. The EITC expansion is recommended in the base budget; because it is a tax provision, it does not have to fit under the discretionary caps – but these changes would require the passage of legislation through Congress.

Workforce Training and Skill Development

The President’s budget also calls for new investments that prepare people for jobs in demand and put unemployed people back to work. His Opportunity, Growth and Security Initiative includes $750 million to restore recent cuts to Workforce Investment Act formula grants to states, increase support for research and innovation, and make targeted investments in programs that serve individuals with barriers to employment. It also includes $1.5 billion for the first year of a four-year Community College Job-Driven Training Fund, which will provide competitive grants designed to increase the number of training programs and apprenticeships supported by employers and focused on jobs in demand. In addition, the proposal includes $125 million (in addition to $25 million in the base budget request) to expand the research-based Jobs Plus model, which connects public housing residents with jobs and training.  The proposal also envisions $20 million for Skills Challenge grants to support and implement bridge strategies and other models that integrate basic skills preparation with occupational skills training.

Higher Education

The budget reaffirms the President’s commitment to making college affordable and increasing the number of Americans with a postsecondary credential. It allows the maximum Pell Grant to increase to $5,830 for the 2015-2016 academic year and takes steps to shore up the program’s funding gap in future years. It restores federal student aid for students without a high school diploma in career pathway programs who are able to demonstrate their ability to benefit from postsecondary education. These career pathway programs, which include bridge programs and co-enrollment approaches, help low-income, low-skilled adults and out-of-school youth improve their basic skills while simultaneously working toward a postsecondary credential in a high-demand industry or sector. The budget also simplifies income-based repayment options to one single plan and extends it to all student borrowers. Two new programs included in the budget are the College Opportunity and Graduation Bonus, a mandatory funding proposal that would provide $7 billion to reward colleges that successfully enroll and graduate a significant number of low- and moderate-income students on time; and the State Higher Education Performance Fund, a $4 billion competitive grant program to encourage and support systemic efforts to improve college attainment and affordability, especially for low-income students. Finally, the budget requests a permanent extension of the American Opportunity Tax Credit (AOTC) and prevents the taxation of Pell Grants.

Job Creation

The budget includes several provisions to expand the availability of subsidized employment for unemployed and disadvantaged workers.  These include a proposed $2.5 billion in mandatory funding for Summer Jobs Plus, which will fund summer and year-round job opportunities for 600,000 youth as well as innovation grants aimed at improving skills and career options for disadvantaged youth, and a plan to shift $602 million from the TANF contingency fund to support state-subsidized employment programs for low-income individuals.  Subsidized employment was shown to be an effective and well-received strategy when funding was available under the TANF Emergency Fund. Because these proposals are in line items that are in the “mandatory” rather than “discretionary” category in the federal budget, they do not have to fit under the cap – but they would require additional legislation beyond the budget to be enacted.

Disadvantaged and Disconnected Youth

Of significant importance is the Administration’s continued focus on equity and opportunity for disconnected and disadvantaged youth and students of color – advancing positive outcomes for young people, elevating effective practice, as well as addressing the federal government’s role in improving its administration of the range of programs through which young people are served.  The budget includes a new $300 million Race to the Top Equity and Opportunity competition centered on increasing the academic performance of high-need students and closing the achievement gap. This competition is based on recommendations from the Equity and Excellence Commission’s report, “For Each and Every Child." Through the Performance Partnership Pilots Initiative, the budget request builds on the newly established initiative authorized in the 2014 appropriations act - designed to enhance administrative flexibility to improve outcomes and accountability for disconnected youth.  The budget also acknowledges the President’s recent launch of the My Brother’s Keeper Initiative that will charge an interagency task force to evaluate public and private efforts that are working for young men of color, gauge how to expand effective interventions, and address how Federal policies and programs can better support the overall development of young men of color.

Pay for Success

President Obama continues to signal his Administration’s interest in and support for “pay-for-success” models under which private investors provide up-front funding for preventive services and are paid by government agencies only if and when the programs achieve desired outcomes.  The budget re-proposes a $300 million pay-for-success fund at the Treasury department to support state and local initiatives, as well as approval to support such efforts with existing funding in areas including job training, education, criminal justice, and housing.

 

While ambitious, this vision is not an unconstrained wish list. Rather, it is a realistic roadmap to the investments necessary to improve the lives of low-income families and individuals.  The two proposals that make up the full budget package represent complementary strategies:  first steps under current budget constraints (the base budget) and next steps that can be funded without raising the deficit.  In all cases, the President outlines detailed plans to pay for the increases, using strategies that include making cuts to other programs, closing loopholes that allow high-income individuals to avoid paying taxes and raising new revenue.  But even with these positive strategies, many programs remain flat funded, not growing to reflect either inflation or population growth. 

What are the next steps?  Congress will be working on its 2015 spending bills, constrained by the same agreed-on cap as in the President’s base budget.  The President’s proposals for mandatory spending and tax changes in the base budget (for example, the EITC expansion) and the additional proposals in the Opportunity, Security and Growth Initiative may or may not be considered by Congress this year.  But even if they are not considered, they offer ideas that national and state legislators, opinion leaders, policy experts, and advocates will want to consider and highlight during deliberations about poverty reduction and economic opportunity over the coming months and years.  Taken together, the two components of his budget improve existing programs, and reflect a serious effort to take the holistic approach necessary to truly impact poverty.

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