BILL ANALYSIS Ó
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|SENATE RULES COMMITTEE | AB 2877|
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CONSENT
Bill No: AB 2877
Author: Committee on Human Services
Introduced:2/22/16
Vote: 21
SENATE HUMAN SERVICES COMMITTEE: 4-0, 6/14/16
AYES: McGuire, Hancock, Liu, Nguyen
NO VOTE RECORDED: Berryhill
SENATE APPROPRIATIONS COMMITTEE: Senate Rule 28.8
ASSEMBLY FLOOR: 78-0, 5/12/16 (Consent) - See last page for
vote
SUBJECT: CalWORKs: rehabilitation services
SOURCE: Author
DIGEST: 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 (WIOA).
ANALYSIS:
Existing law:
1)Establishes the federal EITC for eligible taxpayers based on
the taxpayer's income. (26 U.S.C. Section 32)
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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)
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 WIOA as the most recent
reauthorization of WIA. (P.L. 113-128)
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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:
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.
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2)States legislative intent that counties, at each regular
CalWORKs redetermination, shall 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.
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.
Background
This bill seeks to educate some of the lowest-income
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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 DOR's
Vocational Rehabilitation program by conforming to federal law
and removing outdated language.
1)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 one 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. The California Department of Social Services 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 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
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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.
2)Federal EITC. The federal EITC is a "refundable" 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 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
the Supplemental Nutrition Assistance Program. 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.
3)California's EITC. 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.
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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 two million Californians will benefit from the
state EITC.
4)CSCRSP. 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 CSCRSP could be implemented
and to publish its findings and bring a recommendation to the
Legislature for approval. The final report was issued in May
2016 (www.treasurer.ca.gov/scib/report.pdf). The key finding
in the report was that the CSCRSP 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 implements the
CSCRSP is pending legislative action. This bill provides
legislative approval for the CSCRSP and sets forth
recommendations and requirements for the design and
implementation of that program.
5)WIOA. 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.
Comments
According to the author, the federal EITC has proven to be an
important tool for low-income workers and their families,
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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 were
able to apply for this state tax credit, per the author.
Related/Prior Legislation
SB 1234 (De Leon, 2016) provides legislative approval for the
CSCRSP and sets forth recommendations and requirements for the
design and implementation of that program. The bill is pending
the Assembly Appropriations Committee.
SB 80 (Committee on Budget and Fiscal Review, Chapter 21,
Statutes of 2015) created the state EITC.
SB 1234 (De Leon, Chapter 734, Statutes of 2012) created the
CSCRSP, which is a voluntary retirement savings program for
private industry workers without access to other retirement
options through work.
FISCAL EFFECT: Appropriation: No Fiscal
Com.:YesLocal: Yes
SUPPORT: (Verified8/2/16)
None received
OPPOSITION: (Verified8/2/16)
None received
ASSEMBLY FLOOR: 78-0, 5/12/16
AYES: Achadjian, Alejo, Travis Allen, Arambula, Atkins, Baker,
Bigelow, Bloom, Bonilla, Bonta, Brough, Brown, Calderon,
AB 2877
Page 9
Campos, Chang, Chau, Chávez, Chiu, Chu, Cooley, Cooper,
Dababneh, Dahle, Daly, Dodd, Eggman, Frazier, Beth Gaines,
Gallagher, Cristina Garcia, Eduardo Garcia, Gatto, Gipson,
Gomez, Gonzalez, Gordon, Gray, Grove, Hadley, Harper, Roger
Hernández, Holden, Irwin, Jones, Kim, Lackey, Levine, Linder,
Lopez, Low, Maienschein, Mathis, Mayes, McCarty, Medina,
Melendez, Mullin, Nazarian, Obernolte, O'Donnell, Olsen,
Patterson, Quirk, Ridley-Thomas, Rodriguez, Salas, Santiago,
Steinorth, Mark Stone, Thurmond, Ting, Wagner, Waldron, Weber,
Wilk, Williams, Wood, Rendon
NO VOTE RECORDED: Burke, Jones-Sawyer
Prepared by:Taryn Smith / HUMAN S. / (916) 651-1524
8/3/16 19:11:07
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