BILL ANALYSIS Ó SENATE HUMAN SERVICES COMMITTEE Senator Carol Liu, Chair BILL NO: AB 6 A AUTHOR: Fuentes B VERSION: April 12, 2011 HEARING DATE: June 28, 2011 6 FISCAL: Appropriations CONSULTANT: Brown SUBJECT CalWORKs and CalFresh SUMMARY Streamlines a number of administrative functions within the California Work Opportunity and Responsibility to Kids (CalWORKs) and the CalFresh (formerly known as the food stamp program) programs, including moving participants from quarterly to semiannual reporting and discontinuing the fingerprinting requirement for recipients. It also creates a new "Heat and Eat" program that provides energy assistance benefits to CalFresh participants. ABSTRACT Current law 1) Establishes the California Work Opportunity and Responsibility to Kids (CalWORKs) program, which requires each county to provide cash assistance and services to needy families using federal Temporary Assistance to Needy Families (TANF) block grants, as well as state and county funds. 2) Establishes the CalFresh program to administer California's allocation of federal funds under the Supplemental Nutrition Assistance Program (SNAP), formerly called food stamps. Counties distribute Continued--- STAFF ANALYSIS OF ASSEMBLY BILL 6 (Fuentes) Page 2 CalFresh benefits to eligible participants. 3) Requires that the Department of Social Services (DSS) and the Health and Welfare Data Center maintain a statewide fingerprint imaging system to use as a part of the application process under the CalWORKs and CalFresh programs and requires applicants, as a condition of eligibility, to submit their fingerprints. 4) Requires counties to re-determine eligibility for CalWORKs benefits and grant amounts on a quarterly basis and to determine prospectively the grant amount that a recipient is entitled to receive for each month of the quarterly reporting period. 5) Directs DSS to use the CalWORKs quarterly reporting system in its administration of CalFresh. 6) Requires that participants of both programs submit quarterly reports in order to maintain their eligibility. 7) Establishes that DSS is responsible for administering CalFresh benefits and that the Department of Community Services and Development is responsible for administering the federal Low-Income Energy Assistance Program block grant. This bill 1) Revises reporting requirements from quarterly to semiannually for participants in the CalWORKs and CalFresh programs, makes related adjustments in language, and requires counties to transition participants into the semiannual reporting system no later than January 1, 2013. 2) Directs DSS, in consultation with the California Welfare Directors Association, to report - in April 2013 to policy and fiscal committees of the Legislature -- the effects of implementing semiannual reporting requirements. 3) Deletes the requirement that CalWORKs and CalFresh applicants provide fingerprints. STAFF ANALYSIS OF ASSEMBLY BILL 6 (Fuentes) Page 3 4) Creates a "Heat and Eat" program jointly with the DSS and the Department of Community Services and Development, which automatically enrolls CalFresh recipients in a Home Energy Assistance Program, funded through the federal Low-Income Home Energy Assistance Program block grant, and requires the program be implemented by January 1, 2013. 5) Directs DSS to use the full standard utility allowance in calculating CalFresh benefits, regardless of whether the CalFresh participant is redeeming his or her Home Energy Assistance Program benefit. 6) Codifies California's current income reporting threshold requirements for both CalWORKs and CalFresh participants. FISCAL IMPACT Per the Assembly Appropriations Committee, first year costs for the three program changes required by this bill would be approximately $11 million ($8 million TANF/General Fund). By the second year, the remaining up-front automation and training costs for the semiannual reporting would be fully offset by one half year of administrative savings for a net savings of $17 million ($16 million TANF/General Fund). The committee estimated that ongoing savings and workload relief for counties would be approximately $77 million annually ($51 million TANF/General Fund). The committee also projects that these changes would result in additional benefits to the state, including $850 million in federal Supplemental Nutritional Assistance Program (CalFresh) funding and $23 million in additional sales tax revenue for the General Fund. Approximately $45 million dollars in additional federal funding could come to the 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. BACKGROUND AND DISCUSSION STAFF ANALYSIS OF ASSEMBLY BILL 6 (Fuentes) Page 4 Author's statement The author notes that in difficult budget times, opportunities to improve nutrition for low-income Californians are rare: this bill will bring more federal funds to the state while also reducing state fiscal pressures. Existing law Federal law requires states to implement a system to disburse federal benefits through the Temporary Assistance to Needy Families program and the Supplemental Nutritional Assistance Program block grants. In California those programs are implemented through the CalWORKs and CalFresh programs. Federal law requires California to review recipient eligibility and grant amounts. State law requires quarterly reviews of eligibility and prospective budgeting. State law also specifies that counties may implement staggered reporting cycles, establishes criteria for a complete report, and defines steps to be taken when a recipient fails to submit a complete report. Federal law directs states to establish a system to ensure that no individual receives supplemental nutrition assistance benefits more than once a month, but federal law does not require recipients to be fingerprinted. California law requires fingerprints be submitted as a condition of the application. California participation is low Half of eligible Californians receive CalFresh, according to reports by the United States Department of Agriculture. The state ranked second to last in 2008 among states in use of benefits by eligible residents, and California ranked last in use of benefits among eligible working poor families, according to the USDA. USDA lists California among traditionally poor performing states. California's low participation has been a concern of the federal government, which provides 100 percent of the funding for CalFresh benefits. Fingerprinting and USDA concerns California is one of three states and one city that require fingerprinting as a condition of eligibility. By STAFF ANALYSIS OF ASSEMBLY BILL 6 (Fuentes) Page 5 fingerprinting applicants, counties are able to determine whether the same applicant receives duplicate benefits in another county or under another name. A 2003 Bureau of State Audits report, Statewide Fingerprint Imaging System: The State Must Weigh Factors Other Than Need and Cost-Effectiveness When Determining Future Funding for the System, concluded that the state "was remiss" in implementing the system before determining the extent of duplicate aid fraud. It noted that other computer checks are in place to ensure that duplication and other forms of fraud are identified. It said that in 1998, the USDA had expressed concern about the ability of DSS to identify the extent of duplicate-aid fraud throughout the state. The primary benefits that the State derives from continuing to use SFIS are the proven effectiveness of fingerprint imaging technology to identify duplicate fingerprints and its ability to identify applicants who may travel from county to county seeking duplicate aid. On the other hand, most of the matches that SFIS identified have turned out to be administrative errors made by county staff, and the level of detected duplicate-aid fraud has been small. The USDA notes that states with finger imaging requirements have an average 7 percent lower participation rate when compared to similar states, and USDA is concerned enough about the deterrent factor that it has prohibited other states from requiring applicants to be fingerprinted. In a May 7, 2010 letter to the director of DSS, the undersecretary of USDA's Food, Nutrition and Consumer services branch emphasized the agency's serious concerns that finger imaging requirements may be a barrier to participation and encouraged DSS to "actively consider" more cost-effective alternatives to finger imaging. In a letter to the author sent in May of 2011, the USDA Under Secretary noted, "There are serious concerns that finger imaging requirements may be a barrier to participation among many of the hard to reach eligible populations who wish to enroll in the program? We must ensure that we are not creating unnecessary barriers in the application STAFF ANALYSIS OF ASSEMBLY BILL 6 (Fuentes) Page 6 process." The counties also use a computerized Income and Eligibility Verification System currently to detect other types of fraud. This system also is employed by the counties for use in tracking fraud in their general assistance programs. Semiannual reporting California is the only state that continues to require quarterly reporting; 47 other states, Guam, the U.S. Virgin Islands and the District of Columbia have moved to semiannual reporting. For two years, the USDA has requested that California move to a simplified reporting system, citing concerns with low participation and a belief that streamlining the reporting process would result in better access for participants and improved program administration and accuracy. USDA findings from other states indicate moving to semiannual reporting would limit the number of changes that need to be reported by CalFresh participants, thus improving the state's reporting error rate. Moving to semiannual reporting should also measurably reduce county administrative workload and provide greater access to CalFresh because there would be fewer terminations due to incomplete recertifications. In September 2009, the USDA rejected a DSS request to extend the current quarterly reporting waiver for an additional four years. Instead, USDA granted a six-month extension to develop a plan for converting to a simplified reporting system. Upon submission of the plan in February 2010, DSS received an additional 12-month extension of the current waiver during which time the state was supposed to begin implementation. This bill is a necessary part of that plan. In March, the waiver extension expired, and DSS requested a 38-month extension in order to implement semiannual reporting. The USDA refused this request, granting a six-month extension - to September 30, 2011 - and give DSS time to obtain necessary legislative authority and to take other steps to implement semiannual reporting. This bill seeks to keep CalFresh and CalWORKs aligned by moving CalWORKs recipients to a semiannual reporting system as well. DSS estimates approximately 40 percent of CalFresh recipients also receive CalWORKs, and reporting STAFF ANALYSIS OF ASSEMBLY BILL 6 (Fuentes) Page 7 for the two programs is currently done jointly. Separating the two functions could create additional workload, inefficiency, and confusion among participants. The bill codifies California's current income reporting threshold requirements for both CalWORKs and CalFresh participants. Economic impact of CalFresh CalFresh benefits have the highest economic multiplier effect of all government programs or fiscal policy tools that stimulate the economy, according to Moody's Investor Services, an independent financial services research firm. Moody's projects that for every $1 spent from CalFresh benefits, $1.74 is generated in economic activity. Increased CalFresh participation would generate additional General Fund revenues due to increased taxable purchases by recipients. Heat and Eat Establishment of a Home Energy Assistance Program, funded through existing federal block grant allocations from the Low-Income Home Energy Assistance Program, would result in additional utility benefits for needy families. Enrollees in the CalFresh program automatically would be enrolled also in the energy assistance program. This automatic enrollment would allow CalFresh applicants to claim the standard utility allowance, simplifying paperwork by not requiring applicants to submit a utility bill for use in calculating benefits. Many CalFresh recipients lose benefits because they do not submit any utility verification to use in benefit calculation. Use of the standard utility allowance would increase the amount of federal CalFresh benefits to many participants. Arguments for The California Food Policy Advocates contend that increasing participation levels to near 100 percent of eligible households, as other states have done, could mean an additional $4.9 billion in federal benefits for needy Californians, with the potential to benefit all Californians through the more than $8.7 billion in associated economic activity. Supporters also believe the bill will lead to increased senior enrollment in CalFresh: STAFF ANALYSIS OF ASSEMBLY BILL 6 (Fuentes) Page 8 research shows that CalFresh is underutilized among seniors, and that higher participation in the program would result in better nutrition for older Californians. Arguments against Los Angeles County opposes the bill unless amended, arguing that elimination of the finger imaging system would remove an important anti-fraud tool which increases public confidence in the integrity of the welfare system and costs 37 cents per $100 of CalWORKs costs. Maintaining the fingerprint system is also critical, says the county, to its cross check of General Assistance applicants against CalWORKs and CalFresh cases. The county is, however, amenable to dropping the imaging requirement for CalFresh-only cases, and does support the move to semiannual reporting. Related legislation Attempts to establish semiannual reporting requirements and eliminate the finger imaging requirement have appeared in the budget and in various bills, including: AB 1642 (Beall) 2010 - held in Assembly Appropriations AB 1057(Beall) 2009 - held in Assembly Appropriations AB 2844 (Laird) 2008 - vetoed AB 1382 (Leno) 2007 - vetoed AB 3029 (Laird) 2006 - died at desk AB 696 (Chu) 2005 - vetoed AB 2013 (Steinberg/Lieber) 2004 - died in the Senate without a hearing Assembly votes Floor 49 - 27 Appropriations 11 - 6 Human Services 4 - 2 POSITIONS Support: California Food Policy Advocates (sponsor) Alameda County Community Food Bank California Catholic Conference, Inc. California Chamber of Commerce STAFF ANALYSIS OF ASSEMBLY BILL 6 (Fuentes) Page 9 California Communities United Institute California Farm Bureau Federation California Grocers Association California Hunger Action Coalition California Immigrant Policy Center California Pan-Ethnic Health Network California Restaurant Association California Retailers Association City and County of San Francisco City of Los Angeles County Welfare Directors Association Having Our Say Coalition National Association of Social Workers, California Chapter San Diego Food Bank San Francisco Food Bank Silicon Valley Community Foundation Western Center on Law and Poverty Yolo County Board of Supervisors 1 individual Oppose: California District Attorneys Association Los Angeles County Board of Supervisors (unless amended) -- END --