BILL ANALYSIS Ó ------------------------------------------------------------ |SENATE RULES COMMITTEE | SB 1391| |Office of Senate Floor Analyses | | |1020 N Street, Suite 524 | | |(916) 651-1520 Fax: (916) | | |327-4478 | | ------------------------------------------------------------ THIRD READING Bill No: SB 1391 Author: Liu (D) Amended: 5/25/12 Vote: 21 SENATE HUMAN SERVICES COMMITTEE : 6-0, 4/10/12 AYES: Liu, Emmerson, Berryhill, Hancock, Wright, Yee NO VOTE RECORDED: Strickland SENATE APPROPRIATIONS COMMITTEE : 5-2, 5/24/12 AYES: Kehoe, Alquist, Lieu, Price, Steinberg NOES: Walters, Dutton SUBJECT : CalFresh benefits: overissuance SOURCE : Western Center on Law and Poverty DIGEST : This bill establishes procedures for recovering CalFresh overissuances for both current and former recipient households. This bill would define minimum thresholds for overissuance establishment and collection caused by administrative error (AE), inadvertent household error (IHE), intentional program violation (IPV) or fraud. This bill would also authorize the Department of Social Services (DSS) to establish a minimum cost-effective threshold for collecting overissuances, as specified. ANALYSIS : Existing law: 1.Establishes the Cal Fresh program, which administers the CONTINUED SB 1391 Page 2 provision of federal Supplemental Nutritional Assistance Program benefits (formerly called food stamps) to families and individuals meeting specified income and other criteria. 2.Establishes under state and federal law that when an overissuance of benefits is made to a CalFresh beneficiary, that overissuance must be collected. 3.Establishes under state law a structure for collecting such overissuances from beneficiaries of public social services, including CalFresh, which includes the withholding of five percent of benefits if the overissuance was caused by agency error, and a 10 percent withholding if the error was for any other reason. 4.Establishes a repayment structure for families who are not current beneficiaries. 5.Establishes in federal law three categories of overissuances: A. Intentional program violation, which are deliberate fraudulent mistakes. B. Inadvertent Household Errors, which are unintentional mistakes made by the recipient. C. Administrative Errors, which are mistakes made by the social services agency, either through processing or other means. 1.Requires in federal statute that states return 100 percent of collected overpayments to the federal USDA when those overpayments are the result of administrative error. States retain a percentage of the collections when overissuances are the result of inadvertent household error (20 percent) or intentional program violation (35 percent). 2.Permits states, under federal law, to create a cost-effective threshold for collecting overissuances of Supplemental Nutritional Assistance Program. 3.Establishes in federal law a threshold of $125 for states to opt to neither establish or collect overissuances in CONTINUED SB 1391 Page 3 the Supplemental Nutritional Assistance Program, as specified. This bill: 1.Provides that current and future CalFresh benefits shall be reduced subject to adequate and timely notice, as specified, and as follows: A. For overissuances caused by IHE, IPV, or fraud - monthly benefits shall not be reduced by more than five percent of $10, whichever is greater, unless the recipient elects a higher rate. B. For overissuances caused by AE - monthly benefits shall not be reduced by more than five percent or $10, whichever is greater, unless the recipient elects a higher rate. AE claims will only be recovered if required by federal law or if the overissuance exceeds $125 or the threshold established by DSS, whichever is greater. 1.For households no longer receiving CalFresh: A. No overissuance caused by AE shall be established or collected under $125 or the DSS-established threshold, whichever is greater. B. Overissuances caused by IHE shall be collected if $35 or greater. C. Overissuances caused by IPV or fraud shall be collected pursuant to federal law. 1.Specifies that IHE and IPV allotment reduction rates conform to current DSS practice. Background Cal Fresh . A November 2010 federal survey indicated that nearly 15 percent of U.S. households experienced food insecurity in 2008 and 2009, the highest number since food security surveys were begun in 1995. Food-insecure households had difficulty at some time during the year CONTINUED SB 1391 Page 4 providing enough food for all their members due to a lack of resources. Nearly 7 million Americans, or 6 percent of the country, experienced a severe range of food insecurity in which the food intake of some household members was reduced and normal eating patterns were disrupted due to limited resources. Ten percent of the country's families with children experienced food insecurity at least once annually during each of those years. CalFresh, California's food stamp program, serves about 3.9 million people annually, a number that has grown by approximately 1 million since 2009. Benefits are funded by the U.S. Department of Agriculture; however the federal government, California and counties share the cost of administering the program. The state has had historically low participation rates in the program, which have been the source of various studies and bills. The state ranked last in 2010 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. Error claims . Of the $24 million collected from CalFresh recipients for overissuances in the third quarter of the 2011 fiscal year, $10.6 million or 44 percent was classified as administrative error, according to federal data. All of that money was returned to the federal government. Of the $12.2 million collected from overissuances classified as inadvertent household errors, 20 or 35 percent (depending on collection method), or a minimum of $2.4 million, was retained by the state. Of the $1.4 million collected under the classification of intentional program violation, 35 percent, or $473,000 was retained by the state. Federal guidance . In 2000, the USDA's Food and Nutrition Service issued rules and regulations for the establishment and collection from food stamp recipients. In announcing a departure from the previous federal claims threshold of $35, the agency noted that $35 was "outdated" and did not reflect actual collection costs to state agencies. Instead, it established a $125 threshold for collecting federal overissuances of food stamp benefits. The Food and CONTINUED SB 1391 Page 5 Nutrition Service also added a state option to create its own cost effectiveness plan, which must be approved by the federal agency. FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes Local: Yes According to the Senate Appropriations Committee: One-time costs of approximately $150,000 (General Fund) to modify automation systems. Potential ongoing administrative cost savings due to raising the overissuance recovery threshold, however, due to county budget constraints, administrative savings may be difficult to realize. Additionally, the conversion to semi-annual reporting (SAR) may result in minimal administrative impact due to increasing the overissuance threshold. Potentially significant DSS workload and staffing costs to revise regulations and complete a cost-benefit analysis to submit for federal approval. SUPPORT : (Verified 5/25/12) Western Center on Law and Poverty (source) Alameda County Community Food Bank American Federation of State, County and Municipal Employees California Alliance of Child and Family Services California Association of Food Banks California Catholic Conference, Inc. California Family Resource Association California Food Policy Advocates Coalition of California Welfare Rights Organizations, Inc. Feeding America San Diego National Association of Social Workers San Francisco Board of Supervisors Food Security Task Force St. Anthony Foundation in San Francisco ARGUMENTS IN SUPPORT : The Western Center on Law and Poverty states that this bill aligns California policy with other states in setting the collection of CalFresh CONTINUED SB 1391 Page 6 overissuances at $125, or greater while not altering California's efforts to collect overissuances that result from client errors or fraud. "Many recipients who receive administrative overpayments, and then are noticed that they must repay them, experience shame and anxiety, as well as uncertainty about the process. ? By relieving county administrators of the time required to pursue small overpayments, they can more effectively use their time to help eligible receive the timely, quality assistance." CTW:nl 5/25/12 Senate Floor Analyses SUPPORT/OPPOSITION: SEE ABOVE **** END **** CONTINUED