“Federal Tax Cuts and Jobs Act” could trigger automatic program cuts across the board and what that means for Californians

Blog post Cathy Senderling-McDonald

Abused and neglected children, persons with developmental disabilities, families facing extreme poverty and the elderly all stand to see negative consequences from the passage of the Republican tax bill first hand in California, though not in the way people may think.

Up to now, most discussion of the Republicans’ tax package has centered on the contents of the bill itself – in particular, the extent to which it aids higher-income taxpayers at the expense of the rest of us. Much less has been made of an obscure law that will force massive cuts across a multitude of programs, including many that help the same middle- and lower-income taxpayers who won’t see much benefit from the bill to begin with. This double whammy deserves our attention, and our derision.

The pay-as-you-go-rule, or PAYGO, requires Congress to ensure legislation costs are paid for in the bills they pass. Otherwise, programs championed by both parties across the entire spectrum of government spending will see automatic cuts. If this tax bill is passed and signed into law, PAYGO will be activated, and a wide swath of programs –  ranging from Homeland Security and farm aid to housing, Medicare and programs to help middle and low-income families – will all be on the chopping block. The numbers are so large that the result likely would be worse than simply a cut to these programs’ budgets; entire programs could potentially get the axe to cover the tax bill’s massive outlays. 

The latest version of the Republican tax bill, the Tax Cuts and Jobs Act, was just publicly released on Friday, but it’s already clear the compromises made will not offset the negative consequences of driving up the national deficit. Although the final calculations are not yet complete, this version is not far removed from the previous versions, which, according to the Congressional Budget Office, would have triggered automatic cuts equaling $136 billion dollars each year to many critical programs. According to multiple credible sources, the latest version of the tax bill will still increase the national deficit over the next 10 years by about $1 trillion, meaning the bill would still trigger the PAYGO requirement’s automatic cuts to many federal programs utilized by states and counties to serve their constituents.

With a Christmas deadline for the vote, it’s imperative to draw attention to the widespread ripple effects of proposed tax cuts that already disproportionately benefit the wealthiest Americans and corporations. The offsetting PAYGO cuts will further hurt the most vulnerable populations in California and beyond. The state of California and its counties rely on hundreds of millions of federal funds at risk of PAYGO cuts. Many of these programs fund services to improve child and family well-being. The only way to fix the PAYGO problem if the tax bill passes as-is? Pass another bill that suspends PAYGO. While Senator Susan Collins received assurances this will happen prior to voting for the Senate version of the bill, the vote on such a bill is far from certain in this Congress.

Below is a brief look at what programs are at stake if this bill triggers automatic cuts.

Social Services Block Grant:

The state receives $191 million annually from the SSBG, a fund that has been targeted for reduction and outright elimination several times in recent years by Republicans in Congress. States and counties nationwide use these flexible funds to serve needy communities, such as persons with disabilities, seniors, and abused and neglected children and their families. California primarily spends its SSBG funding on services to persons with developmental disabilities, many of whom also are served by the foster care system or the In-Home Supportive Services program, both county-run. The state also spends $37 million in SSBG funds each year on licensing activities for facilities that serve vulnerable adults and children, and another $3 million on services to the deaf.

If these funds are lost, the state will need to backfill the sizable hole with General Fund dollars. This means fewer state dollars available for other vital services provided by the state and counties throughout our communities.

Promoting Safe and Stable Families:

California receives $31.4 million annually from the federal government for PSSF activities. These dollars go to county child welfare departments and allow them to better support family preservation, promote adoption and guardianship, prevent child abuse and neglect and help foster children transition to adulthood. These funds also go toward increased caseworker visits to children placed with relatives or foster parents, which can be critical for early intervention when issues arise. These funds help to keep children from going into the foster system by preventing mistreatment among vulnerable and at-risk families. PSSF dollars help counties build capacity to address the problems facing families whose children have been placed in foster care, with the goal of safely reuniting them.

The latest tax bill would put at least a portion of this grant, and potentially all of it, in jeopardy. The services needed by children and families could be reduced or, as with the SSBG, the lost funds would need to be backfilled, tying up funds that could be used for other critical programs to help California families.   

CalWORKS and CalFresh:  

Neither the Temporary Assistance to Needy Families block grant, which funds California’s cash assistance and welfare-to-work program, CalWORKs, nor the Supplemental Nutrition Assistance Program, which funds the CalFresh nutrition assistance program, are slated for elimination under PAYGO, but a portion of their funding will be subject to cuts. To the extent that federal funding reductions for these programs translate into cuts to California’s available funding, it could result in delayed eligibility determinations for needy Californians seeking help from these programs.

Make your voice heard

Contact your congress person today and ask that the tax bill be delayed until the negative consequences are mitigated, and legislation is agreed to that will suspend the PAYGO cuts to vital programs serving our neediest citizens. Congress could vote on this bill as soon as today.

You can find your representative here and simply call (202) 224-3121 to be connected.