For most families, getting a raise or new job is a reason to celebrate. For families on public benefits, however, an increase in income is often met with anxiety around how their benefits will be impacted by the benefits cliff.
The benefits cliff refers to a sudden decrease in public benefits as a result of an increase in earnings. This loss in benefits often leaves families worse off financially, even though they are making more money at work.
House Bill 7 of 2022 commissioned the creation of the Benefits Cliff Task Force, which met throughout the interim to study the benefits cliff and ways to mitigate its impact on families and the workforce. This committee released its final findings and recommendations last month, providing the Kentucky legislature with a guide to addressing the benefits cliff in the 2023 legislative session.
Among the task force’s findings was that the benefits cliff is a very real problem for both Kentucky families and the workforce. For many low-income families, turning down a raise or a promotion is a financially sound decision to make, as the rigid income requirements of public benefit programs mean that even a $2 or $3 dollar an hour raise can mean a significant loss in benefits. As illustrated in the chart, a $4,000 increase in income can cause a family of three to lose $10,000 in benefits, including the child care that allows them to work.
To mitigate this cliff’s effect on families and the workforce, the task force recommended:
- Reviewing all public benefits programs to identify flexibilities that may reduce the benefits cliff, such as tiering benefits or increasing earned income deductions.
- Conducting a study on the cost of maintaining pandemic-era changes to the Child Care Assistance Program, such as increasing eligibility, extending eligibility to child care workers, and waiving copays.
- NOTE: This was also a recommendation of the Early Childhood Education Taskforce
- Integrating a user-friendly benefits cliff calculator into all public benefits outreach and support efforts, including the Kynect benefits portal.
- Increasing outreach and tax filing support programs for families who are eligible for the federal Earned Income Tax Credit.
- Creating new public-private partnerships that help reduce the impact of the benefits cliff.
In the 2022 Legislative Session, legislators committed to understanding and mitigating the impact of the benefits cliff on Kentucky families. The Benefit Cliff Task Force’s report gives the legislature a roadmap to do just that into 2023 and beyond.
Leave A Comment