BILL ANALYSIS Ó
AB 6
Page 1
ASSEMBLY THIRD READING
AB 6 (Fuentes)
As Amended April 12, 2011
Majority vote
HUMAN SERVICES 4-2 APPROPRIATIONS 11-6
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|Ayes:|Beall, Ammiano, Butler, |Ayes:|Fuentes, Blumenfield, |
| |Swanson | |Bradford, Charles |
| | | |Calderon, Campos, Davis, |
| | | |Hall, Hill, Lara, |
| | | |Mitchell, Solorio |
| | | | |
|-----+--------------------------+-----+--------------------------|
|Nays:|Jones, Grove |Nays:|Harkey, Donnelly, Gatto, |
| | | |Nielsen, Norby, Wagner |
| | | | |
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SUMMARY : Streamlines a number of issues related to the
administration of CalFresh (formerly known as the Food Stamp
Program) and California Work Opportunity and Responsibility to
Kids program (CalWORKs) and improves nutritional outcomes.
Specifically, this bill :
1)Requires counties to convert from a quarterly to a semi-annual
reporting system for CalWORKs and CalFresh no later than
January 1, 2013, as specified.
2)Eliminates the Statewide Finger Imaging System (SFIS).
3)Requires the Department of Social Services (DSS) and the
Department of Community Services and Development to design,
implement and maintain a "Heat and Eat" program by January 1,
2013, as specified.
FISCAL EFFECT : According to the Assembly Appropriations
Committee:
1)First year costs for the three program changes required by
this bill would be approximately $11 million ($8 million
TANF/GF). By the second year, the remaining up front
automation and training costs for Semi Annual Reporting (SAR)
would be fully offset by one half year of administrative
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savings for a net savings of $17 million ($16.5 million
TANF/GF). On-going savings and workload relief for counties
in the CalFresh and CalWORKs programs would likely be
approximately $77 million ($51 million TANF/GF).
In addition, these changes would likely bring in an additional
$850 million in federal Supplemental Nutritional Assistance
Program (SNAP) funding and $23 million in additional sales tax
revenue for the General Fund.
a) Semi Annual Reporting (SAR):
i) One-time costs of $20 million ($15 million TANF/GF)
for systems changes and providing notices to participants
about the implementation of the new reporting
requirements;
ii) DSS estimates on-going annual administrative savings
of approximately $75 million ($36 million TANF/GF) as a
result of the implementation of SAR;
iii) On-going annual CalWORKs grant costs of
approximately $19 million (TANF/GF) as a net result of
some CalWORKs recipients receiving slightly higher grants
than they would under the current quarterly reporting
system where the grant is adjusted more often due to
earnings and other individuals receiving slightly less
than they would under the current system;
iv) Assuming a 5% increase in CalFresh recipients due to
the implementation of SAR, Californians could receive
approximately $400 million in federal SNAP (CalFresh)
benefits; and,
v) Absent the adoption of SAR through this legislation,
the federal government will require the state to convert
to straight quarterly reporting for its CalFresh caseload
by September 30, 2011. DSS estimates the cost of the
conversion would be approximately $7.2 million in up
front automation changes with an ongoing annual
administrative cost of $24 million ($12 million GF).
Therefore, adoption of SAR allows the state to avoid
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these costs.
b) SFIS Elimination:
i) There is no additional CalWORKs cost associated with
the elimination of finger imaging. In previous years,
DSS has asserted that the elimination of finger imaging
for CalWORKs recipients would result in a $60 million
increase in costs due to duplicate aid fraud. This
estimate is based on a pre-welfare reform study of the
General Relief caseload in the county of Los Angeles.
California's State Auditor, the federal government, an
audit of the states of New York and Texas and a
feasibility study in Maryland refute that assertion. For
a more detailed discussion of the DSS SFIS elimination
estimate, please see the comments section below;
ii) The Office of Systems Integration (OSI) estimates
one-time decommissioning costs of $11 million ($7.4
million TANF/GF) to shut down the finger imaging system
throughout the state. Those costs include paying $7
million in an outstanding loan for the equipment and
paying Hewlett Packard (the vendor) $1.8 million to
travel throughout the state to pack up the 275 finger
imaging machines. These costs would occur only if the
governor fails to adopt the 2011-12 budget passed by the
Legislature, which eliminates the finger imaging of In
Home Supportive Services recipients. If that requirement
remains in state law, the machines would not be
decommissioned;
iii) Assuming an increase in the CalFresh caseload of
4.3%, based on a recent Urban Institute study,
administrative costs for the program could increase by
$27 million ($9 million GF). Those costs, however, would
be partially offset by the on-going savings due to the
elimination of SFIS of $13 million ($9 million TANF/GF);
and,
iv) Assuming a 4.3% increase in CalFresh recipients due
to the elimination of finger imaging, Californians could
receive approximately $352 million in federal SNAP
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(CalFresh) benefits.
c) "Heat and Eat" Program:
i) On-going administrative savings of approximately $12
million ($8 million GF) associated with eligibility
workers no longer having to calculate the utility
allowance for CalFresh recipients. The administrative
savings would be modestly offset by the on-going
administrative costs to add the federal Low-Income Home
Energy Assistance Program (LIHEAP) benefit to the
electronic benefit transfer (EBT) card of approximately
$800,000 ($500,000 GF);
ii) In order to allow all CalFresh recipients to benefit
from the Standardized Utility Allowance (SUA), a modest
LIHEAP benefit must be offered to each recipient. Up to
$500,000 in federal LIHEAP funding could be set aside for
90 days each year for recipients. Based on the
experience of other states, it is assumed that only a
small number of recipients will actually redeem the
benefit. Therefore, of the $500,000, $355,000 would be
returned to the LIHEAP program to be reallocated to other
LIHEAP recipients and $145,000 would likely be redeemed
by CalFresh and CalWORKs participants; and,
iii) Approximately 150,000 CalFresh recipients should see
an increase in their monthly federal benefits. On
average, those benefits will increase by 13% ($46 per
month). That increase will result in Californians
receiving an additional $83 million in federal SNAP
(CalFresh) benefits.
d) Additional Federal CalFresh Benefits:
Assuming a 9.3% increase in food stamps cases and increases
in the CalFresh benefits for 150,000 current CalFresh
families, Californians would receive approximately $850
million in additional federal food stamp benefits.
Further, this bill would allow the children in these
families to be eligible for free school meals, which are
primarily federally funded. Approximately $45 million
dollars in additional federal funding could flow to the
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state to provide these children with free school lunches
and breakfasts. Finally, several million dollars in
increased federal child welfare services funds could be
received by the state.
e) Increased Sales Tax:
To the extent this bill increases food stamp participation,
the state could expect to receive additional state GF
revenues due to increased sales tax. Studies show that low
income families spend approximately 45% of their income on
taxable goods. By providing these families with food
stamps, 45% of the money previously used by the family to
purchase food would now be used for taxable goods. Based
on this assumption, $850 million in additional CalFresh
benefits would result in $23 million in additional sales
tax revenue for the General Fund.
COMMENTS :
1)Rationale . The current complexity of CalFresh is hurting
participation. The United States Department of Agriculture
(USDA) studies show that only 50% of eligible Californians
receive CalFresh. This bill is designed to improve CalFresh
participation and create efficiencies in the program by
continuing the practice of aligning eligibility requirements
for both the CalWORKs and CalFresh programs.
2)Semi-annual reporting :
a) USDA Opinion . In a letter provided to former Assembly
Member John Laird on a similar bill dealing with
semi-annual reporting (AB 2844 (Laird) of 2008), the USDA
strongly encouraged the state to move to a semi-annual
reporting process. According to USDA findings from other
states, semi-annual reporting should have numerous positive
impacts for California, such as:
i) Improving the state's CalFresh error rate by
limiting the number of changes that would need to be
reported by CalFresh participants;
ii) Significantly reducing county administrative
workload due to less frequent certifications and
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interviews, fewer reapplications following closures, and
fewer periodic report forms to process;
iii) Providing greater access to CalFresh for eligible
families because there would be fewer terminations due to
incomplete recertifications, less frequent
recertification reviews, and more time to provide case
managements and other services designed to assist
clients; and,
iv) Increasing the number of families that receive
CalFresh benefits based on the study of four states that
saw an increase in participation once they adopted
semi-annual reporting. The USDA also notes that there is
no known correlation between simplified reporting and an
increase in fraud.
b) Quarterly Reporting Grant Impacts . With the change from
a monthly reporting system to quarterly reporting for
CalWORKs and CalFresh, the prior administration estimated
that there would be a significant cost associated with
families continuing to receive grants for two months for
which they are no longer entitled. However, once the
system was implemented, the actual data on grant payments
showed that this concern was unfounded. Given the state's
experience with the move from monthly to quarterly
reporting, there is no evidence to suggest that a move from
quarterly to semi-annual reporting would have a significant
cost impact on CalWORKs grants. In fact, DSS estimates
that this change would actually result in a CalWORKs grant
savings.
c) CalFresh and Hunger . According to research by the
University of California at Los Angeles, over 2.2 million
Californians cannot always afford enough food, and almost
one-third, or 658,000 of these adults experience episodes
of hunger. According to the USDA, only about half of
eligible food stamp recipients participate in the program
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due to programmatic and administrative barriers.
California's participation rate ranks last in the nation
for number of people eligible but are not receiving
benefits. A 2004 study by Mathematica indicated that
CalFresh participation is 12% lower among working
low-income families because of the burdensome eligibility
process.
d) School Meals Program . School meal programs are also
underutilized. Only half of income eligible students
receive lunch at school, and 18% receive school breakfasts.
Some low-income children with incomes between 133% and
185% of the federal poverty level, currently ineligible for
CalFresh, may not receive school meals because their
families cannot afford the 40 cents required for a reduced
price lunch and 30 cents for breakfast. The children in
new CalFresh households would be eligible for free school
meals.
e) Additional Federal Child Welfare Services Funds . The
federal government awards funding to states through the
Promoting Safe and Stable Families (PSSF) program that can
be used in the Child Welfare Services program for efforts
to reduce the incidences of child abuse and neglect, and to
promote stability and permanency for at-risk children
within families. The federal government sets a capped
amount for funding and then awards those funds to states
and territories based upon the number of children in each
state who are receiving CalFresh benefits. Despite serving
over 25% of the national child welfare caseload, California
receives less than 15% of the federal PSSF funds because of
the low CalFresh participation rate. To the extent this
legislation increases CalFresh participation among families
with children, California's share of the PSSF funding
should increase.
3)Elimination of the Finger Imaging Requirement :
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a) California is one of only three states and one city
across the country that has maintained the practice of
finger imaging CalFresh households as a component of the
application process. This practice, intended to prevent
duplicate aid fraud, has been shown in a California state
audit to be an inefficient and redundant use of funds. The
California State Budget estimates that SFIS will cost $17
million to maintain in 2012 alone. Other more effective
and economical approaches to preventing duplicate aid
fraud, as well as other types of fraud, are already in
place (e.g. Income Eligibility Verification System).
During tough budget times the state cannot continue to fund
a redundant and obsolete administrative practice.
b) In addition, finger imaging acts as a barrier to
participation, preventing eligible Californian's from
receiving nutrition benefits. According to USDA, states
that use finger print imaging have an average 7% lower
participation rate compared to the most similar states (in
terms of caseload) that do not require a finger image.
Concern over the negative impact on participation has lead
the federal government, who pays for 100% of CalFresh
benefits, to urge California to drop the practice and place
a moratorium on any additional states implementing finger
imaging.
c) Given the results of the state audit, the recent
research indicating a negative impact on participation, and
California's need to reduce state costs by eliminating
ineffective administrative practices, the finger print
image requirement should be eliminated.
4)" Heat and Eat" :
a) A "Heat and Eat" initiative would promote access to
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CalFresh, by simplifying the verification process, and will
maximize critical federal nutrition benefits for eligible
and participating households.
b) For many California families a barrier to accessing and
maintaining CalFresh benefits is the complicated and often
excessive verification process that is a component of the
CalFresh application process. The verification process has
been successfully streamlined in a number of other states
to promote ease of application, without compromising the
integrity of the program. One such strategy is to
implement a heat and eat initiative. Such an initiative
provides all CalFresh households with a nominal Low Income
Home Energy Assistance Program (LIHEAP) benefit that
qualifies them to use the standard utility allowance (SUA)
for the purpose of calculating CalFresh benefit levels.
Knowing that a majority of California households incur
utility expenses in one way or another, the initiative will
remove the verification requirement associated with utility
costs (i.e. utility bill) for all households thus
simplifying the application process.
c) An ongoing issue faced by many CalFresh eligible and
participating households is the high cost of living in
California, as well as the often high cost of healthier
food options. In addition, redemption trends show that
CalFresh recipients use their benefits quickly and have
little, if any benefits left at the end of the month.
These facts indicate that current CalFresh benefit
allocations may be inadequate for many California
households. The change in benefit calculations resulting
from the application of a universal SUA through a heat and
eat initiative would result in an increase in monthly
CalFresh benefits for a significant number of households.
Therefore, maximizing critical federal nutrition assistance
and further supporting California families.
d) A heat and eat initiative will increase federally funded
CalFresh benefits, simplify the verification process for
all households, reduce the opportunity for utility related
errors, and will draw down federal funding to stimulate
local economies.
5)Positive fiscal effect of food stamp benefits :
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According to Moody's Investor Services, an independent provider
of credit ratings and financial services research, CalFresh
benefits have the highest economic multiplier effect out of
all government programs or fiscal policy tools that stimulate
the economy. Moody's finds that for every CalFresh dollar
spent, $1.74 is generated in economic activity. (The USDA
finds this amount to be $1.84). Additionally, these benefits
generate sales tax revenue for county and the state coffers.
To the extent that this bill increases CalFresh participation,
the state could expect to receive additional state General
Fund revenues due to increased taxable purchases by
recipients. This is possible because studies show that
low-income families such as CalFresh recipients spend
approximately 45% of their income on taxable goods. By
providing these families with CalFresh benefits, 45% of the
money previously used by the family to purchase food would now
be used for purchasing taxable goods.
Analysis Prepared by : Frances Chacon / HUM. S. / (916)
319-2089
FN: 0000988