What Trump Budget Proposal Would Mean for Kentucky

President Trump’s full budget proposal released today includes harsh, devastating cuts to critical poverty-reducing programs that provide health, nutrition and financial assistance to many Kentuckians. The budget also includes drastic cuts to federal grants to states that improve our economy and quality of life and provide needed assistance to Kentucky’s most vulnerable. The rural areas of our state, which continue to experience the greatest economic challenges, would be hit particularly hard.

Mandatory Federal Programs

President Trump’s budget proposal includes harmful cuts to so-called mandatory programs (meaning spending is determined by how many people are eligible) that provide important assistance to low-income Kentuckians. The largest of these programs are Medicaid and the Supplemental Nutrition Assistance Program (SNAP), formerly known as food stamps, both of which are cut dramatically in the proposal.

Medicaid & CHIP

There are 1.4 million Kentuckians covered by Medicaid, 472,800 of them through the Medicaid expansion, which would effectively end if the American Health Care Act (AHCA) that recently passed the House becomes law. Many who receive Medicaid in Kentucky are children, elderly and/or live in rural parts of the state, according to a Center on Budget and Policy Priorities (CBPP) analysis of 2015 American Community Survey (ACS) data:

  • 37 percent of Kentucky Medicaid recipients are under the age of 18.
  • 10 percent are age 65 and older.
  • 51 percent live in rural counties.

Medicaid funding would be cut an astonishing 47 percent by 2027 once the proposed Trump budget cuts of $610 billion are added to the massive Medicaid cuts in the AHCA. These extreme cuts would severely squeeze our state budget and force lawmakers to radically reduce enrollment, scale back benefits and reduce already inadequate provider payments. These Medicaid cuts add to the extent the program would no longer be fully-responsive to recessions and to health problem outbreaks like Kentucky’s drug crisis.

The proposal also includes a $5.8 billion cut to the Children’s Health Insurance Program (CHIP), which supplements Medicaid to provide health insurance for additional low-income children. In Kentucky there are 567,772 children enrolled in either Medicaid or CHIP, or 38 percent of Kentucky’s kids.

SNAP food assistance

SNAP helps low-income Kentuckians meet basic nutritional needs by providing assistance in the amount of approximately $1.36 per person per meal. The Trump budget proposal cuts SNAP food assistance by 29 percent, in large part by proposing to shift 25 percent of the cost of the program to states by 2023. However, Kentucky could not afford to make such a match for the program, which would have cost an estimated $245 million in 2016. By ending the structure of the program so it is no longer fully-funded by the federal government, the program wouldn’t be able to adequately respond to economic downturns.

Here are the Kentuckians who now participate in SNAP and therefore could be harmed by the deep proposed cuts to the program, according to CBPP:

  • 651,889 Kentuckians (308,453 households) were receiving SNAP in February 2017.
  • 41 percent were under the age of 18.
  • 25 percent were elderly or disabled.
  • 52 percent of Kentuckians receiving SNAP lived in a rural county.

Other Safety Net Programs

SSI & SSDI

Supplemental Security Income (SSI) provides income support for individuals who are disabled or elderly and have little income and few assets. As of December 2016, there were 180,613 Kentuckians receiving Supplemental Security Income (SSI) benefits. Of those, 58 percent are women and 61 percent live in rural areas.

Social Security also provides crucial disability insurance for people who have worked most of their lives but have had their careers cut short by severe medical impairments. As of December 2016, 203,471 Kentucky workers received Social Security Disability Insurance (SSDI) benefits.

Between these two programs the administration proposes a $72 billion cut.

EITC & ACTC

In 2015, 397,439 tax filers in Kentucky received $968 million worth of tax credits through the Earned Income Tax Credit (EITC) program, an average of more than $2,436 per filer. There were also 279,860 Kentuckians who received an Additional Child Tax Credit (ACTC) with an average value of $1,311 in the 2014 tax year. Around 40 percent of ACTC tax filers were single moms. Both of these tax credits help low-income Kentucky families get by while moving up the job opportunity ladder. But the budget proposes to cut $40.4 billion from these credits.

TANF

As of January, there are 18,300 Kentucky families receiving cash assistance through the Temporary Assistance for Needy Families (TANF). This number includes 32,124 children and 7,778 adults earning an average monthly benefit of $101.33 per person. TANF does several things to help families make ends meet. The majority of it goes to basic cash assistance (55 percent), and some goes to support work activities (13 percent) and child care assistance (18 percent). But the program is already stretched so thin that only 19 of every 100 families living in poverty receive any kind of cash assistance. The budget proposes a total cut of $21.7 billion over ten years to the program.

Housing Programs

In Kentucky, 153,584 people (76,039 households) receive assistance through Housing and Urban Development (HUD) rental assistance programs including public housing, Section 8 Housing Choice Vouchers, Section 8 Project-Based Rental Assistance, and Supportive Housing for the Elderly and People with Disabilities. The budget proposal includes deep cuts in rental assistance, which would further shrink the supply of affordable housing in our state and increasing homelessness. Overall, the cuts are 15 percent ($7.4 billion) below what policymakers recently approved for 2017. In Kentucky this means 3,619 fewer housing vouchers and $26.5 million cut from public housing. The Community Development Block Grant and HOME programs, which give flexible aid to poor rural and urban communities, would be cut by $39 million and $13 million in Kentucky, respectively.

Non-Defense Discretionary Grants

Federal Non-Defense Discretionary (NDD) programs improve Kentucky’s economy and quality of life in multiple ways— including by funding improvements in education, help for kids and families, healthier and safer communities, workforce and economic development and cultural enrichment opportunities. Kentucky currently receives approximately $2 billion a year in NDD funding.

The budget proposal includes almost all of the same severe cuts to NDD programs that were in the earlier “skinny budget” — a total of $54 billion below the already-austere sequestration level for 2018 and by $1.6 trillion over the next decade These cuts include critical federal investments in Kentucky’s coal communities.

The cuts in President Trump’s full budget proposal would harm the well-being of large numbers of low-income Kentuckians, particularly in the areas of our state experiencing the greatest economic challenges, while paving the way for extremely large tax cuts for the nation’s wealthiest. These cuts would hit our state especially hard given the relatively large share of funding our state receives from federal sources and the context of both federal and state budget cuts in recent years.

Trump Budget Would Harm Kentuckians, Push Massive Costs Onto State

President Trump’s budget slashes nutrition, health care, and other important assistance that helps hundreds of thousands of Kentuckians meet basic living standards – food on the table, a roof over their heads, and access to health care – while giving new tax breaks to the wealthy and powerful. The budget stands in stark contrast to the commitments the President made during his campaign to help those left behind by today’s economy. It would also shift massive costs to Kentucky at a time when our state is already struggling to meet needs for education, health care, pensions and other building blocks of thriving communities.

For example, the President’s budget would:

  • Slash the Supplemental Nutrition Assistance Program (SNAP, formerly known as food stamps) by $193 billion over 10 years targeting the elderly, working families and workers struggling to find a job — and shifting the cost of more than $100 billion of SNAP benefits, a long time federal responsibility, to states.
  • Cut $600 billion from Medicaid over 10 years — on top of the already-massive cuts in Medicaid and subsidies for private coverage included in the House-passed bill to repeal and replace the Affordable Care Act that President Trump supports and incorporates into his budget. These additional cuts almost certainly would further increase the number of uninsured Kentuckians and would shift additional, significant Medicaid costs to Kentucky on top of the $16 billion cost shift in the House health bill.
  • Cut disability programs by $72 billion, including Social Security Disability Insurance, for workers with disabilities and their families, and Supplemental Security Income, which provides income assistance to poor individuals, including children, with disabilities – breaking the President’s promise not to cut Social Security.
  • Deeply cut investments that expand opportunity and spur long-term economic growth, from job training to education to scientific research. The budget would cut funding for this part of the budget by $54 billion in 2018 alone.  The proposed cuts grow far deeper over the decade – the President is proposing for this part of the budget to be cut by more than 40 percent as compared to 2017 after adjusting for inflation.  These cuts would take funding for this part of the budget to its lowest level since the Hoover Administration as a share of the economy.

At the same time, the President is proposing massive tax cuts largely for the wealthy and corporations that would likely cost several trillion dollars over the coming decade, if honestly measured.  The budget relies on unrealistic economic assumptions, gimmicks, and huge “magic asterisks” to hide that the President’s tax cuts would dramatically increase deficits and debt.

As Congress prepares to advance its own budget plans, our Congressional delegation must not simply oppose the Trump budget. They must oppose any Congressional budget plan that follows the same architecture. They must oppose cuts to assistance that helps millions of Americans achieve a basic living standard. They must oppose cuts to investments in long-run economic growth and basic public services. And they must oppose massive tax cuts to the nation’s wealthiest.

Angel Investor Tax Credit Program is an Overly-Generous Subsidy for Wealthy Investors

Kentucky’s angel investor tax credit program is touted as a way to encourage investment in start-up companies. But because it is overly generous to investors, fails to target start-ups exclusively and lacks adequate evaluation mechanisms, there are reasons to question its cost-effectiveness.

Angel investor tax credit programs are offered in more than 20 states. They are promoted as a way to encourage investors to support start-up and early stage ventures for which it is sometimes difficult to access the capital needed to begin or expand operations — especially in risky or experimental situations. Kentucky created its angel investor tax credit program in 2014 with the first credits awarded in 2015.

The critical question that must be asked in considering the effectiveness of and need for angel investor tax credits is whether they are truly necessary for investment to occur – Will investment happen anyway if the ideas and plans are good enough? Could governments achieve the same results with a less generous credit, or without any credit at all, simply by helping investors and companies seeking investments connect?

Here are some key concerns with Kentucky’s program:

It is not sufficiently targeted to viable start-ups needing assistance.

Kentucky’s angel investor tax credit program differs from most other states because it is not limited to assisting start-up and early stage companies.  Instead, Kentucky’s program focuses more broadly on small businesses, which are defined as legal entities in good standing and holding all necessary licenses or registrations engaged in a qualified activity within the state that have:

  • Less than 100 employees;
  • A net worth of $10 million or less or net income after federal income taxes for each of the 2 prior fiscal years of $3 million or less;
  • More than 50 percent of assets, operations and employees in the state; and
  • Not received investments of more than $1 million in the aggregate that are eligible for the angel investor tax credit program.

To receive investments that qualify for the tax credit program, companies must be approved by the Kentucky Economic Development Finance Authority, which reviews the application for compliance with the statutory requirements set forth above but does not examine or comment on the viability of the company or whether the company will expand or hire more people.

Importantly, there are no requirements that companies demonstrate an inability to access traditional financing sources prior to being accepted into the program.

It lacks accountability to stated purposes. 

Kentucky’s angel investor tax credit program’s key stated purposes are to support:

  • The establishment or expansion of small businesses;
  • Creation of additional jobs; and
  • Fostering the development of new products and technologies. 1

Yet companies receiving investments through the program are not required to assert they will do any of these things as a condition of acceptance into the program. Companies are required to file an annual report for five years with the Kentucky Economic Development Finance Authority that lists the number of new jobs created, increased sales or economic activity, other private investment attracted and any other information requested by the authority. However, the authority is not required to analyze, use or report the data or to evaluate the effectiveness of the tax credits in achieving the stated goals of the program.

The generous credit excessively reduces investors’ risk at significant cost to the state.

To participate in the program, investors must be qualified as investors under federal law, cannot own more than 20 percent of a company and cannot be employed by the qualified business prior to making the investment (but could be after making the investment) — nor can the investor be the parent, spouse, or child of such a person. The investor also must be seeking a financial return from the investment.

Once accepted, investors receive a very generous credit of 50 percent of the amount invested if the company is in a distressed county, or 40 percent of the amount invested otherwise. Once earned, the credit may be freely transferred to any other person by the investor who earned it. A transferable credit is more attractive to investors because they can still fully benefit even if they do not have a sufficient Kentucky income tax liability to use the credit (as would be the case by an out of state taxpayer) by selling or trading the credit to someone who can use it.

The credit dramatically reduces the investors’ risk, increasing the potential upside for the investor by the amount of the credit. If the qualified company simply maintains its current value, the investor achieves a remarkable 40 percent return on investment because of the tax credit. If the business completely fails, the investor will still receive the tax credit, in addition to the deduction of any other eligible losses suffered as a result of the failure of the business. Such a generous credit may result in promoting what would otherwise be imprudent investments. And it means a large subsidy to already-wealthy individuals. As an investor told The Courier-Journal recently, “it’s a good tax credit.”

The fact the program applies to already-established businesses and is not limited to start-ups increases the likelihood that the investor will make money simply because of the credit — and weakens the claim that the credit is necessary for the investment to occur.

Total credits awarded in each calendar year are limited to $3 million overall, and individual investors cannot receive more than $200,000 in credits in any calendar year. The total program is capped at $40 million. 2 To date, the state has awarded $33.7 million in credits, which mean the program will run out of money within the next few years and legislators will have to consider whether it should be expanded. The overly generous design of the credit results in the annual cap being reached very quickly every year.

The only possible recapture of state subsidy dollars happens if the company fails to have 50 percent or more of its assets, operations and employees in the Commonwealth, fails to be actively and principally engaged in a qualified activity, or receives an aggregate amount of qualified investments of more than $1 million in tax credits. If the company becomes insolvent or ceases to exist, the credits are not subject to recapture.

Economic development incentives like the Angel Investor Tax Credit reduce the revenue Kentucky would otherwise collect and invest through the state budget in education, public safety, infrastructure and other public goods that businesses benefit from. The program, like other tax breaks that litter the state’s tax code, should be closely scrutinized and trimmed or ended to make possible those public investments that we know pay off.

 

  1.  KRS 154.20-232
  2.  This cap applies to combined incentives offered under the Kentucky Investment Fund, which is for groups of investors working with a common manager, and the angel investment act.

Medicaid Enrollees in State Concerned About Future

Health Care Repeal Bill Would Squeeze In-Home Health Services for Elderly & Disabled Kentuckians

Important services that enable Kentuckians to receive needed care at home and in the community, rather than an institutional setting like a nursing home, will be cut back if the American Health Care Act (AHCA) becomes law.

There are currently 39,289 Kentuckians who receive Home and Community Based Services (HCBS) through Medicaid. These individuals include participants in the Supports for Community Living and Michelle P. Waiver programs, for which there is already unmet need. Because the AHCA makes permanent cuts to the traditional Medicaid program over time, the state likely would be forced to roll back these critical services for elderly and disabled Kentuckians, as shown in a new report from the Center on Budget and Policy Priorities.

Long-term care is an issue of increasing concern. The number of Kentuckians over the age of 85 is expected to grow 30 percent between 2025 and 2035. Older adults, as well as disabled children and adults, tend to need more health care, and often require assistance with aspects of daily living including meal preparation, household chores such as laundry and transportation to appointments. HCBS are less expensive than nursing home care, and often people would prefer to remain in their communities rather than move to a nursing home. According to one report, in 2014 Kentucky Medicaid paid an average of $48,000 annually for nursing home care, but only $15,000 for home-based care.

Despite the fact that home and community-based services are often cheaper, Kentucky has been underutilizing them compared to other states. A report shows Kentucky spends 81 percent of all long-term care dollars on nursing home care (compared to a national median of 69 percent).  The AHCA would make that imbalance worse.

One reason is that states are not required to provide HCBS through Medicaid, but are required to provide nursing home care. In addition, the AHCA caps federal Medicaid funding to states, squeezing Medicaid dollars over time through a mechanism called a per capita cap. The formula for the cap doesn’t take into account the growing average age of the elderly population, squeezing funding further. State officials likely would be forced to reduce optional benefits, including HCBS. By one estimate, eliminating the Medicaid expansion, which the AHCA effectively does, and instituting a per capita cap would shift $16 billion in cost to Kentucky’s state budget over 10 years.

Dependent seniors and those with disabilities in Kentucky are already subject to long wait lists for HCBS, and further cuts would make those waits even longer, or possibly end those services altogether. We should be making policy decisions that help communities thrive, not force people out of them.

The videos below show the real Kentuckians, and their communities, that benefit now from HCBS programs at risk under the AHCA.

Report on County Jails Shows Why We Need Additional Criminal Justice Reforms

A recently released report from the state Legislative Research Commission (LRC) raises the alarm around the growing number of state inmates housed in county jails. This trend underscores the need for serious criminal justice reforms in Kentucky beyond the first step reentry measures passed in the 2017 General Assembly.

Kentucky ranked second highest in the nation for the imprisonment of state and federal inmates in local facilities as of 2014, the report shows. Close to half of the state’s inmates are now housed in county jails — 11,000 inmates as of Sept. 1, 2016, when there were around 24,000 in the entire corrections system.

Kentucky’s county jails were originally designed to house inmates that committed very low-level crimes for short periods of time. However, in 1992 the General Assembly began requiring those with Class D felonies be housed in local jails — and currently most inmates with Class D (1 to 5 year sentence) and Class C (5 to 10 year sentence) felony convictions are eligible to serve up to 5 years of their sentences in local jails. As the state’s inmate population continues to grow, local jails are becoming increasingly overcrowded. This means inmates may face worsened living conditions and serve up to five years incarcerated without access to many of the programs available in prisons that can help reduce the chances of recidivism — the return of an inmate to jail/prison after release.

Source: Kentucky Department of Corrections.

Here’s what the LRC report found:

Most of Kentucky’s County Jails Are Over Capacity

Overall, the 76 county jails that house state inmates are at 120 percent of capacity — including 6 that are at more than 160 percent. Just 7 jails are not over 100 percent capacity. As seen in the table from the report below, this has meant dorm and cell overcrowding, among other negative impacts.

Programs That Help Reduce Recidivism Limited

Inmates with felony convictions housed in jails rather than prisons may be less likely to reenter society successfully after being released. Recidivism rates are higher for Kentucky inmates housed in county jails rather than prisons. For inmates convicted of a Class C felony, the share of inmates who recidivated within 3 years is 43.6 percent for those in county jails, compared to 40.2 percent for those in a minimum security prison and 41.4 percent for those in a medium security prison.

This difference may have to do with inmates in local jails typically having much less access to programs that help to reduce recidivism — such as substance abuse programs. Most jails do offer at least one type of program; substance abuse treatment is the most common program offered, but the report says just 25 percent of the jails provided one. The study found that female inmates sometimes had less access to programs than male inmates as there are relatively few female inmates in some jails. The table below shows that while the availability of programs in county jails has increased, programming remains minimal in these institutions.

Transferring Inmates Between Jails Has Increased

The LRC report found that transfers of inmates between jails have increased significantly in recent years — growing by 53.2 percent between January 2011 and December 2015. One reason inmates are transferred is a lack of space. The report notes that “Frequent transfers can prevent inmates from completing programs that reduce sentences or lower recidivism.”

Too Many Inmates Remain Unclassified

Inmates go through a process for receiving a security classification that can determine their eligibility for programs, work assignments and sentence credits; the classification process can also determine if an inmate requires supervision at a state prison rather than a county jail. Largely as a result of space issues in the state’s prisons and county jails, there is a large backlog of inmates awaiting security classifications. According to the LRC report, the number of inmates awaiting classification has doubled since August 2011 and is around 3,000. While some jailers report that the Department of Corrections (DOC) has suspended the classification process — which occurs at state prison classification and assessment centers — for two years due to prison overcrowding, DOC staff indicate that it has not been suspended but has slowed due to limited bed availability in state prisons.

Criminal Justice Reforms the Answer

The rise in the state inmate population in local jails is driven by continued growth in the corrections system as a whole — and the state’s lack of action on needed criminal justice reforms. More must be done to stem the tide of the rising inmate population, and reopening failed private prisons, which have been very problematic in Kentucky in the past, is not the answer.

The reentry bill that passed the 2017 Kentucky General Assembly, while positive, is expected to make only modest reductions in the state’s inmate population. Broader reforms, which were under consideration and would have had a dramatic impact, did not make it into this year’s reform package. Meanwhile other criminal justice bills that did pass will worsen the problem by increasing sentences.

In order to address these issues — including the high costs to the state — Kentucky needs to move forward with criminal justice reforms that will do more to reduce the state’s growing inmate population.

 

Any Way You Slice It, A Shift To Consumption Taxes Will Hurt Kentucky

There are two main reasons why shifting from income taxes to sales taxes would be bad for Kentucky:

  • Doing so would make our tax system more regressive than it already is (asking lower- and middle-income families to pay an even larger share of their income in taxes to pay for tax cuts for higher-income families;) and
  • The shift would further reduce revenue growth that is needed to meet our obligations and invest in our schools, infrastructure and other building blocks of thriving communities.

These consequences of upside-down tax shifting are related. When you give huge income tax breaks to people for whom income is growing rapidly and rely more on the sales tax – which disproportionately impacts middle- and low-income families struggling to make ends meet in our top-heavy economy – you shift from imposing taxes on a revenue stream that is growing rapidly to a revenue stream that is not. If revenue doesn’t grow with the economy, additional tax increases or budget cuts will likely be necessary in the near future. And Kentucky’s revenue system is already regressive with the wealthiest 1 percent of Kentuckians paying only 6 percent of their income in total state and local taxes – the least of any income group:


One example of an extremely regressive policy – taxing groceries – has been mentioned recently in conversations about what might be included in a tax proposal from Governor Bevin. Adding groceries to the sales tax base would ask 10 times more as a share of income of families in the poorest 20 percent of incomes compared to the wealthiest 1 percent.

Pair the grocery tax with an income tax cut – even one that “broadens the base to lower rates” – and the shift becomes even more regressive. The chart below illustrates the impact of:

  • Adding groceries to the sales tax base at 6 percent (fiscal impact: +$588 million).
  • Eliminating itemized deductions and the pension exclusion and compressing income tax brackets and rates to a flat 4 percent tax (fiscal impact: -$594 million).

This shift would be a tax increase for the bottom 80 percent of Kentucky households and a tax cut for the top 5 percent. For the very wealthiest 1 percent whose average income is $1.2 million, the tax cut would average $11,457. In other words, this initially revenue neutral income-to-sales-tax-shift would pay for a huge cut at the top by taxing everyone else more. For the reasons mentioned above, it would also stifle revenue growth down the road.

The example above alters both the sales tax and income tax bases, as well as the income tax rate structure. A simple rate cut to the income tax and hike in the sales tax would also constitute a shift from the wealthy onto everyone else. The next chart illustrates the initially revenue-neutral tax shift that would occur if legislators:

  • Remove the top two income tax brackets and rates so that the top rate is 5 percent on income over $5,000 instead of 6 percent over $75,000 (fiscal impact: -$554 million).
  • Increase the sales tax rate from 6 percent to 7 percent (fiscal impact: +$559 million).

In the absence of detailed proposals to shift taxes like those illustrated above, some advocates of a consumption-based system use the fact that a larger share of Kentucky’s General Fund revenue comes from the individual income tax (42 percent) than the sales tax (33 percent) as a reason to claim a shift is needed. That is certainly a specious argument if the goal is to fund pension liabilities and invest in our other needs; stronger income tax growth has protected Kentucky from even deeper budget cuts than have already occurred over the last decade. And as in the examples above, a revenue shift is a tax shift from the wealthy to everyone else. For example, if half of Kentucky’s income tax revenue were replaced with sales tax revenue, families in the bottom 20 percent would pay about 2 percentage points more of their income in taxes, while the top 1 percent of Kentuckians would pay about 2 percentage points less, for a tax break at the top of about $16,000.

Governor Bevin has even expressed interest in eliminating the income tax, which if replaced initially with sales tax revenue would be a tax cut for the very wealthiest 1 percent of Kentuckians averaging more than $30,000 a year.

According to ITEP, replacing all of Kentucky’s income tax revenue with sales tax revenue would require an increase in our sales tax rate to 13.3 percent – more than double the current 6 percent rate and by far the highest state sales tax rate in the country (next highest is California at 7.5 percent). But since a shift would slow revenue growth, the initially revenue-neutral impact would become increasingly negative over time, leaving legislators to choose between raising the sales tax rate even higher, increasing other taxes and/or cutting funding for schools, child welfare and other investments. In states that have experimented with tax-shifting, income tax cuts have not paid for themselves, but have led to education funding cuts, credit rating downgrades, and the need to raise other revenue sources.

The bottom line is that weakening our income tax and relying more on sales tax is a regressive and revenue-slowing tax shift – not tax reform. Instead of undermining the income tax, we should be protecting and strengthening our overall tax system by cleaning up tax breaks for powerful interests. That’s the only way for Kentucky to sustainably meet obligations and invest in an educated workforce, healthy families and strong communities.

Critical Poverty-Reducing Programs at Risk in Upcoming Trump Budget

News reports suggest President Trump’s full budget proposal, slated for release next week, will include deep cuts to federal safety net programs that provide crucial supports for low-income Kentuckians and help boost our economy in hard times. These cuts to so-called mandatory programs (meaning spending is determined by how many people are eligible) are on top of expected cuts to important non-defense discretionary programs we wrote about previously and were targeted for cuts in President Trump’s initial “skinny budget” proposal in March.

Safety net programs potentially at risk provide what is often temporary assistance during downturns for our most vulnerable Kentuckians, many of whom are children, and improve the economy by injecting dollars in communities when they are needed most.

Supplemental Nutrition Assistance Program (SNAP)

In 2016, 644,659 Kentuckians received SNAP assistance, formerly known as food stamps.

SNAP helps low-income Kentuckians who are out of work or earn low wages afford basic food needs. Since SNAP is designed to be responsive to economic downturns, the number of program participants increased during the Great Recession but has declined in recent years, although it remains a lifeline for people and parts of the state that continue to struggle.

More than 68 percent of SNAP participants in Kentucky are in families with children, and more than 38 percent are in families with members who are elderly or have disabilities; more than 36 percent are in working families that still struggle to put food on the table. The average monthly SNAP benefit for each household member is $123, and the average SNAP benefit per person per meal is $1.36.

SNAP protects families from hardship and hunger, and has been shown to improve children’s health and performance in school and lead to improved long-term health and economic outcomes especially for those who receive SNAP as children. SNAP also serves as an economic stimulus in our state. Between 2009 and 2012, SNAP kept 164,000 people out of poverty in Kentucky, on average. According to Moody’s Analytics, in a weak economy a dollar in SNAP benefits generates $1.70 in economic activity; SNAP benefits pumped about $981 million into our state’s economy in 2016.

Supplemental Security Insurance (SSI)

In 2015, 184,103 Kentuckians received SSI benefits.

SSI provides income support for individuals who are disabled or elderly and have little income and few assets. It is a lifeline for very low-income families caring for children with severe disabilities — including Down Syndrome, cerebral palsy, autism, intellectual disability and blindness. SSI provides financial support to these families that, due to the demands of caring for a child with a disability, face higher costs and more demands on their time. Since eligibility requires both disability status and low incomes and assets, the program is responsive to economic downturns just like SNAP, with participation in the program increasing as poverty rates rise — as during the Great Recession — and decreasing when the economy improves.

Without SSI, many more Kentuckians with disabilities would be in poverty; the program has been shown to lift half of otherwise poor child beneficiaries out of poverty and is also very effective in reducing deep poverty.

Supplemental Security and Disability Insurance (SSDI)

In 2015, 206,175 Kentuckians received SSDI.

SSDI provides vital support to Kentuckians — typically those over the age of 50 — whose careers are cut short due to a severe medical impairment. As noted in a recent research brief disputing assertions about SSDI made by President Trump, “By law, SSDI requires a solid work history, a severe and long-lasting impairment that prevents self-supporting work and is documented by medical evidence, and a five-month waiting period.” Fewer than 4 in 10 applicants are awarded SSDI benefits. The typical SSDI benefit is $1,050 a month. Those receiving SSDI switch to Social Security retirement benefits at age 66.

Medicaid

Medicaid provides health care coverage to a total of 1.4 million Kentuckians, including children, according to the most recent Kentucky Cabinet for Health and Family Services data. Of that total, just under 470,000 qualify for Medicaid under the state’s expansion of eligibility requirements, which would effectively end under the version of the American Heath Care Act (AHCA) that recently passed the U.S. House of Representatives. The cuts to Medicaid expected in President Trump’s full budget proposal would be on top of already terribly damaging cuts included in the AHCA.

Medicaid helps provide important preventive care services and substance abuse treatment to low-income Kentuckians, and makes important economic contributions to the state economy as well. Medicaid provides health care coverage for 38 percent of Kentucky children, and 44 percent of all births in our state are paid for by Medicaid. As with other safety net programs, as low-income Kentuckians’ economic situations improve they cycle off Medicaid — and our state Medicaid rolls reflect this “churn.”

Kentucky has much at risk in federal budget negotiations. In addition to the safety net programs highlighted above, President Trump’s budget could include cuts to mandatory federal spending for child nutrition programs and Pell grants that help low-income Kentuckians attend college. These cuts will be considered along with enormous tax cuts for the wealthy, which Bob Greenstein with the Center on Budget and Policy Priorities calls “a radical version of Robin Hood in reverse.”

Many Might Lose Coverage if Ky. Charges Medicaid Premiums, Study Suggests

Kentucky Has Nation’s Most Rural Medicaid Expansion Enrollees, and AHCA Would Take That Away

For largely rural states like Kentucky, the Affordable Care Act (ACA) was a major boon for health coverage. There are 223,700 rural Medicaid expansion enrollees in Kentucky, more than any other state according to a new report by the Center on Budget and Policy Priorities. Fully half of Kentucky’s expansion population lives in a rural area, compared to 15 percent of expansion enrollees across the country. But the American Health Care Act (AHCA) puts those rural gains, and much more, in jeopardy.

The coverage gains Kentucky’s rural communities have experienced are helping them face major health challenges. The state’s rural areas have been hard hit by the opioid epidemic, and Medicaid has played a critical role in providing drug treatment. In fact, according to a study tracking the ACA implementation in Kentucky, Medicaid funded drug treatment grew over 500 percent after the state expanded eligibility.

People who live in rural areas also face higher risk of death from conditions like cancer, heart disease and chronic lower-respiratory disease. But studies have shown that Medicaid expansion enrollees in Kentucky are receiving the treatment critical to improving health. A Harvard School of Public Health study found that after Medicaid expansion low-income adults in Kentucky and Arkansas were likelier to have a primary care physician, receive routine care for chronic conditions, and be screened for things like cancer and diabetes than in Texas, which did not expand Medicaid.

The high share of coverage gains that are rural means rural hospitals have also seen disproportionate benefit from expanding Medicaid. According to the Kentucky Cabinet for Health and Family Services, in the first two years of expansion rural hospitals received 300 percent more in Medicaid expansion payments than their Disproportionate Share Hospital Payments (the income source that helped compensate for indigent care before the ACA). Urban hospitals, in comparison, saw a 250 percent increase.  This lines up with the experience of rural hospitals nationally:

  • Rural hospitals saw a 4 percentage point increase in their operating margins since Medicaid expansion compared to a 1 percentage point increase among urban hospitals.
  • Most of the 78 rural hospitals that have closed since 2010 were in states that didn’t expand Medicaid.

The AHCA effectively eliminates Medicaid expansion and permanently cuts traditional Medicaid. Combined, these cuts represent a $16 billion funding shift to the Kentucky state budget over 10 years, ending coverage for the 470,000 Kentuckians under Medicaid expansion and threatening coverage for nearly 1 million others covered through traditional Medicaid.

Of the Kentuckians who buy their coverage through the ACA marketplace, 45 percent live in rural areas, and they would also be disproportionately hurt by the AHCA. Rural Kentuckians in the exchange would see premiums rise dramatically – especially enrollees who are older and earn less. For example, a 60 year old Pike County woman earning $20,000 a year would see her premiums rise $6,140, while in Fayette County her premiums would rise $2,550. Also, the AHCA eliminates help with paying out-of-pocket costs, which will hurt rural residents who often require more care due to poorer health.

The AHCA is dangerous for hundreds of thousands of rural Kentuckians covered by Medicaid and through the marketplace, and for rural hospitals that have seen their finances dramatically improve. For rural parts of the commonwealth already experiencing economic hardship, it’s a blow they cannot afford to take.