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Debt Ceiling Deal's Impact on Community Action Programs and Clients

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Over the past few months, conversations about the debt ceiling and the United States defaulting on loans have dominated news cycles and kitchen table conversations. With a deal now in place, it is important to look at the impact this deal will have on Community Action clients and programs.

Earlier iterations of a debt ceiling deal included harmful language that would have created work requirements for Medicaid, known as Medical Assistance in Minnesota. Thankfully, the final version of the negotiated deal does not include any changes or additional requirements to the Medicaid program, which would have prevented many Minnesotans with the lowest incomes from accessing health care.

The details of the final negotiated deal, which passed the U.S. House of Representatives on Wednesday, May 31, 2023 and will likely pass the Senate later this weekend, are below:

  • Freeze all discretionary spending at the federal fiscal year 2023 budget levels. This includes Community Action programs like the Low-Income Home Energy Assistance Program, the Weatherization program, Head Start, and the Community Services Block Grant. Although this means these programs will not see any growth in the coming two federal budgets, earlier proposals would have frozen discretionary domestic spending at lower levels.
  • Change work requirements for Supplemental Nutrition Assistance Program (SNAP). Excitingly, the deal actually removes all work requirements from veterans, people who are experiencing homelessness or are unsheltered, and people 18-24 years of age who recently aged out of foster care. This will increase access to SNAP for these populations. At the same time, the bill increases the age of SNAP work requirements for non-exempt adults from 49 to 54 years of age by next fall. These adults need to work a minimum of 20 hours per week to maintain their benefits, and can only be unemployed for three months out of every 36 months or else risk losing their benefits.
  • Change to Temporary Assistance for Needy Families (TANF) work requirements. Federal law requires 50% of each state’s TANF- known as the Minnesota Family Investment Program or MFIP- recipients need to be working. As caseloads go down, states can reduce the work requirement percentage by the amount case loads have decreased since the year 2005- meaning if a state has reduced caseloads by 20% since 2005, the work requirements are also reduced by 20% to 30% of all TANF recipients. It is very weedy policy, but it helps ensure more people with low incomes have access to MFIP. But, the debt ceiling debate will recalibrate this calculation and set the benchmarking year at 2015. This will result in higher work requirement standards and fewer people benefitting from TANF, as estimates show states will not be able to meet the new, higher work requirement thresholds.