Calculating Family Expenses

The Family Resource Simulator provides users with flexibility in determining the cost of basic family expenses. Users can either:

Use the Simulator cost estimates for housing, food, child care, transportation, health insurance, and other necessities. See details below.

Use their own values for these expenses (on Steps 5, 6, and 7), and they can enter a monthly debt payment amount in Step 3.

In addition, the cost of certain expenses—housing, child care, and health insurance—may be offset by in-kind work supports. This depends on user choices in Step 4 and on the family’s eligibility for work supports (for more information about how the Simulator determines eligibility, see Assumptions for Determining Work Support Eligibility).

Family Expenses: Family Resource Simulator Estimates

Rent and utilities

The cost of housing is estimated based on the Fair Market Rent determined by the U.S. Department of Housing & Urban Development. This value varies based on state and city (or county) and number of children; the Simulator assumes a 2-bedroom unit for families with 1 or 2 children and a 3-bedroom unit for families with 3 children.

Food

The cost of food is estimated based on the Low-Cost Food Plan developed by the U.S. Department of Agriculture, which varies based on family size and the ages of family members. Cost estimates are updated for inflation when applicable.

Child care

The Simulator provides cost estimates for multiple child care settings based on data from the state’s child care market rate survey, using 75th percentile rates (updated for inflation when applicable).

Cost estimates in Simulators dated 2003 to 2005, however, are based on the maximum provider payment rates used by the state's CCDF subsidy program. In general, where states offer multiple rates depending on quality and other factors, the basic rate is used (exception: 3-star rates are used in Denver).
Values vary based on state and city (or county), child's age, and child care setting. Cost also varies depending on parent(s)' employment status. For more information, see Estimating Family Child Care Needs.

Transportation

For most cities (and counties), the cost of transportation reflects the assumption that parents commute to work by car and is estimated using the Economic Policy Institute’s Basic Family Budget methodology. This methodology relies on data from the 2001 National Travel Household Survey, the 1990 Nationwide Personal Transportation Survey, and the IRS cost-per-mile rate (for more information, see <www.epi.org/datazone/fambud/fam_bud_calc_tech_doc.pdf>). Cost varies based on state and city (or county) and parent(s)’ employment status.

In cities with extensive public transportation systems, the estimate is based on the cost of public transportation, as reported by the local transportation authority. To determine the adequacy of public transportation, the Simulator relies on the local Self-Sufficiency Standard developed by Diana Pearce for Wider Opportunities for Women (for more information, see <www.wowonline.org/ourprograms/fess/>). Cost varies based on state and city (or county) and parent(s)’ employment status.

Health insurance

The Simulator provides estimates for premiums under two different types of health insurance coverage. Employer-based plan estimates are based on the average employee contribution for employer-based coverage in the state’s private sector, according to the Medical Expenditure Panel Survey (MEPS) conducted by the federal Agency for Healthcare Research and Quality (for more information, see <www.meps.ahrq.gov/mepsweb/data_stats/quick_tables.jsp>). These estimates vary by state and by the number of parents and children covered, reflecting state averages for “single coverage” for a single parent, “employee-plus-one coverage” for two parents, and “family coverage” for a family plan that includes children.

Nongroup plan estimates are based on the lowest quotes provided by www.ehealthinsurance.com for a preferred provider organization (PPO) plan or point-of service (POS) plan with a $500 deductible, 20% coinsurance, and copayments of no more than $25. Quotes were not available from this web site for Massachusetts, New York, or Vermont; estimates for these states are derived from <www.bluecrossma-directpay.com>, <www.ins.state.ny.us/ihmoindx.htm>, and the Catamount Full Premium health insurance plan, respectively. Estimates vary based on state and city (or county), as well as by the number of parents and children covered.

Other necessities

The cost of other necessities is estimated using the Economic Policy Institute’s Basic Family Budget methodology, which relies on data from the Consumer Expenditure Survey (for more information, see <www.epi.org/datazone/fambud/fam_bud_calc_tech_doc.pdf>). It equals 27 percent of the sum of the family’s (unsubsidized) housing and food costs. In Vermont, the cost of other necessities reflects the Lifeline Telephone Service Credit.

Payroll taxes

The cost of payroll taxes is calculated following federal tax regulations.

Income taxes (excluding credits)

The cost of income taxes is calculated following federal, state and local tax regulations and reflects the family's income tax liability excluding the value of credits, which are counted as family resources (see Calculating Family Resources).

For Simulators dated 2003 to 2005, however, the Federal Child Tax Credit, Federal Child and Dependent Care Tax Credit, nonrefundable state (and local) earned income tax credits, and nonrefundable state (and local) child care tax credits are reflected in tax calculations.