ALC-Hospital, Medicaid, & Developmental Disabilities Study Subcommittee
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Thank you.
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Thank you.
Good afternoon, folks.
Senator Jane English
Unverified
4:00
Glad to see you all here and for our Hospital Medicaid and Development Disabilities Study Subcommittee. And as part of our social services and workforce reform tasks that we are charged with, one of the things that is really important is to begin to look at some of these things that are like the benefit clips. So we have invited John Rees from the who's the senior advisor from the Federal Reserve Bank in Atlanta this is kind of their area of expertise
is to talk about some of these things and John is very well versed and so I will turn on your mic and pull it up close to you so we can hear you you introduce yourself for the record and we're glad to have you here
Speaker 4
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John Reese with the Federal Reserve can you all hear me all right all right so my
Speaker 6
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name John Rees of Federal Reserve, Senior Advisor with the Bank. I first want to thank you, Senator English,
for the invitation to speak with you all today. My plan is to basically present for 20, 25 minutes or so, and then take questions. Does that sound sort of appropriate? With that said, if there's anything you don't understand or have a question about during the presentation, please feel free to interject. I'll be happy to take questions throughout the presentations. So I'll start with sort of why I'm here and why I'm operating in the space. I was very briefly speaking with Senator Bryan beforehand,
and sort of a question I often get is why is the Federal Reserve looking at this issue of the benefits cliff? And the reason for that is that we have a dual mandate at the bank. I think most people are probably more familiar with that first part of the mandate, which is to maintain stable prices. And in support of that, that involves a lot of our activities around the Federal Open Market Committee and sort of interest rates. But the other part of that is to promote maximum employment.
And we see this issue of the benefits, Cliff, as a potential impediment to fulfilling that maximum employment mandate. And in the Federal Reserve Bank of Atlanta, we have a Community and Economic Development Division, which is largely focused on three issues: communities, capitals, and careers. And that careers component is what I work with, an initiative we call our Advancing Careers for Low-Income Families initiative, which largely focuses, again, on this issue of the benefits cliff, what is it.
We have developed a series of tools to show how it sort of manifests itself within workers' lives, to do research on this issue, and to connect organizations, states, what have you, that are operating in the space. This would be probably a good time. I probably should have said this to begin with. That one, what I'm speaking about today are my own views, and I don't necessarily reflect those of the federal service system. And secondly, in our role, right, we do do research.
We do create tools. What we don't do is sort of advocate or endorse specific policies, right? We are highlighting that this is a dynamic that does exist. There are examples of, again, sort of states, organizations, individuals trying to address this. But we don't take sort of a stance on that. So another, I think, sort of helpful bit of information is sort of exactly what we're talking about when we speak of benefits. This happens to be an issue, I think, where some people --
this is really what they sort of eat and breathe every day. For some people, they may be familiar with the concept, or at least heard of it, but aren't particularly familiar with it, and other people have never heard of it. So for today's purposes, we're going to say the benefit cliff really is an obstacle that low and sometimes moderate income families face as they pursue economic mobility. And that's because as they do so, they may encounter what we called the cliff effect, in which they receive a modest increase in, let's say, income or
hours worked, and that puts them beyond the threshold for public assistance eligibility. And so they're actually made worse off. Again, I was sharing this story earlier. My boss at the Federal Reserve used to work for the agency in Florida that administers the child care subsidy program. And several years ago, sort of her first brush with this cliff effect was that she had a distraught mother come in and say she had gotten a $0.10 wage increase that was going to put her just beyond the threshold
for eligibility for child care system, so she was going to lose that, and that was valued at about, I think at the time, $1,200 a month, right? So that's sort of a more acute version of that, but as we'll see here, there's a lot of other cliffs that can impact workers. And so,
Speaker 11
9:07
you know, that's a great example, I think, of how it negatively impacts sort of individuals, workers, families, But it also, as we'll see, has implications for
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employers and the government. This actually, this question comes from a published research article this summer
where they did a scientifically ballot survey, I think about 2,000 individuals throughout the country asking, had you taken behavior, taken action to avoid losing your assistance? And about one in five workers have done so, right? They had either not taken a raise or a promotion, kept their savings below a threshold, not take additional hours because, again, of this fear of experiencing the cliff. Similarly, we were working in Florida, and the Florida Chamber was about to send out
a survey to its member organization. We asked if they would add this question. They were looking at sort of obstacles for maintaining workers, asking if they had had workers unwilling to accept jobs or increased hours for fear of losing government assistance. And here it was about one in three. So again, both of these, whether it's one in five workers, one in three employees, hopefully underscores that this is a remarkably widespread phenomenon.
Finally, why I think it impacts sort of governments is because if we can encourage workers to pursue economic mobility, they're not only going to command higher wages for themselves over the long run, but that in turn is going to generate greater tax revenue for the communities in which they reside. This is actually a calculation that comes out of one of our tools. And again, I'm going to show a little bit of how these work in a minute. If you took an individual with two children,
if they can transition from a cashier to a licensed practical nurse. And this is specific. This happens to be actually in Eagle County, Colorado, where I
Speaker 11
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was presenting. But over their lifetime, we anticipate that they would generate an additional
Speaker 6
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$300,000 in tax revenue for their government. So, again, you can imagine if you can sort of scale efforts that promote economic mobility, it can produce a pretty significant fiscal impact.
So we've got this widespread dynamic, right, that is negatively impacting workers, businesses, governments. I think a fair question is, why does this actually exist? I happen to be relatively new to the Federal Reserve. It's been about 15 or so years in economic development consulting. And so that was at least one of my first questions as we started to advance this work. And I think one of the first things you realize when you start looking at public assistance in this country is it's an extraordinarily siloed program, right?
We have a lot of different programs that have a lot of different rules and interact in very complex ways. And that, I think, creates two significant challenges. One, it's very difficult for policymakers to understand how these all interact on an individual. And secondly, it can make it difficult for an individual to understand how, again, a change, let's say they take a promotion or they take on additional hours, how that change is going to impact their assistance,
because they don't have to consider necessarily one program, but maybe a multitude. And so at the Federal Reserve, I can't take credit for this, but some of my extraordinarily talented colleagues have developed something called the Policy Rules Database. And what this does is you can enter in information about household characteristics, right, how many individuals are residing in a household, where they live, whatever public assistance they might be participating in, and their income, and get a sense of where these cliffs exist.
So this shows an example of this Policy Rules Database. Anybody can Google this. You can access this now. Again, it's going to depend on household characteristics. So we're going to say this individual lives in Craighead County, Arkansas. I picked that because in my consulting days I did a lot of
Speaker 11
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work in Jonesboro, actually. We're going to say this individual has an adult and two kids and that they are receiving SNAP, CHIP, which is the
Speaker 6
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Medicaid for Children program, and they also are eligible for the Child Tax Credit and the Earned Income Tax Credit.
Speaker 11
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It's going to spit out a chart that looks like this. And what we're looking at, I'm not a particularly big math person myself, sort of on the horizontal axis is the more money you're making, you're making your job. Sort
Speaker 6
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of vertical axis is your net resources, which we calculate is if you take the income that says workers earning, add to that whatever public assistance they may be receiving, subtract out expenses. For expenses, we use a framework called United for Alice that I'll get into a little bit
more in a second. But really it's just a kind of a bare bones household budget for things like housing, transportation, childcare, and whatnot, and taxes. And we want to know, all right, are people positioned to basically pay their bills? And if we didn't have cliffs, this would be a straight line up, right? The more money you make, the more resources you have. But as you can tell, this is not a straight line. We have periods what we call sort of a benefits plateau, right? This is a dynamic in which maybe you're not worse off,
But you're certainly not any better off. You're really just treading water, right? So you go from, let's say, making $31,000 a year to $32,000 a year. So you've made a wage increase of $1,000, but you lost $900 in public assistance, right? So, again, you're just kind of barely getting ahead. There's also, on this journey, two cliffs, right, where, again, let's say you go from $40,000 to $41,000. Again, sort of enjoyed a $1,000 wage increase, but you lose $2,000 in assistance. and so you're worse off.
Speaker 11
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Just to show sort of the pathway to economic mobility can be fairly bumpy for individuals. And, again, I think prior to our tool, it's been very difficult for either policymakers or individuals to fully appreciate. So we have this thing we call our policy rules engine,
Speaker 6
15:38
and we have utilized this tool to develop a series of other tools that we use in coaching settings. Now, I know that's not necessarily the purpose of today's conversations
for how to coach, but I think they can provide some interesting examples of, one, sort of how this dynamic operates, but also in the second tool I'm going to show about ways to think about sort of breaking down some of those silos that exist not only among individual programs but also that separate considerations of social service provision and workforce development. Because, again, I think that is how workers sort of, you know, workers don't just sort of live in the workforce development silo or in the public assistance silo.
They see that as sort of a holistic environment in which,
Speaker 11
16:23
again, they're trying to pursue economic mobility. So, again, we have three tools, our snapshot, our dashboard, and our planner. Our snapshots, the first thing I'm going to show, really just shows a point in time if you have a change in income. This is what we estimate the immediate impact would be on your household financial situation. The dashboard is going to take a much longer view and say, if you're interested in, let's say, changing careers, pursuing, hopefully, sort of a more promising or higher paying position, here's the anticipated wage trajectory and how would that interact with your public assistance.
And again, how can we bring these two worlds
Speaker 6
17:01
of social service provision and workforce development together? The third tool, which I'm not going to go over
Speaker 11
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today, basically also embeds a financial planning component of it. So for the snapshot, again, like our policy rules database, it's going to be driven by sort of household characteristics, your location,
Speaker 6
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the assistance that you're receiving, and your work situation. We're going to say we have Maria. She lives in Pulaski County, Arkansas.
She's 27 and has two children ages 7 and 5. And she is receiving the following public assistance, SNAP, CHIP, free and reduced school lunch, Medicaid, and two tax credits. Again,
Speaker 11
17:40
the earned income tax credits and the child tax credits. She's making $16 an hour working for, I saw sort
Speaker 6
17:48
of an example of this actually in a sign at a fast food restaurant. Let's say she's making $16 an hour working 24 hours a week as a cashier in a fast food company.
Speaker 11
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And she's doing a really good job, and her boss would like her to take on an additional shift and sort of says, all right, if you can work 32 hours a week, that's all right, you'll work an additional shift a week, I'll give you a dollar wage increase. And Maria wants to know, how is that going to impact my financial situation? At first blush, this seems like this would be a net gain for her, right? She could be working a third more hours, get a dollar an hour wage increase. We
Speaker 6
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run this through the tool, and it is a net positive, right? that we would anticipate that her household finances would improve
by about $500 a month. And that would be because her take-home pay would increase by almost $575 a month. Now, she is going to lose some levels of public assistance, right? You see a reduction
Speaker 11
18:45
in SNAP and her income tax credit. But on the whole, she's going to be in a much better position than she would be previously. But just to show sort of how complex and how slight changes can produce very different scenarios, we're going to keep everything else the same except we're
going to assume that she's already working 32 hours a week, right? And her boss says, I'm going to -- I'd love you to work full time. If you can commit to 40 hours a week, I could give you a dollar an hour wage increase then. So, again, everything else is the same. In that scenario, she'd actually see her household finances sort of contract by close to $300 a a month. And that's because while her take-home pay by, again, working an extra eight hours a week, making that extra dollar, it would increase by more than $850 a month, she's
going to lose SNAP and the earned income tax credit and a little bit and free and reduced lunch. But cumulatively, that is
Speaker 6
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more than the wage increase. So she would, again, be worse off, just to show again how this can operate in the real world.
Speaker 11
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So that's our snapshot tool. I'm going to conclude today with another example from
Speaker 6
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our dashboard. And again, this takes it sort of a much longer-term approach and really is our effort to combine,
I think, kind of three principles. One
Speaker 11
20:11
is this issue of the benefits cliff. Two, this issue of sort of workforce development and pursuing career advancement. And then three, sort of embedding that in an attempt to understand are people positioned, are families positioned to meet sort of their household expenses in which we're going to incorporate United for Alice data. So, again, it looks very similar at First Blush. It's going to ask for sort of where you reside and your household characteristics.
For this example, we're going to stay in Pulaski County. In this scenario, we're going to have an adult with one child. or adult is going to be age 30. I
Speaker 6
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apologize, that's a little hard to read. But an adult age 30 with a five-year-old kid, and we're going to say this individual is participating in Medicaid for adults and CHIP, SNAP, free and reduced school lunch, and TANF, and is also eligible for the Child Tax
Speaker 11
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Credit and the Earned Income Tax Credit. And we're going to say this individual is also working as a cashier.
But as their child is aging, they feel like they've
Speaker 6
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got a little bit more opportunity to pursue career development, and they're interested in becoming a licensed practical nurse. So in our tool, you can basically select any occupation that's up there. I think we've got a couple hundred. But again, for today's example, we're going to say she's interested in becoming a licensed practical nurse. It's going to ask, you know, how long it's going to take to pursue that. And you can select basically, on average, it takes a year to get an LPN degree.
And you can compare that scenario to any other work scenario. The default is what
Speaker 11
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we call a near-minimum wage job, and that is a cashier position. That's what we'll use today. And so we are going to compare two scenarios. One is this individual becomes an LPN versus if they remain as a cashier. Our tool is going to give a series of charts, the first of which is going to show the immediate pay differential. That mayor gold line is the cashier position. You're basically going to be making, we assume, if you look at sort of data on employment in Pulaski County,
Cashiers typically earn around $20,000 a year, whereas LPNs make about $45,000 a year. Now, you'll see a huge leap that first year. Our model assumes that as you become an LPN, you have to go to school for a year. You continue to work part-time as a cashier, so you're making about $10,000. And I think, again, I think before joining the Fed, I saw this is sort of the crux of the obstacle, right, that it's really hard to navigate through that first year, but you come out the other side of that. you get
Speaker 6
22:43
that job as an LPN, you're seeing a basically a doubling of your salary. And at that
point, you're sort of onward. But as we'll see,
Speaker 11
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the reality is a little bit more complex. The second chart shows your after tax income between those two scenarios, right? So again, that's where dark red is the LPN and the marigold color is the cashier. Can you see it on the screen? There's also a gray dotted line. That is the estimated household expense for a family of two in
Speaker 6
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Pulaski County. And as you'll see in a second, we are utilizing data from a separate organization called United for Alice.
Speaker 11
23:22
The important takeaway right now is if you are to remain as a cashier again, as this individual with one child, you're basically
Speaker 6
23:29
never going to be able to meet your household expenses as long as your child's in the house. Our tool basically assumes that once that child, that five-year-old, hits 18, they are no longer in your
Speaker 11
23:40
household and you're no longer supporting them. Only then will you be able to pay your bills, and I know that's not necessarily true for everybody. Whereas if you are becoming LPN, you're going to struggle maybe in those first couple years, but if you look at the long-term trajectory, by year three or four, you're consistently higher.
Speaker 6
23:59
Just for reference, how we calculate that household budget again, it's something called United for Alice. It's an organization affiliated and came out of some work that United Way was doing in New Jersey, and they've expanded it nationally. It's now available for every county and state in the country, including Arkansas. And it's been very helpful in sort of immediately getting a sense of, all right, if we're trying to promote sort of economic mobility and to sort of see if people are positioned to pay their bills,
we needed a source of information to sort of say, all right, what is the estimated expenses for a variety of household types for a variety of expenses for, again, every county in the country? So it includes child care, health care, food, rent, utilities, transportation. That miscellaneous is mostly a savings element and technology, which basically assumes that to sort of live in the modern world, you need a cell phone. And as you can see, it falls over time. Speaking, we have a child, right, and it assumes things like child care expenses decline over time. So, again, this is sort of embedded in our tool.
Speaker 11
25:04
And just to get a sense of sort of how widespread, I think, you know,
Speaker 6
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it's not always appreciated that a lot of people on public systems, particularly with some of the current work
Speaker 11
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requirements, are employed. But we have sort of poverty statistics that miss a lot of that. So that ALICE stands for Asset Limited, Income Constrained, and Employed, basically shorthand for working poor. That's about 28% of the Arkansas population. You add that to the population of poverty, you get about 45%, 44% of the population of Arkansas
falls below that ALICE threshold. This next chart in our tool will actually show the level of public assistance that you would receive in those two scenarios, right, that LPN and a cashier. You can sort of see on that
Speaker 6
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left chart, that's the LPN scenario. Again, remember, we assume you're working part-time as a cashier that first year. You're making around $10,000 a year. You're eligible for a non-institute level of public assistance, but that ramps down very quickly, right?
Speaker 11
26:08
You come out of school, you're making about $45,000 a year. By year three, really the only assistance that you're receiving at that point is the child tax credit. Or on the right, if you remain in a near minimum wage job, you're going to continue to receive, you know, a fair number of public assistance programs, basically for as long as you have a child in the house. This final chart in our tool kind of brings it all together. It adds that income, that social assistance together and says, all right, are you positioned enough to meet those Alice expenses, right?
If you're above zero, you're going to struggle. If you're above that, you're going to be able to pay your bills. If you're below that, you're really going to struggle. And again, on that LPN, I think there's two things to take away. One is, after that first year, you're always above zero, right? Whereas if you remain as a cashier in that neighborhood job, you're never really going to hit that until your child, again, sort of, we assume, leaves the home. Secondly, even though you are going to be able to pay your bills as the LPN scenario,
Speaker 6
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it's not a straight line up, right? We see several cliffs along the journey, and I think it would be helpful to prepare workers for this
Speaker 11
27:19
so that they don't get discouraged, right? You see one pretty immediately in that first year or that second year they come out, right, where they're actually going to have fewer resources because while they're going to see an increase in their earnings, they're going to lose some public assistance. But, much like the tax chart that I started off with, over time, the cumulative benefits for being able to pursue economic mobility are pretty substantial.
This is just one person, and the payoff is not huge in the immediate years, right? That we looked at sort of the anticipated income of those two scenarios for the first couple years, that's less than $1,500 payoff, and that does not include any costs associated with pursuing our education. But over time, again, it compounds. And we would estimate in this scenario, right, that if you do transition from a cashier to an LPN, that you would command more than $500,000 over your lifetime and additional income thanks to that transition.
And again, much like that first chart, that also then generates significantly higher tax revenues for the community of this worker. So again, hopefully I haven't talked too long. I really
Speaker 6
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appreciate this opportunity to share. one, this information with you, but also take any questions that you might have. But with that, that's the sort of end of my formal presentation. I encourage anybody who wants to learn more to either email me directly or to reach out to our
Senator Jane English
Unverified
28:45
website. Thank you very much. We will take Senator Sullivan.
Senator Dan Sullivan
Unverified
28:51
Yes, sir. Thank you for the presentation. You know, this is not new information. The people that are living this understand all of this. So what has, and the opportunities that the chart suggests, people also know because that's their lived experiences in many cases for generations. So it seems like motivation would play a big part in people doing this. Is that assumption accurate?
Speaker 31
29:24
I'll say a couple things for that. I think one is people aren't
Speaker 6
29:29
always, some people are very aware of this, right, and they know exactly how much they can work. Other people aren't, because you can run scenarios like that first one I showed, where someone sort of just thinks I can't take on an extra shift, but
Speaker 11
29:42
they actually are wrong, and they could, right? This is hopefully to give some line of sight into
Senator Dan Sullivan
Unverified
29:47
that. No, there are scenarios in which you can take on that extra shift. Would your position be then that once we educate this segment of the population that this impacts, there will be a significant portion that would now take advantage
because of their additional knowledge? Potentially. I think I
Speaker 40
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will – I'll be perfectly frank. I do think – so the Federal Reserve is great at math,
Speaker 6
30:07
right, hopefully as you saw today. I think we have a lot of work to do on coaching, and that's just not an area of expertise. But I would hope this information would help that. Secondly, I think there are going to be positions, maybe in that year two scenario I showed, in which maybe there's not an immediate payoff, But hopefully, given people the information that sort of over the long term, it is better.
But there are certainly obstacles to consider, right, that even in that first example, right, because I've certainly heard this as sort of to your standpoint, the perception of, yeah, I'm going to be better off, it says on paper, but I'm still going to lose some benefits. So how do we coach people to sort of say, you know, that is going to be part of it, but on the whole, you're going to be better. But again, it gets into some of that gets into
Senator Dan Sullivan
Unverified
30:55
coaching in which I just. Your example is
from Craighead County. I'm from Craighead County and also in Arkansas.
My experience is that these are lived experiences for generations. And the fact that it's in a wonderful slideshow, they know this. And then for generations, we're struggling getting the people who are in that group to provide them the incentive to make the move up. It just is hard. attended this weekend or this week Arkansas State got some great programs very aligned to what you're talking about. The hard part is getting people to buy into it and actually take that leap
of faith and go but I appreciate your presentation. The
Speaker 14
31:40
last thing I'll add to that I do think that sometimes that
Speaker 11
31:44
does speak to the silo though is that there is a conversation about income there is the conversation about sort of public assistance. I don't know that we have always
Speaker 6
31:55
made the connection between that and what's going on in Arkansas State clear enough to sort of say, like, here's a specific program. Like I said, that's hopefully kind of the use of our tool,
and I would be more than happy to talk to anybody at Arkansas State University and sort of say, is there a way to connect those two, right? Is that we have a population that is receiving case management as part of, you know, SNAP or whatever it might be. We have, you know, Jonesboro Metro has been consistently growing now for 20 years. I remember when I was doing work there 10 years ago, they were having a hard time getting enough nurses to serve that population. Is there a way to connect those two to create that sort of win-win?
Senator Dan Sullivan
Unverified
32:37
I don't know, but I certainly hope so. Yeah, thank you. Actually, they are doing that in nursing. And they have those nursing programs that while you're going to the lower level, you have a job. They give you a job to help pay for your school. And then you matriculate up at different licensing and credentialing levels while you're working to do that. So they're doing that.
They're just starting the way to educate in the practical sense of it, side of it, is that they're educating new people to the system. So they're starting when you're in the 10th and 11th grade, educating you while you have a job at that entry level, and then you get more expertise, get more credentials as you move through. So I appreciate what you're doing. I think that's certainly the way out of some of this generational poverty, is to start
young, educate the people, and provide those opportunities. Thank you. Absolutely.
Representative Stephen Meeks
Unverified
33:48
Representative Meeks. Thank you right here in front of you. Thank you for being here for your presentation. I share
kind of the motivational concern with sometimes folks, you just get comfortable in that lifestyle and trying to motivate them to seek better for themselves can sometimes be challenging. My question is, and I came in late so you may have already addressed this,
is this tool available to the public? Is this available to our state employees? who's going to be best to utilize this tool to make this information available to the people who could use it the most? Is that something that we as a state would have to train our employees to say, hey, there's a website available, or how does this work in practicality
Speaker 5
34:32
to use this tool? Thank you very much for that opportunity. That was a miss on my
Speaker 35
34:38
part. This is freely available to anyone who wants to use it.
Speaker 11
34:42
There are now -- there's actually four states, I believe, in which a tool is mandated
Speaker 6
34:48
among their workforce agencies. Three of those states are actually using our tool. Florida uses it in their sort of workforce development arm.
Speaker 11
34:54
The Department of Children and Family are using it in Louisiana, and they're about to launch it in South Carolina. Kentucky also uses a calculator, but they created their own for their state. There's sort of like
Speaker 6
35:06
two -- there's a couple ways to approach it. One is, you know, if you have sort of formal plans to sort of try to launch this at scale,
we are happy to sort of like hold your hand and provide training to your staff. We've also seen some states just do it sort of on a pilot. We've actually, if you actually go and you reach out to me, I can give you sort of the link to use our tools. We actually have a lot of training videos that
Speaker 58
35:31
you can also use. And so there's a lot of ways it can be deployed. We're pretty flexible. And again, none of these involve any sort of cost
Representative Stephen Meeks
Unverified
35:39
to the participant. Okay, sounds good. And then my follow-up is, I don't know how long the tool has been around,
but since other states are using it, do you have any outcomes yet from the use of the tool that you can point to, or is it still too early in
Speaker 5
35:54
the project? So I think we're still early. I mean, to the point earlier, like, to me, I think our
Speaker 6
35:59
next emphasis is going to be largely on coaching. I will say, in general, there were some initial pilots, and this predates my time at the Fed. Workers did say it was very helpful in giving them some line of sight, both on sort of that they weren't surprised because they didn't always have an accurate understanding
of where they would be, or a sense of --
Speaker 11
36:18
we've actually had a couple of employers use it. Healthcare seems to be the best case because there's pretty standard sort of career paths,
Speaker 6
36:26
right, where you can get one credential, you go to LPN, then you become an RN and sort of help them plan and say, all right, you might be experiencing a cliff in the shorthand, but again, sort of long-term, you're going to be better off. And then we've actually did have states have looked at specific policy changes and reached out to us to get a sense of what would this do to some of these cliffs that we see.
Florida, for example, recently increased the threshold for eligibility for their child care, and wanted to sort of get a sense of, all right, how is this going to impact people? And so we kind of can take it both sides. One is
Speaker 11
37:05
deploying the tool, as you say, in sort of counseling sessions, but the other one is as a broad-based sort of policy. Forecasting. Yeah, policy analyst component. We're also, I think in
Speaker 6
37:17
January, going to make the code underlying all this freely available.
We've had one state reach out about doing their own either calculator or financial forecasting using that because you could change certain assumptions. Based on and we worry we actually will work with you if you want to
Speaker 58
37:30
do that now, but if they just want to do it on their own Okay, all right. Thank you. Thank you
Senator Joshua Bryant
Unverified
37:43
manager Thank you madam chair, I think that's I was kind of my question is what discretion does the state have to Smooth some of these cliffs like if we can model
if we can model the situation and And instead of losing $500 by taking an hour bump, does the state have the authority to roll back portions of that over a six-month period to let them stabilize rather than make that initial decision? So it depends
Speaker 36
38:09
on the program. In general, if it's a block grant, you've got a lot more discretion, right? So
Speaker 11
38:16
TANF is a lot easier to do. Childcare subsidy is a lot easier to do, whereas something like SNAP is just not.
Speaker 4
38:25
I'm sorry. I have a very low voice, and it tends to go to
Speaker 6
38:30
the bottom sometimes. So it depends on the program. We can certainly work with you, though, to understand that. But child care, TANF, and CHIP are the three that
Senator Joshua Bryant
Unverified
38:40
generally have the greatest flexibility. And
Speaker 6
38:42
SNAP was the one that was the biggest. Yeah, just because that is largely determined by sort of statute about the thrifty plan and the thresholds. We have seen a couple sort of philanthropic efforts to sort of say,
and you can do things on a pilot where you're sort of saying, all right, well, we're not going to do this statewide. But we actually have had a couple philanthropic organizations use our tool to sort of say, all right, what is the cliff? And if a family experiences cliff as they, let's say, pursue career advancement, we're going to make them whole for two years or we'll make them whole by 50%
Speaker 35
39:15
over two years to sort of mitigate that. So we have seen Tennessee is actually doing that as a pilot right now. with some of their
Senator Joshua Bryant
Unverified
39:22
TANF dollars. So that's done through enabling legislation or just the executive branch can say this is what we're doing?
Speaker 6
39:28
So I think that's actually done at the agency level. I don't think they had, and I'd have to double check that, but because TANF dollars, if they're not spent, stay with the state and they had accumulated a pretty significant, I think they had at one point like $700 million in TANF funding, they've decided to cede, I think it's 18 different pilots, two of which are going to touch on this issue of the benefits cliff. But I could put you in touch with whoever
Speaker 11
39:49
sort of helped implement that. Okay. Thank you. Do I see more questions?
Senator Jane English
Unverified
39:59
Oh. Do I see more questions here? Oh, Johnny Meyer.
Representative Johnny Rye
Unverified
40:11
Representative Wright. Yes, Ms. Chairman. Did you have a question? I have a question for you, sir. Let's just say that you had a lady and two children. And with that, you're talking about assistance, maybe totaling $20,000, $22,000, or $3,000 a year. Yes, sir. If this lady, our man, received a job, and let's just say that they could make $25,000 a year,
would they be penalized for the assistance that they were getting already? Can you explain what would happen in a situation like that?
Speaker 6
40:51
So it would depend on the exact programs, right? There are ones that sort of like smooth out, right? But there's ones that if they're just above the threshold, it's gone, right? And so you have a scenario in which, right, that on paper you're seeing a $25,000 gain in income. But from a resource standpoint, you're not really much better off.
The issue with that, though, in general, and it depends on the program, right, is most of those programs sort of depend on having sort of children in the house. And you're not going to be eligible for them once you have children. So if you look over the lifetime, I mean, that is one of the challenges, right? If you look over sort of the lifetime of a career, you're almost always better off taking that $25,000 job, even though you're going to struggle, than you would be on assistance. but also sort of you need the scaffolding often of sort of assistance on top of that, right?
Like you're still going to be eligible for some programs at $25,000. And, again, I think our tool is an attempt to sort of help individuals understand what that pathway is and sort of what is the path
Speaker 35
41:58
to sort of economic stability. Thank you, sir, and thank you, Mr. Chairman. Representative Beck. Thank
Representative Rick Beck
Unverified
42:12
you, Madam Chair. So looking at your chart, great data, by the way. In looking at your chart, you can see the cliffs in the chart, but you obviously see that the chart is general.
If you were averaging out the line, it's an upward line. So that's exactly what would be a constant motivation for people to take the next step. So my question is, why don't we have the cliffs? I mean, I understand what are the cliffs. I mean, I understand you get to this point and you could drop off losing this. I understand that. But why can't the benefits be almost a mathematical equation that would say at this level you would see this much and if you went up a little bit you would back off just a little bit so that there would never be a need to –
you would basically be averaging out that line going up, and so there would be constant motivation for the individual to head up, to take the next
step, because they would always turn out a plus. I agree.
Speaker 5
43:17
Unfortunately, I don't think I can answer the question. There are ways you could do this. I mean,
Speaker 6
43:23
a lot of that would require, I think, sort of like changes in federal law, but there's only so much flexibility individual states have on some of these.
But it would be possible. Minnesota actually, interestingly, they did it with SNAP. But they did it so long ago, I'm not even sure it's possible anymore because the laws have changed. So there have been efforts in the past. But as far as to why they exist, I mean, I do think one of the reasons, in addition to that, right, is a lot of cliffs are actually created by the interaction of multiple programs. And it's not always clear how those occur
unless you're doing a lot of modeling. And to my knowledge, there had not been sort of a nationwide understanding of that in a real thorough sense until our calculator, right, is that that cliff may not exist in program A and it may not exist in program B necessarily in those same ways, which when you add them together and a specific situation that they're created.
Speaker 35
44:27
So that is also sort of one part of that.
Representative Rick Beck
Unverified
44:31
Does that make sense? Yes. Follow-up? So is there any data around showing that,
like as you mentioned, the block grant programs and things that
states have more can play with those numbers? Is there any indication that the states are actually doing that? So in other words, I guess what I'm looking at is Some of the cliffs, we'll call it a federal cliff, right? There's nothing that the state can do about that. It drops off at that point. Versus these block grants that the state could, if they wanted to, kind of smooth that out. Is there any indication that the states are trying to do that?
Speaker 5
45:09
So a state, Florida's done it for CHIP and the child care subsidy. They just, the cliff still exists, but they just
Speaker 6
45:15
pushed it out, right? So instead of it hitting at 300 or 200 percent of the federal poverty rate, it's now 300 percent of the federal poverty rate. And so they've been able to push that. They did put in state dollars to do that, right? But when they did the analysis, they didn't think it, if you push it out far, you know, if you push the cliff out to $200,000, let's say, theoretically exists, but it's going to impact far fewer people. And that's kind of just a made-up number.
But they have done that with both CHIP and the child care subsidy. Tennessee is looking at that on a pilot basis. There's also been efforts by, I think, Ohio is one and Kentucky is one to do pilots to do some of this stuff, to come up with programs that would mitigate that. They've generally been fairly modest in scope, partially to sort of see, does it work, does it encourage people to pursue career advancement. And so that is one option. That generally doesn't require, you know, a lot of sort of change in the federal law.
You generally get a decent amount of latitude to do pilots. The ones in Tennessee are ongoing, and so we'll see. But
Speaker 91
46:24
out right now about how effective they've been. So one follow-up
Representative Rick Beck
Unverified
46:29
basically to your answer. I like that. But moving the clift out, right, a state, let's say, interjecting and saying that we're going to move the clift out just a little bit, you still have the cliffs it's still there so is it when they move it out is it just for a period of time or is it income level or something like that room it's the income level so like in Florida
Speaker 74
46:52
for example I think chip went from like 85 percent of the state median income being the threshold to
Speaker 6
46:57
100 so it did just move it out but that still gives a lot of people breathing room right like if you can make an extra you know five ten thousand dollars I don't know what that would be without hitting a cliff that may be, particularly with the child care aspect, where it's a pretty discreet period of time when you're eligible, that might be enough to reduce it for a lot of individuals, right, because you're generally only going to get
Speaker 35
47:19
that subsidy for three to five years anyway.
Representative Rick Beck
Unverified
47:22
But help me to understand that you would still then, using the three years later, you would still get to a
point where now if I take the location, now I'm going to hit another cliff. So instead of
Speaker 74
47:33
hitting it at $45,000, you might hit it, let's say, or $35,000, you hit it at $40,000. But for a lot
Speaker 6
47:40
of workers, they're never going to actually hit that $40,000 point, right? They're going to hit sort of an income plateau. And so they're not like you only hit the cliff when you make more money. And if states increase that level, it's likely to impact fewer workers.
Does that make sense? Because it's not sort
Speaker 99
48:07
of a time frame. It's also just how much you're
Senator Jim Petty
Unverified
48:10
earning. I understand. Thank you. senator petty thank you madam chair i'm not real sure how i want to phrase this question but um talking about the cliffs there's been a lot of good conversation around the cliffs uh and and i know that that the majority of these programs that we're talking about they're not going to change whether or not we've got less people facing a cliff or more people
facing a cliff the the block grant or the funding level is not going to change but have you have you guys done any research around the public burden uh for example if we you know leveled out the cliff and those that that were otherwise facing the cliff but now they they get to step down and so there's going to be less use of of emergency rooms and the burden that they leave with emergency
rooms and and other federal programs and so the cost benefit analysis we just automatically think all right we're going to cut you off and and that's going to save the you know taxpayer money but in reality there may be overall less burden on the public if if there was this level more of the leveling out and less of the cliff effect that's an interesting point I
Speaker 15
49:22
think we were a small team we've really only looked at if you look at sort of income
Speaker 6
49:29
tax gains from from that career advancement both at the federal and the
statewide level you could certainly do I think a more robust analysis both on right of just a fiscal impact looking at you know if you're making more money you're gonna
Speaker 35
49:43
spend more money right you're gonna generate greater sales tax You're also not going to be on benefits and you are likely to consume fewer public resources. We just haven't had the bandwidth to do that sort of conferencing, partially just because it's going to look different pretty much for every place in the country because of different tax regimes and it's going to be different based on sort of household characteristics.
Speaker 6
50:06
I will say none of what I'm presenting, I would say, is like sort of the end game for us. I mean, we just constantly either add programs or do additional sort of analysis to sort of answer these questions right now, working on seeing if we can develop a tool to sort
Speaker 35
50:21
of show how prevalent this is just looking at something like census data in individual states. And so that's something that we also might consider just to make that fiscal impact component a little bit more comprehensive.
Speaker 103
50:37
Thank you, Representative Bentley. Thank you. Thank you, Mr.
Representative Mary Bentley
Unverified
50:41
Reese, up here. Thank you so much for being here today. I know we have a lot of people that will be listening in to this committee meeting today. Can you go over again exactly how people will get a hold of this tool and how they can use it? What's the
Speaker 11
50:56
website? So if you go to this link that's listed here or you take a picture of this link, it
Speaker 6
51:01
will take you to a website that says complete this form. All that does is ping me with an e-mail. I'll reach out to you, and I will show you the tool, the address, and all that information.
Again, there's no sort of cost or any other burden, but we do want you to reach out to us first just so we have some sense of how this is being deployed, right, and where you're going to
Speaker 35
51:20
use it just for our internal sort of tracking purposes. But there's not really any sort of constraints on how you can deploy it or when you can deploy it. If you do want additional resources, like I said,
Speaker 6
51:31
if you want us to do some like either customized training or to work with you to think about how to plan we're happy to have that discussion as well okay great thank you
Representative Matt Brown
Unverified
51:43
representative Brown madam chair thank you mr. Dees for being here did I say that reads not these this isn't really a question but I know we've incitated instituted financial literacy for our schools and I would think that this would be an interesting component of financial literacy to show children, children themselves, how they can break that cycle and how they could be better off. If I
think it would give them hope or where children could see the possibility they don't have to live like
mom and dad. They don't have to continue to do what they're doing, and they could live
Speaker 6
52:35
a better life. So my understanding, and this predates my time at the Fed, but that that wasn't
Speaker 35
52:41
initially conceived as a use, and then we got contacted by organizations to do just that.
Speaker 6
52:48
So there are places where this has been used in a setting, not sort of administering benefits. One thing that may not be apparent from some of the screenshots is that you do have to put in sort of your household characteristics and your location. When it asks for benefits, one of the criteria you can actually select no benefits. And we've seen organizations use that just to give individuals or children a sense of, all right, if you select this career, what is the anticipated wage? What's the difference between tax and after-tax income?
Speaker 35
53:20
And so, again, that's not sort of the, I think, originally envisioned purpose of the tool.
Representative Matt Brown
Unverified
53:27
We certainly have seen it deployed like that. Well, I'm just thinking that, you know, when you talk about financial literacy, of course you want to talk about budgets and how to manage a checkbook and things like that and all these new money opportunities that are becoming available. But you also talk about insurance and investing. And, you know, benefits are another source of possible income or, you know, resources to help take care of yourself and your family.
So I think that those kind of benefits need to be included in that consideration so people can see that they have better opportunities. So I didn't also
Speaker 6
54:07
our planner. So the other two tools use that sort of United for Alice framework, right, to estimate cost. But as you saw, right, there was, I think, seven categories. That planner tool allows you to do everything you're talking about because you might, let's say, you get in someone saying,
like, well, I have all these expenses, but I also have $800 in credit card debt. I need to budget for that every month. You can input all that. You could put in I've got two jobs. It's pretty powerful. I don't generally show it just because it takes a lot more time to do, but it allows you, it basically is our attempt, if that second tool I showed you is our attempt to show career trajectories and benefits and household budgets, that third tool is, all right, how do you take it a step further to get a better sense
Speaker 35
54:48
of how to build actually the household budget that makes sense for your family thank you for
Senator Jane English
Unverified
54:55
being here anybody have any more questions I don't see any thank
you so very much for being here and talking to us as we're thinking about our workforce reform all of these are topics that we need to be thinking about and planning for and I really appreciate your effort and they're coming to visit us thank you thanks again and again please
Speaker 6
55:25
do not hesitate if you have any additional
questions or want me to connect with anybody in your communities you all have a great rest for your day thank you
Senator Jane English
Unverified
55:39
saying no further business I adjourn the meeting Thank you.
Agenda
A. Call to Order
B. Discussion of Benefit Cliffs and Asset Limited, Income Constrained, Employed (ALICE) [Exhibit B] ̶ John Rees, Senior Advisor, Federal Reserve Bank of Atlanta
C. Discussion of Recommendations by Committee
D. Other Business
E. Adjournment
Documents
| Title | Type | Pages | Source |
|---|---|---|---|
| Agenda — ALC - HOSPITAL, MEDICAID, & DEVELOPMENTAL DISABILITIES STUDY SUBCOMMITTEE, Oct 16, 2025 | Agenda | 1 | Official source ↗ |
| Exhibit B- Federal Reserve Bank of Atlanta | Exhibit | 36 | Official source ↗ |
Speakers
Senator Jane English
Unverified
Speaker 4
Speaker 6
Speaker 11
Senator Dan Sullivan
Unverified
Speaker 31
Speaker 40
Speaker 14
Representative Stephen Meeks
Unverified
Speaker 5
Speaker 35
Speaker 58
Senator Joshua Bryant
Unverified
Speaker 36
Representative Johnny Rye
Unverified
Representative Rick Beck
Unverified
Speaker 91
Speaker 74
Speaker 99
Senator Jim Petty
Unverified
Speaker 15
Speaker 103
Representative Mary Bentley
Unverified
Representative Matt Brown
Unverified
Speaker 93