BILL ANALYSIS Ó
Senate Appropriations Committee Fiscal Summary
Senator Christine Kehoe, Chair
AB 509 (Skinner)
Hearing Date: 08/15/2011 Amended: 08/15/2011
Consultant: Mark McKenzie Policy Vote: G&F 6-3
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BILL SUMMARY: AB 509 would require state departments and
agencies that provide services to low-income persons to annually
notify program recipients that they may qualify for the federal
earned income tax credit (EITC).
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Fiscal Impact (in thousands)
Major Provisions 2011-12 2012-13 2013-14 Fund
EITC notices:
Dept. of Education Minor and absorbable costs General
DSS Estimated annual costs of about
$100General
CPUC: UTLS program $220 $220 $220 Special*
EDD Minor and absorbable costs Federal
DHCS $100 $100 General
MRMIB Minor and absorbable costs General
Other state departmentsUnknown, potentially significant
costsGeneral
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*Universal Lifeline Telephone Service Fund
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STAFF COMMENTS: This bill meets the criteria for referral to the
Suspense File.
Existing federal law allows a refundable EITC to qualifying low-
and moderate-income taxpayers. The amount of the credit is
based on the taxpayer's income and number of qualifying children
claimed, and is phased out as income increases. Currently, to
qualify for the credit, an individual's adjusted gross income
must be less than $43,352 ($48,362 filing jointly) with more
than two qualifying children, $40,363 ($45,373 filing jointly)
with two qualifying children, $35,535 ($40,545 filing jointly)
with one qualifying child, or $13,460 (18,470 filing jointly)
without a qualifying child. Depending on filing status and
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number of children, the current maximum refundable credit ranges
from $457 for an individual to $5,666 for taxpayers with more
than two qualifying children.
Existing state law requires employers to notify employees that
they may be eligible for the EITC, and specifies that this
notice shall be provided within one week before or after an
employer provides employees with an annual wage summary.
Employers are required to either hand the notice directly to
each employee or to mail the notice to each employee's last
known address. In addition, the federal Internal Revenue
Service recently provided notice to over 46,000 California
taxpayers who appeared to be eligible for the EITC, including
instructions, worksheets, and information on filing assistance.
AB 509 would expand notice requirements to state departments and
agencies that operate state or federally funded programs
primarily engaged in providing services to low-income
individuals and families who may qualify for the EITC. The bill
specifies that notice must be provided annually between January
and April, or during a regularly scheduled contact with the
recipient by telephone, mail, electronic communication, or in
person. The bill also specifies certain departments and
programs that provide services to low-income persons, but does
not limit the notice requirements to those listed.
The departments, agencies, and programs that would be required
to provide notices to service recipients include, but are not
limited to the following:
The State Department of Education (CDE), which administers the
free or reduced-price meal program and the national School
Lunch Program. CDE costs are absorbable because free and
reduced-lunch applications are printed annually and a notice
about the EITC could be added at that time for minimal costs.
The Department of Social Services (DSS), which administers
CalWORKS, CalFresh, and foster families programs. DSS
indicates that brochures provided to CalWORKS beneficiaries
include notification about the EITC, and approximately 80% of
CalWORKS recipients also receive CalFresh benefits. Foster
families could receive EITC information during a regular visit
with social workers. There would be some relatively minor
printing and mailing costs to reach the remaining population.
The California Public Utilities Commission (CPUC), which
administers the Universal Lifeline Telephone Service Program.
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CPUC indicates that costs to print a form and include it in a
mailing with over 3 million annual application and renewal
notices would be about $220,000 annually. Staff notes that
the other CPUC programs noted in the bill are administered by
utility companies and would be paid for from ratepayer funds.
The Employment Development Department (EDD), which administers
the Unemployment Insurance Program. EDD indicates that costs
related to this bill would be absorbable because the notice
could be included in a benefits handbook that is regularly
updated, or included on an existing form.
Department of Health Care Services (DHCS), which administers
the Medi-Cal Program. DHCS indicates that costs to send a
notice to 4.1 million Medi-Cal households as part of a regular
mailing would be approximately $100,000. This would be a
General Fund cost because it is not eligible for federal
reimbursement.
The Managed Risk Medical Insurance Board (MRMIB), which
administers the Healthy Families Program. MRMIB indicates
that the notice could be added to billing statements for
approximately 872,000 recipients at an absorbable cost.
Staff notes that the bill's requirements are not limited to the
departments, agencies, and programs specified in the bill.
Overall costs, therefore, could be much greater. In addition,
it is likely that the specified programs serve many of the same
individuals and families, resulting in duplication of efforts.
Staff recommends that the bill be amended to limit the notice
requirements to a more targeted list of departments, agencies,
and programs to prevent overlap and limit costs.
A 2010 report published by the New America Foundation, estimates
that in 2009, 800,000 Californians failed to claim over $1.3
billion worth of EITC credit. California has an EITC non-filer
rate of 24.9%, compared to a national average of 17.8%. To the
extent that the bill's notice requirement results in additional
claims for the federal EITC, there could be a tangential
economic benefit that results in increased sales and use tax
revenues, assuming a portion of the windfall to claimants is
spent on taxable purchases.
Staff notes that SB 1154 (Cedillo), which was vetoed by Governor
Schwarzenegger last year, would have required CPUC to provide
notice to low income electricity and telecommunications
customers of the availability of the EITC. The veto message
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includes the following statements:
Throughout my Administration, I have been supportive of
efforts to inform Californians of the tax benefits they
could realize under the EITC. Nonetheless, it is outside
the responsibility of the CPUC and electrical and telephone
corporations to provide outreach materials on federal tax
programs.
Additionally, I am concerned about the precedent of
requiring utility companies to advertise an ever-growing
list of programs that are not directly related to the
services they provide, yet would impose costs on other
ratepayers who may receive little or no benefit.