Climbing the Cliff: How Montana DPHHS Can Help Clients Understand and Navigate Benefits Cliffs

Abstract

Benefits cliffs have negative repercussions for public assistance recipients, employers, taxpayers, and the government. For public assistance recipients, benefits cliffs can prevent self-sufficiency and threaten long-term stability. Assistance recipients are confronted with worse short- and medium-term outcomes when faced with a benefits cliff, which may be a disincentive to seeking out higher-paying work opportunities. The disincentives created by benefits cliffs mean that employers also struggle to recruit and retain employees, and that taxpayers and the government must spend more money to fund a higher number of assistance program participants. One of the Montana Department of Public Health and Human Services’ (DPHHS) goals is “for all Montanans [to] have the tools and support to be as self-sufficient as possible,” but benefits cliffs prevent the full realization of that goal. Therefore, DPHHS has a responsibility to investigate how it can help public assistance recipients understand and navigate benefits cliffs. This report begins with background on benefits cliffs, followed by findings from interviews with five Montana Office of Public Assistance (OPA) staff, three Human Resources Development Council (HRDC) staff, and five Montana public assistance recipients; and findings from a literature review of benefits cliff-mitigating policies. The report ends by proposing recommendations for DPHHS to help its clients understand and navigate benefits cliffs, based on the interview and literature review findings. The 13 interviews with OPA staff, HRDC staff, and public assistance recipients revealed that it is difficult or nearly impossible for assistance recipients to anticipate when they might face an income-induced benefits cliff and how it will impact their net income, because there are too many factors involved in calculating benefits levels. Further, when assistance recipients experience a benefits cliff due to increased income, they tend to seek out non-OPA resources for support. Even if they are not seeking benefits cliffs-related support from OPA staff, all interviewed assistance recipients said that they always think about how a job will impact their benefits and ability to afford necessities. Assistance recipients reported that they assess the extent of the negative impact of the benefits cliff when deciding whether to take a new employment opportunity.