BILL ANALYSIS Ó
SENATE COMMITTEE ON HUMAN SERVICES
Senator McGuire, Chair
2015 - 2016 Regular
Bill No: AB 2877
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|Author: |Committee on Human Services |
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|Version: |February 22, 2016 |Hearing |June 14, 2016 |
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|Urgency: |No |Fiscal: |Yes |
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|Consultant|Taryn Smith |
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Subject: CalWORKs: rehabilitation services
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.
ABSTRACT
Existing law:
1) Establishes the federal EITC for eligible taxpayers
based on the taxpayer's income. (26 U.S.C. Section 32)
2) Establishes the state EITC for eligible taxpayers based
on certain eligibility criteria. (RTC 17052)
3) Establishes the California Secure Choice Retirement
Savings Plan (CSCRSP) which creates a statewide program and
allows private industry workers without access to other
retirement savings through work. (GOV 100000)
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4) Establishes under federal law the Temporary Assistance
for Needy Families (TANF) program to provide aid and
welfare-to-work services to eligible families and, in
California, provides that TANF funds for welfare-to-work
services are administered through the CalWORKs program.
(42 U.S.C. 601 et seq., WIC 11200 et seq.)
5) Requires all individuals over 16 years of age, unless
they are otherwise exempt, to participate in
welfare-to-work activities as a condition of eligibility
for CalWORKs. (WIC 11320.3, 11322.6)
6) Establishes a 48-month lifetime limit of CalWORKs
benefits for eligible adults, including 24 months during
which a recipient must meet federal work requirements in
order to retain eligibility. (WIC 11454, 11322.85)
7) Establishes the federal Workforce Investment Act (WIA)
for the purpose of providing workforce investment
activities through statewide and local workforce investment
systems. (P.L. 105-220)
8) Establishes the federal Workforce Innovation and
Opportunity Act (WIOA) as the most recent reauthorization
of WIA. (P.L. 113-128)
This bill:
1) Includes reference to the state EITC and CSCRSP in
intent language related to CalWORKs participants' access to
certain benefit, savings, and investment programs.
2) Permits counties, in order to encourage CalWORKs
recipients to participate in activities that will maximize
their receipt of EITC, to inform CalWORKs recipients that:
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a) Earned income may make them eligible for the state
EITC;
b) Receipt of the state EITC does not affect their
CalWORKs grant and is additional tax-free income for
them; and
c) A CalWORKs recipient who receives the state EITC may
invest these funds in specified savings and investments
accounts, and that investments in these accounts will not
make the recipient ineligible for CalWORKs benefits or
reduce the recipient's CalWORKs benefits.
1) Adds the CSCRSP to the list of specified accounts in
which a CalWORKs recipient who receives EITC may invest
funds without impacting his or her CalWORKs eligibility or
benefit level.
2) States Legislative intent that counties, at each regular
CalWORKs redetermination, ask a CalWORKs recipient if he or
she is eligible for and takes advantage of the state EITC,
and, where applicable, provide the recipient with the state
EITC form and encourage application.
3) Deletes outdated language that required the CDSS to
develop guidelines for counties to implement legislative
intent.
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4) Changes references from "most severe" disabilities to
"most significant" disabilities in language related to
vocational rehabilitation services offered by the
Department of Rehabilitation (DOR) pursuant to the 1998
reauthorization of WIA.
5) Updates references to federal law to include WIOA.
6) Changes references from "individual written
rehabilitation program" to "individual plan for employment"
pursuant to the 1998 reauthorization of WIA.
FISCAL IMPACT
According to an analysis prepared by the Assembly Appropriations
Committee, this bill will have no state fiscal impact.
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BACKGROUND AND DISCUSSION
Purpose of the bill:
According to the author, the federal Earned 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, per the author.
This bill seeks to educate some of the lowest-income
Californians about the state EITC, and to inform them that they
will not be 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,
according to the author. This bill also seeks to maximize
low-income individuals' ability to invest in their retirement by
including references to the recently-established CSCRSP.
Additionally, this bill updates current law pertaining to the
Department of Rehabilitation's Vocational Rehabilitation program
by conforming to federal law and removing outdated language.
CalWORKs
According to the California Public Policy Institute, 21% of
Californians were living in poverty and 24% of California's
children were living in poverty in 2013. During and after the
Great Recession, California saw growing rates of childhood deep
poverty - those living below 50 percent of the federal poverty
line. One of California's most essential anti-poverty strategies
is the CalWORKs program, which provides cash assistance to
approximately 540,000 families - including more than 1 million
children, according to 2014 federal data.
CalWORKs implements the federal TANF program in California. In
addition to temporary cash assistance to meet basic family
needs, CalWORKs provides education, employment and training
programs. CDSS is the designated state agency responsibility
for program supervision at the state level. The counties are
responsible for administering the caseloads at the local level.
The CalWORKs program is funded with a mix of federal, state, and
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county funds.
State law provides for a cumulative 48-month lifetime limit on
cash aid for adults. During those 48 months, adults may receive
a total of 24 months of Welfare-to-Work (WTW) services and
activities. WTW activities include subsidized and unsubsidized
employment, community service, adult basic education, job
skills, training, mental health counseling, substance abuse
treatment and other activities necessary to assist recipients in
obtaining employment. Once the 24 months of WTW activities have
been exhausted, adults must meet the stricter federal work
participation requirements (20, 30, or 35 hours weekly,
depending on family composition) unless they are exempt or
receive an extension. Children of adults who exhaust the
48-month lifetime limit may continue to receive cash aid, if
otherwise eligible, up to age 18.
Federal Earned Income Tax Credit
The federal EITC is "refundable" a tax credit targeted at
low-income, working individuals and families. The federal EITC
reduces a taxpayer's final federal income tax liability. If a
taxpayer's EITC credit is greater than their initial tax
liability, the federal government owes the taxpayer money for
that year. For example, if a taxpayer's tax liability is $400
and the calculated EITC is $900, the federal government must
refund the taxpayer $500.
The EITC is structured in three stages: 1) phase in, 2) flat
range, and 3) phase out. The value of the credit varies by
income and the number of children the taxpayer has. The size of
the credit increases for every additional dollar earned, giving
the individual a greater incentive to enter the work force and
increase hours. This three-stage structure, with phase-in and
phase-out stages, avoids creating a "cliff" effect whereby a
slight increase in earnings would result in complete loss of the
tax benefit.
According to the Internal Revenue Service (IRS), during the 2014
tax year, 27.5 million people received roughly $66.7 billion in
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EITC benefits. According to IRS research in 2005, only 75
percent of eligible taxpayers take advantage of the EITC, which
is approximately the same participation rate of SNAP. In
California, 3.1 million individuals applied for the EITC; with
$7.4 billion dollars in EITC refunded. The average EITC was
$2,401 per claimant.
California's Earned Income Tax Credit
California's 2015-16 budget package established a refundable
state EITC beginning in tax year 2015. California's EITC is
only available to households of annual earnings below about
$14,000, depending on family size. California's EITC is also
limited to workers with earnings subject to wage withholding;
income earned from self-employment is not eligible. The
Governor's office estimates that 2 million Californians will
benefit from the state EITC.
California Secure Choice Retirement Savings Program
SB 1234 (DeLeón, Chapter 734, Statutes of 2012) created the
CSCRSP, which is a voluntary retirement savings program for
private industry workers who do not have access to other
retirement savings through their employer.
The bill also required the California Secure Choice Retirement
Savings Investment Board to perform a market analysis and
feasibility study to determine if SCRSP could be implemented and
to publish its findings and bring a recommendation to the
Legislature for approval. The final report<1> was issued in May
2016. The key finding in the report was that the SCRSP is
financially viable and self-sustaining even under adverse
conditions with poor investment returns and high opt-outs rates.
A follow-up bill (SB 1234, DeLeón, 2016) that would implement
the SCRSP is pending legislative action. This bill provides
legislative approval for the SCRSP and sets forth
recommendations and requirements for the design and
implementation of that program.
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<1> http://www.treasurer.ca.gov/scib/report.pdf
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Workforce Innovation and Opportunity Act
The federal WIOA, which was signed into law in 2014, provides
federal guidance for distributing workforce development funding
to state and local governments. AB 2877 conforms state law to
federal law by deleting references to individuals with the most
severe disabilities 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.
Related Legislation:
SB 1234 (De Leon, 2016) provides legislative approval for the
SCRSP and sets forth recommendations and requirements for the
design and implementation of that program.
This bill is pending referral in the Assembly.
SB 80 (Senate Committee on Budget and Fiscal Review, Chapter 21,
Statutes of 2015) created the state EITC.
SB 1234 (De Leon, Chapter 734, Statutes of 201), created the
CSCRSP, which is a voluntary retirement savings program for
private industry workers without access to other retirement
options through work.
PRIOR VOTES
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|Assembly Floor: |78 - |
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|Assembly Appropriations Committee: |20 - |
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|Assembly Human Services Committee: |7 - |
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POSITIONS
Support:
None.
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Oppose:
None.
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