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When Was the Last Time a Government Program Shrank?

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When Was the Last Time a Government Program Shrank?

MacIver Institute, November 6, 2013

by James Wigderson
Special Guest Perspective for the MacIver Institute

Can we provide a social safety net at a lower cost while still serving those most in need? Most of us would answer yes, and that belief is being tested with the Wisconsin Shares program with some success.

The Wisconsin Shares program is a subsidy to help low-income families with child care assistance. The program covers part of the cost of day care with the subsidy recipient covering the rest. So far in fiscal year 2012-2013 the average monthly subsidy per child is $405. The average per family subsidy in June 2013 was $855.44 while the average family share of child care costs in June 2013 was $120.95. The total cost of the program in 2012 was nearly $250 million.

In a Pulitzer Prize winning series in 2009, the Milwaukee Journal Sentinel reported on fraud in the Wisconsin Shares program. Providers were overbilling or billing for children that weren’t even in their care. In a follow-up article earlier this year, the Milwaukee Journal Sentinel reported that efforts to cut out fraud saved $100 million from 2009 to 2011. “More than 30 people have been criminally charged and some 200 centers suspected of swindling funds have been closed.”

However, as much as cracking down on fraud has saved, reforms have also been important in saving the taxpayers money. David Edie the Wisconsin Council on Children & Families told the Milwaukee Journal Sentinel, “Clearly anti-fraud efforts have saved money in the budget. But my opinion is pretty strong that the substantial reduction in expenditures has much more to do with intentional policies to drive costs down.”

State Rep Adam Neylon agrees. In a recent interview, he said the state is looking at underspending the budget by $24.7 million in the current fiscal year. If the trend continues, the state will spend $50 million less than budgeted over the biennium.

This underspending is in addition to the $31 million already cut from the Wisconsin Shares budget in the next biennium. But if the current spending level continues, the state could see an additional $48.5 million in underspending in the next biennium.

Neylon said the biggest factor in reducing the costs of the program was a change in the way payments to the providers was calculated. “I think the biggest change was the change of the child care subsidy payments to attendance based rather than enrollment. Before they were getting subsidies based on the number of low income children enrolled.”

In addition to that change, the state froze the rates paid for child care services in 2006. The freeze has now been lifted but not much more has been allocated to the program.

There has also been a 5% cut in the amount paid to providers that do not achieve better than a two star rating YoungStar quality rating system implemented last year. According to the Wisconsin Council on Children and Families, “over 65% of child care programs participating in Shares were rated as 2-star.”

Enrollment is down, too, by five percent since 2009. Overall both demand for the program and payments are down.

Until 2009 the long term spending trend was upward, as with most government subsidy programs. Now the trend is in the opposite direction. Total spending in 2008 peaked at $347 million. In 2012, the state spent $249 million. That’s nearly $100 million annually in savings going forward in the state budget.

All of these savings can be undone. Neylon says there is pressure to increase the payments to the two star programs, increase enrollment in the program with greater eligibility, and change the payment structure back to paying based upon enrollment.

“Democrats like [State Rep] Chris Taylor are adamant about changing it back to enrollment, so I know there are Democrats that want it to go back to enrollment-based instead of attendance-based. They bring it up at almost every hearing we have.”

Of course, changing the subsidies back to enrollment-based for the child care providers will re-open the system for more abuse and corruption and lead to higher costs. Instead of the quiet success of containing costs while providing the government service to poor families in need, Wisconsin could return to unnecessary spending while subsidizing waste and fraud by undoing the reforms that have already been implemented.

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