BILL ANALYSIS                                                                                                                                                                                                    Ó




                   Senate Appropriations Committee Fiscal Summary
                            Senator Kevin de León, Chair


          SB 672 (Leno) - CalFresh: eligibility guidelines.
          
          Amended: April 11, 2013         Policy Vote: Human Services 6-0
          Urgency: No                     Mandate: Yes
          Hearing Date: May 23, 2013      Consultant: Jolie Onodera
          
          SUSPENSE FILE. AS PROPOSED TO BE AMENDED.
          
          
          Bill Summary: SB 672 would require the Department of Social  
          Services (DSS) to issue guidance specifying the process of  
          verification of earned income and dependent care expenses to be  
          used to determine eligibility and benefit level for CalFresh, as  
          specified. This bill would also require counties utilizing an  
          electronic database for verification purposes to follow specific  
          procedures and notification requirements for applicants and  
          recipients. 

          Fiscal Impact: 
              One-time, minor increased workload to the DSS to issue  
              guidance to counties. Potential additional costs of about  
              $150,000 (General Fund) to the extent the development and  
              adoption of revised regulations are required to implement  
              the provisions of this bill.
              Potential near-term state-reimbursable costs to county  
              agencies for costs associated with implementation of the  
              revised eligibility process of verification of dependent  
              care expenses. Potential administrative cost savings in  
              future years to the extent the provisions of this bill  
              result in administrative efficiencies. 
              Significant local costs to implement the process and  
              notification requirements related to verification of income.  
              Additional, unknown, potentially significant one-time costs  
              for automation changes required to implement the new  
              processes.
              Annual increase in CalFresh and CalWORKs payments due to  
              new process requiring notification prior to negative actions  
              being taken. 
              Streamlining the application process could increase  
              participation and benefit levels for low-income families,  
              significantly increasing the amount of CalFresh (Federal)  
              benefits received, potentially in the hundreds of thousands  








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              to millions of dollars. For example, if 500 households  
              claimed the dependent care deduction and experienced a  
              benefit increase of $118 per month, benefits would increase  
              by over $700,000 annually. Increased administration  
              (Federal/General Fund) costs for newly eligible (not  
              existing) cases would be offset in minor part by increased  
              sales tax revenue on the sales of taxable goods.  

          Background: Approximately 1.9 million households in the state  
          receive CalFresh, California's name for the national  
          Supplemental Nutrition Assistance Program
          (SNAP), which provides benefits to low-income households to  
          alleviate hunger and to improve nutrition and health by helping  
          individuals meet their nutritional needs. The state also  
          provides benefits through the California Food Assistance Program  
          (CFAP) to about 47,000 eligible legal immigrants who are not  
          eligible for federal nutrition assistance.

          The CalFresh application process includes completing and filing  
          an application, being interviewed, and providing information  
          subject to verification, such as earned income and dependent  
          care expenses in order to determine eligibility and benefit  
          level. County human services departments are required to act  
          promptly on all applications and provide CalFresh benefits  
          retroactive to the month of application to those households that  
          have completed the application process and have been determined  
          eligible. 

          Federal laws and regulations provide states the flexibility to  
          define the scope of allowable expenses for the dependent care  
          deduction. This bill proposes to simplify the process of  
          verification of dependent care expenses and earned income to  
          enable more applicants and recipients of CalFresh to receive the  
          increased monthly benefits for which they are eligible.

          Proposed Law: This bill requires DSS to issue guidance to  
          simplify the verification of earned income and dependent care  
          for purposes of verifying deductions necessary to determine  
          eligibility or benefit level of CalFresh, to the extent  
          permitted by federal law. The guidance shall require all of the  
          following:
              Provides that dependent care expenses shall be considered  
              verified upon receipt of a statement of monthly expenses  
              that includes the federal taxpayer identification number of  








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              the dependent care provider or other form of verification  
              allowed by federal law instead of verification with a  
              receipt from the care provider.
              Provides that if a county uses an electronic database for  
              earned income verification to determine eligibility, the  
              county shall do both of the following:
               o      Use the electronic data base to verify income  
                 instead of requiring paper verification at time of  
                 application or reapplication for benefits;
               o      Inform applicants and recipients of their right, if  
                 any, to request a copy of their electronic employment and  
                 wage data maintained in the database and to correct  
                 errors in the database. 
               o      Requires the notice to be provided when the  
                 information in the database is used to determine  
                 eligibility or benefit level or to verify income at any  
                 time.

          Related Legislation: AB 1970 (Skinner) 2011 would have required  
          county human services departments to maximize the use of  
          electronic means to verify applicant and recipient information.  
          This bill was held on the Suspense File of this committee.

          Staff Comments: It is estimated that DSS would incur a minor  
          workload increase to issue the mandated guidance. To the extent  
          the development and issuance of revised regulations related to  
          the notification and verification processes for earned income  
          and dependent care expenses is required, the DSS would incur  
          additional workload.

          By mandating the DSS issue guidance that could potentially  
          impose new duties on county human services agencies that  
          administer CalFresh, this bill could result in one-time or  
          near-term state-reimbursable costs for any training and  
          associated costs to implement the revised procedures. However,  
          once fully implemented, to the extent the provisions of this  
          bill serve to simplify and streamline the application and  
          verification process, county human services departments could  
          experience long-term cost savings due to increased  
          administrative efficiencies. While this bill could reduce  
          workload and county administrative costs, the state would only  
          achieve actual savings to the extent a county's single  
          allocation is reduced. Given the numerous and substantial  
          reductions sustained by county human services departments in  








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          recent years, it is unknown at this time if this would occur.

          As currently drafted, this bill provides that "if a county uses  
          an electronic database for earned income verification to  
          determine eligibility, a county shall do both of the following:"  
          In the absence of a reference to the specific type of  
          "electronic database" intended to be regulated (in this case,  
          The Work Number, a for-profit, third party resource that  
          counties are authorized but not required to use), the bill could  
          potentially create a state-reimbursable mandate on county human  
          services departments, as counties utilize the Income and  
          Eligibility Verification System (IEVS), also an electronic  
          database, by reviewing and comparing this data to case record  
          information and by verifying the applicability of the matched  
          data. Similar to the revised procedures for verification of  
          dependent care expenses, the counties could incur one-time costs  
          to implement the revised verification procedures, and could  
          incur additional ongoing costs of an unknown amount associated  
          with the notification requirements outlined in this bill. At the  
          time of this analysis, it was undetermined if automation changes  
          would be required to implement the revised verification and  
          notification processes. To the extent such changes are required,  
          additional costs (General Fund) would be incurred.

          Under existing law, CalFresh households are eligible to deduct  
          the full amount of eligible dependent care costs incurred,  
          resulting in higher benefits for program recipients and newly  
          eligibly cases. According to the Center on Budget and Policy  
          Priorities report, The Food Stamp Dependent Care Deduction: Help  
          for Families with Child Care Costs (2010), the percentage of  
          single-adult working households with young children claiming the  
          dependent care deduction in 2008 was only 37 percent nationally  
          (the figure for California was 10 percent, but based on a sample  
          of fewer than 40 households). 

          To the extent the provisions of this bill increase the number of  
          applicants and recipients who utilize the dependent care and  
          earned income deductions, substantial increases in federal  
          CalFresh (100 percent Federal) benefits (and a related, but much  
          smaller increase in CFAP (100 percent General Fund) benefits)  
          could be received. Additional administrative costs for newly  
          eligible cases would be offset in part by an increase in sales  
          tax revenue, as studies have shown that low-income families  
          spend a significant portion of their money on food, and  








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          increasing CalFresh access would allow them to spend that money  
          on taxable items.

          Recommended Amendments: In order to clarify that "electronic  
          database" refers to private third-party entities, and does not  
          impact the counties' utilization of IEVS, staff recommends an  
          amendment to specify private third-party vendors (such as The  
          Work Number) that operate electronic employment and wage  
          database systems, to remove the potential state-reimbursable  
          mandate.

          Federal regulations provide that a state agency shall verify,  
          prior to certification of the household, all other factors of  
          eligibility which the state agency determines are questionable  
          and affect the household's eligibility and benefit level.  
          Although a state may establish its own standards for the use of  
          verification, at a minimum, federal regulations require that all  
          questionable factors are verified and that such standards do not  
          allow for inadvertent discrimination.  

          To ensure the provisions of this bill provide enough flexibility  
          to meet this federal standard, the author may wish to consider  
          an amendment clarifying that notwithstanding the verification  
          procedures mandated within the bill's provisions, nothing  
          precludes the verification of any questionable factors.

          Author amendments: 
                 Clarify the dependent care expense verification process  
               to ensure compliance with federal law.
                 Specifies client rights and county eligibility  
               procedures when a county uses information from a privately  
               maintained database and credit reports in the determination  
               of eligibility for CalFresh, as well as CalWORKs.