Weekly Wonk: Should I PAY or Should I GO Now?
S-PAYGO calling, immigration restrictions on HHS benefits, & more
Welcome back to your Weekly Wonk, where we can’t believe summer is half over.
It’s the time of year when you take a two-week family road trip to see waterfalls and mountains, and your three-year-old summarizes it as “uhh, we went to a hotel…”
We’ve got lots for you this week:
Let’s get to it.
Partners Making Your Weekly Wonk Possible
Expanding Exclusions to HHS Benefits
As immigration enforcement continues expanding, HHS changes benefits eligibility
On July 10, U.S. Department of Health and Human Services (HHS) Secretary Kennedy issued a policy further restricting HHS-funded based on immigration status.
Prior Policy
Existing restrictions date to the ‘96 welfare reform law; the Personal Responsibility and Work Opportunity Reconciliation Act of 1996 (P.L. 104-193, PRWORA).
PRWORA already restricts benefits like economic assistance through the Temporary Assistance for Needy Families (TANF) program.
Policy Changes
This new policy expands the scope of programs subject to these restrictions.
The policy provides a non-exhaustive list of newly covered programs, including:
Title IV-E prevention services under the Family First Prevention Services Act;
Title IV-E Kinship Guardianship Assistance Program;
Chafee Education and Training Vouchers; and
Head Start.
Policy Timing & Process
The policy takes effect immediately.
Wonks may wonder how a policy change this substantial can occur without the usual notice and comment process under the Administrative Procedure Act (APA).
Earlier this year, HHS issued a repeal of the Richardson Waiver, ending decades of HHS policy that applied the APA rules to grants, contracts, and benefits.
What’s now changing through PRWORA policy is all about grants, contracts, and benefits; a clear example of what has changed with the Richardson repeal.
Key Considerations
We’ve previously discussed the ways that the risks of policy implementation are rising and devolving to state and local agencies.
Examining this policy in that context illuminates the administrative and fiscal policy questions that emerge when benefits eligibility is part of immigration enforcement.
Agency leaders already facing budgetary headwinds will need new technology systems, training, contracting, and staff time to ensure and prove compliance.
Service providers already working on established contracts will face new costs of business without an increase in resources.
Regardless of your views on immigration policy, these issues will need deliberation.
What Comes Next
HHS is accepting comments through August 13th. Enforcement begins immediately.
Reconciliation Strikes Back: Complex Budget Rules Could Cause More Cuts
How an arcane budget policy rule could compound cuts across more programs without Congressional action.
By Doug Steiger, Child Welfare Wonk Senior Contributor
With budget reconciliation enacted, leaders and policy experts are preparing for cuts of nearly $1T to Medicaid and $186B to the Supplemental Nutrition Assistance Program (SNAP).
They would do well to also prepare for the possibility of across-the-board cuts to even more programs.
Driving Deficits
If you heard anything about the One Big Beautiful Bill Act (P.L. 119-21), it was that the law’s safety net cuts offset its new spending on tax, defense, and immigration enforcement policy.
However, despite significant reductions to programs like Medicaid and SNAP, the cost of tax cuts was so significant that the law is forecast to increase the deficit.
The Congressional Budget Office (CBO) estimated it will lead to an increase of more than $3 trillion over the next ten years.
This matters because it triggers other aspects of budget policy.
Specter of S-PAYGO
Increasing the deficit isn’t merely contested framing between partisans; it brings into play an arcane federal budget rule we have previously flagged, Statutory Pay-As-You-Go (S-PAYGO).
S-PAYGO attempts to manage the deficit by requiring cuts (or “sequestration”) at the end of a Congressional session if the cumulative changes to taxes and mandatory spending have increased the deficit.
It was established in 2010 as part of legislation to increase the debt ceiling, the latest in a series of similar “pay as you go” measures dating back decades, with the idea that the prospect of such cuts would keep policymakers from deficit-increasing bills.1
Given the size of the deficit increase in the reconciliation bill, the sequestration cuts required by S-PAYGO would be on the order of $300 billion.2
Social Security is exempt from these cuts. Medicare is not, though benefit reductions are limited to 4 percent.
Some low-income programs, including Medicaid, SNAP, Title IV-E foster care, and TANF are also exempt.
Importantly, as we noted before, there are several safety net programs serving children and families that are subject to sequestration3, including the:
Social Services Block Grant (SSBG)
Maternal, Infant, and Early Childhood Home Visiting MIECHV) Program; and
Mandatory funding for the Title IV-B Promoting Safe and Stable Families program.
Since the OBBB Act triggered S-PAYGO, Congress would need to act to prevent these across-the-board cuts.
When to Worry
S-PAYGO dates to 2010, but typically has led to a pro forma waiver instead of cuts.
The reconciliation bill did not include a waiver.
Does that mean the Republicans intend to allow the across-the-board cuts to happen? Probably not, though these are not usual times.
While some conservatives would cheer the resulting cuts, it is not certain if the Administration wants them.
President Trump, for example, has regularly warned conservatives not to cut Medicare, though he has been known to change his positions.
What’s likely to happen
Congressional Republicans could move to enact a waiver later in the year, either as part of another comprehensive bill or as a standalone provision, and dare Democrats to object to heading off the Medicare and other cuts.
This would be challenging though; there are fiscal conservatives who would like further spending cuts, and they might not approve of a party-line strategy that requires them to vote for a waiver to engage in this game of chicken with Democrats.
Another option could be the usual approach; including the waiver in negotiated bipartisan legislation.
For example, it could be part of whatever appropriations legislation is eventually enacted to fund the government.
But we have noted that those negotiations appear especially difficult this year.
Alternatively, the White House could employ creative scorekeeping.
As it happens, the final arbiter of the “scorecard” is not CBO but the White House Office of Management and Budget (OMB).
This would be in line with the pathway that brought us here; Senate Republicans opted to use a different spending baseline than the norm for scoring the impact of the tax cuts.4
Under this Administration, OMB has been testing the limits of budget law, such as withholding appropriated funding.
In light of this, it seems plausible that OMB could “score” the deficit impact of the reconciliation bill in such a way as to simply eliminate the need for sequestration.
What Lies Ahead
So, yes, we are currently headed for large “sequestration” cuts later this year.
However, there are solid reasons to think that, as in the past, a waiver will turn off the automatic cuts.
But given all the unprecedented things happening in Washington, this is not the year to simply assume enactment of a waiver, even if all the players think it should happen.
Doug Steiger is a Child Welfare Wonk Senior Contributor and public policy consultant.
He served as a Counselor to the HHS Secretary during the Obama Administration and was a Senate staffer for 12 years.
Waiting on a Waiver: Projected Cuts by State
While an S-PAYGO waiver is typically forthcoming, Doug’s analysis makes clear that there’s a material difference between improbable and impossible.
It’s beneficial to know what the impact could be on funding after the end of this Congress, given the myriad other headwinds this year.
So Child Welfare Wonk has got you covered, whether you’re a:
Hill staffer prepping for complex FY ‘26 funding debates;
Agency leader updating your budget following the OBBB Act;
Funder revising strategy amidst endowment changes and new grantee needs; or
State advocate wondering about how to orient to your next legislative cycle.
This map shows the projected cuts, which range widely, from $5M to over $100M+.
These are the ten states facing the biggest S-PAYGO cuts broken down by program.
Director’s Cut
Welcome back to Director’s Cut, our standing series featuring former agency directors from across the country and ideological spectrum.
We invite former leaders to say it straight— what do they wish policymakers, advocates, and philanthropy knew when crafting policy.
Investing in Better Child Welfare Outcomes – A Balancing Act
By Brenda Donald, MPA
To be an effective child welfare leader, it’s not enough to be expert in policies, the budget process, direct service, and management.
You need all that, and you need to be savvy on navigating the political process in a nonpartisan way.
The average tenure of a child welfare leader is less than two years.
And they don’t just get a short runway; they usually start when an agency is in crisis or in response to high-profile child tragedies
Even when a child welfare agency is in relatively good shape, the new leader always has a learning curve but still needs to hit the ground running.
Courting Your Critics
When I assumed my role as Cabinet Secretary for the Maryland Department of Human Services, I made a list of the key players I would need to meet with, including legislators, advocates, and providers.
One of my first meetings was with the powerful chair of one of the legislative Committees.
He was a key power center, with authority over our funding and the accumulated clout of 20 years in office. He was also our Department’s most vocal critic.
My team told me he was a huge problem, and that his legislative agenda was influenced by an advocacy community that was fed up with the department’s terrible outcomes over many years.
As a leader, I understood how the sting of his criticisms led my new team to get defensive. At the same time, he saw a need for deeper change that registered with me.
I was new on the scene with a credible track record from running the Washington, DC child welfare agency, but everyone was impatient and wanted immediate change.
I knew I had to model a different type of leadership for our team by positioning the department as a credible entity capable of doing its job.
Cultivating Common Ground
Maybe I could have been more diplomatic, but I decided on a more direct approach. My opening statement in my meeting with the chair was:
“Everybody warned me that I would have to fight you. I’m hoping we can find common ground and work together to improve the department. I know we both want better outcomes for the kids and families we serve.”
That opened the door for a productive partnership during my tenure.
Of course we didn’t agree on everything, but we found ways to agree on important issues.
The chairman, the governor, and I all wanted to reduce the state’s use of group homes for children in foster care, for different reasons:
The governor hated group homes because they were costly and often poorly run;
The committee chair hated them because of what he heard from constituents- they brought more traffic, noise, and police activity to the neighborhoods they were concentrated in;
My concern was that kids should be raised in families, and only placed in congregate care for episodic treatment and stabilization.
At that time, over 15 percent of Maryland’s foster care children were in group homes, well above the national average of five percent.
So we all had an incentive to address the issue, even if we had totally different motivations to bring us to it.
Crafting Compromise
The chair was considering legislation that would simply reduce the number of annual group homes licensed.
I didn’t want to reject his agreement on a core aspect of the issue, but I also knew that reducing the number of kids in group homes had to be part of a broader child welfare systems transformation.
Reducing group home utilization would take time, beginning with reducing the number of kids entering foster care, increasing kinship placements and recruiting and retaining more foster homes.
So my team developed a comprehensive plan called Place Matters.
I was able to convince the chair that I had a viable plan and that legislation was not necessary, and perhaps even counterproductive.
Instead, I outlined a comprehensive approach for him; preventing unnecessary foster care, increasing use of kinship care, and better supporting foster parents.
I showed him that these approaches worked, both with evidence and my track record using them in DC.
I committed to regular, public-facing reports on progress via a Place Matters report card.
As the department made progress, the chair could claim victory on his agenda as we proved the department could deliver on our commitments.
What could have led to a tenure of contention became a win-win; in just two years, we cut the number of kids in congregate care by half.
These experiences taught me a few things to consider for a better balancing act that I would share with any new leader:
Be impatient, but realistic. Change takes time, but there must be a sense of urgency. As a policymaker, consider what that looks like.
Is legislation actually necessary, or might it inadvertently impose hamstrings that slow and undermine progress?
Make informed cost-benefit analyses – is there evidence that the policy makes sense/cents? What are the possible unintended consequences?
Look at the whole picture – context matters. It’s never just one thing.
Is it worth it to go down a rabbit hole when that means leaving the rabbit free to enjoy the rest of the garden?
Look for the common ground – if the goals are better outcomes for kids and families, there is room to work together, even if there’s a lot you disagree on.
Brenda Donald has over 25 years in senior leadership human services roles, including serving three Mayors and one Governor in Cabinet level positions.
You can find more background in this Congressional Research Service report
This May CBO letter to the House Budget Democrats lays out some of the calculations involved. For a sense of magnitude, this is comparable to the potential impact of the American Rescue Plan Act (P.L. 117-2, ARPA), before the waiver of S-PAYGO for that law.
This is also why they claim the deficit impact of the bill is much smaller than the $3 trillion figure.