BILL ANALYSIS Ó AB 2877 Page 1 Date of Hearing: May 4, 2016 ASSEMBLY COMMITTEE ON APPROPRIATIONS Lorena Gonzalez, Chair AB 2877 (Committee on Human Services) - As Introduced February 22, 2016 ----------------------------------------------------------------- |Policy |Human Services |Vote:|7 - 0 | |Committee: | | | | | | | | | | | | | | ----------------------------------------------------------------- Urgency: No State Mandated Local Program: YesReimbursable: No SUMMARY: This bill makes technical and clarifying changes to existing law to encourage counties to inform California Work Opportunity and Responsibility to Kids (CalWORKs) applicants and recipients about the State Earned Income Tax Credit (EITC). This bill also makes technical and clarifying changes to existing law to be consistent with the federal Workforce Innovation and Opportunity Act (Workforce Act). FISCAL EFFECT: AB 2877 Page 2 No state fiscal impact. COMMENTS: 1)Purpose. According to the author, "The federal Earned Income Tax Credit (EITC) has proven to be an important tool for low-income workers and their families, enabling them to increase their income and savings as they work to move out of poverty or near-poverty. In the 2015-2016 budget, California joined many other states by adopting its own state EITC; starting in tax year 2015, eligible households may now apply for this state tax credit. This bill seeks to educate some of the lowest-income Californians about the state EITC, and to inform them that they will not be inadvertently harmed by receipt of the state EITC because the new refundable state tax credit will not be considered income for purposes of determining CalWORKs eligibility or benefit amounts; this conforms to current state law which treats the federal EITC in the same manner. This bill also seeks to maximize low-income individuals' ability to invest in their retirement by including references to the recently-established California Secure Choice Retirement Savings Plans alongside references in current statute to permitted savings accounts into which CalWORKs recipients may invest their EITC benefits without impacting their eligibility or grant amounts." 2)Background. The 2015 Budget Act established a state EITC, beginning with the 2015 tax year, that focuses on the lowest income Californians. This bill makes technical and clarifying changes to existing law to encourage counties to inform CalWORKs applicants and recipients about the state EITC. On July 22, 2014, the Workforce Act was signed into law by President Obama to serve as federal guidance for distributing workforce development funding to state and local governments. This bill conforms state law to federal law by deleting references to individuals with the most severe disabilities AB 2877 Page 3 and instead refers to individuals with the most significant disabilities. Additionally, this bill deletes references to an individualized written rehabilitation program and instead refers to an individualized plan for employment. 3)Current Legislation. SB 1234 (De Leon), 2016, seeks to implement the California Secure Choice Retirement Savings Program provided for in SB 1234 (De Leon), Chapter 734, Statutes of 2012. This bill pending hearing in the Senate Appropriations Committee. 4)Prior Legislation. a) SB 80 (Senate Committee on Budget and Fiscal Review), Chapter 21, Statutes of 2015, created the State Earned Income Tax Credit (EITC) which was later adopted in the 2015-16 Budget. b) SB 1234 (De Leon), Chapter 734, Statutes of 2012, created the California Secure Choice Retirement Savings Program, which is a voluntary retirement savings program for private industry workers without access to other retirement options through work. Analysis Prepared by:Jennifer Swenson / APPR. / (916) 319-2081 AB 2877 Page 4