RD88 - The Public Assistance Benefit Cliff and A Study Proposal to Test the Effects of Eligibility Rules on Moving to Self-Sufficiency

Executive Summary:

The 2020 Appropriations Act, Item 350. Q. states: “The Department of Social Services shall study the resource cliff faced by families receiving public assistance when income increases enough to reduce or terminate the family's eligibility for public assistance. The report shall address how the structure and terms of eligibility affect the ability of participants to move toward self-sufficiency. The report shall be submitted to the Governor and Chairmen of the House Appropriations and Senate Finance committees on or before August 1, 2021."

The resource cliff is commonly referred to as the “benefit cliff" and is a well-documented phenomenon where low-income families lose eligibility for public assistance as their earned income increases. The income threshold for most of these programs is set by federal law with the exception of the Temporary Assistance for Needy Families (TANF) which is set by states. Hence, the benefit cliff cannot be fully eliminated without changes in federal policy. However, there is demonstration authority in federal law that allows Virginia to test and evaluate policy changes using existing federal program funding that could eliminate the benefit cliff and help low-income Virginians earn a living wage.

The Department of Social Services proposes a pilot project to overcome the benefit cliff creating an earned income disregard across all the programs which replaces the benefit cliff with a benefit phase out at the point of a living wage. Families would not lose their supports until their earned income fully replaced a loss in benefits. The pilot could be financed in one of three ways: General Assembly support through an allocation of General Funds or TANF funds; General Assembly support through language directing the Department to seek demonstration authority and use existing federal program funds; or by seeking philanthropic funds.