Category: Report

MacArthur Amendment to American Health Care Act Would Cause Even More Harm to New Jersey

Posted on by Raymond Castro

To read a PDF version of this report, click here.

Rep. Tom MacArthur of New Jersey’s 3rd Congressional District – the only member of the state’s Congressional delegation who supported the first iteration of the American Health Care Act – has now resurrected the bill with a new amendment that retains all the worst elements of the original plan to repeal and replace the Affordable Care Act and sharply reduces protections for pre-existing conditions and other health benefits.[1]

New Jersey Still Harmed Much More Than Most Other States

Because the MacArthur amendment leaves most of the previous bill intact, in New Jersey the proposal would still cause:

  • About a half million New Jerseyans to lose their health insurance[2]
  • The phase-out of the Medicaid expansion, which would eliminate coverage for 562,000 residents and sharply reduce federal funds for the state’s budget
  • Reduced health care for up to 1.8 million New Jersey seniors, people with disabilities and children due to a permanent cap on federal Medicaid funds that would reduce funding to New Jersey by 20 percent, the largest reduction in the nation
  • An average $2,740 increase in out-of-pocket health care costs for 250,000 residents who have purchased insurance through the Marketplace, which would end coverage for many of them[3]
  • Increased income inequality due to major tax cuts for 164,000 of New Jersey’s highest income households, including millionaire and billionaire residents
  • The loss of tens of thousands of jobs with the loss of over $30 billion in federal funds over ten years
  • A major financial threat to New Jersey’s hospitals

Amendment Also Guts Protections for Pre-Existing Conditions

The MacArthur amendment to the bill poses an even greater threat to New Jersey because it eliminates key protections for people with pre-existing health conditions and marks a return to the highly-flawed, discriminatory pre-ACA individual insurance market.

In practice, the amendment means that millions of people with pre-existing conditions could no longer afford coverage, women would likely be charged more than men for insurance, and plans could once again come with annual and lifetime limits on coverage – violating promises President Trump and many Republican legislators have repeatedly made to maintain these protections.

In New Jersey, there are an estimated 3.8 million non-elderly residents with pre-existing conditions. These New Jerseyans are found throughout the state, with hundreds of thousands in every Congressional District – including 307,100 in Rep. MacArthur’s district alone. In fact, a slightly higher share of Garden State residents in districts with Republican representatives (52.4 percent) have pre-existing health conditions than residents in districts with Democratic representatives (51.1 percent).[4]

Of these 3.8 million New Jerseyans, nearly half a million (476,800) are children – that means about one of every four Garden State kids (24 percent) have a pre-existing condition.CD table preexisting conditionsv2-01

High-Risk Pools Haven’t Worked in New Jersey or Other States

Dropping these protections for people with pre-existing conditions would lead to exorbitant premium increases for many New Jerseyans. The MacArthur amendment proposes the establishment of a federal or state high-risk insurance pools – which combine the sickest people and provide a public subsidy to the insurer to partially reduce cost sharing – to address this problem. But in reality, these pools would do little to help.

The experience of many states shows that these pools frequently do not work, and often allow the sickest people to fall through the cracks. These pools have come with enrollment caps, long waiting lists, unaffordable premiums, exclusions for pre-existing conditions, high deductibles, benefit caps and annual and lifetime limits on coverage. Moreover, they covered only several hundred thousand people nationwide and weren’t sustainable over time because they pooled sick people with even sicker people.[5]

High-risk insurance pools haven’t worked in New Jersey, either. In the first year of the ACA, the state created a pool (called NJ Protect) with the help of a $140 million federal grant. In the end, the pool ended up enrolling less than half of one percent of New Jerseyans who were estimated to be eligible (1,500 of 256,000 New Jerseyans)[6].

And high-risk pools aren’t even intended to help people with many of the most common pre-existing conditions like asthma, hypertension, or depression. These New Jerseyans would be left to navigate the individual market, where insurers could once again charge them higher premiums, offer them subpar coverage or some combination.

Amendment Also Allows Waivers That Could Harm Millions

The other dangerous changes the MacArthur amendment makes are through the state waivers process: the proposal would allow states to move forward with potentially damaging waivers with practically no oversight. In fact, states would receive automatic approvals for these waivers within 90 days, just by attesting that their purpose is to lower premiums, improve coverage levels, or “advance another benefit to the public interest.”

The first type of waiver allowed under the amendment would allow states to opt out of the ACA’s “community rating” requirements – which prevent insurers from charging people higher insurance premiums based on their health – so long as they create or participate in a federal high-risk pool.

This means insurers could once again discriminate against people based on their medical history. Insurers could increase premiums without limits for anyone with a history of cancer, hypertension, asthma, depression or other conditions. While insurers would still be required to offer coverage, the so-called protection would be rendered meaningless since insurers could offer coverage with such arbitrarily high premiums that the effect would be to deny coverage outright.

The amendment would also allow states to waive the ACA’s “Essential Health Benefits” requirement that requires individual and small group market health plans to cover essential services like inpatient, outpatient and maternity care, prescription drugs, mental health and substance abuse treatment.

The result would be to effectively end protections for those with pre-existing conditions by allowing insurers to drop coverage for everything from cancer treatment to high-cost drugs. This would discourage more sickly persons with high-cost health problems from enrolling. So the more than 130 million Americans – including nearly 4 million New Jerseyans – with pre-existing conditions often wouldn’t be able to find individual market coverage that covers their needs at any price, much less an affordable one.[7]

On top of that, waiving Essential Health Benefits would mean:

  • Women could again be charged more for coverage than men. While proponents claim that the MacArthur Amendment preserves the ACA’s ban on gender discrimination, eliminating Essential Health Benefit requirements means that women would have to pay more for plans that include maternity care and other key services – if they could find plans with those benefits at any price.
  • Plans could impose annual and lifetime limits on coverage – including for people who get health coverage through their jobs. The ACA prohibits plans from imposing annual or lifetime limits on coverage – but only on coverage for Essential Health Benefits. Plans can still impose annual or lifetime limits on services not classified as essential. If states are allowed to eliminate Essential Health Benefits standards, plans could once again impose coverage limits on anything from emergency services to inpatient care to prescription drugs.[8] This would also effectively end the ACA’s cap on annual out-of-pocket costs, as that limit is based on the services that are covered by the plan.

Before the ACA, 3.3 million New Jerseyans with private health insurance – most of whom had employer-based plans – had policies that imposed lifetime limits on coverage. Repealing Essential Health Benefit requirements could mean going back to a time when millions of people with health coverage were one major illness away from medical bankruptcy.

Amendment Offers No Protections for People with Pre-Existing Conditions, Just Smoke and Mirrors

Despite Rep. MacArthur’s claim that his amendment maintains some protections for people with pre-existing conditions,[9] in practice it clearly doesn’t.

  • Exorbitant premiums and coverage exclusions are no different than coverage denials. While insurers wouldn’t be allowed to deny coverage altogether to people with pre-existing conditions, they could offer plans that charge premiums of tens of thousands dollars per month and offer no coverage for hospitalizations, prescription drugs or various other basic health services.
  • Pre-existing condition protections would once again rely entirely on state options. While states could keep or impose protections if they choose, they have always had this option – but few exercised it prior to the ACA. And many states are likely to opt out if they can. Since the AHCA would sharply increase consumer costs by eliminating the individual mandate and slashing subsidies, states would be under substantial pressure to seek waivers.
  • High-risk pools are an inadequate substitute. High-risk pools have not worked in the past, and don’t even apply to people with the most common kinds of pre-existing conditions.

Endnotes

[1] The following is a summary of the amendment as reported by Politico: http://www.politico.com/f/?id=0000015b-8ab0-df96-a9db-dff115c30001

[2] New Jersey Policy Perspective, The ‘American Health Care Act’ Would Cause Nearly Half a Million New Jerseyans to Lose Health Coverage, March 2017.

[3] Center on Budget and Policy Priorities, House Republican Health Plan Would Mean More Uninsured, Costlier Coverage in New Jersey, April 2017.

[4] Center for American Progress, Number of Americans with Pre-Existing Conditions by Congressional District, April 2017.

[5] Kaiser Family Foundation, High-Risk Pools as Fallback for High-Cost Patients Require New Rules, January 2017.

[6] Rutgers Center for State Health Policy, Data for Planning a Temporary High Risk Health Insurance Pool In New Jersey, May 2010.

[7] Center on Budget and Policy Priorities, If “Essential Health Benefits” Standards Are Repealed, Health Plans Would Cover Little, March 2017.

[8] Brookings Institution, New Changes to Essential Benefits in GOP Health Bill Could Jeopardize Protections Against Catastrophic Costs, Even for People with Job-Based Coverage, March 2017.

[9] Rep. Tom MacArthur, About the MacArthur Amendment, April 2017.

The ‘American Health Care Act’ Would Cause Nearly Half a Million New Jerseyans to Lose Health Coverage

Posted on by Raymond Castro

To read a PDF version of this report, click here.

As House Republicans rush to “repeal and replace” the Affordable Care Act (ACA), it has become clearer how much their proposal would harm New Jersey. The non-partisan Congressional Budget Office analysis of the American Health Care Act projects a major increase in the number of uninsured Americans, deep cuts to Medicaid, higher insurance premiums and tax cuts for the wealthy and corporations.

The best way to understand the American Health Care Act is to see it as a vehicle to shift income from working and poor families to the wealthy and as part of the plan to shift federal spending from a broad range of domestic services to the military budget.

In fact, the proposed cuts in the Medicaid expansion and the marketplace alone would reduce or eliminate health coverage for millions, including half a million New Jerseyans in just the next three years. Meanwhile, 250 New Jersey millionaires would see their federal taxes reduced by an average of $57,000 a year – a $14 million break, all told – while thousands of low- and middle-income New Jerseyans would face 30 percent tax hikes as support for their health care premiums would shrink or disappear.

Republicans are doing more than replacing the ACA with this legislation: Their plan is to enact a radical agenda that will dramatically change how Medicaid is funded, with the eventual result of big cuts to medical assistance for seniors, people with disabilities, working parents and children. 

Nearly Half a Million New Jerseyans Would Lose Health Coverage

By 2020 under the American Health Care Act, about 476,000 fewer New Jerseyans would have health insurance than in 2015, due to the almost-certain end of the Medicaid expansion and other changes in the insurance marketplace, like a one-third reduction in premium tax credits for low-income New Jerseyans. (2015 has the latest and most reliable data for the uninsured, as supplied by the U.S. Census.) If anything, using that year underestimates the numbers of uninsured by 2020 since marketplace and Medicaid expansion enrollment increased in 2016 and 2017.

The result would be more New Jerseyans lacking insurance in 2020 than in 2013, before the ACA began insuring more residents – because there are 172,000 New Jerseyans who were on Medicaid before the ACA but would no longer be eligible since the state is in no financial condition to replace federal funding for Medicaid expansion with state dollars.

uninsured post ahca-01

Number of Uninsured Would Spike in All Congressional Districts

CD table uninsured-01All New Jersey Congressional districts would see major increases in the number of uninsured residents under the American Health Care Act. But the largest percentage increases would be in districts currently represented by Republican Congressmen (New Jersey has no Republican Congresswomen).

Taken together, the number of uninsured constituents by 2020 would increase by 74 percent in New Jersey’s five districts with Republican Representatives, a significantly higher jump than the increase of 58 percent in the state’s seven districts with Democratic Representatives.

The largest percentage increase in the number of uninsured would be in District 3, where their ranks would almost double (94 percent increase). In that district, 34,350 additional residents would become uninsured by 2020 on top of the 36,539 residents uninsured in 2015. The smallest increase was in District 8.

The main reasons for this difference are:

  • Democratic districts tend to have more residents who live below the federal poverty line who were already covered by Medicaid prior to the expansion
  • The marketplace includes more residents who work and have modest incomes who are disproportionately in Republican districts
  • Republican districts have lower uninsurance rates than in Democratic districts, so they see a bigger percentage increase when their residents are dropped from Medicaid and the marketplace 

New Jersey’s Successful Medicaid Expansion Would Be Jeopardized

The latest House Republican plan to replace the ACA includes drastic cuts in federal funding for the Medicaid expansion. This cut would likely result in many New Jerseyans losing their health coverage. If New Jersey’s economy and financial condition were stronger, the state could continue the expansion starting in 2020. However, if it were to maintain it at current eligibility levels, New Jersey would be on the hook for an additional $8.8 billion over the next decade. By 2027, New Jersey’s annual match would be five times higher ($2.1 billion instead of $461 million) than it would if the Affordable Care Act were continued. And these estimates are conservative since they assume no increase in enrollment over that time, such as would occur with the onset of another recession (inflated health care costs are factored in).

AHCA federal loss-01

Radical Restructuring of Medicaid Funding Would Harm New Jersey

New Jersey would also lose additional federal funding under the proposed Medicaid per capita cap. The bill would establish a dollar-amount cap on each person enrolled in Medicaid. The cap would be different for different types of enrollees (aged, disabled, children, and adults in the Medicaid expansion in 2016) and it would be adjusted annually by the federal index for health services prices (CPI-Medical).

The index’s increases will likely fall below what high-cost states like New Jersey need, helping to generate the federal savings needed to offset revenues lost by tax cuts to the wealthy and corporations. Most states will likely fall below the index in some years and above it in others. The Congressional Budget Office projects that the index for health costs will increase on average by 3.7 percent annually from 2017 to 2026, compared to a 4.4 percent increase for Medicaid costs – or a 19 percent higher rate. From 2000-2011, average per capita increases in New Jersey exceeded the CPI-M level for adults (7 percent) and children (5.1 percent). Using national averages almost always puts high-cost New Jersey at a disadvantage.

Since this is a national price index, it would not respond to state-specific health crises and patterns, like an infectious disease outbreak like Zika, a medical breakthrough or an opioid addiction crisis. In addition, while federal funding under a per capita cap would increase when additional residents were served – such as during a recession ­– the rate of federal reimbursement would be lower than a state would receive today. In other words, if more residents needed services during a recession it would still cost the state more ­- at the very same time when federal payments to states would be reduced.

Since states will not know their level of federal funding until the year before, long range planning will be very difficult, if not impossible. The federal government could also decrease the caps at any time. With federal Medicaid funding uncertain, states would likely spend less to stay within the caps, or cut services and/or reimbursement rates when the caps are exceeded. Because the caps are based on 2016 federal Medicaid expenditures, states would likely curtail Medicaid expenditures as soon as the bill is signed into law to avoid exceeding the caps in 2020 when they take effect. For example, if the state continues to expand services to opioid addicts, it runs the risk of increasing the average per capita cost for adults covered by the Medicaid expansion. Thus, by 2021 the state might easily exceed its cap with the state on the hook for all additional costs.

Currently there are more federal optional services (28) than required services (15). New Jersey has very comprehensive benefits and has opted for nearly all the services that are permitted. Some of these optional services that could be eliminated to reduce per capita costs include:

  • Prescription drugs
  • Home and community based services
  • Private duty nursing
  • Dental
  • Case management
  • Physical therapy
  • Hospice
  • Institutional services for the developmentally disabled and children

Reduced access to services

If a state decides to make up for steadily declining federal grants, it may focus its cuts on the most costly enrollment groups, thus putting New Jersey’s seniors and the disabled in the crosshairs since these two groups generate about three-quarters of all the state’s Medicaid spending. On the other hand, if the state decides to make the cuts based on the largest enrollment groups, children would be put at disproportionate risk, as they comprise over half of total enrollment.

medicaid breakdown-01

medicaid services breakdown-01

Instead of viewing Medicaid as an investment, the state would view it as threat to the budget and other priorities. Since total Medicaid funding would in effect become a shrinking pie, different groups in Medicaid would have to compete with each other for diminishing resources.

In addition to eliminating services, the state could also reduce reimbursement rates for services, some of which are already some of the lowest in the nation despite New Jersey’s health costs being among the nation’s highest (it should come as no surprise that just 38.7 percent of New Jersey doctors accept Medicaid patients, the lowest rate in the nation).

New Jersey would be penalized for its efficiencies in Medicaid

Proponents of capping federal Medicaid funding claim that states would have more flexibility to initiate efficiencies that would absorb any loss in federal funds. However, any additional flexibility in Medicaid in New Jersey would probably not help, because the state already implemented the most promising efficiencies under the flexibility of the current Medicaid program. Unfortunately, the federal dollars New Jersey has saved will be subtracted from the 2016 base year that will be used to calculate the state’s Medicaid funding in the future. In other words, the state would permanently lose those funds because it tried to make Medicaid more efficient and effective.

The following are some of the efficiencies that have been implemented—many with waivers approved by the federal government– which might not be available to New Jersey to absorb any future loss in federal dollars due to Medicaid caps:

  • New Jersey saved $2 billion in federal funding over five years under a comprehensive waiver that, among other things, placed the elderly in communities rather than nursing homes.
  • New Jersey is ranked sixth highest nationally in the percent of it Medicaid population in managed care (95 percent).
  • New Jersey operates three Accountable Care Organizations that focus on patient-centered quality and cost of care for Medicaid participants, one of the highest numbers in the country.
  • New Jersey is ranked 49th lowest nationally in fees to providers (mostly primary care physicians).
  • New Jersey is ranked ninth nationally in medical home participants.
  • New Jersey spends only about seven percent of its Medicaid dollars for administration, far lower than in the private insurance sector. 

Methodology

Increase in the uninsured

The estimated number of uninsured in New Jersey in 2013 and 2015 is from the American Community Survey. The 2020 estimate assumes that the state would not opt for the Medicaid expansion because of the high cost to the state and that, therefore, all of the 550,000 New Jerseyans currently enrolled in the expansion would lose their Medicaid.

The estimate that 172,000 of those New Jerseyans were participating in New Jersey Family Care prior to the Affordable Care Act is based on the New Jersey Department of Human Services’ response to the Office of Legislative Services for the 2017 budget. It is assumed that they would all become uninsured if made ineligible for Medicaid.

For the remaining individuals in the expansion it was estimated that 51 percent of them would not find alternative health coverage and therefore would become uninsured consistent with a 2015 RAND study (Trends in Health Insurance, 2013-2015) which estimated the number of individuals in the Medicaid expansion who did not have insurance prior to the Affordable Care Act.

To determine the number of the uninsured resulting from proposed changes in the insurance marketplace, New Jersey’s share of the national marketplace is applied to the Congressional Budget Office (CBO) national estimate for the number of individuals who will lose their coverage in the marketplace in 2019 and 2020. That number was reduced on the assumption that half of them would be able to find coverage elsewhere. The CBO national estimates of the number of uninsured from the marketplace decreases by 2027 which would also lower the number of the uninsured in New Jersey in that year. The projected increase in uninsured New Jerseyans is conservative because it does not take into account the likely decrease in employer-based coverage and other changes in the House Republican plan.

Congressional district impact

The share of adults enrolled in Medicaid in each district was calculated based on enrollment data for public insurance in the American Community Survey, which was applied to the number of persons statewide that would become uninsured as a result of the House Republican plan as described above. The share of adults in the marketplace in each district was calculated based on data provided by the Kaiser Family Foundation, Interactive Maps: Estimates of Enrollment in ACA Marketplaces and Medicaid Expansion, February 28, 2017 which was applied towards the statewide total of uninsured due to changes in the marketplace caused by the House Republican plan as explained above.

State cost for new Medicaid expansion

To determine the cost to New Jersey of maintaining Medicaid expansion should it elect to maintain coverage for those enrolled via Medicaid expansion, the total cost of the Medicaid expansion as estimated by the New Jersey Department Human Services for state fiscal year 2018 was increased by 4.4 percent annually as projected nationally through 2027 by the Congressional Budget Office cost estimates, American Health Care Act, March 13, 2017. Federal funds were calculated based on the 90 percent matching rate under current law. To determine federal funds under the House Republican plan, the federal funds were reduced to take into account the attrition rate for all individuals that were grandfathered in the expansion based on the attrition rate estimated by the Center and Budget and Policy Priorities. The remaining federal funds were calculated based on the 50 percent federal matching rate. The state matching rate under current law and the proposed House Republican plan were compared to calculate the additional state cost.

As written, the American Health Care Act appears to require that if New Jersey wants to continue receiving a higher federal match for individuals in the Medicaid expansion as of 2020, the state must also accept all newly eligible individuals at the lower match of 50 percent. Our cost estimates assume that scenario. However, if the state decides that it cannot afford the lower match it could also decide not to elect the Medicaid expansion in which case everyone would become ineligible in 2020 and the state would lose about $3 billion annually it currently receives in federal funds.

However, the current interpretation is that the intent of this legislation is to allow the state more flexibility in this option and allow it to 1) not accept any new enrollees and let the grandfathered cases remain in Medicaid at the 90 percent federal match until they leave; or 2) accept a narrower category of new enrollees. For example, New Jersey could make eligible the 172,000 parents and childless adults who were eligible for Medicaid prior the ACA. However even with this more liberal interpretation, it would cost the state hundreds of millions of dollars depending on how they define this new eligible category.

Blueprint for Economic Justice & Shared Prosperity

Posted on by NJPP Staff

From the President

For more than 20 years, New Jersey has been on a downward economic and financial slide. Our middle class is shrinking. Poverty is rising. The state government is effectively bankrupt. We’re dangerously close to hitting rock bottom.

The next governor is New Jersey’s last, best chance to slow the state’s collapse, restore its stable financial foundation and rebuild its enterprising, job-creating, wealth-producing economy.

How did we get here?

The Jersey Slide began with a familiar false premise: cut taxes, and the savings will stimulate economic activity and increase state revenues. Hence a 30 percent cut in income tax rates in 1994, which produced immediate declines in state support for property tax relief and set off a two-decade chain reaction of gimmicks to hide the damage.

Gimmicks like slashing the state’s payments for public employees’ pensions and retiree health benefits enough to make up for revenues sacrificed to the tax cuts. Like granting local governments a pension payment “holiday” to keep property taxes from spiking.

And, in a damning blow, borrowing almost $3 billion to cover the state’s share of pension costs for two or three years – sticking unknowing future taxpayers with the very large repayment bill.

Along the way, a bipartisan cast of governors, legislators and justices ignored the urgent warnings of financial experts, and violated state constitutional protections intended to safeguard against precisely these types of abuses. Because the constitution is clear: you can’t spend money in the annual budget that isn’t raised in the same year, and you can’t borrow money long term without voter approval.

Now the chickens are coming home to roost. The games and gimmicks must stop. It’s time for truth telling, and courageous action.

I understand the challenge. I’ve run for office five times and participated in numerous campaigns. Not once has someone come up and asked: “Gee, my taxes are pretty low, can you do something to raise them?”

But people’s concerns about the taxes they pay often mask concerns about how their taxes are spent:

• “Potholes cost me $800 for new tires.”
• “I thought public colleges were supposed to be affordable.”
• “The high school cut my kid’s band class.”
• “The district said it’s not safe for my kid to drink water from the tap.”

These complaints lay bare a fact that’s been too-long neglected by our political leadership: Residents want New Jersey’s enviable assets to be properly maintained. People understand that investments in the assets we all share are paid for by the taxes we all pay – taxes that should be levied in a fair and equitable way.

The idea that the state needs to protect and invest in its assets is what drove New Jersey’s thriving economy from the 1960s into the early ‘90s. Those were the years when the state invested strategically in public transportation; in public colleges and universities; in preserving open space; in protecting the environment; and beyond. The state’s robust opportunities and vibrant communities attracted striving immigrants from around the world, who in turn fostered further economic growth. The result: New Jersey transformed itself from a fading industrial state into an enterprising, prosperous and stable state with a robust middle class and a plentiful opportunity.

That was then. The picture is starkly different now. After ten credit downgrades in seven years, New Jersey ranks 49th among the 50 states for creditworthiness. Our once robust biotech and pharmaceutical industry is being lured to states that are accelerating – not slashing – public investments in innovation centers like university hubs. Inequality is at historic highs. In this high-cost state, which never bounced back from the Great Recession, New Jersey’s working families are finding it harder than ever to make ends meet and give their children opportunities to advance.

Here’s the good news: New Jersey still has enviable assets. And it’s not too late for new leadership to stop the state’s downward spiral. No candidate should promise that it’ll be easy or painless to restore New Jersey as an engine of enterprise and opportunity. Nor should anyone suggest that one term as governor or as a legislator will be sufficient.

But big ideas, carefully planned and plainly explained, are the starting point.

That is the work of New Jersey Policy Perspective, and specifically, this Blueprint.

– Gordon MacInnes, President

To read the Blueprint, click here.

Repealing the Affordable Care Act Would Devastate New Jersey

Posted on by Raymond Castro

 

ACA repeal main-01

Imagine, in 2019: 58,000 Hudson County residents losing Medicaid coverage. 19,000 Ocean County residents losing access to Marketplace insurance plans. 22,000 Bergen County seniors losing invaluable prescription drug coverage. $350 million in lost federal funds in Middlesex County. 48 deaths in Union County.

In county after county, the numbers are clear: repealing the Affordable Care Act (ACA) without an adequate replacement would devastate New Jersey.

The greatest harm would be caused by repealing the Medicaid expansion, which would terminate health coverage for about 550,000 low-income New Jerseyans and cost the state about $3 billion in federal funds each year. Despite threats by Congress and the President to end the Medicaid expansion, participation increased by another 12,000 in the enrollment period ending last month, demonstrating the urgent need for this coverage. In addition, up to about 300,000 New Jerseyans who signed up for a plan in the Marketplace would lose their coverage, and with it a billion dollars in federal funds that pay for premium subsidies to make insurance affordable. That is a total $4 billion loss to New Jersey which would result in an estimated loss of about 86,000 jobs and 84 deaths due to lack of insurance.

Both of those cuts affect mostly working New Jerseyans who are struggling to get by in a state with one of the highest costs of living in the nation, but the elderly would also be harmed by the proposed repeal of the ACA. For example, seniors have benefited from the closing of the gap in prescription drugs in Medicare, often referred to as the “donut hole.” Over 200,000 seniors would lose this assistance that enables them to pay for prescriptions that are often life-saving. If this benefit is eliminated the average senior would have to pay $1,241 more each year which would force them to choose between paying for their medications or rent.

Click here for the impact in each county:

Atlantic | Bergen | Burlington | Camden | Cape May | Cumberland | Essex | Gloucester | Hudson | Hunterdon | Mercer | Middlesex | Monmouth | Morris | Ocean | Passaic | Salem | Somerset | Sussex | Union | Warren

Methodology

Medicare Donut Hole

Each county’s share of annual enrollment for all Medicare prescription drugs from The Centers for Medicare and Medicaid Services’ Yearly Medicare Enrollment Counts State and County (2015) was applied towards total persons receiving Medicare donut hole coverage in New Jersey and the total federal expenditures in New Jersey from the U.S. Department of Health and Human Services’ Compilation of State Data on the Affordable Care Act (2015).

Marketplace

Total enrollees taken from the U.S. Department of Health and Human Services’ Plan selections by County and Zip Code in the Health Insurance Marketplace (March 2016), and lost federal funds were calculated based on total subsidies received (adjusting for inflation) using the March 2015 and March 2016 Centers for Medicare and Medicaid Services’ Effectuated Enrollment Snapshot, applied towards the number of estimated participants in the Marketplace for each county.

Medicaid Expansion

Number of adults enrolled in the expansion taken from New Jersey’s Division of Medical Assistance and Health Services’ NJ FamilyCare enrollment website (January 2017), and the prorata share of enrollment in each county was applied towards the total federal funds for the Medicaid expansion estimated for state fiscal year 2019 by the New Jersey Department of Human Services in Discussion Points prepared for the Office of Legislative Services for the fiscal year 2016 Budget, adjusted to take into account higher enrollment in January 2017.

Jobs and Deaths

To estimate the number of jobs lost, the county share of total federal funds lost was applied to the estimated total jobs lost in The Commonwealth Fund’s Repealing Federal Health Reform: Economic and Employment Consequences for States (January 2017). The death rates for uninsured are based on Health Insurance and Mortality in US (December 2009), with the death rate applied to the total number of uninsured due to ACA as estimated in the same Commonwealth Fund report. Estimated deaths are over a 12-year period (consistent with the Health Insurance and Mortality in US report). Deaths for each county were calculated by applying the share of persons losing benefits in the Marketplace and Medicaid in each county applied towards the total deaths in the state.

Increasing the EITC Will Boost New Jersey’s Workers and Their Families

Posted on by Jon Whiten

To read a PDF version of this report, click here.

Increasing New Jersey’s Earned Income Tax Credit (EITC) to 35 percent from 30 percent of the federal EITC will provide over half a million New Jersey working families with a much-needed bump in their take-home pay while giving the state’s economy a boost.

The state’s EITC supplements the federal EITC, an income tax credit for low-income working people that rewards work and boosts the pay of families across the country. Working families with qualifing children and earned incomes up to $53,505 (for married couples filing jointly and with three or more children in tax year 2016) are eligible for this tax credit; adults without children with earned incomes less than $14,880 are also eligible.

Working New Jerseyans are currently eligible to receive 30 percent of the federal credit received through the state EITC, which was created in 2000, rose to 25 percent in 2009, was cut to 20 percent in 2010 and was increased to 30 percent last year.[1] In 2013, the latest year for which state data are available, 576,400 New Jersey households claimed the credit on their tax returns.[2] In 2014, according to federal data compiled by the Brookings Institution, 594,700 New Jersey households claimed the federal EITC.[3]

Increasing the EITC to 35 percent will help nearly 600,000 New Jersey families whose members are working but not earning enough to get by in this high-cost state. These workers’ annual take-home pay will increase by an average of $116 (and by as much as $314), bringing the average total of state EITC dollars received to $811 a year.[4]

This income boost will be crucial for these working families in tandem with the fuel tax increases simultaneously approved by the legislature to invest in critical road, bridge and transit infrastructure. After all, low-income and middle-class families will pay a larger share of their incomes to these new fuel taxes than other New Jerseyans – and a boost to the EITC helps mitigate that impact.[5]

However, the large-scale tax package that included the fuel tax and EITC increases also included more than $1.3 billion in additional annual tax cuts that will disproportionately help higher-income New Jersey families while crippling the state’s ability to maintain services that are essential to low-income working families.[6] So it’s by no means all good news for low-income working families.

That said, with a 35 percent EITC, New Jersey will be a national leader in boosting the incomes of working families – and rightly so, given how expensive basic necessities like housing are here.

The Garden State now trails only the District of Columbia, which has a 40 percent credit; Minnesota and California have different structures that also allow for credits of more than 40 percent (the former’s range goes up to 45 percent; the latter’s, 85 percent).[7]

Families All Over New Jersey Will Benefit

eitc recip by county-01Boosting the EITC will help working people all over New Jersey. All but five of the state’s 21 counties have more than 10,000 households receiving the EITC, and more than half of them (12) have over 20,000 EITC households.

The largest counties in each part of the state have tens of thousands of EITC households, with Essex County having the most recipients in North Jersey, Middlesex County having the most in Central Jersey and Camden County having the most in South Jersey.

While there are greater concentrations of EITC families in New Jersey’s urban centers, the use of this tax credit has spread to more suburban counties as families all over the state struggle with long-term unemployment and stagnant wages or fewer hours for those who have jobs. Even affluent counties like Morris and Somerset, for example, now have over 10,000 EITC families.

Increasing the EITC Will Help Poor Families the Most

EITC incomes 2016-01Nine out of every ten New Jersey households that receive the EITC earn less than $30,000 a year. About three-quarters earn less than $20,000 and more than half – 61 percent – make less than $15,000.[8]

These are families that are clearly struggling to get by in high-cost New Jersey. The EITC is critical to their struggles.

For example, the budet needed to meet basic needs in the least expensive metro area of the state (the Ocean City area) is $29,662 a year just for a single, childless adult. Add one child to the mix, and that nearly doubles, to $55,672 a year. And this is the most affordable part of the state. In the most expensive metro area (the Middlesex/Somerset/Hunterdon area), the budget needed for basic necessities is $67,026 a year for that same single parent.[9]

In other words, it’s clear that even this modest boost to the take-home pay of these families will allow them to better meet basic necessities like food and rent and rely less on the social safety net to survive.

Boosting the EITC Will Make Tax System More Equitable

Despite having a relatively progressive income tax based on one’s ability to pay, New Jersey’s tax system is still backwards, with the lowest-income households paying the highest share of their earnings to state and local taxes each year. This is due to the regressive nature of sales and property taxes. One of the best ways to help make this upside-down system more equitable is to increase the EITC.

Increasing New Jersey’s EITC to 35 percent will reduce the share of state and local taxes paid by the poorest families. While these New Jerseyans in the bottom 20 percent, whose average annual income is a scant $15,000, will still pay the largest share of their income to these taxes, the gap between this group and other New Jersey households would have been reduced if the EITC increase happened in a vacuum.[10]

But it didn’t. Instead, the EITC increase was paired with a broad-based fuel tax increase that will affect nearly every New Jerseyan, as well as a slew of tax cuts that will benefit wealthier families the most. In the end, each income group in New Jersey will pay a greater share of their incomes to state and local taxes after all of the changes from the Transportation Trust Fund deal.[11]

Expanding This Tax Credit Will Boost New Jersey’s Economy

eitc dollars by county-01The EITC is also a big-time economic stimulus for local economies. The New Jersey EITC distributes nearly $400 million in tax credits each year throughout the state,[12] while the federal EITC puts nearly $1.4 billion a year into the pockets of working New Jerseyans.[13]

But the economic impact of the EITC goes beyond the specific amount credited to each family. Low-wage workers tend to spend these tax credits immediately and locally on short- to medium-term needs like clothes for their family, repairs to the family car, household items or catching up on past-due rent or utility bills.[14]

Increasing the state EITC to 35 percent will further boost the tax credit’s economic impact, generating $69 million in new tax credits each year that will help boost local economies around the state, bringing millions of dollars of spending to almost every county.[15]

The EITC Promotes Work, Raises Living Standards and Helps Lift Families Out of Poverty

The EITC, traditionally a strongly bipartisan measure, is perhaps the most powerful anti-poverty tool available, with significantly positive effects on families who receive it.

The tax credit promotes work, particularly in strong labor markets. During the 1990s, for example, EITC expansions did more to raise employment among single mothers with children than either the changes to welfare during that time or the strong economy.[16]

Lifting a low-income family’s income when a child is young, as the EITC does, improves that child’s immediate well-being, as the family is able to better meet basic needs. But these income boosts have also been tied to better health and more schooling for these children, as well as more hours worked and higher earnings once they become adults.[17]

The extra dollars that these low-wage workers and their families receive each year keeps more than 150,000 New Jerseyans above the federal poverty level each year, including 79,000 New Jersey children.[18] Investing in a program that does so much to help low-income families across New Jersey is common sense.

Next Up: Expanding the EITC for Adults Without Children

The EITC is a crucial tool that improves the lives of working families with children. But it falls short in boosting working adults without children, thanks to a low income cutoff (only those earning less than $14,880 qualify) and a high age threshold (eligibility begins at 25). As a result, working adults without children are the lone group of Americans that the federal tax code taxes into – or deeper into – poverty.

Expanding the EITC for low-income workers without dependent children would raise their incomes and help offset the impact of other taxes they pay.[19] And in a high-cost state like New Jersey, which leads the nation in the share of 18 to 34 year olds living at home,[20] this EITC expansion would help promote greater economic mobility for young workers, which in turn would help boost the economy.

Thankfully, national leaders from both political parties agree this is a problem. The proposals to fix the problem put forward by House Speaker Paul Ryan, Senator Cory Booker, Senator Sherrod Brown and others would help between 343,000 and 504,000 low-income working New Jerseyans across different ethnic groups and vocations.[21] 

Appendix: Impact of Increasing the EITC to 35 Percent by County

EITCto35countychart-01

Endnotes

[1] New Jersey Division of Taxation, Earned Income Tax Credit Information

[2] New Jersey Office of Revenue and Economic Analysis, Statistics of Income, 2013 Tax Returns, Summer 2015.

[3] NJPP analysis of Brookings Institution, Earned Income Tax Credit Interactive and Resources, Tax Year 2014. Source data available at https://www.brookings.edu/interactives/earned-income-tax-credit-eitc-interactive-and-resources/

[4] Ibid 3

[5] New Jersey Policy Perspective, Tax Increase to Fund Transportation Should Be Combined with Credit to Help Low-Income Families, January 2015.

[6] New Jersey Office of Legislative Services, Legislative Fiscal Estimate of A-12, October 2016. Note: NJPP used the low range of the estimated revenue loss for Fiscal Year 2022.

[7] Tax Credits for Workers and Their Families, State Tax Credits, 2016.

[8] Ibid 2

[9] Economic Policy Institute, Family Budget Calculator, 2016.

[10] Institute on Taxation and Economic Policy microsimulation model. For more on the methodology, see the Institute’s Who Pays? report: http://www.itep.org/whopays/

[11] Ibid 10

[12] New Jersey Division of Taxation, New Jersey Tax Expenditure Report, February 2016.

[13] Ibid 3

[14] The Brookings Institution, Using the Earned Income Tax Credit to Stimulate Local Economies, November 2006.

[15] Ibid 3

[16] Center on Budget and Policy Priorities, EITC and Child Tax Credit Promote Work, Reduce Poverty, and Support Children’s Development, Research Finds, April 2015.

[17] Ibid 16

[18] Brookings Institution, Fighting Poverty at Tax Time through the EITC, December 2014.

[19] Center on Budget and Policy Priorities, Strengthening the EITC for Childless Workers Would Promote Work and Reduce Poverty, April 2016.

[20] New Jersey Policy Perspective, New Jersey’s Sluggish Recovery Hurting Working Families, September 2016.

[21] New Jersey Policy Perspective, EITC Expansion Would Provide a Crucial Boost to Hundreds of Thousands of New Jerseyans, October 2016.

2017 Minimum Wage Hike Is a Positive Step, but It’s Not Nearly Enough

Posted on by Jon Whiten

To read a PDF version of this report, click here.

key-facts-01On January 1, 2017, New Jersey’s minimum wage will rise by 0.7 percent to $8.44 per hour,[1] giving approximately 99,000 Garden State workers a very slight pay increase in the new year.

To call this 6-cent wage increase “modest” would be a huge understatement. But the lifting of the wage floor is an important illustration of smart policy design and the power of “indexing” minimum wages. Without a minimum wage that was tied to rising costs of living, as New Jersey’s now is, these workers would see an even-worse decline in the purchasing power of their meager wages.

Policymakers were smart to include indexing in the 2013 wage increase, but there is clearly more work to be done to improve the economic security of the Garden State’s low-paid workers.

Unfortunately, efforts to boost the incomes of these lowest-paid workers, and the state’s economy, hit a dead end this year when Gov. Christie vetoed legislation that would have gradually raised the minimum wage to $15 an hour over the course of five years. With the stroke of his red pen, the governor blocked a sensible and modest raise for about 1 in 4 Garden State workers, or 975,000 men and women.[2] The wage increase would have helped a diverse group of workers who currently aren’t paid enough to make ends meet, improving their chances of getting by – and, for many, providing for their families – in high-cost New Jersey.

In contrast, the wage increase going into effect on January 1 will effect a much smaller portion – about 2.5 percent rather than 25 percent – of the state’s workforce, and have a much smaller impact on low-paid workers and their families, as well as the local economies that rely on these workers as customers.

Of the 99,000 workers affected by the wage increase, 98,000 are directly affected – meaning they currently make between $8.38 and $8.44 per hour – and the remaining 1,000 are indirectly affected – meaning they currently make between $8.44 and $8.50 per hour, and will see their pay increase as employer pay scales are adjusted upward to reflect the new minimum wage.[3]

Overall, these 99,000 workers will see an average annual wage increase of $402 in 2017. The increase for all affected workers will total $39.7 million in 2017.

While the 2017 increase in the state minimum wage is welcome news for New Jersey’s low-paid workers (think: a $7.73 average weekly increase), it is not a wage floor that allows workers to get by, much less climb into the middle class, in a high-cost state such as New Jersey.

In fact, the basic cost of living in 2017 for a single adult working full time requires an hourly wage between $14.80 in the Ocean City metro area and $20.34 in the Bergen-Passaic metro area – far above the 2017 minimum wage of $8.44 an hour. Adding one child to the mix for a single parent increases that benchmark to between $27.77 in the Ocean City metro area and $32.74 in the Bergen-Passaic metro area.[4]

basic-wage-by-msa-01

This basic family budget, designed by the Economic Policy Institute, includes money for the major expenses of housing, food, transportation, health care, child care and taxes, as well as modest amounts for other necessary items like clothing, personal care items, school supplies, entertainment and household supplies. It does not include other typical expenditures of a middle-class family like weekend trips or savings of any kind.[5]

January 1 Increase Will Help a Diverse Group of Low-Paid Workers

A total of 99,000 low-wage New Jersey workers – or 2.5 percent of the state’s total workforce –will benefit from the coming minimum wage increase. Due to ongoing shifts in the nature of low-wage work in America, these workers are older, more educated and working more hours than they have been in decades – despite the insistence of minimum wage opponents that low-paid workers are primarily teenagers looking for extra cash.[6]

Of those affected, an overwhelming majority – 73 percent – are at least 20 years old, while about one in three – 32 percent – are at least 40 years old. Nearly half – 47 percent – are working full-time, and an additional 28 percent are working mid-time (between 20 and 35 hours per week). Only 25 percent are working part-time.

About one in four affected workers – 24 percent – have children, and 48,000 New Jersey kids have at least one parent who will see a pay boost in 2017.

demographics-appendix-01

Endnotes

[1] New Jersey Department of Labor and Workforce Development, Notice of Administrative Changes N.J.A.C. 12:56-3.1, September 2016,

[2] New Jersey Policy Perspective, Raising New Jersey’s Minimum Wage to $15 an Hour Would Boost a Large and Diverse Group of Working Men and Women, March 2016.

[3] All economic and demographic information in this report is from the Economic Policy Institute’s analysis of the Current Population Survey (CPS), Outgoing Rotation Group public use microdata from the fourth quarter of 2013 to the third quarter of 2014. The number of workers is estimated from the CPS respondents for whom either a valid hourly wage is reported or one can be imputed from weekly earnings and average weekly hours. Consequently, this estimate tends to understate the size of the full workforce. All figures are rounded for clarity and readability.

[4] NJPP analysis of Economic Policy Institute family budgets by metro area, adjusted to 2017 to account for inflation using projections for the Consumer Price Index from the Congressional Budget Office. Calculations assume each adult is working full-time for the entire year (2080 hours per adult).

[5] For more on how the family budgets are calculated, see: http://www.epi.org/resources/budget/

[6] For example, see: Center for Economic and Policy Research, Low-Wage Workers Are Older and Better-Educated Than Ever, April 2012.

Six Reasons the Governor’s ‘Fairness Formula’ Must be Rejected

Posted on by Gordon MacInnes

To read a PDF version of this report, click here.

Gov. Christie has proposed a radical change to New Jersey’s school aid formula that would dismantle four decades of efforts to target school aid to districts that serve concentrations of children from poor families. Labeled the “Fairness Formula,” his proposal is rooted in the argument that lower-income districts have failed so completely after decades of generous state funding that it’s time to reallocate their funds to more successful districts. In brief, he seeks to use school aid to lower property taxes in middle-income and wealthy districts at the expense of districts serving kids from poor families.

In September, the governor petitioned the New Jersey Supreme Court to reverse the court’s 40 years of strong decisions establishing that the state constitution mandates that the state provide funding to address the consequences of concentrated poverty in selected districts. He requests, moreover, that the court nullify statutes dealing with teacher tenure and to overturn collective bargaining contracts. Elsewhere, he described the continuation of funding for urban districts as “criminal.”

Of course, there is no way to predict how the Court will respond to the governor’s petition. One cannot guarantee a quick dismissal, and even if there is one, this issue won’t necessarily go away. The governor could go so far as to incorporate his formula in his 2018 budget proposal, which would be followed two days later with official notices to districts of their expected aid. But assuming that the Governor’s preferred formula would not be adopted via the legislative budget process, districts would be in a precarious position since school budgets have to be adopted in early April before the June 30 deadline for state budget adoption. Districts losing significant state aid would have to send layoff notices not later than May 15 before the budget is resolved, leading to chaos.

In the end, the governor’s proposal would reduce – even eliminate – educational opportunities for children from New Jersey’s poor and working-class families. 

1. The proposal ignores indisputable evidence about the connection between poverty and educational achievement.

Beginning with the 1967 Coleman Report, there are now billions of data points that consistently point to the two factors that most heavily determine student achievement: the socioeconomic status of one’s parents and the socioeconomic status of one’s classmates. Know these two facts and one can predict with near-certainty how most students will perform on standardized tests.

The gold standard for tracking the academic achievement of large numbers of randomly selected students is the National Assessment for Educational Progress. A review of the reading and math tests in 2015 confirms that not one state’s students from poor families (its free and reduced lunch recipients) outperformed the students from middle-class and affluent families (those not eligible for subsidized lunches) in their own or any other state.[1]

New Jersey has operated since 1975 with a classification scheme to take these economic and demographic certainties into account to gauge how students in similar districts perform. Districts in the lowest grouping (“A”) have lower family incomes, parental educational and occupational levels, higher poverty and unemployment rates. Districts in the highest grouping (“J”) have low poverty rates with higher parental income and educational levels.[2] Given that there are eight groupings for reporting test results, that tests are required in seven grade levels and that there is both a math and language arts test in each grade (plus a science test in two grades), there are a total of 102 opportunities each year for districts in a lower-rated socioeconomic group to outperform a higher group. Over the two-year period of 2013 and 2014 (when there were 204 opportunities), this happened once, and by a tiny margin (by .1 of 1 percent on the scale score for high school math).[3]

A 204-to-1 bet is not a good one to place. And the notion advanced by the governor that “no child in this state is worth more state aid than another” ignores decades of evidence that schools with concentrations of children from poor families in fact face more daunting educational challenges.[4]

2. Children in urban districts are the innocent victims since the districts are unprepared to contend with devastating cuts in state aid.

By far, the biggest losers under Gov. Christie’s plan would be the 31 school districts formerly called the “Abbott” districts (based on 21 New Jersey Supreme Court decisions between 1985 and 2011). These districts educate about 20 percent of New Jersey’s students and receive about 55 percent of all state aid. Between them the districts would lose $2.5 billion in aid – a reduction of 43.6 percent.

Students in these districts are disproportionately poor, representing 41.6 percent of all students who are eligible for the free lunch program, and these districts enroll about half (47.9 percent) of the state’s English-language learner students. A majority of students in these districts (85 percent) are black and Latino, accounting for about two of every five black and Latino students in New Jersey.

And the poorer the district, the greater the loss. Gentrified Hoboken would actually see its aid increase by 20 percent; Camden – the poorest of the former Abbott districts – would lose 78.1 percent of its scheduled aid.

How a formula that would dismantle the work of districts charged with the education of the state’s most vulnerable children can be described as “fair” requires a Kafkaesque or Orwellian dictionary.

The governor’s claim of widespread failure in these districts ignores not only the indisputable difficulties of educating concentrations of poor children, but the fact that they are not uniformly poor-performing districts. In fact, more than one-third of them have a four-year average graduation rate that exceeds the national rate of 82 percent, and four of the 31 districts have a higher graduation rate than the state average (which is one of the nation’s highest).

abbotts-grad-rates-01

Let’s take a look at Union City, which, as the governor has noted, comes very close to the state average for graduation rates – even with almost one-quarter of its students still learning English and one of the highest counts of children from very poor families in the state. The governor was right to spotlight Union City since it is one of the best-performing deeply poor school districts in the nation. As a reward, he proposes to slash aid to Union City by 56 percent – and offers no explanation for how the district would maintain its exceptional performance after losing more than half of its funding.

3. Children in over 100 working-class districts would also be harmed.

The governor builds his case on the court-ordered Abbott case that resulted in 31 districts receiving 55 percent of the state’s school aid. However, in his town hall tour he neglects to mention that an additional 110 school districts would also suffer a loss in state aid with the result that one-third of New Jersey’s students – not the mistaken 23 percent he cites – would go to school in districts with reduced state aid. Not surprisingly, these 110 districts also have larger shares of students from poor families and more students from non-English-speaking homes.

Take Dover in Morris County as an example. Eighty-six percent of its students are Latinos and 62 percent are free-lunch-eligible.[5] Even though it is one of the highest-performing “A” districts, it would lose one-sixth of its state aid ($6.2 million). Lindenwold in Camden County has an even higher count of very poor students (75 percent are free-lunch-eligible) and 83 percent are black and Latino.[6] Lindenwold would suffer a 19 percent reduction of $7.2 million in state aid under the governor’s proposal. Neither district could make up the loss from higher property taxes, with the result being a severe reduction in staffing and the consequences that flow from bigger class sizes and less individualized attention. 

4. The proposal would spell the end of high-quality preschool for poor New Jersey families, removing an essential building block to help close the achievement gap.

The evidence is overwhelming that investing in high-quality preschool pays off better than just about any public investment. Kids from very poor families that attend good preschools are much more likely than their neighbors who do not to graduate from high school, stay out of jail and work full time.

New Jersey’s expansion of preschool opportunity is a direct result of the Abbott decisions, but the School Finance and Reform Act of 2008 extended preschool aid to another 81 districts with high counts of very poor kids. Unfortunately, the state has never paid for this preschool expansion. (The legislature in 2016 authorized a modest $25 million increase but the governor vetoed it out of the budget.)

The oft-cited excellence of the Union City schools begins with its emphasis on preschool (nine of ten Union City 3- and 4 year-olds attend) and its almost organic connection to the K-3 years. The result is that Union City’s 3rd graders outperform those in every other former Abbott district.[7] It is ironic and inconsistent that the governor would single out Union City for its excellent performance and then dismiss the foundation for that excellence – preschool – as “babysitting” and propose to effectively demolish that foundation by slashing the district’s state aid.

The governor’s blanket claim of city school failure ignores not just Union City’s progress, but that of other districts like Elizabeth, Long Branch and West New York that all educate many students from deeply poor families. All of them give special emphasis to connecting their preschool “grads” to intensive early literacy efforts in the K-3 grades.

5. The governor glosses over the root causes of New Jersey’s property tax problem.

Gov. Christie begins by arguing that the intervention of the state Supreme Court in school finance “has caused us to have the highest property taxes in the nation.” This is true: New Jersey does have the highest property taxes.

But this is also true, and unmentioned by the governor: New Jersey had the highest property taxes before the court’s orders on school finance kicked in in the 1997 fiscal year.[8]

There are many explanations for New Jersey’s historically high property taxes such as its population density, the excessive number of municipalities and school districts and its traditions of local control. For the majority of school districts, the local property tax has always been the primary source of funding – and that did not change with the court’s Abbott decisions.

The governor claims his proposal would lead to substantial property tax reductions in the state’s middle-class and affluent towns, as it would distribute state aid on a $6,599 per student basis. Nine out of the ten districts that would receive at least a 1,530 percent increase in state aid under the “Fairness Formula” are in the wealthiest groupings of the Department of Education classification scheme. In other words, the districts with the least challenging educational issues would receive the most money. Districts receiving the increased aid would be limited to using a small part of it to cover the 2 percent ceiling on increased school spending, with the balance mandated to reduce residential property taxes. To make the case clearer, assume one of those wealthy districts spends $15,000 per student with only $800 coming from the state, the balance paid via the property tax. If the governor’s plan were adopted, the district’s spending could rise to $15,300 per student but the property tax bill would be reduced by $5,499 per student, a 687 percent decrease.

However, not all of this aid will be available if the governor follows through on his pledge to protect state assistance for special education and charter schools. One might safely assume that assistance for transportation, security and health services at private religious schools would also be maintained. So, right off the top, the $6,599 number declines to no more than around $4,500 per student.

6. The governor misleads on urban charter schools.

There is a common assumption that charter and district schools – since they are located in the same municipality – educate kids from a uniform pool. They don’t.

Across the state, there are two categories of students that are noticeably missing from the charter school rolls: students who are classified with special education disabilities and English-language learners.

For example, in Newark’s district schools, 17.1 percent of students are classified for special education, including one in six with multiple disabilities or autism. The count in Newark’s charter schools is 9.7 percent, all of whom fell into the three least severe disability categories.[9]

When it comes to students who are English-language learners, the charter schools are close to AWOL. Just 0.9 of 1 percent of Newark’s charter students are English learners, while more than one in ten students (10.9 percent) in the Newark district schools are.[10] The governor’s solitary reliance on charter schools to address the problems of 141 districts receiving state aid cuts fails to even mention the need to address the education of thousands of immigrant and disabled students who are found overwhelmingly in districts suffering reductions in state aid.

To provide these contrasts between charter and district school profiles is not a blanket criticism of charter schools, nor an automatic defense of district schools. Many charters do not enroll a large enough student body to employ the highly specialized teachers and specialists to contend with large numbers of classified students, especially the severely disabled. To a lesser extent, the same prevails when it comes to educating large numbers of students not proficient in English. However, given the numbers of foreign-born families in charter-rich cities such as Paterson, Jersey City and Newark the modest to non-existent outreach by charters to English learners is noteworthy.

While charters in some cities like Newark and Camden might enroll students with similar economic profiles as students in district schools, this is not true in all major cities. In Jersey City, for example, the contrast is quite marked. Free-lunch-eligible students make up 48.6 percent of the 4,392 students enrolled in ten charters there, compared to 71.7 percent for the district as a whole.[11] The notion, therefore, that charter schools alone can make up for the slashing of district school budgets does not come close to addressing the consequences. In Jersey City’s case, the “Fairness Formula” would slash $216.7 million in aid, a cut of almost $7,800 per student or 51.8 percent.

Moreover, the core of the governor’s argument – that urban charter schools perform better than district schools for about half the money – is simply untrue. In fact, it turns out to be the reverse: charter schools receive significantly more funding than individual district schools.

The governor’s calculations fail to account for the fact that charter school funding comes directly out of their home district’s budget. They also fail to account for district payments to charter schools, out-of-district placements for special education, central office management and debt service when calculating the true cost of educating a child enrolled in an urban district.

Charter schools are protected by enabling legislation stating they will receive 90 percent of the district’s per-student operating budget. In Newark, for example, charter schools received $226 million in the 2015-6 school year to educate 13,752 students or $16,434 per student. This and other out-of-district payments, debt service and central office expenses left Newark’s public schools with $323 million to manage over 35,000 students at an average of $8,500 per K-8 students and $11,300 per high school student.[12] These numbers aren’t even close to the governor’s citation that Newark spends $22,000 for students enrolled in its district schools.

Endnotes

[1] NJPP analysis of The Nation’s Report Card 2015; available at https://www.nationsreportcard.gov/reading_math_2015/#reading/state?grade=4

[2] See New Jersey Department of Education for more detail (http://www.state.nj.us/education/finance/rda/dfg.shtml)

[3] NJPP analysis of “NJ ASK” and “HSPA” results from 2013 and 2014

[4] Gov. Chris Christie’s Office, Governor Christie: No Child Is Worth More Than Another, June 2016.

[5] NJPP analysis of New Jersey Department of Education enrollment data

[6] Ibid 4

[7] New Jersey Department of Education, Grade 3 New Jersey Assessment of Skills and Knowledge Spring 2014 – specifically the “NJASK 2014 State Summary” Excel file. Available at http://www.state.nj.us/education/schools/achievement/14/njask3/

[8] The Public Policy Institute of New York State, Just the Facts: Key Economic and Social Indicators for New York State, (1999-2000) http://www.ppinys.org/jtf99/table23.htm

[9] New Jersey Department of Education, 2015 Special Education Data – specifically the “District Classification Rates, Ages 3-21” Excel file. Available at http://www.state.nj.us/education/specialed/data/2015.htm

[10] NJPP analysis of New Jersey Department of Education enrollment data

[11] NJPP analysis of New Jersey Department of Education enrollment data

[12] Newark Public Schools, Budget Presentation, pp. 10-11.

Repealing the Medicaid Expansion Would Reverse Health Coverage Gains & Deepen New Jersey’s Financial Crisis

Posted on by Raymond Castro

To read a PDF version of this report, click here.

text-box-medicaid-repeal-01President-elect Donald Trump’s proposal to repeal the Medicaid expansion as part of rolling back most of the Affordable Care Act (ACA) would harm New Jersey far more than most other states, causing over a half million low-income residents to lose health coverage and costing the state about $3 billion a year in federal funds. This would reverse the progress New Jersey has made in reducing the number of residents without insurance while deepening the state’s severe financial and budget crisis. New Jerseyans across the state, as well as hospitals and other health care providers, would be harmed.

The option for states to expand Medicaid took effect January 1, 2014 and allows them to raise eligibility to a higher, uniform national level and, for the first time, include adults without children at a much higher federal matching rate to make it easier for states to cover more Americans.

Given the threat the Trump proposal poses to New Jersey, the state’s Congressional delegation must strongly oppose any repeal of the Affordable Care Act, including the Medicaid expansion; Gov. Christie should use his influence to ensure that the expansion stays in place; the legislature should hold hearings and urge Congress to keep the expansion intact; and the state should stay the course and help more uncovered people enroll.

About 10 Percent of New Jersey Adults Would Lose Health Coverage

Repealing the Medicaid expansion would cause about 528,000 adult New Jerseyans – or 10 percent of all non-elderly adults in the state – to lose their health coverage. This is because so many New Jerseyans have benefitted from the Medicaid expansion – far more than originally anticipated. In fact, New Jersey has the eighth highest number of new participants.

Prior to the Affordable Care Act, Medicaid enrollment was decreasing but when the expansion became available, an additional 480,000 New Jerseyans signed up – increasing total enrollment by 37 percent over just three years.

medicaid-enrollments-2016-01

But it’s not just most of these new enrollees who are at risk of losing coverage. Many adults who had coverage in NJ FamilyCare before the Medicaid expansion, are also at risk because waivers that were granted by the federal government to assist them have since expired. In other words, the state could end up with fewer New Jerseyans in Medicaid than it had prior to the Medicaid expansion if it is repealed.

If all of these New Jerseyans lose their health coverage, it would reverse the historic gains the state has made in reducing the number of residents without health insurance. The Medicaid expansion and other parts of the ACA have caused the state’s uninsurance rate to drop by 34 percent in just two years, falling to an unprecedented 8.7 percent in 2015 from 13.2 percent in 2013. Now just 771,000 residents lack insurance, compared to 1,160,000 in 2013.[1]

The Medicaid expansion has helped drive this unprecedented progress in health coverage for New Jerseyans, much more so than the federal health insurance marketplace. More than twice as many New Jerseyans are in the Medicaid expansion than the marketplace; far fewer of them had health insurance prior to the ACA; they have lower incomes and therefore fewer insurance alternatives; and, as mentioned above, an entirely new group of New Jerseyans would become uninsured.

uninsured-reduction-01

Many At-Risk New Jerseyans Are Low-Paid Workers Trying to Get By in High-Cost New Jersey

Nearly two-thirds of the adults who are at risk of losing coverage under the repeal of the Medicaid expansion are working, or living in households where someone works.[2] These workers are paid very low wages and cannot afford even minimal medical care without assistance.

The Medicaid expansion extended health coverage to individuals up to 138 percent of the federal poverty level, or an approximate annual income of $15,800 for an individual and $23,800 for a single parent with two children. Adults earning this little in New Jersey – the equivalent to between $8.50 and $15 for full-time, year-round work – are struggling every day just to pay for food and housing in a state with one of the highest costs of living in the nation.[3]

These New Jersey residents work in jobs we see every day: they are the servers at our local diner, the teachers at our child care center, the cashiers at the grocery, the salespeople at our favorite department store, our kid’s school bus drivers. In fact, the New Jerseyans in the Medicaid expansion work in nearly 300 different industries. Much of the comprehensive health care they are now able to receive is essential for them to continue to work, such as treatment, which was enhanced in the Medicaid expansion for the growing problems of substance abuse and mental illness.

industries-medicaid-expansion-01

New Jerseyans All Over the State Would Lose Coverage, but the Impact Would Be Most Severe in Urban Counties and Major Cities

Some New Jersey’s counties are among the wealthiest in the nation yet many of their residents would lose Medicaid if Trump’s proposal is adopted. The number of adults losing coverage ranges from 3,100 in Hunterdon County to 67,000 in Essex County. (For a full breakdown, which includes the number of parents at risk and the potential loss of federal funds by county, see the Appendix.)

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medicaid-expansion-cd-table-01The dangers posed by repealing the Medicaid expansion should be considered a bipartisan issue because the lack of health care harms Americans regardless of their political party affiliation. Although more New Jerseyans at risk of losing health coverage live in Democratic districts, 145,000 of them live in Republican districts.[4]

While the damage from repealing the Medicaid expansion would be felt in all parts of the state, it would be felt most keenly in many of New Jersey’s major cities.

A total of 163,000 adults – or about a third of the statewide total – are at risk of losing coverage in ten cities alone. In these cities, between one in three and one in seven adults are at risk. Newark has the most at-risk adults total (36,751), while Camden has the greatest share of at-risk adults (about one in three).

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New Jersey Would Suffer its Greatest Loss in Federal Funds Ever, Deepening its Financial Crisis

Repealing the Medicaid expansion would cause New Jersey to lose about $3 billion in federal funds each year starting in 2018 assuming the cuts take effect that year. This loss would total $11 billion over just four years. Such a large loss in federal funds would have what economists call a “multiplier effect,” resulting in a first-year loss of $4.1 billion in economic activity and many jobs, particularly in the health care sector.[5] Since the Medicaid expansion and the marketplace started in 2014, 24,000 health jobs have been added in New Jersey, many of which would be eliminated if the Medicaid expansion is repealed.

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state-costs-and-savings-medicaid-01This loss in federal funding would directly blow a big hole in New Jersey’s budget.

While there have been modest state costs due to the Medicaid expansion, on the whole the expansion has saved the state money. New Jersey has already saved $1 billion in the last three years thanks to the expansion, which has been used to balance the chronically unbalanced and underfunded state budget. New Jersey is also projected to save nearly half a billion dollars annually in the future – but that would not happen if the Medicaid expansion is repealed.

The reason for this windfall is that New Jersey was using state funds to help cover 167,000 childless adults and parents prior to the Affordable Care Act; the Medicaid expansion replaced those state funds entirely with federal funds. Prior to the ACA, New Jersey had paid for all the costs for childless adults receiving General Assistance. In addition, under a waiver, the state was responsible for a 35 percent match to obtain 65 percent matching federal funds for parents in NJ FamilyCare, which has since expired.

New Jersey’s finances are already at rock bottom, with the state unable to meet promised obligations, invest in the assets that can grow the state’s economy or ensure a strong safety net. Repeal of the Medicaid expansion would dig this very deep hole even deeper.

Hospitals and Health Care Providers Would Be Significantly Harmed

medicaid-expansion-spending-01Most of the medical services low-income New Jerseyans have received under the Medicaid expansion prevent more expensive hospitalizations. About three-quarters of the funding that is spent for the medical care they receive is for pharmacy, primary care, outpatient and other services that prevent more costly medical conditions and reduce the incidence of hospitalization. With repeal, thousands of primary doctors, specialists and pharmacists would be put in the very tough position of having to tell their patients they no longer can assist them, no matter how serious their condition, or continue to care for them without getting paid.

Hospitals would have their own set of major challenges. Under New Jersey law, residents cannot be charged for any emergency and other care in a hospital if their income is below 200 percent of the federal poverty level (residents between 200 to 300 percent of the federal poverty level also get some help but pay a sliding-scale fee). To help ensure that hospitals were able to provide this care, the state has historically had a line item in the budget for “charity care,” which is half paid for with state funds and half federal, and is distributed to all acute-care hospitals in the state.

But in the past few years, New Jersey has cut this charity care funding by more than half (to $302 million by the 2017 budget from $650 million in the 2015 budget). The Christie administration’s rationale was that hospitals would need less funding for charity care since more New Jerseyans had coverage through the Medicaid expansion (this was a bit misleading since the state never fully compensated the hospitals for their charity care in the first place).

If the Medicaid expansion is repealed, many of the newly uninsured would return to the hospital emergency rooms for their care even though charity care funds to serve them would no longer be sufficient. State policymakers would have to either replace these funds – at the very same time budget pressures would increase due to the reduction in federal Medicaid funds – or put the financial solvency of many of these hospitals in jeopardy. New Jersey’s hospitals employed 118,000 people and paid out $8 billion in salaries in 2014, and are often the largest employer in the towns in which they are located.[6] Undermining hospital finances would also harm local economies with immediate and consequentially negative ripple effects.

New Jersey’s Leaders Must Act to Preserve Coverage

1. New Jersey’s Congressional delegation must strongly oppose the repeal of the Affordable Care Act, including the Medicaid expansion.

Every Senator and member of the House that represents New Jersey should fight to preserve the Medicaid expansion for the sake of the tens of thousands of constituents in every Congressional district whose coverage is at stake. It will be particularly important that New Jersey’s House Republicans take the lead on this, since they are in the majority party in Congress.

At the very least, the Congressional delegation needs to oppose repeal until a suitable replacement is identified. Congressional leaders and President-elect Trump have said that they intend to repeal the Affordable Care Act first and worry about how to replace it later, before the repeal becomes effective (possibly in two years). The problem is these opponents of the ACA have yet to come up with a clear and adequate replacement. All of their suggestions so far, such as Health Savings Accounts, high-risk insurance pools and tax credits for premiums, would only benefit higher-income Americans and would be of virtually no help for the poorest Americans who benefit from the Medicaid expansion.

2. Gov. Christie should use his influence to ensure that the expansion stays in place.

While its unclear exactly how much influence Gov. Christie has with the President-elect, the governor was one of Trump’s close advisors during the campaign and a big supporter. This, and his embrace of the Medicaid expansion despite overall opposition to the ACA, makes Gov. Christie well-suited to highlight the special significance of the Medicaid expansion and help convince both the Trump administration and Congress to not repeal it.

3. The New Jersey legislature should hold hearings and urge Congress to maintain the Medicaid expansion.

The legislature should provide an opportunity for the Christie administration to explain how the state could respond to the possible repeal of the Medicaid expansion and/or how they will fight it in Congress. Since the governor has advocated for the repeal of the ACA, it is important that his administration provide an alternative that the state can implement to avoid the loss of health coverage to a half-million New Jerseyans. It will also be critical to understand how New Jersey can respond to the elimination of budget savings resulting from the Medicaid expansion and how the state can replace the cutbacks in charity care to avoid the possible closing of some hospitals.

4. The state should not start winding down the Medicaid expansion in anticipation of repeal.

New Jersey officials should stay the course on the Medicaid expansion and continue enrolling residents who need coverage, even with the threat of repeal on the horizon. It would be irresponsible for the state to prevent low-income residents from obtaining coverage – if even for a short time – or to turn down billions of dollars in federal funds while they are still available.

Appendix

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Endnotes

 

[1] NJPP analysis of US Census Bureau, American Community Survey, 2015.

[2]| The Henry J. Kaiser Family Foundation, The Coverage Gap: Uninsured Poor Adults in States that Do Not Expand Medicaid, October 2016.

[3] Missouri Economic Research and Information Center, Composite Cost of Living, Third Quarter 2016.

[4] We count the fifth Congressional district – where a Democrat defeated a Republican on election day – as Democratic here, since we are looking at a proposal that could be taken up by the next Congress, not the current Congress.

[5] The methodology for converting federal funds received to economic activity and jobs was based on a report published by Families USA, New Jersey’s Economy Will Benefit from Expanding Medicaid, which contracted with the Regional Economic Model, Inc. (REMI) to estimate the impact of expanding Medicaid in New Jersey. REMI used its 51-Region PI+ Model, which includes 70 industry sectors for the Families USA report. The same ratio of federal funds to economic activity and jobs that was used in the above report was also used in this report.

[6] New Jersey Hospital Association, 2015 Economic Impact Report.

Removing All Undocumented New Jerseyans Would Harm the State’s Economy

Posted on by Jon Whiten

To read a PDF version of this report, click here.

New Jersey’s economy would suffer a substantial blow if all of the United States’ 11.3 million undocumented immigrants – more than 7 million of whom are working – were removed from the country.

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In fact, the loss to New Jersey’s Gross Domestic Product of 4.9 percent is the largest loss of any of the 50 states, topping immigrant-heavy states like California (4.7 percent loss), Texas (3.9 percent loss) and New York (3 percent loss), according to a new 50-state analysis by the Center for American Progress.[1]

The forced removal of these striving immigrants would cause New Jersey to lose $25.9 billion in annual economic activity. While this is not the largest dollar loss of any state (California tops the list at $103 billion), it is the largest when taken in context of the size of a state’s economy.

New Jersey’s workforce has the third-highest share of undocumented workers in the nation, at 7.4 percent – behind California (10.2 percent) and Texas (8.7 percent). But the loss of these workers’ contributions would be more keenly felt by New Jersey’s economy, in large part because there undocumented workers’ contributions to the economy are more diverse and felt in many higher-paid industries.

sector-gdp-loss-01For instance, New Jersey’s financial industry would lose an estimated 5.3 percent of its annual economic activity without undocumented workers – a far higher share than all other states (the next closest states are Connecticut with a 2.6 percent loss and New York with 2.3 percent).

That said, the loss to New Jersey’s economy from the removal of the undocumented workforce would be felt across industries.

These grim prospects serve as an important reminder of the unmistakable value that immigrants – both undocumented and documented – bring to New Jersey and to the state’s economy.

Without the economic contributions of immigrants, the Garden State would be far worse off – which is all the more reason for the state to pursue commonsense policies that embrace and welcome our immigrant neighbors, rather than force them to live in the shadows. Allowing undocumented New Jerseyans to legally drive, for example, would be a vital step towards building an inclusive state while improving public safety and boosting the economy.[2]

Endnotes

[1] Center for American Progress, The Economic Impacts of Removing Unauthorized Immigrant Workers, September 2016.

[2] For more on this issue, see: New Jersey Policy Perspective, Share the Road: Allowing Eligible Undocumented Residents Access to Driver’s Licenses Makes Sense for New Jersey, September 2014.

EITC Expansion Would Provide a Crucial Boost to Hundreds of Thousands of New Jerseyans

Posted on by Brandon McKoy

To read a PDF version of this report, click here.

The Earned Income Tax Credit – or EITC – is a critical tool that improves the lives of working families across New Jersey and the entire country. But it falls short in boosting incomes for low-wage working adults who aren’t raising children, because they are largely excluded from the credit. As a result, working adults without children are the lone group of Americans that the federal tax code taxes into – or deeper into – poverty.

Expanding the EITC for low-income workers without dependent children would raise their incomes and help offset the impact of other taxes they pay.[1] And in a high-cost state like New Jersey, which leads the nation in the share of 18 to 34 year olds living at home,[2] this EITC expansion would help promote greater economic mobility for young workers, which in turn would help boost the economy.

who-benefits-eitc-without-kids-01Thankfully, national leaders from both political parties agree that these workers shouldn’t be taxed into economic hardship, and they have plans to address it. President Obama and House Speaker Paul Ryan have put forth nearly identical proposals that would start a course correction by lowering the eligibility age for childless workers’ EITC to 21 from 25, and raising the maximum federal credit to roughly $1,000 from $506. This plan would help approximately 343,000 New Jersey workers, including 101,000 workers between the ages of 21 and 24 who would be eligible for the credit for the first time.[3]

A separate plan proposed by Senate Finance Committee member Sherrod Brown and House Ways and Means Committee member Richard Neal is even more robust and would expand the credit for 425,000 New Jersey workers, including 122,000 workers between the ages of 21 and 24 who would be eligible for the credit for the first time. Under this plan, the age for eligibility would be lowered to 21 and the maximum credit would be raised to about $1,400.

More recently, Senators Cory Booker and Tammy Baldwin introduced their own plan that it is the most ambitious of the bunch. Just like the others, this plan would lower the age for eligibility to 21, but it would increase the maximum credit to a little over $1,500 as well as widen the income range at which workers are eligible to receive the maximum credit. Additionally, this plan would mirror the Obama proposal by extending eligibility to workers aged 65-66. Under this plan, 504,000 New Jersey workers would be helped, including at least 122,000 workers between the ages of 21 and 24 who would be eligible for the credit for the first time.[4]

Starting in tax year 2016, a qualifying New Jersey worker without children can receive up to $506 for the federal EITC and up to $177 for the New Jersey EITC.[5] The existence of a strong state EITC that piggybacks off the federal credit ensures that low-wage working New Jerseyans would receive an additional bang for the buck with any federal expansion.

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The benefits of extending the EITC to childless workers go beyond helping low-income individuals and families afford more of their day-to-day needs. Decades of research on the EITC has shown improvements in health outcomes and increased employment for EITC recipients, and recent studies indicate that this expansion for workers not raising children could reduce crime and increase public safety.[6]

Just as research by the federal government projects that increasing the minimum wage to $12 by 2020 would reduce crime by 3 to 5 percent and yield national public savings of $8 billion to $17 billion,[7] recent studies have shown that extending the EITC to workers without dependent children would have similar effects. Implementing this policy would boost incomes for workers with criminal records as they take steps to re-enter the workforce, helping them get on their feet and reducing the likelihood that they will commit further crimes. Expanding the EITC could create an estimated national societal benefit of $1.7 billion to $3.3 billion by decreasing criminal offenses 0.5 percent to 1 percent each year, according to the Center for American Progress.[8]

Extending the EITC to younger workers with no children would have a particularly significant impact today. Across the nation, fewer young adults are even entering the labor force; labor-force participation among childless young adults with a high school education or less has plummeted by 12.5 percent in less than two decades – currently 3 of every 10 of these young adults aren’t in the labor force.[9]

And in New Jersey, nearly half of young adults between 18 and 34 years old live at home with their parents – more than in any other state – thanks to few job opportunities, low wages and the high cost of housing in the Garden State.[10]

Expanding the EITC would go a long way to helping more young adults enter the workforce, and – particularly when combined with other smart policies like raising the minimum wage – would help make work pay and encourage more young New Jerseyans to fully participate in the state’s economy.

A Diverse Group of Workers Would Benefit from EITC Expansion

Proposals to extend the EITC to childless workers would reward the hard work of a broad swath of people in every state – young and older, male and female, and across all races – who do important low-paid jobs in hospitals, schools, office buildings, and construction sites. (See Appendix for full breakdown by occupation.)

demographics-eitc-expansion-01In New Jersey alone, thousands of workers across different ethnic groups and vocations would benefit from an EITC expansion to childless workers.

Looking at the most modest expansion plan, the Obama/Ryan plan, at least 101,000 New Jerseyans between 21 and 24 years old would be helped. At least 57,000 African Americans, 113,000 Latinos, 145,000 Whites (Non-Hispanic), and 25,000 Asians of all ages would be helped. Additionally, at least 9,000 veterans and active duty military members would be helped by the Obama/Ryan EITC expansion. (Detailed demographic and occupational breakdowns are not currently available for the Booker/Baldwin proposal.)

If Congress Fails to Act, New Jersey Should Step Up

While the cleanest path forward to expand the EITC to these workers without children is at the federal level, if Congress fails to act, New Jersey should follow the lead of other states and consider implementing the EITC expansion at the state level.

In 2014, Washington, D.C. expanded its EITC for childless workers from those who make under $14,000 to those who make under $23,000. It also increased the maximum credit from about $200 to about $500.[11] In May of this year, the Minnesota legislature passed a bill that would have lowered the age of eligibility for childless workers from 25 to 21 and increased the size of the credit.[12] Earlier this year, both houses of the Maryland legislature were poised to pass bills that would have expanded the EITC, but ultimately failed to do so. The bills would have expanded Maryland’s eligible EITC from childless workers who make $11,000 or less to those who work full-time and earn $18,720 or less per year, and they would have also increased the amount of credit received.[13]

Whether it occurs at the federal or state level, expanding the EITC for younger workers without children would be a significant boost for hundreds of thousands of New Jerseyans, and the benefits would be felt for years to come.

Appendix: Number of Workers Helped, Selected Occupations

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Endnotes

[1] Center on Budget and Policy Priorities, Strengthening the EITC for Childless Workers Would Promote Work and Reduce Poverty, April 2016.

[2] New Jersey Policy Perspective, New Jersey’s Sluggish Recovery Hurting Working Families, September 2016.

[3] The Obama proposal would also extend eligibility to workers age 65-66, while the Ryan proposal would not.

[4] Ibid. 1

[5] The state Earned Income Tax Credit will rise to 35 percent under A-12, which was signed into law by Governor Christie on October 14, 2016.

[6] Ibid. 1

[7] White House Council of Economic Advisers, Economic Perspectives on Incarceration and the Criminal Justice System, April 2016.

[8] Center for American Progress, EITC Expansion for Childless Workers Would Save Billions – and Take a Bite Out of Crime, August 2016.

[9] Ibid. 1, Figure 4

[10] Ibid. 2

[11] DC Fiscal Policy Institute, District of Columbia’s Earned Income Tax Credit, August 2014.

[12] Minnesota Budget Project, 2016 Tax Bill Provisions Focus on Working Minnesotans, May 2016.

[13] Tax Justice Blog, Income Tax Cuts, Including Expanded EITC, Fail to Make It Across Finish Line in Maryland, April 2016.

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