BILL ANALYSIS 1
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SENATE ENERGY, UTILITIES AND COMMUNICATIONS COMMITTEE
ALEX PADILLA, CHAIR
SB 1154 - Cedillo Hearing Date:
April 20, 2010 S
As Amended: April 5, 2010 FISCAL B
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DESCRIPTION
Current law establishes the California Alternate Rates for
Energy (CARE) program, administered by the investor-owned
utilities (IOUs), which provides eligible low-income customers a
20 percent discount on their electric and natural gas bills.
Current law establishes the Universal Lifeline Telephone Service
(ULTS) program, administered by the California Public Utilities
Commission (CPUC), which provides eligible low-income customers
a 50 percent discount on the rate of basic telephone service.
Current federal law provides for the Earned Income Tax Credit
(EITC), a refundable federal income tax credit for low- to
moderate-income working households.
This bill would require the CPUC to ensure that all applications
for the CARE and ULTS programs include information about the
applicant's eligibility to qualify for the EITC.
BACKGROUND
Tax Credit Refunds - According to a March 2010 report of the New
America Foundation, an estimated 2.4 million California
residents will claim $4.95 billion in EITC refunds in 2009.
However, the report predicts an additional 800,000 Californians
will fail to claim the credit, thereby leaving an estimated $1.2
billion in EITC refunds on the table. On average, families not
claiming the credit would have received a refund amounting to
$1,400. The report states: "The families and individuals who
miss out are not the only losers when these refunds go
unclaimed. Local economies never benefit from this money.
These dollars are never spent at local businesses, so fewer jobs
are created, fewer wages are paid, and eventually less tax
revenue goes to state and local governments. These refunds are
a foregone economic stimulus for California."
According to the Internal Revenue Service Web site, income
eligibility for the EITC and the amount of credit varies with
the number of children in the household, ranging from a maximum
tax credit of $5,657 in a household with three or more
qualifying children and adjusted gross income of less than
$43,279 to a maximum tax credit of $457 in a household with no
qualifying children and adjusted gross income of less than
$13,440.
CARE Program - A customer can be eligible for the CARE program
based on (1) household income, ranging from less than $30,500
for a household of one or two persons to less than $58,000 for a
household of six persons, or (2) enrollment in public assistance
programs such as Medicaid/Medi-Cal, Supplemental Security
Income, etc. The costs of the CARE programs are paid by
ratepayers. Each IOU is authorized to recover its cost of
administering the CARE program through a surcharge on each
customer's bill. The utilities offer customers a variety of
procedures for applying for CARE, including mail, telephone, and
online applications and recertifications. The utilities are
required to submit annual reports on the program to the CPUC.
ULTS Program - A customer can be eligible for ULTS, also known
as Lifeline service, based on (1) household income ranging from
less than $24,000 for a household of one or two persons to less
than $34,000 for a household of four persons, or (2) enrollment
in public assistance programs. The ULTS is funded through an
all end-user surcharge on intrastate telecommunications service,
with funds going to the CPUC, which administers the program.
The CPUC pays an outside contractor - Solix - for handling all
initial application forms and annual recertification
applications.
According to the author, one of the main reasons eligible
Californians do not apply for the EITC is that they do not know
about the program. "Partnering with an established program like
CARE and Lifeline to do outreach about the federal EITC will
allow information about the EITC to reach target populations
that would most likely qualify for the EITC."
COMMENTS
1) Application Procedures . This bill requires the CPUC to
ensure that "all applications" for CARE and ULTS include
information about the applicant's eligibility to qualify
for the EITC and further provides that the information "may
be included on a separate sheet in the same envelope that
the application for the CARE and ULTS program is sent."
Mail is not the only means used by either program for
initial application or recertification. The author and
committee may wish to consider amending the bill to clarify
if the IOUs and CPUC (Solix) are required to include
information about the EITC in connection with online and
telephone applications for CARE and ULTS or just
applications sent through the mail.
2) Who Provides Information ? This bill requires that CARE
and ULTS applicants be provided information about the EITC
requirements, the potential benefit to the applicant's tax
return, and contact information for obtaining further
information. The bill does not specify who is required to
develop this information, but the author's stated intent is
that CPUC shall provide it. This raises the question
whether the CPUC, which regulates California utilities,
should be responsible for preparing, and ensuring the
accuracy of, information about a federal tax program that
can change from year to year.
3) Customer Confusion . The premise of this bill - that
individuals eligible for low-income utility and telephone
service are highly likely to also be eligible for the EITC
- is rational. But it is unclear if providing these
individuals information about a tax credit in a mailing
about utility or telephone service will lead them to apply
for the EITC. Perhaps more importantly, will including
information about a federal tax program clutter up the
mailing and detract from its primary purpose - getting the
individual to apply or recertify for ULTS or CARE service?
Improving application and recertification procedures in
order to improve overall participation in CARE and ULTS has
been the focus of many CPUC workshops and proceedings in
recent years. For example, changes implemented as a result
of a 2007 "Strategies Report" on improving ULTS included
redesigning envelopes for greater visibility to customers,
using First Class mail, using an outbound dialer to inform
customers of an imminent mailing, and stamping the envelope
"Immediate Action Required." Adding an insert about an
unrelated federal tax program has the potential to undo the
positive effects of these carefully crafted improvements.
4) Other Low-Income Programs . Many programs that benefit
low-income individuals may view CARE and ULTS as a
convenient means to distribute their information. If these
utility and telephone programs are made available for the
EITC, should they also be available for outreach by other
programs?
5) Low Income Oversight Board . Current law establishes the
Low Income Oversight Board (LIOB), which is made up of
representatives of utilities, the CPUC, and low-income
organizations and is charged with advising the CPUC on
low-income electric and gas customer issues and serving as
a liaison for the CPUC to low-income ratepayers and
representatives. The author and committee may wish to
consider amending the bill to require the LIOB to make
recommendations on whether the CARE and ULTS programs could
assist with outreach about EITC in a manner that does not
detract from the primary mission of these programs and that
minimizes ratepayer impact.
POSITIONS
Sponsor:
Author.
Support:
None on file.
Oppose:
None on file.
Jackie Kinney
SB 1154 Analysis
Hearing Date: April 20, 2010