President Obama Signs Full-Year Omnibus Budget and Improved Refundable Tax Credits
UPDATED ON DECEMBER 18, 2015
Law Makes Important Investments in Low-Income People
Washington, D.C.—After intense negotiations, the U.S. House and Senate have passed—and President Obama has signed—an omnibus spending bill for FY 2016 (the fiscal year that began on October 1). It allocates to specific programs the funding agreed to earlier this fall in the Bipartisan Budget Act of 2015, which included an increase in the overall discretionary budget. The law does not include damaging riders that had been considered earlier, such as provisions to hinder the resettlement of Syrian refugees.
Also packaged with the law are critical improvements to key refundable tax credits programs that support working families and students. While we have concerns about both the overall cost of the tax provisions—as the foregone revenue will make it harder to make further needed investments—and about elements that could make it difficult for some immigrants to access these benefits, overall, we believe this package is an important step forward for poor and low-income people and provides needed stability for the programs that serve them.
Here’s what the omnibus budget includes for key programs:
- A $326 million increase for the Child Care and Development Block Grant (CCDBG). This is the largest increase in funding for CCDBG since 2001, besides the exceptional investment made through the American Recovery and Reinvestment Act of 2009 (ARRA), and will provide critical funds for states as they move forward on implementation of the CCDBG reauthorization. The law includes a $127 million set aside for improving the quality of infant-toddler care.
- A $570 million increase for Head Start, which includes $141 million for a cost of living adjustment for grantees, a $135 million increase for Early Head Start–Child Care Partnerships, and $294 million for supplemental funds to grantees to support increased costs of expanding program operating hours, as well as training and technical assistance on expanding hours. This dedicates some funds for the Administration’s recent proposal in the Head Start draft program standards rewrite to require programs to provide full-school-day and full-school-year services. CLASP recommended that implementation of this proposal include sufficient dedicated resources to avoid reduction in the number of children receiving Head Start services.
- A $39 million increase in Workforce Innovation and Opportunity Act (WIOA) Title I-Adult funding, providing a 5 percent increase in funds for states and local areas to offer career services, job training, and work-based learning opportunities, giving a priority to low-income adult populations, including public assistance recipients and others with barriers to employment.
- A $42 million increase in Workforce Innovation and Opportunity Act Title I-Youth funding, providing a 5 percent increase in funds for states and local areas to implement effective employment, education, and youth development strategies for the most vulnerable young people in highly distressed communities, with an increased focus on out-of-school youth.
- A $13 million increase for Adult Education/Literacy grants to states, offering a 2 percent increase in funds for states to help the 36 million Americans with low basic skills strengthen their English language and educational levels to take advantage of emerging economic opportunities, support the educational and skill achievement of parents and family members, improve health and financial literacy, and participate fully in society.
- Full funding for Pell Grants—enabling the maximum Pell grant for the 2016-2017 academic year to reach $5,915 (a $140 increase), which provides vital student aid to support higher education access for low-income students. The law also allows students to receive the full Pell award under the “ability to benefit” provision that offers aid to qualified students without a high school diploma or equivalent who enroll in career pathway programs coordinating college and adult basic education.
- Level funding for Work-Study and Supplemental Educational Opportunity Grants (SEOG), which provide important need-based aid in a time when the average unmet financial need for the lowest-income students is over $10,000.
- Level funding for Perkins basic state grant program to support our nation’s high schools, technical centers, and community colleges in developing the highly skilled workforce demanded by employers.
Congress also passed a package of changes to the tax code that were combined with the omnibus spending bill. This includes permanent extensions of both major business tax credits and improvements to the refundable tax credits for working families and students. Specifically, the law makes permanent a modestly larger Earned Income Tax Credit (EITC) for families with three or more children, includes marriage penalty relief by increasing the income phase-out range for married couples filing jointly, and allows low-income workers who earn at least $3,000 to begin to qualify for the refundable Child Tax Credit (CTC). Without these improvements, which would have expired at the end of 2017, married couples would face higher marriage penalties due to a cut and larger families would face a cut in their EITC, while individuals would have to earn roughly $14,000 to be eligible for any of the refundable CTC. The law also makes permanent the American Opportunity Tax Credit (AOTC), a partially refundable credit for students attending postsecondary education.
Extending these credits is a significant win for low-income workers and their families. In 2014, the Census Bureau found that the EITC and CTC reduced overall poverty (as measured by the supplemental poverty measure) by 3.1 percentage points and child poverty by a remarkable 7.1 percentage points. In the absence of a negotiated compromise, it is highly likely that Congress would have simply extended the business credits without doing anything for working families. However, we have deep concerns about some provisions of the law that would limit the access of low-income, working immigrants to these critical supports and make it harder for them to get an Individual Taxpayer Identification Number (ITIN) in order to pay their taxes. Children in these families are a crucial part of America’s future, and hindering their and their families’ access to economic stability is deeply short-sighted.
Overall, the omnibus is a step towards providing much-needed and overdue increased investments in programs that support poor and low-income children, families, and individuals. However, many of these programs remain well under the levels needed. The nation is missing out on major opportunities, such as last year’s Congressional reauthorizations of WIOA and CCDBG, both of which passed by large bipartisan majorities. Yet without significant additional investment, the important improvements made by these laws will be largely empty promises. Moreover, the revised spending caps for FY 2017 are at about the same nominal level as FY 2016, which means another year without accommodation for inflation or population growth.
A much greater investment is still needed to fix the remaining gaps in the safety net, address the damaging effects of low-wage work, help low-skilled youth and adults move up to better jobs, and support a two-generational approach so both parents and children can escape poverty. However, it will not be possible to make these investments without a tax policy that brings in sustainable revenue and asks corporations and wealthy individuals to pay their fair share.
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CLASP is a national, nonpartisan, anti-poverty organization advancing policy solutions that work for low-income people. With nearly 50 years of trusted expertise, a deeply knowledgeable staff, and a commitment to practical yet visionary approaches to opportunity for all, CLASP lifts up the voices of poor and low-income children, families, and individuals, equips advocates with strategies that work, and helps public officials put good ideas into practice. The organization’s solutions directly address the barriers that individuals and families face because of race, ethnicity, and immigration status, in addition to low income. For more information, visit clasp2022.tealmedia.dev and follow @CLASP_DC.