Federal Benefits and Services for People with Low Income: Programs, Policy, and Spending, FY2008-FY2009
Congressional research reportJan 31, 2011
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Federal Benefits and Services for People with
Low Income: Programs, Policy, and Spending,
FY2008-FY2009
(name redacted)
Specialist in Domestic Social Policy and Division Research Coordinator
January 31, 2011
Congressional Research Service
7-....
www.crs.gov
R41625
CRS Report for Congress
Prepared for Members and Committees of Congress
Federal Benefits and Services for People with Low Income
Summary
The federal government spent almost $708 billion in FY2009 on programs for low-income
people, and nearly $578 billion the previous year. The increased spending between the two years
was largely due to the recession, with almost two-thirds coming from the American Recovery and
Reinvestment Act (ARRA, P.L. 111-5), the economic stimulus enacted in February 2009.
Low-income programs discussed in this report are distinct from social insurance programs, such
as Social Security or Medicare, which aim to protect American workers universally against lost
wages or benefits when they retire, become disabled, or lose a job. In contrast, programs
addressed here focus explicitly on low-income populations. They provide assistance in obtaining
basic needs, such as health care, food, or housing, and seek to address the causes of low income
through education, training, or other services. While these programs are very diverse, the analysis
in this report yields certain general findings:
•
Health care dominates all other categories of benefits and services, accounting for nearly
half of federal spending for low-income people. Cash aid is second but trails far behind,
comprising 18% of spending in FY2009. Other categories, in decreasing size, are food assistance,
housing and development, education, social services, energy assistance, and employment and
training.
•
Four programs account for 60% of federal spending for low-income people and 10 programs
make up more than three-fourths. Medicaid alone accounted for nearly 40% of FY2009 lowincome spending; next were the Supplemental Nutrition Assistance Program (SNAP, formerly
food stamps), Supplemental Security Income, and the refundable portion of the Earned Income
Tax Credit.
•
Elderly and disabled individuals, and families with children are key target populations for
much of the spending for low-income people. Federal policy toward families with children
generally encourages work and includes incentives to “make work pay.” Other populations served
by selected programs include veterans, students, homeless people, Indians, and refugees.
•
Within broad target populations, programs use different concepts to determine who is
eligible. Most spending is on behalf of people determined individually eligible by virtue of their
low income or eligibility for another income-tested program. “Low income” is defined in a
multitude of ways, using different percentages of the federal poverty guidelines, specific dollar
amounts, percentages of local area median income (primarily for housing programs), or other
measures.
•
Many programs distribute funding to states or other entities to provide benefits and services
to low-income people, using population-based allocation factors, cost-sharing formulas, or other
mechanisms to target resources toward areas or entities with the greatest need. Some of these
programs (especially in elementary and secondary education) have no further requirements for
individuals to be determined income-eligible.
•
Programs for low-income people are most likely to use formula grants to distribute funds to
states or another unit of government. Under many of these programs, notably including Medicaid,
states must spend a specified amount of their own funds to receive federal dollars. State and local
governments administer most of these federal programs; however, many of the largest programs
provide federal benefits directly to individuals or via a nongovernmental intermediary.
Congressional Research Service
Federal Benefits and Services for People with Low Income
Contents
Introduction ................................................................................................................................1
Caveats .................................................................................................................................3
A Brief History of Federal Low-Income Policy ...........................................................................4
Overview of Federal Spending on Benefits and Services for People with Low Income ................7
Change in Spending from FY2008 to FY2009 .......................................................................9
Budgetary Classification of Federal Spending on Benefits and Services .............................. 11
A Look at the 10 Largest Programs............................................................................................ 12
Overview of Benefits and Services by Category ........................................................................ 17
Health Care......................................................................................................................... 17
Cash Aid ............................................................................................................................. 18
Food Assistance .................................................................................................................. 18
Housing and Development .................................................................................................. 18
Education............................................................................................................................ 20
Social Services.................................................................................................................... 20
Energy Assistance ............................................................................................................... 21
Employment and Training ................................................................................................... 21
Defining Individual Eligibility for Benefits and Services ........................................................... 22
Federal Poverty Guidelines ................................................................................................. 24
Other Income Measures ...................................................................................................... 26
Specific Dollar Amounts ............................................................................................... 26
Median Income ............................................................................................................. 26
“Need Analysis”............................................................................................................ 27
Lower Living Standard Income Level............................................................................ 27
Treatment of Income ..................................................................................................... 28
Asset/Resource Limits ........................................................................................................ 29
Categorical and Behavioral Requirements and Exclusions ................................................... 29
A Note About Noncitizens............................................................................................. 30
Automatic Eligibility........................................................................................................... 30
Targeting Federal Resources According to Need........................................................................ 32
Formula Allocation Factors ................................................................................................. 33
Cost-Sharing Rules ............................................................................................................. 35
Limited Eligibility for Areas or Entities............................................................................... 37
Types of Federal Grants and Grantees ....................................................................................... 37
Formula-Based Grants ........................................................................................................ 38
Competitive or Discretionary Awards .................................................................................. 39
Direct Benefits to Individuals.............................................................................................. 40
Matching and Related Requirements ................................................................................... 41
Policies Affecting Indian Tribes........................................................................................... 42
Policies Affecting U.S. Territories ....................................................................................... 43
Benefit Levels Under Selected Cash and Near-Cash Programs................................................... 43
Final Notes and Outstanding Questions ..................................................................................... 46
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Federal Benefits and Services for People with Low Income
Figures
Figure 1. Federal Spending on Benefits and Services for Low-Income People,
FY2008 and FY2009, by Category ...........................................................................................8
Figure 2. Federal Spending on Benefits and Services for Low-Income People, FY2008
and FY2009, with and without ARRA Spending, by Category ..................................................8
Tables
Table 1. Federal Spending by Major Category on Benefits and Services for People with
Low Income, FY2008, FY2009, and ARRA .............................................................................9
Table 2. Spending for 10 Largest Programs for People with Low Income,
FY2008, FY2009, and ARRA ................................................................................................ 12
Table 3. Key Features of the 10 Largest Programs ..................................................................... 15
Table 4. Concepts Used in Determining Individual Eligibility for Federal Benefits and
Services for Persons with Low Income................................................................................... 23
Table 5. Concepts Used in Targeting Federal Resources According to Need............................... 33
Table 6. Cash and Near-Cash Benefit Amounts:
As of July 2008, July 2009, and July 2011.............................................................................. 45
Table B-1. Spending for Federal Benefits and Services for People with Low Income, by
Program: FY2008, FY2009, and ARRA ................................................................................. 53
Table B-2. Target Populations and Concepts Used to Determine Individual Income
Eligibility Criteria and/or Target Federal Resources, by Program............................................ 60
Table B-3. Types of Grants or Awards, and Eligible Immediate Grantees or Beneficiaries,
by Program ............................................................................................................................ 67
Table C-1. Guide to Program Fact Sheets and Page Numbers.................................................... 73
Appendixes
Appendix A. Methodology of Report......................................................................................... 49
Appendix B. Detailed Program Tables....................................................................................... 52
Appendix C. Program Fact Sheets ............................................................................................. 73
Appendix D. Sources of Additional Information on Selected Income Measures and
Eligibility Tests .................................................................................................................... 173
Contacts
Author Contact Information .................................................................................................... 174
Acknowledgments .................................................................................................................. 175
Congressional Research Service
Federal Benefits and Services for People with Low Income
Introduction
People and communities with limited resources are a major focus of public policy. While
policymakers might disagree in theory on whether or to what extent government should act to
protect the economic well-being of individuals and families, the federal government in fact
spends large sums of money on numerous programs targeted toward those with limited income
and assets. This report attempts to identify and analyze these programs and provide a broad
overview of the policies underlying them.
In FY2009, federal spending on programs for people with low income was almost $708 billion,
and totaled nearly $578 billion the previous year. Most of the growth between the two years was
related to the recession and associated policy responses, with almost two-thirds (64%) of the
increase coming from the American Recovery and Reinvestment Act of 2009 (ARRA, P.L. 1115). In both years, four programs accounted for almost 60% of total spending, and 10 programs
accounted for more than 75%.
The distinguishing feature of federal programs examined here is their explicit focus on lowincome populations, as distinct from social insurance programs such as Social Security, Medicare,
or Unemployment Insurance. Social insurance programs aim to protect American workers
universally against lost wages and work-related benefits due to retirement, disability, or
temporary periods of unemployment. They are financed in large part through contributions from
workers and employers and their aggregate spending is much larger than programs intended
specifically for those with low income. Social insurance programs play a major role in reducing
poverty among significant segments of the population.1
In contrast to social insurance, programs examined in this report are funded through general
revenues and provide benefits and services to people with limited income either by explicitly
tying eligibility to a measure of income, or by targeting assistance through funding allocation
formulas or other need-related mechanisms. They attempt to ameliorate or mitigate the effects of
low income by providing cash or noncash benefits to help people meet basic needs, such as food,
housing, and health care. They also seek to address root causes of economic disadvantage by
providing education, training, and other services to improve people’s employability and earnings
capacity. Some programs combine these purposes by conditioning aid on participation in work or
training or providing incentives to engage in these activities. Finally, some programs target
assistance to communities with significant concentrations of low-income people to compensate
for their low tax capacities, and help provide revenues to support benefits and services to
residents.
These programs are extremely diverse in their purpose, design, and target populations. Many
were created independently of one another, at different times and in response to different
perceived policy problems. They also changed over time in response to various societal and other
factors. “Social welfare,” “social safety net,” and “public welfare” are generic terms sometimes
1
See, for example, House Ways and Means Committee 2008 Green Book, Appendix E, “Poverty, Income Distribution,
and Antipoverty Effectiveness,” pp. E-65-E-76: http://democrats.waysandmeans.house.gov/media/pdf/110/appE.pdf;
and CRS Report RL33289, Social Security’s Effect on Child Poverty, by (name redacted).
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Federal Benefits and Services for People with Low Income
used to refer to these programs; however, there is no single label that best describes all programs
included in this report.2
Key findings of the report are presented in the Summary, above. The body of the report is
organized as follows:
•
The report begins with a very brief history of federal low-income policy, to
provide context for the subsequent discussion of current programs. The report
then gives an overview of current federal spending on benefits and services for
low-income people, including a review of the budgetary classification of these
funds (mandatory or discretionary).
•
The next section looks specifically at the 10 largest programs, which together
account for three-fourths of all spending in the report, followed by an overview
of all programs, organized by major category in order of FY2009 spending:
health care, cash aid, food assistance, housing and development, education, social
services, energy assistance, and employment and training.
•
The next two sections look in greater detail at the ways in which benefits and
services are directed toward people with limited income, either by establishing
explicit eligibility criteria for individuals or families, or by targeting assistance
toward communities or entities based on a measure of need. These sections look
at use of the federal poverty guidelines and other income measures in defining
eligibility or otherwise targeting assistance, as well as criteria that enable certain
categories of people to qualify automatically.
•
The form of federal assistance—formula grants, competitive or discretionary
awards, direct payments to individuals—is the focus of the next section, which
also looks at the immediate recipients of federal funds, such as states, local
governments, and nonprofit organizations. The section discusses matching or
other requirements for nonfederal spending, and very briefly addresses the
participation of Indian tribes and U.S. territories.
•
The report generally does not discuss the value of benefits or services provided;
however, the next section shows maximum benefit levels under selected cash and
near-cash benefit programs. The report concludes by identifying potential
questions for further analysis.
•
The report includes several appendixes: Appendix A discusses the
methodologies used to prepare the analysis; Appendix B provides overview
tables of programs included in the report; and Appendix C is a series of short
fact sheets on each program. Appendix D gives references to information about
the federal poverty guidelines and other income measures and eligibility tests.
2
As these terms are commonly understood, they are either too broad or too narrow to collectively characterize
programs included in this report. “Social welfare” and “social safety net” are sometimes understood to include social
insurance programs in addition to programs explicitly targeted on low-income populations. “Public welfare” often is
understood as a more narrow set of programs that primarily provide cash or near-cash benefits to low-income people.
While such programs are included here, programs that provide in-kind benefits and services also are discussed.
“Income-tested” or “means-tested” might be used to describe programs in this report, although (as discussed later)
some programs target assistance toward low-income communities or entities but do not specifically apply an income or
means test to individual participants or beneficiaries.
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Caveats
The analysis in this report required numerous decisions about which programs to include,
how to categorize them, and what measure of federal spending to use. The methodologies
chosen are described in Appendix A. Readers should be aware, however, of the
following caveats:
•
The report refers to the target population of these benefits and services as persons
with “low” or “limited” income, rather than “poor” people. Although some
programs limit participation to individuals with income below federal poverty
guidelines, income eligibility criteria vary widely and frequently include people
with income above the federal definition of poverty.
•
The number of programs included in this report is not meaningful. While fact
sheets are presented for 82 “programs,” some could have been characterized as
more than one program and others could have been consolidated. In addition,
only programs with new obligations of $100 million or more in a given year are
included. If smaller programs were included, the overall number of programs
would be larger, but the analysis would essentially be unchanged.
•
The assignment of programs—and therefore dollars—to broad categories (health
care, cash aid, food assistance, etc.) is not perfect. Certain programs provide
multiple types of assistance and spending could not be disaggregated, so
spending was assigned to a single category. Some programs are ambiguous;
different analysts might categorize them differently. The analysis might be
changed somewhat if different assignments had been made.
•
The report does not include tax programs, with the exception of direct spending
for the refundable portion of the Earned Income Tax Credit and the refundable
Additional Child Tax Credit.
•
The report does not provide long-term trend data on spending. For reasons
explained in Appendix A, obligations are generally used as the measure of
spending. While obligations are the most consistent program-specific measure
available for the majority of programs included here, they are difficult to trace
backward. Spending is provided for FY2009 because it is the most recent year for
which final amounts are available for all programs included. Because FY2009
was an unusual year, however, with a large infusion of funding from the
economic stimulus law (ARRA), FY2008 spending is also shown.
•
The report provides a snapshot of policies and spending for low-income
programs in FY2008 and FY2009. It does not address the effectiveness of these
programs in meeting their policy goals.
•
Readers familiar with the CRS series of reports entitled Cash and Noncash
Benefits for Persons with Limited Income should know that this report is not an
update of that earlier series. This report is meant to replace that series but it uses
different methodologies and is therefore not comparable to the Cash and
Noncash reports. See Appendix A for an explanation of the differences.
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Federal Benefits and Services for People with Low Income
A Brief History of Federal Low-Income Policy
A review of the evolution of federal policy for low-income people provides useful context for
understanding today’s programs and policies. The following is a quick overview of key
milestones, such as the New Deal of the 1930s and the Great Society of the 1960s. While many
current programs trace their roots to these eras, few exist today in the same form. Today’s
programs reflect policy changes enacted over many decades in response to numerous factors,
particularly the shift in societal expectations about mothers working outside the home. Federal aid
initially focused on groups who were not expected to work, including mothers of dependent
children; however, federal policy today generally favors work among able-bodied aid recipients
and includes incentives to “make work pay.” Federal policy also expanded over time to include
efforts to address root causes of poverty and disadvantage, in addition to helping people meet
their basic needs.
Federal involvement in providing benefits and services for people with low income generally
began in the first part of the 20th century, largely after the Great Depression overwhelmed the
resources of states, local governments, and private organizations, which previously had borne
primary responsibility for helping the disadvantaged. With some key exceptions, such as veterans’
benefits and tax credits for low-wage workers, state and local governments still play a significant
role in most programs intended for low-income populations, regardless of whether they are
partially or fully federally funded.
Benefits for veterans, initially to meet the medical needs of those who became disabled during
service, are among the oldest in the United States, and date back in some form to the beginning of
the country.3 By the early 1900s, these benefits had grown to include medical care and cash
assistance for the indigent as well as veterans with disabilities, including assistance for
dependents and survivors of veterans. These were the primary benefit programs administered by
the federal government until the Great Depression of the 1930s.
The New Deal was the federal government’s response to the Depression, and the Social Security
Act of 1935 was its cornerstone. The act brought the federal government into the fields of social
insurance and cash relief for populations who either could not work or who society at that time
did not expect to work. 4 The original act established income security programs for aged and
retired workers and for temporarily unemployed workers (the beginning of today’s Social
Security and Unemployment Compensation programs). It also authorized federal grants to states
to make cash aid payments to two groups, in addition to the elderly, who were not expected to
work. These groups were fatherless (dependent) children and the blind, although within these
categories, the act gave states the authority to define specific eligibility and benefit levels.
Aid to Dependent Children, as created in 1935, was amended over the succeeding decades and
became Aid to Families with Dependent Children in 1962. Aid was provided to parents (typically
single mothers) in addition to the children. However, at the same time, expectations about
mothers’ work began to change. Starting in the late 1960s and continuing over the next 30 years,
3
VA History, Department of Veterans Affairs, http://www4.va.gov/about_va/vahistory.asp.
4
See CRS Report 86-45EPW, Social Security Benefits, Cash Relief, and Food Aid: A Short History, by (name redacted)
(out-of-print; available upon request). Also see CRS Report R40946, The Temporary Assistance for Needy Families
Block Grant: An Introduction, by (name redacted).
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Congress imposed work registration and work or training requirements on certain parents
receiving cash benefits. In 1996, Congress replaced AFDC with Temporary Assistance for Needy
Families (TANF), which established time limits on the receipt of benefits and conditioned cash
aid on participation in work activities. States continue to make key decisions regarding eligibility
and benefit levels under TANF, and have the added flexibility to use funds for noncash services.
(In fact, the majority of TANF funds are now used for noncash services, such as social services
and employment-related activities.) The 1996 law also gave states more federal funding for child
care for low-income working families.
The 1930s also marked the federal government’s entry into the field of housing.5 In response to
trouble in the mortgage market resulting from the Depression, the U.S. Housing Act of 1934
encouraged lending for housing construction through a new Federal Housing Administration. The
U.S. Housing Act of 1937 subsequently created the low-rent Public Housing program, which
required states to establish quasi-governmental local public housing authorities (PHAs) to
administer the program. In 1949, Congress declared the federal goal of “a decent home and a
suitable living environment for every American family,” and over the next two decades it enacted
provisions to provide affordable housing through incentives to private developers to build lowcost housing. The Housing Act of 1974 created a new rental assistance program, known as
Section 8, which provided rental subsidies for private properties, in lieu of development
subsidies. Section 8 was later expanded to include portable rental vouchers administered by
PHAs. While Section 8 vouchers have effectively replaced subsidies for new development, many
housing units that were subsidized under these earlier programs still provide affordable housing
today. They are administered by PHAs or private properties, under contract with the federal
Department of Housing and Urban Development (HUD).
An early version of food stamps existed for several years during the Depression and was revived
in 1961 as a small pilot program.6 The program became permanent during the Great Society,
through the Food Stamp Act of 1964. Originally, states set their own eligibility rules, and benefits
varied regionally. This changed in 1971 when the program was effectively converted to a national
income guarantee, providing an amount of food stamps to participating households sufficient to
buy items equivalent to the Agriculture Department’s “economy diet.” However, recipients had to
contribute a monthly “purchase requirement” based on their income in order to obtain benefits.
The law set nationally uniform eligibility rules and federally paid benefit levels, but states
continued to administer the program. Congress enacted a number of major policy changes to the
Food Stamp program over the next three decades, including removal of the purchase requirement
in the late 1970s, allowing automatic eligibility for those receiving other public assistance
benefits or services in 1985, and limiting access for able-bodied adults without dependents in
1996. In 2008, the Food Stamp program was renamed the Supplemental Nutrition Assistance
Program (SNAP). States continue to administer SNAP and have some leeway in determining
eligibility through application of the automatic eligibility rules, but benefit levels remain federally
financed and nationally uniform.
A central feature of the Great Society was the War on Poverty, and the Economic Opportunity Act
of 1964 was its primary legislative vehicle. That act and its subsequent amendments authorized
numerous programs that sought to address the causes of economic disadvantage, and to
5
See CRS Report RL34591, Overview of Federal Housing Assistance Programs and Policy, by (name redacted) et al.
See CRS Report 86-45EPW, Social Security Benefits, Cash Relief, and Food Aid: A Short History, by (name redacted)
(out-of-print; available upon request).
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Federal Benefits and Services for People with Low Income
ameliorate its effects. Programs were designed to meet the multiple needs of low-income
preschool children and their families, and the employability needs of low-income youth and
adults, and to give low-income people a formal role in planning services for their communities.7
Modern-day programs with origins in the War on Poverty include Head Start, Job Corps, Adult
Basic Education, components of the Workforce Investment Act, the Legal Services Corporation,
Weatherization Assistance, the Low-Income Home Energy Assistance Program, School
Breakfast,8 the Summer Food Service Program, the Child and Adult Care Food Program, and the
Community Services Block Grant. The Great Society also focused on education; both the
Elementary and Secondary Education Act and the Higher Education Act became law in 1965.
The Great Society also saw the creation of Medicare and Medicaid, which have grown into the
nation’s largest health care programs. Medicare was created in 1965, providing health coverage as
a form of social insurance to elderly and disabled individuals with a significant attachment to the
workforce. The same legislation created Medicaid, a means-tested entitlement that finances
medical services and long-term care for specified low-income and categorical groups. Medicaid
replaced two earlier programs of federal grants to states that provided medical care to welfare
recipients and the elderly.9 Both Medicare and Medicaid have been amended numerous times
over the years, expanding both eligible populations and services. A prescription drug benefit was
added to Medicare in 2003, which includes a subsidy for low-income beneficiaries. And most
recently, the 2010 health reform law—the Patient Protection and Affordable Care Act (P.L. 111148, as amended by P.L. 111-152)—significantly expanded Medicaid, so that, beginning in
FY2014 (or potentially sooner, at state option), Medicaid will cover low-income childless adults
in addition to the program’s traditional target populations of low-income parents and children,
and elderly and disabled individuals.
The original Social Security Act’s grants to states for cash aid to needy blind and aged individuals
were expanded over time to include people with disabilities. However, in contrast to cash aid and
related programs for needy families with children, which remain state-administered, Congress
“federalized” programs for low-income aged, blind, and disabled people in 1972. These earlier
programs were replaced by Supplemental Security Income (SSI), which has uniform federal
minimum eligibility and benefit rules (rather than state-determined policies) and serves blind and
disabled children as well as adults.
Also in the early 1970s, Congress considered but did not enact welfare reform legislation that
would have replaced AFDC with a federal minimum cash guarantee for poor families, including
working families with two parents. Instead, in 1975 Congress enacted a temporary “work bonus”
or wage supplement intended to return a portion of Social Security taxes to low-income working
households. 10 This program was made permanent in 1978 and became the current
7
A key component of the War on Poverty was the Community Action Program, which required local antipoverty
agencies to include low-income residents on their governing boards. These boards were charged with identifying and
advocating for government services to meet local community needs. Many of the original Community Action Agencies
are current eligible entities under the Community Services Block Grant, administered by the Department of Health and
Human Services. See CRS Report RL32872, Community Services Block Grants (CSBG): Background and Funding, by
(name redacted).
8
While School Breakfast traces its origins to the War on Poverty, the National School Lunch Program began earlier,
under the Richard B. Russell National School Lunch Act of 1946.
9
See CRS Report RL33202, Medicaid: A Primer, by (name redacted).
10
See CRS Report 95-542, The Earned Income Tax Credit: A Growing Form of Aid to Low-Income Workers, by James
Storey (out-of-print; available upon request).
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Earned Income Tax Credit (EITC). The credit has been expanded several times over the past 30
years and is currently one of the largest cash assistance programs for low-income households,
reflecting the prevailing policy goal of “make work pay.”
Consistent with the emphasis on promoting work for low-income families, the welfare reform law
of 1996 created TANF, which, as noted above, conditions cash aid on participation in work
activities, and also expanded funding for child care. In the year following enactment of welfare
reform, low-income families not sufficiently poor for Medicaid gained access to health insurance
for their children through enactment of the State Children’s Health Insurance Program (CHIP) in
1997. The Child Tax Credit and refundable Additional Child Tax Credit (ACTC) also were
created in 1997, although the impact of the ACTC originally was limited. In 2001 and subsequent
years, the ACTC was expanded so that it now targets assistance toward low-income families.
Most recently, Congress enacted the American Recovery and Reinvestment Act (ARRA, P.L. 1115) in 2009, in an effort to stimulate the economy during recession. While ARRA did not create
significant new initiatives for people with limited income, it revised and expanded certain
existing policies, at least temporarily, to make them more responsive to the needs of people and
communities affected by the downturn. As the following discussion shows, ARRA resulted in a
substantial increase in spending on benefits and services for low-income populations between
FY2008 and FY2009. The bulk of funding provided by ARRA was intended to be spent during
FY2009 and FY2010.
Overview of Federal Spending on Benefits and
Services for People with Low Income
Federal spending on benefits and services for low-income people totaled $708 billion in FY2009
and $578 billion in FY2008. These programs generally seek to mitigate the effects of low income
by helping people meet basic needs such as health care, food, or shelter, or to address the root
causes of economic disadvantage through services, education, or job training. Notably, few
programs have poverty reduction as an explicit goal or purpose. Key target populations for many
of these programs, including some of the largest, include low-income elderly and disabled
individuals, and dependent children and their families. Other target groups for selected programs
include veterans, students, people who are homeless, Indians, and refugees, among others.
Figure 1 illustrates the composition of spending, by category, in FY2008 and FY2009. Figure 2
displays FY2008 and FY2009 spending by category, and also highlights the portion of spending
in FY2009 attributable to ARRA. Table 1 shows this information, both overall and by category,
and the percent change in spending from FY2008 to FY2009. See Appendix Table B-1 for a
listing of specific programs in each category.
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Figure 1. Federal Spending on Benefits and Services for Low-Income People,
FY2008 and FY2009, by Category
Source: Prepared by the Congressional Research Service (CRS) from obligations data contained in the U.S.
Budget Appendix for FY2010 and for FY2011.
Note: FY2009 amounts include federal obligations under the American Recovery and Reinvestment Act. FY2008
amount for cash aid includes an unspecified amount for a one-time $300-per-child tax rebate, authorized under
the Economic Stimulus Act of 2008 (P.L. 110-185), which was not targeted on low-income families.
Figure 2. Federal Spending on Benefits and Services for Low-Income People,
FY2008 and FY2009, with and without ARRA Spending, by Category
Source: Prepared by the Congressional Research Service (CRS) from obligations data contained in the U.S.
Budget Appendix for FY2010 and for FY2011.
Notes: ARRA = American Recovery and Reinvestment Act. FY2008 amount for cash aid includes an unspecified
amount for a one-time $300-per-child tax rebate, authorized under the Economic Stimulus Act of 2008 (P.L.
110-185), which was not targeted on low-income families.
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Table 1. Federal Spending by Major Category on Benefits and Services for People
with Low Income, FY2008, FY2009, and ARRA
(dollars in billions)
FY2008
FY2009
ARRA (included in
FY2009)
% Change, FY2008
to FY2009
Health
258.5
319.3
34.4
24%
Cash aid
133.7
129.6
0.4
-3%
Food assistance
58.9
77.5
5.0
32%
Housing and
development
39.6
59.9
14.4
51%
Education
41.9
58.2
18.7
39%
Social services
36.2
44.3
3.9
22%
Energy assistance
2.9
10.3
4.7
259%
Employment and
training
6.2
8.6
1.8
38%
$577.8
$707.6
$83.4
22%
Category
Total
Source: Prepared by the Congressional Research Service (CRS) from obligations data contained in the U.S.
Budget Appendix for FY2010 and for FY2011.
Notes: ARRA = American Recovery and Reinvestment Act, P.L. 111-5. The FY2009 column includes amounts
also shown separately in the ARRA column. The FY2008 amount for cash aid includes an unspecified amount for
a one-time $300-per-child tax rebate, authorized under the Economic Stimulus Act of 2008 (P.L. 110-185), which
was not targeted on low-income families.
As Figure 1 shows, spending for health care dominates all other categories, accounting for close
to half (45%) of total spending for limited-income populations in FY2009. Cash aid is the second
largest category but trails health care by a wide margin, with 18% of spending in FY2009. Food
assistance is third (11% of FY2009 spending), followed by housing and development (almost
9%), education (8%), social services (6%), energy assistance (almost 2%), and employment and
training (1%).
Change in Spending from FY2008 to FY2009
Overall spending on federal benefits and services for low-income populations grew by 22%
between FY2008 and FY2009, largely due to policy responses to the recession. Almost two-thirds
(64%) of the additional spending was provided under ARRA, the economic stimulus enacted in
February 2009.11 Some large entitlement programs (e.g., Medicaid, the Supplemental Nutrition
Assistance Program (SNAP)) saw additional growth in spending beyond that provided under
ARRA, likely due to an increase in eligible and enrolled individuals as a result of the economic
downturn.
Spending growth from FY2008 to FY2009 was uneven among categories. The largest percentage
increase was for energy assistance, which represented less than 1% of all spending in FY2008 and
11
For an overview, see CRS Report R40537, American Recovery and Reinvestment Act of 2009 (P.L. 111-5): Summary
and Legislative History, by (name redacted) et al.
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more than tripled in FY2009. Spending for housing and development programs rose by 51%,
education by 39%, and employment and training by 38%. Spending on food assistance increased
between the two years (32%), as did spending for health care (24%) and social services (22%).
Spending for cash aid appeared to drop by 3% between FY2008 and FY2009; however, this was
the result of a one-time $300-per-child tax rebate, which was included as spending under the
Additional Child Tax Credit (ACTC) in FY2008 but was not targeted toward low-income
families.
In terms of dollar increases between the two years, health care saw the largest growth, with $61
billion of additional obligations in FY2009. More than half of this increase (54%) resulted from
provisions in ARRA that temporarily raised the federal share of Medicaid costs. However, growth
in Medicaid spending—regardless of ARRA—accounted for another 30% of the dollar increase in
low-income health spending from FY2008 to FY2009.
The next largest dollar increase was for housing and development programs, which grew by $20
billion between FY2008 and FY2009. Most of this growth (71%) resulted from additional
appropriations provided under ARRA for such programs as Public Housing, Homeless Assistance
Grants (specifically for a new Homelessness Prevention and Rapid Re-Housing Program), and
Section 8 Project-Based Rental Assistance. ARRA also funded two temporary grants related to the
Low-Income Housing Tax Credit.
Spending for food assistance rose by almost $19 billion between FY2008 and FY2009. More than
a quarter of this growth resulted from ARRA provisions that increased the dollar value of SNAP
benefits. As noted above, however, SNAP grew significantly regardless of the ARRA provisions,
as more households became eligible and enrolled in the program during the recession and its
aftermath. Additional SNAP obligations unrelated to ARRA accounted for 60% of the FY2009
spending increase in the food assistance category.
Education spending grew by $16 billion from FY2008 to FY2009, although without additional
appropriations provided under ARRA, this category would have decreased by $2 billion.
However, ARRA was enacted before final decisions were made on total FY2009 appropriations,
so appropriators were able to take into consideration the additional amounts already provided
through ARRA. Pell Grants for postsecondary students and grants to disadvantaged school
districts under Title I-A of the Elementary and Secondary Education Act were the largest
beneficiaries of ARRA funding among education programs specifically targeted on low-income
populations.
Spending for social services rose by $8 billion between FY2008 and FY2009, with almost half of
the increase coming from appropriations made by ARRA, specifically for Head Start, the Child
Care and Development Fund, and the Community Services Block Grant. Energy spending grew
by $7 billion, of which nearly two-thirds (64%) was ARRA funding for the Weatherization
Assistance Program. Finally, employment and training saw a $2 billion increase in spending in
FY2009, with more than three-quarters (77%) coming from appropriations under ARRA for the
Workforce Investment Act and Job Corps.
As noted above, cash assistance spending appeared to go down in FY2009, by about $4 billion.
However, FY2008 obligations in this category included an unspecified amount of spending for a
one-time $300-per-child tax rebate, authorized under the Economic Stimulus Act of 2008 (P.L.
110-185). This one-time rebate was counted as spending under the ACTC, but was not targeted
toward low-income families. Thus, FY2008 spending for low-income people under the ACTC
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appears higher than it actually was. While ARRA made changes in both the Earned Income Tax
Credit and the ACTC, these changes did not take effect until tax year 2009, and therefore
associated spending would generally not be seen until FY2010.
Budgetary Classification of Federal Spending on Benefits
and Services
Of total spending on programs for low-income people, about 75% is classified in budget terms as
“mandatory” (also called “direct” spending) and the remainder as “discretionary.”12 In mandatory
programs, many of which are entitlements to individuals or units of government, Congress
defines eligibility and payment rules in authorizing laws.13 These rules determine the amount of
spending that will occur, so Congress generally must amend the authorizing law in order to
control federal spending. The amount of federal spending for discretionary programs, on the other
hand, is determined by Congress through the annual appropriations process.14
Mandatory spending may be structured as open-ended or capped. In an open-ended entitlement
program, no predetermined ceiling is imposed on federal expenditures; instead, federal payments
are made to all eligible beneficiaries for eligible expenditures as defined in law. (Medicaid is an
example of an open-ended entitlement program.) In a capped program, the authorizing law limits
the total amount of federal spending that can occur. (Temporary Assistance for Needy Families is
an example of a capped entitlement program.) Of mandatory spending discussed in this report,
more than 90% is through open-ended programs.
The pattern of mandatory versus discretionary spending differs by major category of benefits and
services. All cash aid spending, and most spending for health care and food assistance, is
mandatory. In all three of these categories, spending occurs largely through open-ended
entitlement programs. In contrast, all spending for energy assistance and employment and
training, and most spending for housing and development and education, is discretionary. Social
services spending is a mixture; about two-thirds is mandatory and the rest is discretionary. Of the
mandatory social services spending, a little more than half is capped and the balance is
open-ended.
12
For more information on these budget classifications and trends in both areas of spending, see CRS Report RL33074,
Mandatory Spending Since 1962, by (name redacted) and (name redacted) and CRS Report RL34424, Trends in
Discretionary Spending, by (name redacted) and (name redacted).
13
Most mandatory programs in this report are entitlements; however, not all mandatory spending is for entitlement
programs. See U.S. Government Accountability Office, A Glossary of Terms Used in the Federal Budget Process,
GAO-05-734SP, September 2005.
14
Congress also funds certain mandatory programs through annual appropriations laws; however, the amounts to be
provided are established in authorizing laws, and appropriators generally lack the “discretion” to adjust these amounts.
These programs are sometimes referred to as appropriated entitlements.
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A Look at the 10 Largest Programs
This report generally looks at spending and policy by major category, such as health care, cash
aid, or food assistance. It illustrates the enormous diversity among and within categories in terms
of target population and various design elements. However, it is important to note that a few
individual programs account for the vast majority of spending for low-income populations, and
these programs merit special attention. The four largest programs contributed almost 60% of total
spending in each of FY2008 and FY2009, and the top 10 accounted for more than three-fourths.
The following provides an overview of these programs; they are discussed in the context of all
low-income programs in the balance of the report. Table 2 shows spending for these programs in
FY2008 and FY2009, and separately under ARRA. Table 3 highlights key features of
these programs.
Table 2. Spending for 10 Largest Programs for People with Low Income,
FY2008, FY2009, and ARRA
(dollars in billions)
FY2008
FY2009
ARRA
(included in FY2009)
Medicaid
214.015
265.058
32.632
Supplemental Nutrition
Assistance Program
37.530
53.763
4.478
Supplemental Security
Income
48.926
52.446
0
Earned Income Tax Credit
(refundable portion only)
40.600
42.418
0
Pell Grants
18.000
26.019
8.497
Additional (refundable)
Child Tax Credit
34.019
24.284
0
Title I-A—Education for
the Disadvantaged
13.352
21.495
9.936
Medicare Part D, LowIncome Subsidy
17.400
20.300
0
Temporary Assistance for
Needy Families
17.469
18.761
0.616
Section 8 Housing Choice
Vouchers
15.552
16.289
0
$456.863
$540.833
$56.159
Program
Total
Source: Prepared by the Congressional Research Service (CRS) from obligations data contained in the U.S.
Budget Appendix for FY2010 and for FY2011.
Notes: ARRA = American Recovery and Reinvestment Act, P.L. 111-5. The FY2009 column includes amounts
also shown separately in the ARRA column. Amounts shown for TANF include obligations in the following
categories: cash aid, social services, and employment and training. Amounts shown for SNAP include obligations
primarily in the food assistance category, but also include obligations in the employment and training category.
The FY2008 amount for cash aid includes an unspecified amount for a one-time $300-per-child tax rebate,
authorized under the Economic Stimulus Act of 2008 (P.L. 110-185), which was not targeted on low-income
families.
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As Table 2 shows, Medicaid is the single largest program and alone accounts for nearly 40% of
low-income spending. Next in size are the Supplemental Nutrition Assistance Program (SNAP,
formerly food stamps), Supplemental Security Income (SSI), and the refundable portion of the
Earned Income Tax Credit (EITC).15 Notably, SNAP became the second largest program in
FY2009 but was number four in spending in FY2008, behind SSI and EITC. Rounding out the
top 10 are Pell Grants, the Additional Child Tax Credit (ACTC),16 Title I-A of the Elementary and
Secondary Education Act (ESEA), the low-income drug subsidy under Part D of Medicare,
Temporary Assistance for Needy Families (TANF),17 and Section 8 Housing Choice Vouchers.
Because of the effect of Medicaid, more than half (53% in FY2009) of spending under the top 10
programs fell into the health category. Spending for programs in the cash assistance category
equaled 23% of spending under the 10 largest programs in FY2009, followed by programs
categorized as food assistance (10%) and education (9%). Small percentages of total spending for
the top 10 programs went to those categorized as housing (3%), social services (2%), and
employment and training (less than 1%).18
Low-income elderly, disabled, and families with dependent children are the focus of much of the
spending under the top 10 programs. Medicaid provides health care for low-income people within
certain categorical groups, which are primarily the elderly, individuals with disabilities, and
dependent children and their families. 19 Low-income elderly and disabled Medicare recipients
receive subsidized prescription drug insurance under Part D. Cash aid goes to low-income elderly
and disabled beneficiaries under SSI, and to low-income working households through the EITC20
and ACTC. TANF serves families with dependent children; states define specific eligibility rules
but federal law emphasizes participation in work activities for recipients of cash aid.
SNAP provides assistance specifically for the purchase of food to households below a certain
income threshold. While the program does not target benefits to certain demographic groups,
nearly half of SNAP recipients in FY2009 were children and another 8% were age 60 or older. 21
The law also requires able-bodied non-elderly adults without dependent children to participate in
work or training to receive benefits for more than a brief period of time. 22
15
This report captures direct spending for the refundable portion of the EITC, which accounted for nearly 90% of the
credit in FY2009. The program also results in tax expenditures, which are not included in this analysis.
16
The ACTC is a refundable credit, available to certain families who also qualify for the regular nonrefundable Child
Tax Credit but whose tax liability is too low for them to fully benefit from the regular credit.
17
For purposes of identifying the 10 largest programs, TANF is treated as a single program, although in the analysis of
spending by category, TANF dollars are disaggregated among cash aid, social services, and employment and training.
Although TANF is frequently thought of as cash welfare, it would not qualify as one of the 10 largest programs if only
its cash aid component were considered.
18
These calculations are based on disaggregated TANF and SNAP spending by category; see notes for Table 2.
19
This report discusses programs as they existed in FY2009. However, the Patient Protection and Affordable Care Act
(PPACA, P.L. 111-148) significantly amended Medicaid to expand eligibility, beginning in FY2014 (or sooner at state
option), to low-income childless adults. See CRS Report R41210, Medicaid and the State Children’s Health Insurance
Program (CHIP) Provisions in PPACA: Summary and Timeline, coordinated by (name redacted).
20
Childless adults with income below a certain threshold are eligible for the EITC; however, the overwhelming
majority of EITC spending is for benefits to working families with children. See Table 4 in CRS Report RL31768, The
Earned Income Tax Credit (EITC): An Overview, by (name redacted).
21
See Characteristics of Supplemental Nutrition Assistance Program Households: FY2009, Summary, Food and
Nutrition Service, U.S. Department of Agriculture, October 2010: http://www.fns.usda.gov/ora/MENU/Published/snap/
FILES/Participation/2009CharacteristicsSummary.pdf.
22
ARRA (P.L. 111-5) temporarily suspended this provision, from April 2009 through September 2010.
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The 10 largest programs also include housing vouchers for low-income families (“families” are
defined by local public housing authorities and may include single individuals). Two education
programs are among the top 10, including Pell Grants, which assist students whose family
resources are not adequate to meet their college costs. The system used to determine benefit
amounts under Pell sometimes gives aid to students with relatively high family income; however,
the benefits given to these students are likely to be low. Finally, low-income school districts
receive grants through Title I-A of ESEA, but individual students do not necessarily have to be
low-income to be served by the program.
As noted earlier, about 75% of all spending for limited-income populations is classified as
mandatory. This percentage is higher for the top 10 programs; close to 90% of spending under
these programs is mandatory, which means the amount spent is a function of program rules set
forth in law rather than annual decisions made by congressional appropriators. Moreover, of
mandatory programs in the top 10, only TANF is capped; the rest are open-ended. Three of the
top 10 programs are classified as discretionary. These are Pell Grants (which also includes a
mandatory component), Title I-A of ESEA, and housing vouchers.
With one exception, the 10 largest programs all require that beneficiaries must be determined
individually eligible to receive aid. In other words, except for Title I-A of ESEA, individuals or
households must meet an income (or equivalent) test to benefit from these programs. The
particular income test used, however, varies with the program. For example, Medicaid, SNAP,
and the Part D subsidy all use different multiples of the federal poverty guidelines to determine
eligibility, in addition to criteria that allow beneficiaries of certain other programs to qualify
automatically. Specific dollar amounts are used to define eligibility for SSI and also to determine
when EITC benefits begin to phase out.23 Section 8 housing vouchers use income limits that are
based on area median income to define eligibility, and TANF income eligibility thresholds, as
noted earlier, are set by states. No absolute income threshold determines eligibility for Pell
Grants; however, the lowest-income students receive the largest grants.
As stated above, children are not required to meet an income eligibility test to receive benefits
funded by Title I-A of ESEA. Rather, the program uses allocation formulas to direct federal
resources toward local educational agencies with relatively high concentrations of low-income
students. Once these funds are received by an individual school, students may be served
regardless of their family income.
Title I-A is an example of a formula grant program. (Other mechanisms for distributing funds
include competitive or discretionary awards, and direct benefits to individuals.) Medicaid, TANF,
and Section 8 housing vouchers also use formulas to distribute funds, but the specifics vary.
Because Medicaid is an open-ended entitlement, the federal government reimburses states for all
eligible expenditures with no cap on federal spending; however, the federal “matching rate” is
calculated for each state by a formula inversely related to its per capita income (poorer states get
a larger federal match, and wealthier states get a smaller federal match).24 TANF allocates block
grants to states according to a formula that considers their spending patterns under the
23
Unlike the EITC, the Additional Child Tax Credit (ACTC) does not phase out at specified income levels. However,
as a family’s income goes up, it may begin to incur tax liability and at a certain point (depending on individual
circumstances), it could become eligible for the nonrefundable Child Tax Credit, rather than the refundable ACTC.
24
Services are generally matched at this variable rate (referred to as the federal medical assistance percentage, or
FMAP); however, administrative costs are matched at a uniform 50% federal rate. See CRS Report RL32950,
Medicaid: The Federal Medical Assistance Percentage (FMAP), by (name redacted).
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predecessor Aid to Families with Dependent Children (AFDC) program. Funding to renew
existing housing vouchers is distributed to local public housing authorities (not states) according
to a formula established by Congress each year in appropriations law, which typically is related to
the use and cost of vouchers in the local area.
As noted above, formula grants are one of three major ways that federal programs for low-income
populations distribute funds; the other two are competitive or discretionary awards, and direct
benefits to individuals. None of the 10 largest programs award funds on a competitive or
discretionary basis, other than a relatively small component of TANF. 25 Instead, these large
programs either allocate funds to states or another unit of government by formula, as just
described, or give benefits to eligible individuals directly (or through a nongovernment
intermediary). Federal benefits are provided directly under SNAP (although states administer the
program), SSI (although states may supplement the federal benefit), EITC, ACTC, Pell Grants,
and the Medicare Part D subsidy.
Benefits provided by the federal government directly to eligible individuals typically are 100%
federally funded, although, as noted above, states incur administrative costs under SNAP (which
are reimbursed at a 50% federal rate) and may supplement federal payments under SSI. Some
states also operate their own earned income tax credit programs, which supplement the federal
EITC. Medicaid and TANF, however, are federal-state programs, and states must spend a
significant amount of their own money to receive federal funds. As noted above, state Medicaid
expenditures are reimbursed by the federal government at prescribed matching rates. Unlike
Medicaid, TANF is not a matching grant; however, to receive TANF block grant funds, states
must maintain a certain level of their own spending from prior years. Local educational agencies
that receive Title I-A grants also are required to maintain a certain amount of prior-year spending
and must use federal funds to “supplement and not supplant” nonfederal funds that would
otherwise be used for the same purpose.
Table 3. Key Features of the 10 Largest Programs
Medicaid
•
Mandatory spending, open-ended.
•
Serves elderly, disabled, and families with children.
•
Uses federal poverty guidelines to determine eligibility, automatic eligibility for certain groups.
•
Formula grant to states; cost-sharing formula determines federal share.
Supplemental Nutrition Assistance Program
•
Mandatory spending, open-ended.
•
Limits participation of able-bodied adults without dependents.
•
Uses federal poverty guidelines to determine eligibility, automatic eligibility for certain groups.
•
Direct benefits to individuals; matching grants to states for administrative costs.
Supplemental Security Income
•
Mandatory spending, open-ended.
•
Serves elderly and disabled.
•
Sets specific dollar thresholds for eligibility.
•
Direct benefits to individuals; states may supplement federal payment.
25
TANF grants to promote healthy marriage and responsible fatherhood are awarded competitively; these are discussed
later in the report.
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Earned Income Tax Credit
•
Mandatory spending, open-ended.
•
Serves workers with earnings; largest benefits for families with children.
•
Phases out benefits at specific dollar thresholds.
•
Direct benefits to individuals.
Pell Grants
•
Discretionary spending, small mandatory component.
•
Serves postsecondary students.
•
No individual income eligibility threshold; benefits based on available resources and cost of education.
•
Direct benefits to individuals.
Additional Child Tax Credit
•
Mandatory spending, open-ended.
•
Serves families with children.
•
Phases out benefits at specific dollar thresholds.
•
Direct benefits to individuals.
Title I-A Education for the Disadvantaged
•
Discretionary spending.
•
Serves students in schools with high concentrations of low-income students.
•
No individual income eligibility determination; students need not be low-income.
•
Formula grants to local educational agencies; uses population-based and other allocation factors.
Medicare Part D, Low-Income Subsidy
•
Mandatory spending, open-ended.
•
Serves elderly and disabled Medicare beneficiaries.
•
Uses federal poverty guidelines to determine eligibility, automatic eligibility for certain groups.
•
Direct benefits to individuals.
Temporary Assistance for Needy Families
•
Mandatory spending, capped.
•
Serves families with children.
•
States set their own eligibility criteria.
•
Formula grants to states; allocations based on historical expenditures under predecessor program.
Section 8 Housing Choice Vouchers
•
Discretionary spending.
•
Serves families, with priorities defined by local public housing authorities.
•
Uses income limits based on area median income to determine eligibility.
•
Formula grants to local public housing authorities; allocations based on use and cost of vouchers.
Source: Prepared by the Congressional Research Service (CRS).
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Overview of Benefits and Services by Category
The following sections provide brief overviews of the programs included in each major category
of benefits and services, organized by size of spending in FY2009. Tables included in Appendix
B individually list and identify key features of the programs, and brief fact sheets on each
program are provided in Appendix C.
Health Care
As health care dominates federal spending on benefits and services for people with limited
income, Medicaid dominates spending within the health care category. Medicaid accounted for
83% of health care spending in FY2009 and, as noted above, was nearly 40% of all spending in
this report. Medicaid is intended to provide medical assistance to specified categories of lowincome people who lack the income and resources to afford necessary medical care. Low-income
parents, dependent children, the elderly, and individuals with disabilities have been the primary
target populations served by Medicaid.26 The program finances the delivery of a wide range of
primary and acute medical services as well as long-term care. The State Children’s Health
Insurance Program (CHIP) provides health coverage for low-income children who lack health
insurance but whose family income exceeds Medicaid eligibility levels.
The next largest health programs are the low-income subsidy under Medicare Part D, which helps
low-income seniors and individuals with disabilities pay for prescription drugs, and medical care
for low-income veterans without service-connected disabilities. The latter program pays for an
array of primary care, specialized care, and related social and support services provided by the
Department of Veterans Affairs (VA). The Indian Health Service also offers a wide variety of
health services to its target population, who are American Indians or Alaskan Natives living on
reservations or within a specified service delivery area. Consolidated Health Centers offer
primary and other health services to low-income populations in medically underserved areas, and
the Maternal and Child Health block grant supports preventive and primary health care services
for low-income women, infants, and children.
The Ryan White HIV/AIDS Program is intended to address the unmet care and treatment needs of
individuals living with HIV or AIDS who lack insurance or resources to pay for core medical
services, including prescription drugs, and related support services. Additional programs focus on
specific health services, such as family planning and early breast and cervical cancer detection, or
specific populations, such as refugees.
26
About half of Medicaid beneficiaries are children (see program fact sheet in Appendix C); however, slightly less
than 19% of Medicaid payments in FY2008 were on behalf of children. Of total FY2008 Medicaid payments, almost
41% were on behalf of disabled beneficiaries; almost 22% on behalf of elderly beneficiaries; and 12% on behalf of
other adults (i.e., low-income parents). (Source: 2010 CMS Statistics, Centers for Medicare and Medicaid Services.) As
noted earlier, the Patient Protection and Affordable Care Act (PPACA, P.L. 111-148) significantly amended Medicaid
to expand eligibility, beginning in FY2014 or sooner at state option, to low-income childless adults. However, this
report discusses programs as they existed in FY2009.
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Cash Aid
Three programs account for the bulk of cash aid spending, and each is among the 10 largest of all
programs for low-income people. SSI, which aims to provide a minimum income for aged, blind,
or disabled individuals with very low income and resources, is the largest and accounted for
slightly more than 40% of cash aid spending in FY2009. The refundable portion of the EITC
accounted for another 33% of cash aid spending, and almost 19% resulted from the refundable
ACTC. The EITC subsidizes the wages of low-income workers, with most benefits going to those
with children. The ACTC is a refundable credit for families whose tax liability is too low for them
to fully benefit from the regular nonrefundable Child Tax Credit.
The cash aid category also includes TANF, the welfare reform program that replaced Aid to
Families with Dependent Children (AFDC) in 1996. As AFDC’s successor, TANF is still
sometimes viewed as traditional “welfare” for poor families; however, the majority of TANF
expenditures are for activities other than cash aid. TANF aims to increase the flexibility of states
in meeting several statutory goals, including assisting needy families so that children can remain
in their homes; ending dependence of needy parents through job preparation, work, and marriage;
preventing and reducing incidence of out-of-wedlock pregnancies; and encouraging the formation
and maintenance of two-parent families. In this report, TANF spending has been allocated among
cash aid, social services, and employment and training, based on states’ reporting of their actual
expenditures. Finally, cash aid programs include pensions for needy elderly or disabled veterans
and their dependents or survivors.
Food Assistance
SNAP (formerly food stamps) dominates spending for food assistance, accounting for about twothirds of obligations in this category and registering as the second largest of all low-income
programs in FY2009. SNAP attempts to alleviate hunger and malnutrition and to help lowincome households purchase food to support a healthy diet. The next largest area of food
assistance spending is for programs that subsidize the costs of breakfast and lunch served to lowincome schoolchildren; these programs aim to support learning readiness, promote healthy eating,
and protect the health and well-being of low-income children. Related programs subsidize the
costs of meals and snacks for children in child care and other out-of-school settings (and some
low-income elderly and disabled adults in adult care settings) and for children during the summer
when they lack access to school-based meal programs.
Food assistance programs also include the Special Supplemental Food Program for Women,
Infants and Children (WIC), which provides supplemental food and nutrition education to lowincome pregnant, postpartum, or breastfeeding women and their infants and young children who
are at nutritional risk. The program seeks to protect children’s health during critical
developmental stages, to prevent health problems, and to improve health status. Food assistance
programs also include congregate and home-delivered meals for the elderly to reduce hunger and
promote socialization and well-being for older individuals, and emergency food assistance in the
form of commodities for individuals defined by their states as needy.
Housing and Development
The federal government supports the housing needs of low-income people primarily by
subsidizing the cost of rental units in the private market. Section 8 housing vouchers and
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project-based rental assistance together accounted for 43% of all housing and development
spending in FY2009. (The voucher component of Section 8 is one of the 10 largest low-income
programs.) The overarching goal of Section 8 is to provide low-income people with decent, safe,
and sanitary housing. Public Housing, which represented 18% of spending in this category in
FY2009, achieves a similar goal by making publicly owned rental units available to low-income
tenants at affordable prices. Federal spending for Public Housing supports the capital needs and
operating costs of publicly owned housing developments, as well as the HOPE VI program,
which demolishes, rehabilitates, and replaces distressed public housing units. Additional housing
programs are intended to expand the supply of supportive housing for low-income elderly and
disabled households, as well as individuals living with AIDS. Homeless Assistance Grants
attempt to meet the needs of homeless individuals and families, including individuals with
disabilities, for basic shelter, short-term and long-term housing, and related support services.
Two block grants—HOME and the Community Development Block Grant (CDBG)—target
federal assistance toward communities with high rates of poverty and aging housing stock
(among other factors) to help meet the housing needs of low-income homeowners, homebuyers,
and renters (HOME) and to expand the community’s supply of decent housing and economic
development activities (CDBG). An additional block grant provides housing assistance and helps
develop private housing finance mechanisms on Indian lands.
To address housing needs in rural areas, loans are available to help low-income households
purchase, build, or renovate homes, and rental subsidies are available for low-income tenants.
Low-interest loans and grants also are available to support new and improved water and waste
disposal facilities in low-income rural communities. Finally, the housing and development
category includes the Public Works and Economic Development program, which provides grants
to distressed communities to help them revitalize, expand, and upgrade their physical
infrastructure to attract new industries, expand businesses, diversify their economies, and
generate job and investment growth.
Certain temporary programs are included in the housing and development category. The
Neighborhood Stabilization Program-1 was established by the Housing and Economic Recovery
Act of 2008 (P.L. 110-289) to assist in rehabilitating abandoned and foreclosed homes for
occupancy by low-income tenants. Obligations under this program occurred in FY2009.27
Likewise, FY2009 spending includes obligations under two temporary programs created by
ARRA as adjuncts to the Low-Income Housing Tax Credit (LIHTC) program. 28 These temporary
programs offered grants to states in lieu of tax credits and provided capital investments for
owners of certain LIHTC-financed properties. They were enacted in response to the financial
crisis, which, along with the departure of several large tax credit investors, made it difficult for
developers to sell their tax credits to raise capital. Finally, ARRA added funds to HUD’s
Homeless Assistance Grants, specifically for a new Homelessness Prevention and Rapid
Re-Housing Program.
27
Congress provided funding for a Neighborhood Stabilization Program-2 under the American Recovery and
Reinvestment Act (P.L. 111-5), with somewhat different rules from NSP-1. No obligations for NSP-2 occurred in
FY2009. See CRS Report RS22919, Community Development Block Grants: Neighborhood Stabilization Program;
Assistance to Communities Affected by Foreclosures, by (name redacted) and (name redacted).
28
The Low-Income Housing Tax Credit itself, which is a nonrefundable credit for the development of affordable
housing, is not included in this report. See CRS Report RS22389, An Introduction to the Design of the Low-Income
Housing Tax Credit, by (name redacted).
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Education
The Federal Pell Grant Program is the single largest education program for people with limited
incomes, accounting for 43% of targeted federal education spending in FY2009. The program is
among the 10 largest in this report. Pell Grants are one of several ways the federal government
helps subsidize the costs of higher education for needy students. Other grant programs with
similar goals include Federal Supplemental Education Opportunity Grants, Federal Work-Study,
and the Academic Competitiveness and Smart Grant programs.29 In addition to direct assistance
to students, the federal government provides institutional aid to help expand the capacity of
colleges and universities that serve high proportions of low-income and minority students.
Federal TRIO Programs offer grants to institutions of higher education and other organizations to
motivate and support disadvantaged students as they move from high school through college. The
GEAR-UP program provides services to low-income children in elementary and secondary
schools who are at risk of dropping out and aims to increase the number of such students who
enter and succeed in higher education.
The second largest education program included in the report (also one of the 10 largest lowincome programs) is Title I-A of the Elementary and Secondary Education Act, which accounted
for more than one-third of targeted federal education spending in FY2009. Title I-A provides
grants to local educational agencies with high concentrations of disadvantaged children and aims
to ensure that all children have an opportunity to obtain a high-quality education and reach at
least minimum proficiency on challenging academic achievement standards. A separate program
has similar goals for children of migrant workers, and the Rural Education Achievement Program
helps rural school districts meet academic achievement standards. The Bureau of Indian
Education operates several programs to meet the educational needs of Indian children living on or
near reservations. Other elementary and secondary education grant programs aim to increase
student achievement through improvements in teacher and principal quality and to improve
teacher knowledge and student performance in mathematics and science.
Literacy is the focus of the Adult Basic Education program, which helps adults to become literate
and obtain the skills necessary for employment and self-sufficiency, and to become partners in
their own children’s educational development. Reading First and Early Reading First also
promoted literacy, focusing specifically on young children, from preschool through grade 3.30
Finally, 21st Century Community Learning Centers are intended to provide a wide range of
remedial education and academic enrichment opportunities during non-school hours for children
in high-poverty and low-performing schools.
Social Services
The social services category is diverse and includes a wide variety of activities to support lowincome or otherwise vulnerable populations. 31 Of spending categorized as social services in this
29
Low-cost loans to help students finance higher education also are provided through the Federal Family Education
Loan and William D. Ford Federal Direct Loan programs. However, these programs are not strongly targeted toward
low-income students and are not included in this report’s analysis. See explanation in Appendix A.
30
These programs had obligations in FY2008 and FY2009; however, no appropriations were made for Early Reading
First in either FY2010 or FY2011, and Reading First received its last appropriation in FY2008.
31
Social services is a loosely defined category. Some of the programs included here could be classified in other
categories; e.g., Head Start could be viewed as education rather than social services. See discussion in Appendix A.
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report, the vast majority—93% in FY2009—is focused directly on children and youth or their
families. Services funded by TANF are the largest single activity in this category, accounting for
almost a quarter of social services spending in this report. As noted in the earlier discussion of
cash aid, TANF is often thought of as traditional welfare for poor families. However, states have
flexibility in spending their TANF grants, and the majority of funds are used for noncash aid,
including a wide variety of social services for families with children. TANF spending in the social
services category also includes obligations under competitive grants for promotion of healthy
marriage and responsible fatherhood.
Head Start is the second largest program in this category, accounting for more than 20% of social
services spending for low-income populations. Head Start aims to promote school readiness for
young children through a full array of educational, health, nutritional, social and other services to
children and their families. The Child Care and Development Fund (CCDF), with 16% of social
services spending in FY2009, subsidizes the cost of child care for low-income parents while they
work or attend school. Additional programs targeted toward children and families include Child
Support Enforcement, which provides services on behalf of custodial parents who are seeking
support for their children from the children’s noncustodial parent. Foster Care grants are used by
states to provide temporary homes for children who cannot remain safely with their families;
Adoption Assistance helps facilitate the adoption of children with special needs as defined by
their state; and the Chafee Foster Care Independence Program helps current and former foster
children transition to a self-sufficient adulthood.
Of social services programs not specifically targeted toward children and families, the Social
Services Block Grant (SSBG) is the largest and most flexible. The program supports a continuum
of services to promote self-sufficiency but decisions about target populations and services are left
to the states. Other social services programs focus on specific target populations. For example,
social services for the elderly are provided under the Older Americans Act; support and advocacy
grants help people with developmental disabilities; and various human services are provided for
American Indians. Programs that focus services at the community level include the Community
Services Block Grant (CSBG), which aims to reduce poverty and empower low-income
individuals and families to become self-sufficient, and Emergency Food and Shelter Grants,
which provide services for homeless and hungry individuals in high-need communities. Finally,
the Legal Services Corporation attempts to ensure equal access to the justice system for people
who are otherwise unable to afford legal counsel.
Energy Assistance
Two programs make up the energy assistance category. The Low-Income Home Energy
Assistance Program (LIHEAP) helps low-income households pay their heating and cooling
expenses, and the Weatherization Assistance Program helps increase the energy efficiency of
homes occupied by low-income people to reduce energy costs and improve health and safety.
Employment and Training
Two programs serving disadvantaged youth comprised almost half of FY2009 employment and
training spending included in this report. Specifically, youth activities under the Workforce
Investment Act (WIA) provide a variety of services to improve the educational and skill
competencies of eligible youth and to develop connections with employers and mentoring
opportunities with adults. Job Corps focuses on those disadvantaged youth who can benefit from
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an intensive residential program to become employable and productive. The employment and
training category also includes work-related services for needy families with children under
TANF, a small employment and training program for recipients of SNAP benefits, and a program
that provides employability and related services to help refugees and other humanitarian entrants
find jobs quickly. Remaining programs include WIA’s adult activities program; Community
Service Employment for Older Americans, which helps older individuals (age 55 or older)
become self-sufficient through community service jobs and training; and Foster Grandparents,
which provides stipends for low-income older individuals to provide services to children with
special needs.
Defining Individual Eligibility for Benefits
and Services
As described above, federal programs for low-income people can be grouped into several major
categories of benefits and services. Key target groups for these benefits and services include the
elderly, individuals with disabilities, and children and families, among others. Within these broad
target populations, there is not necessarily a coherent policy regarding who should receive
assistance, although some themes emerge within categories.
Programs use different concepts to define who is eligible. Many programs use explicit income
eligibility criteria that individuals, families, or households must meet, but the specific levels and
measures of income vary. Some measures are uniform throughout the country; others vary by
geography. Some are adjusted annually for inflation; others are not. In some cases, income
criteria are used to set priorities for who is served but are not necessarily applied to every
participant. Some programs use asset tests in addition to income tests. Many programs have
categorical requirements, such as age or disability, in addition to income criteria; and some use
alternative criteria that allow specified groups or categories of people to qualify automatically
without having to meet an individual income test. Automatic “exclusions” exist under some
programs, so that people who would otherwise qualify based on their income are excluded if they
fall into specified categories. Finally, some programs establish federal parameters for eligibility
but allow states or other entities to set their own income eligibility criteria within these
parameters.
This section of the report discusses the various ways in which individual eligibility is determined.
The section looks at use of the federal poverty guidelines, as well as other measures of economic
need used to define eligibility such as specific dollar amounts, percentages of area or state median
income, and the “need analysis” system used for postsecondary student aid. The section briefly
discusses asset limits, and then turns to nonfinancial or categorical rules. Table 4 summarizes the
various concepts used in determining individual eligibility and Table B-2 in Appendix B shows
the concepts used by specific programs.
It is important to note that being eligible for a program does not necessarily mean that an
individual will receive benefits from that program. While some of the programs included here,
especially some of the larger ones, are entitlements to individuals, which means that all eligible
applicants must receive benefits, most programs are either discretionary (subject to annual
appropriations) or capped entitlements, and eligible individuals are served only to the extent that
funds are available.
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Finally, not all programs require participants to be determined individually eligible. Some target
federal resources toward communities or entities where low-income populations are likely to be
concentrated and do not examine the income, assets, or other characteristics of a particular
individual or family. Such targeting mechanisms are discussed in the next major section of
this report.
Table 4. Concepts Used in Determining Individual Eligibility for Federal Benefits and
Services for Persons with Low Income
Concept
Summary
Financial Conceptsa
Federal poverty guidelinesb
The federal poverty guidelines are a simplified version of the federal poverty thresholds.
The thresholds are used to calculate official poverty statistics, such as the number of
Americans in poverty, and are adjusted for inflation annually by the Census Bureau.
The guidelines are used for administrative purposes, such as determining eligibility for
certain programs. Updated guidelines are published yearly by the Department of
Health and Human Services (HHS). The guidelines vary by family size and are the same
for the 48 contiguous states and DC; separate guidelines apply to Alaska and Hawaii.
Specific dollar limitsb
Specific dollar amounts are used to determine eligibility for medical care and pensions
for needy veterans, SSI, and to phase out benefits under the EITC. (Also see the
discussion later in this report on benefit levels in selected cash programs, including SSI,
EITC, veterans’ pensions, and TANF.)
Median incomeb
The Census Bureau publishes median family incomes for states using three-year data
from the American Community Survey. The Department of Housing and Urban
Development (HUD) uses these data to calculate and annually update median family
incomes for states, and for metropolitan and nonmetropolitan areas within states. The
definition of “area” is that used to determine fair market rents for the Section 8
Housing Choice Voucher program. HUD establishes definitions of “low-income,” “very
low-income,” and “extremely low-income” as percentages of these area median
incomes, and uses these income limits to determine program eligibility.
“Need analysis”b
The need analysis system is used to calculate a postsecondary student’s Expected
Family Contribution (EFC), or the amount a family can be expected to contribute
toward the student’s college costs. Students provide income and asset data used to
calculate the EFC through the Free Application for Federal Student Aid (FAFSA).
Lower Living Standard
Income Levelb
Lower Living Standard Income Levels (LLSILs) are defined in the Workforce
Investment Act as the “income level (adjusted for regional, metropolitan, urban and
rural differences, and family size) determined annually by the Secretary [of Labor]
based on the most recent lower living family budget issued by the Secretary.” The
lower living family budget is no longer issued, but alternative data are used to annually
update the LLSILs.
Assets/resources
Assets or resources commonly counted in programs with asset/resource tests include
either the equity value or the fair market value of property (usually excluding the
primary residence), stocks, bonds, notes, individual retirement accounts, bank
deposits, savings accounts, and cash.
Nonfinancial Concepts
Categorical/behavioral
requirements
In addition to financial eligibility rules, some programs require individuals to be
members of a particular target population group (e.g., above or below a certain age,
disabled, or veterans). Behavioral requirements may include participation in work or
training activities.
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Concept
Automatic eligibility
Summary
Some programs allow automatic eligibility (also referred to as “categorical eligibility”)
for people who have already qualified for another, specified income-tested program, or
if they are a member of a specified target population (e.g., members of a federally
recognized Indian tribe, homeless, refugees).
Source: Prepared by the Congressional Research Service (CRS).
a.
Additional financial concepts, not shown in this table, that are used to determine eligibility include
“countable” income (i.e., the categories of income that are counted in determining whether an individual or
household is below the income eligibility threshold for a particular program), and the “filing unit.” The filing
unit refers to the unit (e.g., individual, family, household) for whom eligibility is determined and whose
income (and resources, if applicable) are counted.
b.
See Appendix D for references to additional information on these concepts and their actual dollar
amounts, where applicable.
Federal Poverty Guidelines
As already stated, programs in this report do not strictly serve the poor. Rather, target populations
are more accurately characterized as people with “low” or “limited” income. Even among
programs that use the federal poverty guidelines as a criterion for determining eligibility, very
few limit participation to individuals or households with income at or below “poverty” as defined
by the federal government. 32 Most programs that use the federal poverty guidelines (FPG) as an
element in defining eligibility use a multiple of poverty, with some programs defining eligibility
as high as 200% or 300% of FPG.
The poverty guidelines trace their origin to a 1963 Social Security Administration study that
based poverty income cutoffs on the amount families needed to spend to meet their basic food
needs (the “Economy Food Plan”) and the relationship between expenditures on food and
expenditures on other items. With food accounting for roughly one-third of low-income budgets
in a 1950s survey of consumption, the poverty cutoffs were set at three times the Economy Food
Plan for a given family size and type. These poverty cutoffs were subsequently adopted by the
Census Bureau for counting the poor, and are also the basis for the HHS poverty guidelines used
for administering programs. They are uniform nationwide (except for Alaska and Hawaii) and are
updated annually for inflation (see Table 4).
Most health care programs that serve people with limited income use FPG as a criterion in
determining eligibility, typically in conjunction with categorical requirements. Mandatory
coverage groups under Medicaid, for example, which has numerous pathways to eligibility,
include different categories of children and families with income ranging from 100% to 185% of
FPG. Optional coverage groups (which states may serve at their discretion) include additional
categories, including certain elderly and disabled individuals, with income as high as 250% of
FPG. The CHIP program serves children with family income above Medicaid eligibility levels, at
32
For a detailed discussion of the federal poverty guidelines, and the federal poverty thresholds on which they are
based, see CRS Report R41187, Poverty Measurement in the United States: History, Current Practice, and Proposed
Changes, by (name redacted). Also see
Frequently Asked Questions Related to the Poverty Guidelines and Poverty:
http://aspe.hhs.gov/poverty/faq.shtml#differences, and additional references in Appendix D.
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income thresholds established by states with federal approval. (As of January 2009, the highest
reported income standard was 350% of FPG, in New Jersey. 33)
Medicare beneficiaries are eligible for the low-income prescription drug subsidy under Part D if
their income is no higher than 150% of FPG, although the deepest subsidy goes to those below
135% of poverty. Remaining health programs that use FPG either give priority to people below
100% of poverty (Family Planning and the Maternal and Child Health block grant), or provide
services free of charge to those below 100% but allow higher-income participants on a sliding fee
scale basis (up to 200% of FPG under Consolidated Health Centers and 250% for Breast and
Cervical Cancer Early Detection).
Cash aid, housing and development, and education programs generally do not use the poverty
guidelines in determining eligibility. An exception is the TRIO programs for certain low-income
postsecondary students, which cap income eligibility at 150% of FPG. TANF eligibility
thresholds are established by states and are well below the federal poverty guidelines in
most states.34
Food assistance programs typically use multiples of the federal poverty guidelines in determining
eligibility, but they also provide automatic eligibility to categorical groups. The SNAP program
generally serves those with gross income up to 130% of poverty. Child nutrition programs serve
meals free to children with family income up to 130% of poverty, and at a reduced price to
children with family income up to 185%. The WIC program caps eligibility at 185% of poverty.
The nutrition program authorized by the Older Americans Act gives priority to certain groups,
including seniors with the greatest economic need, defined as 100% of poverty.
In the social services category, CSBG and Head Start use 100% of the federal poverty guidelines
as their income eligibility limit, but they both provide flexibility to states (in the case of CSBG)
or grantees (for Head Start) in adjusting this limit upwards.35 Likewise, the Legal Services
Corporation sets eligibility at 125% of FPG, but allows it to be increased up to 200% in certain
circumstances. The SSBG has no federal income eligibility limit except for services funded by
TANF grants that are transferred to the SSBG, which may only be used for families with income
below 200% of FPG. Like the elderly nutrition program mentioned above, the Older Americans
Act grant programs for supportive services and senior centers and for family caregivers give
priority to seniors with income below 100% of poverty.
LIHEAP uses 150% of poverty as its income eligibility limit, or 60% of state median income, if
higher. Weatherization formerly used 150% of FPG to define income eligibility, but effective in
FY2009, this was increased to 200%. Both weatherization and LIHEAP allow automatic
eligibility for those eligible for certain other programs.
Employment and training programs for people with limited income use the federal poverty
guidelines as one of several eligibility criteria, which include other measures of low income as
well as categorical groups. Job Corps limits eligibility to those with income no higher than 100%
33
See Table 1 in CRS Report R40444, State Children’s Health Insurance Program (CHIP): A Brief Overview, by
(name redacted) and (name redacted).
34
See Table 4 in CRS Report RL32760, The Temporary Assistance for Needy Families (TANF) Block Grant:
Responses to Frequently Asked Questions, by (name redacted).
35
The CSBG Act allows states to increase eligibility to 125% of FPG; ARRA (P.L. 111-5) temporarily allowed states
to increase eligibility to 200% of FPG during FY2009 and FY2010.
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of FPG; however, certain groups qualify automatically. Youth activities under WIA set eligibility
at 100% of FPG, or 70% of the lower living standard income level (described below), if higher.
The same criteria are used to give priority for certain adult activities under WIA. Both adult and
youth activities under WIA also allow automatic eligibility for specified groups. Community
Service Employment for Older Americans and Foster Grandparents (as in effect in FY2009) both
limit eligibility to those with income no higher than 125% of poverty.36
Other Income Measures
Three alternative measures of income are most commonly used to define eligibility for programs
that have individual income eligibility criteria but do not use the federal poverty guidelines.
These measures are used primarily, but not exclusively, in three categories of federal benefits and
services. Specifically, most cash assistance programs set an actual dollar amount that determines
who is eligible; housing and development programs typically use a percentage of area median
income; and student financial assistance programs use a relative concept of need that considers
both available family resources and the actual cost of education. A fourth alternative measure is
the lower living standard income level, which is used in conjunction with the poverty guidelines
in certain employment and training programs.
Specific Dollar Amounts
In the cash assistance category, specific dollar amounts are used to determine eligibility (and
benefit levels) for pensions for needy veterans; the same concept is used in the health care
category to determine eligibility for free medical care for needy veterans. Specific dollar amounts
also are used to determine eligibility and benefit levels under SSI, and to determine when EITC
benefits begin to phase out.37 Veterans’ benefits, SSI, and EITC are generally adjusted each year
for price inflation. Veterans’ benefits and SSI adjustments are tied to Social Security cost-ofliving adjustments (COLAs); and EITC is adjusted for price changes through indexing to the
Consumer Price Index.38
As noted previously, under TANF, states set their own dollar limits to define who is eligible to
participate. (See Appendix D for references to further information about the current VA income
thresholds, SSI eligibility limits, and EITC phase-out limits.)
Median Income
Housing and development programs typically use the concept of area median income, with
various percentages of local area median income used to define “low-income,” “very lowincome” and “extremely low-income.” These income limits are then used to determine program
36
Effective in FY2010, the Serve America Act (P.L. 111-13) amended the Foster Grandparent program to increase the
income eligibility limit from 125% to 200% of the federal poverty guidelines.
37
As noted earlier, unlike the EITC, the Additional Child Tax Credit (ACTC) does not begin to phase out at specified
income levels. However, as a family’s income goes up, it may incur tax liability and become eligible for the regular
nonrefundable Child Tax Credit instead of the refundable ACTC.
38
The income threshold above which families are eligible for the ACTC also is indexed for inflation; however, this has
the effect of reducing (rather than increasing) the amount of the credit available to families with a given income level.
The size of the credit itself is not indexed.
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eligibility. For example, Section 8 Housing Choice Vouchers serve “very low-income” families,
defined as those with income no higher than 50% of the area median. However, 75% of the
Section 8 vouchers that become available each year must go to “extremely low-income” people,
defined as those with income no higher than 30% of area median. Under limited circumstances,
vouchers may go to “low-income” households, with income up to 80% of area median. Similarly,
Public Housing serves low-income families (80% of area median) but at least 40% of units that
become available each year must go to extremely low-income families (30% of area median).
Supportive housing programs for the elderly and disabled limit eligibility to households with
income no higher than 50% of area median, while Housing Opportunities for Persons with AIDS
(HOPWA) and Indian Housing Block Grants serve people with income up to 80% of area median.
The single-family rural housing loan program makes guaranteed loans available to households
with income as high as 115% of area median, while direct loans are limited to those with income
no higher than 80% of area median. (See Appendix D for references to further information about
area median family incomes published by the Department of Housing and Urban Development.)
Few non-housing programs use the median income concept. Exceptions are the Child Care and
Development Fund (CCDF) and LIHEAP, which both use state median income as a component of
their eligibility criteria. CCDF allows states to define their own income eligibility limits within
the federal maximum of 85% of state median income, and LIHEAP, as noted earlier, uses 60% of
state median income as an alternative measure of low income, if higher than 150% of the federal
poverty guidelines.
“Need Analysis”
There is no absolute income threshold for certain postsecondary student aid programs. As noted
above, these programs use a relative concept to determine the amount of aid a student is eligible
to receive. Applicants provide information about family income and assets through completion of
the Free Application for Federal Student Assistance (FAFSA). This information is then used to
determine the Expected Family Contribution (EFC), or the amount the student’s family is
expected to contribute toward the student’s education. Different EFC formulas are applied to
three different groups of students: those considered dependent on their parents; independent
students with no dependents other than a spouse; and independent students with dependents other
than a spouse. The federal need analysis methodology is used for Pell Grants and several smaller
higher education programs such as Supplemental Educational Opportunity Grants, Federal WorkStudy, and Academic Competiveness and Smart Grants.39 Aid is capped under the Pell Grant
program, so that higher income students are likely to receive smaller awards and the majority of
students who receive Pell grants are low-income. 40 (See Appendix D for references to additional
information on the need analysis system.)
Lower Living Standard Income Level
Employment and training programs for adults and youth under WIA, as discussed earlier, use the
lower living standard income level (LLSIL) as one component in eligibility determinations. The
39
The need analysis system also is used for federal student loan programs, which are not included in this report’s
analysis. Under the student loan programs, the need analysis system can result in aid going to students from relatively
well-off families, especially if they attend particularly expensive schools.
40
In FY2008, an estimated 62% of dependent Pell Grant recipients had total family income at or below $30,000 and an
estimated 83% of independent Pell Grant recipients had total income at or below $30,000.
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LLSIL has its origins in a series of family budgets developed by the Department of Labor’s
Bureau of Labor Statistics (BLS). In 1967, BLS published estimates for family budgets at three
standards of living—lower, intermediate, and higher—based on a list of goods and services
needed to achieve those standards of living and their prices. These budgets were last fully priced
in 1969. They were subsequently updated by summary components of the Consumer Price Index
(CPI) through 1981, when the BLS family budget series was discontinued.41 Since 1981, the
LLSIL has been updated annually based on overall changes in the CPI-U. (See Appendix D for
references to further information about the current LLSILs.)
Under WIA, individuals are determined eligible (or, in the case of certain adult activities, receive
priority) if their income is at or below 100% of the federal poverty guidelines, or 70% of the
LLSIL, whichever is higher. Unlike the federal poverty guidelines, the LLSIL vary by region and
by metropolitan and non-metropolitan areas.
Treatment of Income
As illustrated in the discussion above, measures of income used to determine eligibility vary
widely among federal programs. It is important to note that definitions of countable income also
vary. Some programs have explicit rules for counting income while many do not. A full
discussion of the treatment of income is beyond the scope of this report; however, readers should
know there may be differences between programs, so that income counted in determining
eligibility for one program might not be counted in another, even though the programs might
appear to use similar eligibility criteria.
Wages are typically counted as income, although some programs disregard a portion of earned
income as an incentive for aid recipients to work. Programs differ as to whether they count Social
Security and retirement income, public or private disability insurance, other work-related benefits
such as Unemployment Compensation and Workers’ Compensation, and investment income such
as interest and dividends. Benefits provided under means-tested programs often—but not
always—are excluded from the definition of income when determining eligibility for another
means-tested program. Programs vary as to whether they count the income of the individual
applicant, or also the income of a spouse, children, or other household members; in other words,
the definition of “filing unit” varies among programs. Income can be looked at before tax, or after
tax; on a monthly or an annual basis. Finally, some programs specify allowable deductions from
countable income.
Moreover, income (and assets, as discussed below) used to determine eligibility for a particular
program might be evaluated differently when determining benefit levels under that program.
Individuals with the same amount of countable income or assets might qualify for different levels
of benefits, because of the program’s specific calculation rules. This section of the report has
focused primarily on eligibility rules; benefit determinations are discussed briefly in a
later section.
41
For a history of BLS family budgets, see David S. Johnson, John M. Rogers, and Lucilla Tan, “A century of family
budgets in the United States,” Monthly Labor Review, May 2001, pp. 28-45.
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Asset/Resource Limits
In addition to income eligibility rules, some programs use explicit asset or resource tests to limit
eligibility. In other words, applicants may not have assets (e.g., cars, bank accounts; see Table 4)
valued above a certain level to be eligible for a particular program. As with income eligibility
rules, the amount of assets or resources that are subject to limits varies widely among programs.
Likewise, programs define countable assets differently, although typically they are limited to
liquid assets. Many exclude the value of a primary residence and personal belongings, and some
overlook all or part of the value of a car.
Within the health care category, asset tests apply for the VA medical care program and the lowincome subsidy under Part D of Medicare. Under CHIP, states have the option of applying an
asset test, although few states currently do, and Medicaid is required to use an asset test only for
certain categories of beneficiaries that are age 65 or older, have disabilities, and/or have high
medical expenses.
In the cash assistance category, asset rules apply to pensions for needy veterans and to the SSI
program. States also may choose to apply asset tests in their TANF programs, and the majority of
states currently do. SNAP is the only food assistance program with an explicit resource test,
although it is not applied to households that are automatically eligible because they have already
received benefits or services under another means-tested program. While housing programs do
not have asset tests, several impute a certain amount of income from assets. These include singlefamily rural housing loans, supportive housing for the elderly and persons with disabilities, and
Section 8 vouchers and project-based rental assistance. Higher education programs that use the
“need analysis” system consider assets along with income and the cost of school attendance to
determine how much financial aid a student may receive.
Programs that were historically linked to the former AFDC program, including Foster Care and
Adoption Assistance, still have remnants of the AFDC assets test. And, Legal Services
Corporation grantees are required to establish “reasonable” asset limits for eligible individuals
and households.
Categorical and Behavioral Requirements and Exclusions
For many programs, categorical requirements apply in addition to financial eligibility rules, so
that an applicant must be both income-eligible and a member of the program’s target population.
While some programs are intended to help people in general below a certain income level, most
are targeted on specific segments of the low-income population. As noted previously, key target
populations for low-income programs, including many of the largest included here, are the elderly
and individuals with disabilities, and dependent children and their families. Other target groups
for selected programs include veterans, students, people who are homeless, Indians, and refugees,
among others.
Some programs also impose behavioral requirements as a condition of eligibility. For example,
recipients of TANF cash assistance must comply with work and training requirements and
cooperate with child support enforcement efforts; student aid recipients must generally maintain
good academic standing; and certain Public Housing residents must participate in a selfsufficiency program or engage in community service. Able-bodied adults without dependent
children must comply with work and training requirements to receive SNAP benefits for more
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than a limited time, and the EITC and ACTC go only to workers with earnings and their families.
To receive CCDF-funded child care, parents must be working or in training, in addition to
meeting income eligibility criteria.
Certain behaviors or characteristics automatically exclude individuals from participating in some
programs. For example, postsecondary students, households with members on strike (unless they
were eligible before the strike), or people living in institutions are automatically disqualified from
SNAP, even if they otherwise meet eligibility rules. Federal law bars individuals who are fleeing
arrest or have been convicted of a drug-related felony from participation in SNAP and TANF, and
individuals fleeing prosecution or confinement for a felony also are disqualified from SSI. TANF
further allows states to test cash aid applicants and recipients for substance abuse and to sanction
those who fail. Federal housing law prohibits individuals who have been convicted of producing
methamphetamine on federally-assisted housing property or who are subject to lifetime
registration on a state sex offender registry from admission to Public Housing or receipt of
Section 8 vouchers. Public housing authorities have the discretion to adopt additional criteria,
barring admission to households on the basis of such factors as other criminal convictions, poor
credit histories, poor rental histories, or other criteria set by the PHA.
A Note About Noncitizens
Treatment of noncitizens under federal programs serving low-income populations is a complex
topic that is beyond the scope of this report.42 Federal policy in this area is found in the various
programs’ authorizing statutes, but also in overarching provisions enacted in the 1996 welfare
reform (P.L. 104-193) and immigration reform (P.L. 104-208) laws, as subsequently amended, as
well as policy interpretations by executive branch agencies. Eligibility of noncitizens varies
across and within programs and often depends on the noncitizens’ immigration status, when they
arrived in the U.S., how long they have lived here legally, their work history and military
connection, and policies in the state where they live. Aliens living in the U.S. without legal
authorization are generally barred from access to most federal benefits.
Automatic Eligibility
As distinct from categorical or behavioral requirements that apply in addition to income
eligibility rules, a concept of “automatic eligibility” is sometimes used as an alternative to
individual income eligibility.43 If someone meets the eligibility criteria for one program, that
person is automatically deemed eligible for another program, simplifying the process for both the
applicant and the administering agency. In some programs, people are automatically determined
eligible because they fit a particular demographic group or have a particular characteristic.
42
See CRS Report RL33809, Noncitizen Eligibility for Federal Public Assistance: Policy Overview and Trends, by
(name redacted), CRS Report RS21470, Noncitizen Eligibility For Major Federal Public Assistance Programs:
Legal Concepts, by (name redacted), CRS Report RL31753, Immigration: Noncitizen Eligibility for Needs-Based
Housing Programs, by (name redacted) and (name redacted), and CRS Report RL34500,Unauthorized Aliens’ Access to
Federal Benefits: Policy and Issues, by (name redacted).
43
Provisions that make certain categories of people automatically eligible for a program are also referred to as
“categorical eligibility” criteria. However, the term “automatic eligibility” is used here, to avoid confusion between
these provisions and categorical requirements described earlier that apply in addition to financial eligibility rules.
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Among health care programs, Medicaid, the low-income subsidy under Medicare Part D, and
services for refugees allow some degree of automatic eligibility. For example, SSI recipients are
one of several groups that automatically qualify for Medicaid; SSI and Medicaid recipients are
automatically eligible for the Part D subsidy; and unaccompanied minor children are
automatically eligible for transitional medical services for refugees.
Cash assistance programs typically do not allow automatic eligibility for specified groups, while
almost all food assistance programs do. TANF and SSI recipients automatically qualify for
SNAP; TANF and SNAP recipients are automatically eligible for child nutrition programs; and
TANF, SNAP and Medicaid recipients are automatically eligible for WIC, if they also are at
nutritional risk. Head Start children, residents of emergency shelters, and runaway and homeless
youth are examples of other groups that automatically qualify for some nutrition programs.
Most housing and development programs that have individual income eligibility criteria do not
allow automatic eligibility for particular groups as an alternative. Homeless Assistance Grants,
however, base eligibility on a person’s residential status rather than their income, and Indian
Housing Block Grants allow certain non-low-income households to receive assistance if they
meet other criteria related to their need for housing.
In the education category, the Pell Grant program allows certain postsecondary students—
dependent students and independent students with dependents other than a spouse—to qualify for
an automatic zero EFC (expected family contribution). This means they would receive the
maximum Pell Grant award if they enroll full-time at a school where the cost of attendance equals
or exceeds the maximum award. In general, to qualify for the automatic zero EFC, these students
must have received means-tested benefits from other federal programs or had been eligible to file
certain federal income tax returns, or had been a dislocated worker. However, parents or students
also must have family income levels at or below certain annual thresholds ($30,000 in award year
2010-2011), to qualify. Children of deceased Iraq/Afghanistan service members also may qualify
for an automatic zero EFC. One of the benefits of qualifying for an automatic zero EFC is that it
greatly reduces the response burden associated with completing financial aid forms.
With the exception of postsecondary student aid, education programs typically do not require
individuals to be determined income-eligible for assistance; rather, they target assistance toward
areas or entities where low-income students are likely to be served (such targeting mechanisms
are discussed later in the report). However, certain education programs use alternative criteria to
identify eligible participants. For example, Adult Basic Education serves adults who lack basic
skills or credentials; the Title I Migrant Education Program serves the children of migrant
workers; and Education for Homeless Children and Youth bases eligibility on children’s living
situations. GEAR-UP serves students determined to be at risk of dropping out, and Reading First
and Early Reading First based eligibility on a child’s reading proficiency. Indian education
programs generally serve children who are members of federally recognized tribes.
Among social services programs, Child Support Enforcement automatically serves families
receiving TANF, foster care payments, or who are eligible for Medicaid. Children receiving
public assistance, foster children, and homeless children automatically qualify for Head Start,
along with a limited number of non-low-income children if they meet other criteria related to
their likelihood to benefit from the program. Individuals with developmental disabilities are
eligible for services under Developmental Disabilities Basic Support and Advocacy Grants,
regardless of their individual income status. Likewise, older foster children and former foster
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children may participate in the Chafee Foster Care Independence Program, without meeting
individual income eligibility criteria.
Both energy programs included in the report allow automatic eligibility for TANF and SSI
recipients. Weatherization also allows states to make LIHEAP recipients automatically eligible,
and LIHEAP provides automatic eligibility for beneficiaries of SNAP and certain veterans
benefits. Finally, in the employment and training category, public assistance recipients, homeless
youth, and certain foster youth automatically qualify for WIA youth activities and Job Corps.
And, the WIA adult program gives priority for certain services to adults considered low-income,
which may include those who receive public assistance or are homeless.
Targeting Federal Resources According to Need
The previous section looked at the ways in which programs define individual eligibility for
federal benefits and services for low-income people. In most programs, the process of
determining individual eligibility and delivering benefits and services is done through entities
such as states, local governments, or private organizations. Federal funds are often provided to
these entities via mechanisms that target areas with the greatest need or concentration of eligible
individuals. These targeting provisions also may compensate for variation in fiscal capacity at the
state and local level.
This section looks at three primary concepts used to target federal resources: allocation formulas
that distribute funding to states or other areas based, at least in part, on factors related to need;
cost-sharing rules that vary the federal share of total program costs by a measure of need; and
provisions that limit federal funds only to certain institutions or jurisdictions that serve lowincome people. As with individual eligibility rules, specific targeting provisions vary widely, even
within the same general concept. Moreover, some programs use a combination of these concepts;
in other words, federal funds might be allocated to states according to factors related to the target
population, but the federal share of the program’s costs might also be determined by a measure of
need. Table 5 provides a summary of these targeting concepts, and Table B-2 in Appendix B
shows use of the concepts by program.
There is considerable overlap between programs that impose individual eligibility criteria (those
discussed in the previous section) and those that also target federal resources by a measure of
need. In other words, programs may use targeting mechanisms to distribute federal funds, but
individuals still must be determined income-eligible for the program. Some programs, however,
rely on broad targeting mechanisms only, and do not require participants or beneficiaries to meet
an individual eligibility test.
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Table 5. Concepts Used in Targeting Federal Resources According to Need
Concept
Summary
Formula allocation factors
Need-related factors (e.g., number of low-income
children) are included in allocation formulas so that a
greater share of federal funds are provided to areas with
relatively greater need.
Cost-sharing rules
Matching rates or other provisions reflect a measure of
need in determining the federal share of total program
costs.
Limited eligibility for areas or entities
Funding is provided only to areas or entities that meet
some criteria related to need (e.g., schools with a high
proportion of low-income students).
Source: Prepared by the Congressional Research Service (CRS).
Formula Allocation Factors
Federal grant programs, especially those targeted toward a particular population, frequently use
formulas to allocate funding among states or, sometimes, local governments or other entities.
Many programs in this report are formula grants (as compared with competitive or discretionary
awards, or direct benefits to individuals), and use population-based allocation factors as a way to
direct resources toward areas with large concentrations of the program’s target group. Programs
that allocate funding in this way usually have a cap on total federal spending, so that allocation
factors determine each jurisdiction’s relative share of the total amount available.
While programs for low-income people often allocate funds in part on a measure of economic
need (e.g., population with income at or below the poverty guidelines), not all formula factors are
need-based. Some programs base allocations in whole or in part on historic spending patterns,
which may reflect a wide variety of factors; if current population-based formulas were applied to
these programs, the distribution of resources might change significantly. Moreover, “holdharmless” provisions, small-state minimums, and “ceilings” and “floors” are often used to
mitigate large changes in a particular jurisdiction’s formula-based allotment from one year to the
next.44 The specific data sources to be used also are significant and sometimes are specified in
statute.45
The following provides an overview of the types of allocation factors used in low-income
programs, but does not constitute a complete explanation of any particular formula, nor does it
discuss the effectiveness or efficiency of these allocation factors in actually directing resources
toward areas with the greatest need.
In the health care category, the CHIP program for low-income children without health insurance
currently (effective FY2009) allocates funds among states according to past and projected
44
These mitigating factors are generally not addressed in the discussion below; however, they can significantly affect
the distribution of formula allocations.
45
In allocating funds according to a measure of population, federal agencies typically use the decennial Census or
related surveys. For a discussion of the use of Census data in formula grant programs, see U.S. Government
Accountability Office, Formula Grants: Funding for the Largest Federal Assistance Programs is Based on CensusRelated Data and Other Factors, GAO-10-263, December 2009: http://www.gao.gov/new.items/d10263.pdf.
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spending. Previously, however, CHIP allocated funds among states, in part, using two relevant
population factors: the number of low-income children in the state and the number of such
children without health insurance. The Ryan White program for low-income people with HIV or
AIDS allocates funds to metropolitan areas and states based on relative population size and
incidence of AIDS cases, but does not use an income factor. The Maternal and Child Health block
grant allocates funds according to states’ relative shares of funding under predecessor programs,
and according to their population of low-income children.
TANF block grants are allocated among states according to their historic spending under the
predecessor AFDC program, so that states with higher expenditures under AFDC get relatively
larger grants under TANF. Among food assistance programs, WIC uses a formula that reflects
actual food and caseload costs, and the Commodity Supplemental Food Program allocates
resources according to caseload, based on past participation. The Emergency Food Assistance
Program (TEFAP) allocates resources based on the number of poor people in each state, in
combination with the number of unemployed persons. Nutrition for the elderly under the Older
Americans Act allocates funds among states based on the population age 60 and older, with no
income factor.
Most housing and development programs use a need-based formula to allocate funds, but the
formulas vary widely. Rural programs use such factors as state shares of rural population, rural
poverty, overcrowded housing or housing units without plumbing, and unemployment. Housing
programs for the elderly and people with disabilities use measures of elderly or disabled
individuals, in addition to housing factors. Community Development Block Grants go to eligible
communities and states based on poverty, population, overcrowded housing, age of housing, and
slow population growth; somewhat similar factors are used for Emergency Shelter Grants and
Indian Housing Block Grants. The HOME program uses the number of older housing units
occupied by low-income households and number of poor families. The temporary Neighborhood
Stabilization Program-1 allocated funds to states and local governments on the basis of home
foreclosures, subprime mortgages, and homes in default or delinquency.
In the case of Section 8 Housing Choice Vouchers, Congress establishes a formula, typically in
annual appropriations laws, for allocating funding among public housing authorities to renew
their existing vouchers. The formula is usually based on some measure of the utilization and cost
of vouchers in the local area. However, the geographic distribution of vouchers that are renewed
each year is a function of historic patterns and may not necessarily reflect the current distribution
of the eligible population. Likewise, operating and capital funds for Public Housing are allocated
by formula, but the distribution of public housing units that receive these funds is a reflection of
decisions made by local communities to participate in the program in its earlier days.
Many education programs are designed as formula grants and rely in some way on counts of poor
children. Title I-A of ESEA distributes funds to local educational agencies according to four
separate formulas that consider such factors as number of school-aged children in poverty and
average per-pupil expenditures in the state. Areas with high concentrations of poverty receive
additional weighting under two of the four formulas. Aggregate state allocations under Title I-A
in turn determine state shares under other ESEA programs, including Education for Homeless
Children and Youth and 21st Century Community Learning Centers. The number of school-aged
children in poverty also is an allocation factor for Reading First, Math/Science Partnerships, and
Improving Teacher Quality Grants.
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Certain education programs use allocation factors related to the target population, but not
explicitly tied to income. The Migrant Education Program (under Title I of ESEA) allocates funds
according to the number of eligible migrant children and state average per pupil expenditures, and
Adult Basic Education bases allocations on the number of individuals age 16 or older who have
not completed high school. Federal Supplemental Educational Opportunity Grants and the
Federal Work-Study Program both allocate funds to participating institutions of higher education,
based on the aggregate “need” of their students, as indicated through the need analysis system
discussed earlier.
Most social services programs allocate funds by formulas, which often include a poverty-related
allocation factor. Components of the CCDF are distributed through several formulas, which use
such factors as a state’s relative share of children under age 5, children who receive free or
reduced-price school meals (a proxy for low-income children), and children under age 13, as well
as state per capita income and historic funding patterns. Head Start allocates funds among states
(from which awards are made to local grantees) according to several factors, including poor
children under age 5. The Legal Services Corporation allocates funds according to each state’s
poverty population.
As with a number of the education programs discussed above, some social services programs use
allocation factors tied to their target population but not explicitly to their income. The Older
Americans Act allocates funds for supportive services and senior centers according to each state’s
relative share of population aged 60-plus, and for the family caregiver program according to
population aged 70-plus. The Chafee Foster Care Independence Program bases allocations on
each state’s number of foster children; the Emergency Food and Shelter Program allocates funds
to local jurisdictions based on their number of unemployed persons; and SSBG allocates funds
according to total state population. CSBG allocates funds based on historic funding patterns; the
total amount received in 1981 by local antipoverty agencies in each state, under a now-defunct
provision of the Economic Opportunity Act, determines the state’s allotment of CSBG
funds today.
Weatherization funds go to states based on a combination of factors, including low-income
population, climate conditions, and residential energy expenditures by low-income households.
LIHEAP uses a particularly complex formula, which, among other things, includes total
residential energy consumption, temperature variation, and low-income heating and
cooling consumption.
Finally, among employment and training programs, Community Service Employment for Older
Americans gives states an amount based on historic funding, and then allocates funds according
to state shares of the nation’s population age 55-plus and state per capita income. WIA funds go
to states based on their shares of “substantial” unemployment (unemployment rate of at least
6.5%), “excess” unemployment (rate above 4.5%), and the “disadvantaged” population
(disadvantaged adults for the WIA adult activities program, and disadvantaged youth for the
youth program). Funding for employability services for refugees (referred to as “social services
and targeted assistance”) are allocated according to the number of refugees, asylees, and other
humanitarian cases that entered a state during the previous 36 months.
Cost-Sharing Rules
Under certain programs, the federal government pays a larger share of total costs depending on
the income level or concentration of poverty in the state or community to be served. This
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increased federal share can happen through use of a federal matching rate that is tied to income or
another measure of need, or through special provisions that raise the matching rate or federal
share under specified circumstances. Relatively few programs use need-related cost-sharing
mechanisms; however, these programs include Medicaid which, as noted previously, is the single
largest program included in this report.46
As discussed earlier, Medicaid is a federal-state partnership, in which the federal government and
states share the costs of providing health care services to eligible beneficiaries, with no
predetermined cap on federal spending. The federal government’s share of expenditures for most
Medicaid services is called the federal medical assistance percentage (FMAP). Generally
determined annually, the FMAP varies by state and is inversely related to state per capita income,
so the federal government pays a larger portion of Medicaid costs in lower-income states and a
smaller portion in higher-income states. For expenditures in FY2009 (and extended through June
2011 by subsequent legislation), ARRA (the economic stimulus legislation) authorized increased
FMAPs for states.47 Most Medicaid administrative expenditures are matched at a uniform 50%
rate.
The CHIP program uses an enhanced FMAP (E-FMAP) to determine the federal share of program
funding, which is more generous than the regular FMAPs used under Medicaid. CHIP is a capped
entitlement program and, as discussed earlier, allotments to states are based on past and projected
spending, among other factors. Because CHIP is a federal-state matching program, states must
spend a portion of their own money, determined through use of the E-FMAP, to receive their full
formula-determined allocation of federal funds.
In the social services category, the Medicaid FMAP is used to calculate the federal matching rate
for certain child care funds under the CCDF, and for expenditures on maintenance payments and
adoption assistance payments in the Foster Care and Adoption Assistance programs.
The rural Water and Waste Disposal program varies the amount of federal support provided by the
income level of the community served. The lowest interest rates are provided to projects in
communities where median household income is no higher than 80% of state nonurban median
income or the poverty guidelines. In addition, federal resources may cover up to 75% of costs in
such communities, but no more than 45% of costs in communities where income is higher. Under
the Public Works and Economic Development program, the usual 50% federal share of program
costs may be increased up to 80%, depending on the relative needs of the area where a project is
located, and may reach 100% for grantees that have exhausted their borrowing and/or taxing
capacity.
In the education category, the 21st Century Community Learning Center program allows states to
require local grantees to match federal funds; however, the match is adjusted based on the relative
poverty of the grantee’s target population. The developmental disabilities program requires a
nonfederal match of 25%, which may be reduced to as low as 10% for projects conducted in
poverty areas.
46
Readers should note that some programs require participants to share in the cost of services, for example, through
copayments for medical services or meal payments for subsidized school breakfasts and lunches. While these are a
form of cost-sharing, this section primarily discusses provisions that establish need-related cost-sharing rules between
units of government (e.g., federal and state/local).
47
FMAP rules and calculations are very complex. See CRS Report RL32950, Medicaid: The Federal Medical
Assistance Percentage (FMAP), by (name redacted).
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Limited Eligibility for Areas or Entities
As discussed previously, many programs for low-income people require individual participants or
beneficiaries to meet a need-related eligibility test. Some programs also (or instead) require the
geographic area or participating entity to meet an income or need-related test, which is the third
general concept used to target federal resources toward low-income populations. Under this
approach, funding is not necessarily distributed nationwide, but only to areas or entities meeting
specified criteria. The approach is not used widely, but the following provides examples.
Consolidated Health Centers assist people who are “medically underserved,” defined to mean
they live in an area designated by the federal government as having a shortage of personal health
services. In designating such an area, economic factors such as the area’s poverty population may
be considered.
Although TANF block grants go to all states, TANF contingency funds are available only to states
that meet a test of “economic need,” based on either unemployment rates or food stamp (SNAP)
caseloads. TANF supplemental grants go to states that meet criteria related to high population
growth and/or low historic spending for welfare.
A few housing and development programs limit eligibility to communities or areas based on need.
For example, Water and Waste Disposal grants and loans only go to communities that are unable
to finance their projects through other means. To receive funding under the Public Works and
Economic Development program, projects must be located in areas with either low per capita
income (at or below 80% of the national average), high unemployment (above the national
average for the most recent 24 months), or a special need arising from severe unemployment or
changes in economic conditions.
Education programs that target resources in this way include Institutional Aid for higher
education; eligible institutions must have high proportions of students receiving need-based
assistance or Pell Grants, or be minority-serving institutions. Funding goes to states by formula
under the 21st Century Community Learning Center program but must be used to serve children
attending high-poverty schools. Similarly, certain formula grants to states under the Rural
Education Achievement Program must go to local educational agencies where at least 20% of
children are poor. To be eligible for GEAR-UP grants, partnerships must include a low-income
middle school.
Finally, in the social services category, eligible jurisdictions in the Emergency Food and Shelter
Grant program are chosen by measures of population, unemployment, and poverty.
Types of Federal Grants and Grantees
As discussed in the previous section, federal benefits and services are frequently structured as
nationwide grant programs, in which federal funds are provided to specified jurisdictions
according to some type of formula; government agencies or other entities within these
jurisdictions deliver the benefits and services to eligible individuals. Some programs are
structured as competitive or discretionary grants, leaving decisions about specific grantees and
award amounts to the federal administering agency, within parameters set forth in law. Certain
federal benefits are provided to eligible individuals directly.
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This section looks at the three primary forms of federal assistance for low-income people—
formula-based grants, competitive or discretionary awards, and direct benefits—and the
immediate recipients of these funds (see Table B-3 in Appendix B). It also discusses matching
and related requirements for state or local spending, and briefly examines policies affecting
participation of Indian tribes and U.S. territories.
Formula-Based Grants
Most programs for low-income people allocate funds nationwide, dividing federal resources
among jurisdictions according to a formula based on specified factors (e.g., number of children
with family income below the poverty guidelines). Formula-based grants also include those that
use cost-sharing formulas to determine the amount of federal funds a jurisdiction will receive
(such as the Medicaid FMAP, described above, which determines the amount of state
expenditures that the federal government will reimburse). Formulas are most often used to
determine funding levels for states (as opposed to localities), and state governments or specified
state agencies are typically the recipients of the funds. However, some programs distribute funds
by formula at the local level. Moreover, programs that award formula funds to states sometimes
require the states to pass through a portion (or all) of the funding to local entities, either using a
substate formula specified in law or at the state’s discretion. And, some programs award funds
directly to local agencies, but use a state-level formula to determine the aggregate amount that
grantees in the state may receive.
In the health care category, Medicaid makes payments to states based on their eligible
expenditures and the applicable federal matching rate. CHIP, the Maternal and Child Health block
grant, and Transitional Cash and Medical Services for refugees all use formulas to allocate and
award funds to states. The Ryan White program for low-income people with HIV or AIDS
allocates and awards funds by formula both to states and to eligible localities.
Cash aid is the only major category that does not rely significantly on formula grants. TANF
operates as a formula grant to states, but all other cash programs award benefits directly to
eligible individuals. Most food assistance programs operate as formula grants to states (usually
state educational agencies for child nutrition programs), which then distribute resources to
participating schools, institutions, or other local sponsors. SNAP is something of a hybrid;
although SNAP benefits go directly to eligible individuals, states administer the program and the
federal government reimburses states for part of their administrative costs, using a cost-sharing
formula of 50% federal and 50% state.
Housing and development formula grants typically allocate and award funds at the substate level,
with a few exceptions. For example, the Water and Waste Disposal program allocates funds
among the Department of Agriculture’s state rural development offices using state-level formula
factors, but makes loans and grants directly to local governments and organizations. Both of the
temporary ARRA-created programs related to the Low-Income Housing Tax Credit made formula
grants at the state level, awarding funds to state housing credit agencies. Among other housing
and development formula grants, however, Community Development Block Grants go to substate
“entitlement communities” and to states only on behalf of non-entitlement communities.
Emergency Shelter Grants (one of HUD’s homeless assistance programs), HOME, HOPWA, and
the temporary NSP-1 all allocate and award federal funds to a combination of metropolitan cities
and urban counties and to states on behalf of non-metropolitan areas. Funding for Public Housing
and Section 8 Housing Choice Vouchers is allocated and awarded to local public housing
authorities, while Indian Housing Block Grants go to Indian tribes.
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Education programs under ESEA are a combination of formula grants to state and local
educational agencies (SEAs and LEAs). Adult Basic Education and Education for Homeless
Children and Youth are non-ESEA programs that operate as formula grants to states, which in
turn award funds to local projects or LEAs. Federal Supplemental Education Opportunity Grants
and the Federal Work-Study program allocate and award funds by formula directly to institutions
of higher education.
Almost all social services programs are structured as formula grants to states. An exception is the
Emergency Food and Shelter Program, which allocates funding among eligible local jurisdictions
and makes grants to local boards in those jurisdictions. In addition, both Head Start and the Legal
Services Corporation use state-level data to allocate funds among states, but grants are awarded
from those allocations directly to local programs. CSBG requires states to pass through most of
their allotments to local “eligible entities” and Older Americans Act grants are suballocated to
local area agencies on aging.
Weatherization and LIHEAP grants are allocated and awarded to states, which in turn use a
network of local agencies and organizations to operate their programs. Among employment and
training programs, WIA allocates federal funds among states by formula, but the majority of these
funds are awarded directly to local workforce investment boards, with a portion given to the
states. The Community Service Employment Program under the Older Americans Act allocates
and awards funding by formula both to states and national organizations.
Competitive or Discretionary Awards
Federal programs are sometimes structured as competitive or discretionary grants, in which
federal agencies select specific grantees and determine amounts to be awarded.48 Authorizing
laws provide criteria or parameters for federal agencies to follow in making such decisions, but
these criteria can range from very specific to relatively broad. Grantees may be selected through
an annual competition or for multi-year periods with a presumption of renewal.
Competitive awards are less common than formula grants among federal benefits and services for
limited-income populations. 49 No cash, food, or energy assistance programs are structured this
way; however, a number of such programs exist in other categories.
In health care, Family Planning and Consolidated Health Centers are both competitive grants to
eligible public and nonprofit agencies. Under the Breast/Cervical Cancer Early Detection
program, states compete for grants and in turn, enter into grants or contracts with public and
private nonprofits. The Ryan White program, in addition to its formula grants described earlier,
makes competitive awards to specified health care providers.
Under the Public Works and Economic Development program, a variety of entities are eligible to
compete for grants, including designated economic development districts, states, local
governments, institutions of higher education, and public and private nonprofit organizations.
With the exception of the formula-driven Emergency Shelter Grants program described above,
Homeless Assistance Grants award funds on a competitive basis; states, local governments, public
48
The term “grant” is used here but these awards are sometimes also made through contracts or other mechanisms.
Many programs authorize funds to be awarded on a competitive basis for national activities such as training and
technical assistance, program evaluation, or data collection; however, these activities are not addressed in this report.
49
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housing authorities, private nonprofits, and (for certain grants) community mental health centers
may apply. HOPWA includes a competitive grant component in addition to its formula grants,
with states, local governments and nonprofit organizations eligible to apply. The HOPE VI
component of Public Housing also operates as a competitive grant, open to public housing
authorities.
The federal government directly administers a few discretionary education programs, including
Institutional Aid for colleges and universities; the TRIO programs, which are open to institutions
of higher education and other public and private organizations; and GEAR-UP, which is open to
states and partnerships that include an institution of higher education and a low-income
middle school.
While TANF is primarily a formula grant program, it includes certain grants designated for social
services to promote healthy marriage and responsible fatherhood. These grants are awarded by
the federal government directly to public and private nonprofit agencies through a competitive
process. As described earlier, both Head Start and the Legal Services Corporation are social
services programs that allocate funds among states by formula, but award funds directly to local
grantees. These grantees are selected on a competitive basis, but grantees retain their designations
for several years at a time.
Among employment and training programs, public and nonprofit organizations may apply for
sponsorship of the Foster Grandparents program, and the federal government enters into contracts
for operation of Job Corps centers with selected federal, state and local agencies, area vocational
schools, residential vocational schools, and other public and private organizations.
Direct Benefits to Individuals
A relatively small number of programs make benefits available directly to eligible individuals, or
through a nongovernmental intermediary organization or entity. These programs, however,
include six of the 10 largest programs in this report.
Among health programs, both the Department of Veterans Affairs (VA) and the Indian Health
Service (IHS) provide free medical care directly to eligible needy veterans and American Indians
and Alaskan Natives, respectively, at VA and IHS facilities. The Part D Medicare program
subsidizes the costs of prescription drug insurance directly through contracts with participating
drug plans.
Other than TANF, all cash aid is provided directly to beneficiaries. The Social Security
Administration makes payments to eligible elderly and disabled individuals under SSI (although
medical determinations of disability are made by state agencies). The Internal Revenue Service
administers the EITC and ACTC, issuing refund checks directly to eligible workers.50 The VA
makes direct payments to recipients of pensions for needy veterans.
As noted earlier, SNAP is a hybrid of direct benefits and formula grants to states. States play a
key role in SNAP—determining eligibility and benefit levels and administering a related
50
The option to receive advance payments of the EITC through employers was repealed for tax years beginning after
Dec. 31, 2010 by P.L. 111-226.
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Federal Benefits and Services for People with Low Income
employment and training program—but assistance to purchase food is provided directly to
beneficiaries, typically through electronic benefit transfer.
A few housing and development programs provide benefits directly. For example, the Department
of Agriculture either makes or guarantees single-family rural housing loans, and makes direct
payments to property owners who participate in the Rural Rental Assistance Payments program.
Likewise, HUD makes payments directly to property owners under the Section 8 Project-Based
Rental Assistance Program; these subsidies enable owners to rent units to low-income families at
affordable rates.
Among education programs, Pell Grants and Academic Competitiveness and Smart Grants are
paid to participating institutions on behalf of eligible students; the schools receive an
administrative allowance for the cost of determining students’ eligibility and benefit levels.
Matching and Related Requirements
This report does not attempt to quantify nonfederal spending related to federal programs for
limited-income populations. However, a significant amount of such spending occurs. For
example, as already explained, Medicaid is a federal-state matching program in which states
spend considerable amounts of their own money. Specifically, in calendar year (CY) 2009,
national health expenditures under Medicaid totaled $385 billion, of which $254 billion were
federal and $131 billion were state or local. In CY2008, national expenditures under Medicaid
totaled $354 billion, of which $209 billion were federal and $145 billion were state or local.51 The
decrease in state and local expenditures from CY2008 to CY2009 is likely a function of the
increased federal medical assistance percentage (FMAP) in effect for FY2009, as authorized by
ARRA (P.L. 111-5).
Many low-income programs have provisions that require states or other grantees to match federal
funds with a specified amount of nonfederal resources (“matching” requirements), or require
grantees to maintain the same level of their own spending that occurred in a previous year
(“maintenance-of-effort” provisions), or prohibit grantees from substituting federal funds for
nonfederal funds that would have been available otherwise (“supplement and not supplant”
requirements).
Matching grants are generally designed in one of two ways. Under certain programs (e.g.,
Medicaid), the federal government reimburses grantees for a portion of their eligible
expenditures, generally based on a cost-sharing formula. Additional examples are CHIP, Child
Support Enforcement, Foster Care, and Adoption Assistance.
More typically, matching programs require grantees to demonstrate that they can provide
nonfederal resources equal to a percentage of the federal grant, but the federal government is not
necessarily reimbursing grantees for expenditures already incurred. Some federal programs
require the nonfederal share to be in cash, but many also allow in-kind contributions (e.g., the
value of donated real estate or other property, the services of volunteers). Programs with
nonfederal matching requirements include the Ryan White program for people with HIV/AIDS,
51
These data are for calendar year instead of fiscal year, and their source is the National Health Expenditure Data
reported by the Centers for Medicare and Medicaid Services; thus, federal expenditures cited here are slightly different
from the fiscal year obligations data shown elsewhere in this report.
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Federal Benefits and Services for People with Low Income
Breast/Cervical Cancer Early Detection, and the Maternal and Child Health block grant; Older
Americans Act nutrition and social services programs; the Public Works and Economic
Development program, certain Homeless Assistance Grants, and HOME; Adult Basic Education,
Supplemental Education Opportunity Grants, and GEAR-UP; Head Start, State Councils on
Developmental Disabilities, the Chafee Foster Care Independence Program; Community Service
Employment for Older Americans, and Foster Grandparents.
As noted above, some programs use maintenance-of-effort (MOE) requirements to ensure a
minimum level of nonfederal spending. A key example is TANF, which requires states to spend
annually at least 75% of the amount they had spent under the predecessor AFDC program in
FY1994 (or 80% if they fail to meet certain work participation requirements). Other programs
with MOE provisions include School Lunch, The Emergency Food Assistance Program (TEFAP),
Title I-A of ESEA, and CCDF.
Education programs in particular use the “supplement and not supplant” concept, which provides
that grantees may not use federal funds to replace nonfederal (or in some cases, other federal)
funds that would otherwise have been used for the same purpose. Programs with such provisions
include Title I-A of ESEA, the Rural Education Achievement Program, Math and Science
Partnerships, Improving Teacher Quality State Grants, and Institutional Aid for higher education.
Policies Affecting Indian Tribes
Several programs specifically for Indian populations are included in this report, namely the Indian
Health Service, Indian Housing Block Grants, Indian Education, and Indian Human Services.
However, tribes and tribal organizations are eligible to participate in additional programs, either
by applying for competitive or discretionary awards, or through funding specifically set-aside for
them. Moreover, individuals who are American Indians or Native Americans likely participate in
many programs for limited-income populations, not because of their heritage or tribal affiliation
but because they otherwise meet a program’s eligibility rules.
Examples of programs for which tribes and tribal organizations or other Indian entities are
explicitly eligible to participate include the Ryan White program and Breast/Cervical Cancer
Early Detection; WIC and TEFAP; Water and Waste Disposal grants and loans, Public Works and
Economic Development, Homeless Assistance Grants, and HOME; Institutional Aid for colleges
and universities; the Community Service Employment Program for Older Americans, Foster
Grandparents and Job Corps. In addition, tribes may apply to the federal government to
participate directly (rather through states) under several block grant
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