What a new GAO report could mean for social program spending

The Government Accountability Office recently released a seemingly obscure report that could have important implications for the federal-state partnership on social programs in the years ahead. 

The report has a title only a wonk could love: “Child Support Enforcement: Departures from Long-Term Trends in Sources of Collections and Caseload Reflect Recent Economic Conditions.” It tracks how states responded to federal funding changes in the child support enforcement (CSE) program as a result of the Deficit Reduction Act of 2005. That law closed a loophole that previously allowed states to claim federal matching payments when they spent federal child support incentive dollars. That sort of double dipping – getting a second federal dollar for spending a first federal dollar – made no sense. The loophole was closed in 2007, and starting in 2008 states were to get only the incentive payments, not the matching funds for spending them.

Experts predicted trouble ahead. For example, in estimates widely cited by reform opponents, the Congressional Budget Office predicted the change would be followed by both lower spending on CSE activities and smaller child support collections. Fortunately, GAO found that after the policy change “collections increased to reach their peak in 2008, the year the incentive match was eliminated and total CSE expenditures increased slightly.”

Why? Because child support enforcement, like so many programs, is a two-way street. States can and do make proper judgments about the right amount to invest to serve families in need. What actually happened when Congress closed the double dipping loophole is that states ramped up their own spending on the program. That not only prevented a decline in overall child support spending, it resulted in more child support collections than before – when states relied more heavily on federal funds. 

Bolstering that fact is what happened next. Democrats’ 2009 stimulus law re-opened the double dipping loophole in 2009, increasing federal spending.  But states cut their own spending, and as a result overall spending and child support collections actually fell.

See a pattern?  When experts predicted federal cuts would lead to lower spending and worse outcomes, states stepped up, spending rose and outcomes improved. Then when experts figured more federal spending would lead to more spending and better outcomes, states backed off, spending fell and outcomes dropped.

Granted, two years is not a definitive story. But the broader lesson – that states, with the right incentives, can make proper decisions about social programs – is an old one, but one that bears repeating. Welfare reform in the 1990s challenged states to engage welfare recipients in work and other activities, and it succeeded in driving down dependence and poverty. But part of the reason it worked is because states had an increased financial stake in achieving the better outcomes – if welfare caseloads shrank, states could save some of their own money, and could even save federal welfare dollars for rainier days to come.

But the story doesn’t end there. Consider the current array of major social programs designed to help the needy, and the share of their benefit spending that came from federal sources in 2009. Medicaid total spending was about $381 billion, with 66 percent from federal sources. The Supplemental Security Income (SSI) program spent nearly $51 billion, with 91 percent from federal funds. And the food stamps program is fully federally-funded, spending over $50 billion in benefits1.

Do states have much incentive to prevent food stamp fraud when 100 percent of the money comes from federal sources? Of course not. Yet, if you listen to some advocates, you might think the only way to really help the poor is to increase federal spending on social programs. Meanwhile, the federal debt is already above $14 trillion, which is not only a fiscal problem, but a serious threat to national security. 

GAO’s report about child support funding suggests we should take a broader look at the division of labor on these and other social programs, and ask whether federal and State actors are bearing the proper loads. As we have seen, too much federal spending crowded out state spending and accountability for the child support program, reducing its effectiveness. It’s time to ask whether the same holds true for other social programs as well. 

1 Sources: 2010 Actuarial Report on the Financial Outlook for Medicaid, https://www.cms.gov/ActuarialStudies/downloads/MedicaidReport2010.pdf; Supplemental Nutrition Assistance Program Participation and Costs, as of January 31, 2011, http://www.fns.usda.gov/pd/SNAPsummary.htm; State Assistance Programs for SSI Recipients, January 2010, http://www.ssa.gov/policy/docs/progdesc/ssi_st_asst/.

Rep. Geoff Davis (R-Ky.) is a member of the Ways and Means Committee and the Chairman of the Human Resources Subcommittee.