BILL ANALYSIS �
AB 6
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Date of Hearing: May 4, 2011
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Felipe Fuentes, Chair
AB 6 (Fuentes) - As Amended: April 12, 2011
Policy Committee: Human
ServicesVote:4 - 2
Urgency: No State Mandated Local Program:
Yes Reimbursable: Yes
SUMMARY
This bill changes a number of policies related to the
administration of CalFresh (formerly Food Stamps) and California
Work Opportunity and Responsibility to Kids program (CalWORKs).
Specifically, this bill:
1)Requires counties to convert from a quarterly to a semi-annual
reporting system for CalWORKs and CalFresh no later than
January 1, 2013.
2)Eliminates the Statewide Finger Imaging System (SFIS).
3)Requires the Department of Social Services (DSS) and the
Department of Community Services and Development to design,
implement and maintain a "Heat and Eat" program by January 1,
2013.
FISCAL EFFECT
1)First year costs for the three program changes required by
this bill would be approximately $11 million ($8 million
TANF/GF). By the second year, the remaining up front
automation and training costs for Semi Annual Reporting (SAR)
would be fully offset by one half year of administrative
savings for a net savings of $17 million ($16.5 million
TANF/GF). On-going savings and workload relief for counties in
the CalFresh and CalWORKs programs would likely be
approximately $77 million ($51 million TANF/GF).
In addition, these changes would likely bring in an additional
$850 million in federal Supplemental Nutritional Assistance
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Program (SNAP) funding and $23 million in additional sales tax
revenue for the General Fund.
a) Semi Annual Reporting (SAR)
i) One-time costs of $20 million ($15 million TANF/GF)
for systems changes and providing notices to participants
about the implementation of the new reporting
requirements.
ii) DSS estimates on-going annual administrative savings
of approximately $75 million ($36 million TANF/GF) as a
result of the implementation of SAR.
iii) On-going annual CalWORKs grant costs of
approximately $19 million (TANF/GF) as a net result of
some CalWORKs recipients receiving slightly higher grants
than they would under the current quarterly reporting
system where the grant is adjusted more often due to
earnings and other individuals receiving slightly less
than they would under the current system.
iv) Assuming a 5% increase in CalFresh recipients due to
the implementation of SAR, Californians could receive
approximately $400 million in federal SNAP (CalFresh)
benefits.
v) Absent the adoption of SAR through this legislation,
the federal government will require the state to convert
to straight quarterly reporting for its CalFresh caseload
by September 30, 2011. DSS estimates the cost of the
conversion would be approximately $7.2 million in up
front automation changes with an ongoing annual
administrative cost of $24 million ($12 million GF).
Therefore, adoption of SAR allows the state to avoid
these costs.
b) SFIS Elimination
i) There is no additional CalWORKs cost associated with
the elimination of finger imaging. In previous years, DSS
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has asserted that the elimination of finger imaging for
CalWORKs recipients would result in a $60 million
increase in costs due to duplicate aid fraud. This
estimate is based on a pre-welfare reform study of the
General Relief caseload in the county of Los Angeles.
California's State Auditor, the federal government, an
audit of the states of New York and Texas and a
feasibility study in Maryland refute that assertion. For
a more detailed discussion of the DSS SFIS elimination
estimate, please see the comments section below.
ii) The Office of Systems Integration (OSI) estimates
one-time decommissioning costs of $11 million ($7.4
million TANF/GF) to shut down the finger imaging system
throughout the state. Those costs include paying $7
million in an outstanding loan for the equipment and
paying Hewlett Packard (the vendor) $1.8 million to
travel throughout the state to pack up the 275 finger
imaging machines. These costs would occur only if the
governor fails to adopt the 2011-12 budget passed by the
Legislature, which eliminates the finger imaging of In
Home Supportive Services recipients. If that requirement
remains in state law, the machines would not be
decommissioned.
iii) Assuming an increase in the CalFresh caseload of
4.3%, based on a recent Urban Institute study,
administrative costs for the program could increase by
$27 million ($9 million GF). Those costs, however, would
be partially offset by the on-going savings due to the
elimination of SFIS of $13 million ($9 million TANF/GF)
iv) Assuming a 4.3% increase in CalFresh recipients due
to the elimination of finger imaging, Californians could
receive approximately $352 million in federal SNAP
(CalFresh) benefits.
c) "Heat and Eat" Program
i) On-going administrative savings of approximately $12
million ($8 million GF) associated with eligibility
workers no longer having to calculate the utility
allowance for CalFresh recipients. The administrative
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savings would be modestly offset by the on-going
administrative costs to add the federal Low-Income Home
Energy Assistance Program (LIHEAP) benefit to the
electronic benefit transfer (EBT) card of approximately
$800,000 ($500,000 GF).
ii) In order to allow all CalFresh recipients to benefit
from the Standardized Utility Allowance (SUA), a modest
LIHEAP benefit must be offered to each recipient. Up to
$500,000 in federal LIHEAP funding could be set aside for
90 days each year for recipients. Based on the
experience of other states, it is assumed that only a
small number of recipients will actually redeem the
benefit. Therefore, of the $500,000, $355,000 would be
returned to the LIHEAP program to be reallocated to other
LIHEAP recipients and $145,000 would likely be redeemed
by CalFresh and CalWORKs participants.
iii) Approximately 150,000 CalFresh recipients should see
an increase in their monthly federal benefits. On
average, those benefits will increase by 13% ($46 per
month). That increase will result in Californians
receiving an additional $83 million in federal SNAP
(CalFresh) benefits.
d) Additional Federal CalFresh Benefits
Assuming a 9.3% increase in food stamps cases and increases
in the CalFresh benefits for 150,000 current CalFresh
families, Californians would receive approximately $850
million in additional federal food stamp benefits. Further,
this bill would allow the children in these families to be
eligible for free school meals, which are primarily
federally funded. Approximately $45 million dollars in
additional federal funding could flow to the state to
provide these children with free school lunches and
breakfasts. Finally, several million dollars in increased
federal child welfare services funds could be received by
the state.
e) Increased Sales Tax
To the extent this bill increases food stamp participation,
the state could expect to receive additional state GF
revenues due to increased sales tax. Studies show that low
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income families spend approximately 45% of their income on
taxable goods. By providing these families with food
stamps, 45% of the money previously used by the family to
purchase food would now be used for taxable goods. Based on
this assumption, $850 million in additional CalFresh
benefits would result in $23 million in additional sales
tax revenue for the General Fund.
COMMENTS
1)Rationale . The current complexity of the CalFresh program is
hurting participation. United States Department of Agriculture
(USDA) studies show that only 50% of eligible Californians
receive CalFresh benefits. Among working families, California
is last in the nation, reaching less than one-third (31%) of
the eligible families. This bill is designed to improve
participation and create efficiencies in the program by
continuing the practice of aligning eligibility requirements
for both the CalWORKs and CalFresh programs.
2)Federal Denial of CalFresh Quarterly Reporting Waiver . The
current federal waiver which allows California to align the
reporting requirements for CalWORKs and CalFresh cases expired
at the end of March this year. The federal government over
the last two years has demanded that California move their
CalFresh program to the semi-annual reporting schedule
contained in this bill. Absent that change, the two programs
will be separated and CalWORKs will maintain the current
modified quarterly reporting requirements (with a requirement
to report certain changes in family income) and CalFresh
recipients will revert to a straight quarterly reporting
system (where changes in income are not reported during the
interim months). This bifurcation means that families who
receive both benefits, essentially all CalWORKs recipients,
will need to navigate a system that requires them to report
changes in their circumstances one way for CalWORKs and a
different way for CalFresh. This would create significant
confusion for both the recipients and the eligibility workers
and would likely result in an increase in the state's CalFresh
error rate, which could bring with it financial penalties for
the state.
Since the implementation of the CalWORKs program in 1998, the
state has worked consistently to align the requirements of the
two programs, both for administrative ease for the eligibility
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worker and to provide simplification for recipients who are
eligible for multiple programs. Failing to pass this
legislation that allows the state to move both programs to a
semi-annual reporting schedule, the state will need to begin
bifurcating the programs and reversing the policy direction of
the last 13 years.
In the most recent letter to the administration, the United
States Department of Agriculture has allowed the state to
extend their waiver until September 30, 2011, in order to give
the Legislature enough time to pass AB 6 and for the governor
to sign the bill.
3)Why the Old DSS SFIS "Savings" Estimate Does Not Hold Up . For
many years DSS has defended the $15 million annual state
investment in SFIS by suggesting the system "saved" over $60
million in fraudulent welfare payments. This estimate is based
on a Los Angeles county study of their General Relief program.
Since that time, both the State Auditor and the USDA have
questioned the validity of that original study. In their
audit of DSS' finger imaging system, the State Auditor noted:
"In its eagerness to implement SFIS, Social Services based
its estimates of the savings that SFIS would produce on an
evaluation of Los Angeles County's fingerprint imaging system,
rather than conducting its own statewide study. We have
concerns that the methods Los Angeles County used to develop
its savings estimate do not allow for the results to be
extrapolated statewide. Further, Social Services' use of this
data assumes that conditions in Los Angeles County hold true
in other counties. Similar concerns were expressed by the
United States Department of Agriculture as early as 1998."
Beyond the flawed nature of the initial study, it is important
to note that the nation reformed welfare in the time since the
study was conducted. Since 1998, under CalWORKs, recipients
are required to participate in work activities as a condition
of receiving a CalWORKs grant. Because of these requirements,
it becomes difficult for a person to commit multi-county
duplicate aid fraud because they would need to work or
participate twice as many hours to meet the requirements for
each grant. In addition, EBT cards have replaced paper stamps
in the CalFresh program and paper checks in CalWORKs therefore
it makes duplicate aid fraud less lucrative for people who
could previously sell or trade their food stamps.
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Finally, SFIS is not the only fraud protection system in place
in both programs. With the advance of technology, the state
has been able to develop a myriad of automated matching
programs that detect attempted fraud. There are many data
matches in the program which allow counties to check the
information provided by applicants. Among others, CalWORKs,
CalFresh and MediCal data is double-checked against data from
the Franchise Tax Board, Social Security Administration,
Prison and Death Records, Employment Development, records
already in the Medical Eligibility Determination System
(MEDS), and an Income and Eligibility Verification System
(IEVs). Therefore, the integrity of the programs remains
protected even if the finger imaging requirement is removed.
4)USDA Opinion . In a letter provided to former Assemblymember
John Laird, on a similar bill dealing with semi-annual
reporting (AB 2844 of 2008), the USDA strongly encouraged the
state to move to a semi-annual reporting process. According to
USDA findings from other states, semi-annual reporting should
have numerous positive impacts for California, such as:
a) Improving the state's food stamps error rate by limiting
the number of changes that would need to be reported by
food stamps participants.
b) Significantly reducing county administrative workload
due to less frequent certifications and interviews, fewer
reapplications following closures, and fewer periodic
report forms to process.
c) Providing greater access to food stamps for eligible
families because there would be fewer terminations due to
incomplete recertifications, less frequent recertification
reviews, and more time to provide case managements and
other services designed to assist clients.
d) Increasing the number of families that receive food
stamps based on the study of four states that saw an
increase in participation once they adopted semi-annual
reporting. The USDA also notes that there is no known
correlation between simplified reporting and an increase in
fraud.
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5)Quarterly Reporting Grant Impacts . With the change from a
monthly reporting system to quarterly reporting for CalWORKs
and Food Stamps, the prior administration estimated that there
would be a significant cost associated with families
continuing to receive grants for two months for which they are
no longer entitled. However, once the system was implemented,
the actual data on grant payments showed that this concern was
unfounded. Given the state's experience with the move from
monthly to quarterly reporting, there is no evidence to
suggest that a move from quarterly to semi-annual reporting
would have a significant cost impact on CalWORKs grants. While
the fiscal section of this analysis acknowledges DSS'
assumption that there will be a grant cost in the CalWORKs
program, it may be that those costs are not borne out once
semi-annual reporting is implemented.
6)USDA Study . The United States Department of Agriculture
recently released a study that concluded that fingerprinting
is a statistically significant barrier for individuals who may
otherwise apply for food stamps.
7)Urban Institute Study . In March 2007, the Urban Institute
released a study examining a total of 25 specific policies
thought to affect food stamp program participation. The
Institute found strong evidence demonstrating the use of
fingerprinting reduces willingness to participate in the food
stamps program.
8)School Meals Program . School meal programs are also
underutilized. Only half of income eligible students receive
lunch at school, and 18% receive school breakfasts. Some
low-income children with incomes between 133% and 185% of the
federal poverty level, currently ineligible for food stamps,
may not receive school meals because their families cannot
afford the 40 cents required for a reduced price lunch and 30
cents for breakfast. The children in new food stamps
households would be eligible for free school meals.
9)Additional Federal Child Welfare Services Funds. The federal
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government awards funding to states through the Promoting Safe
and Stable Families (PSSF) program that can be used in the
Child Welfare Services program for efforts to reduce the
incidences of child abuse and neglect, and to promote
stability and permanency for at-risk children within families.
The federal government sets a capped amount for funding and
then awards those funds to states and territories based upon
the number of children in each state who are receiving food
stamps. Despite serving over 25% of the national child welfare
caseload, California receives less than 15% of the federal
PSSF funds because of the low food stamps participation rate.
To the extent this legislation increases food stamps
participation among families with children, California's share
of the PSSF funding should increase.
10)Related Legislation . The SAR and SFIS portions of this
legislation have appeared in the budget and in various bills
over the years. Those bills include:
a) AB 1642 (Beall) 2010 - held in Assembly Appropriations
b) AB 1057(Beall) 2009 - held in Assembly Appropriations
c) AB 2844 (Laird) 2008 - vetoed
d) AB 1382 (Leno) 2007 - vetoed
e) AB 3029 (Laird) 2006 - died at desk
f) AB 696 (Chu) 2005 - vetoed
g) AB 2013 (Steinberg/Lieber) 2004 - died in the Senate
without hearing
11)Chaptering Problem . AB 959 (Jones) and AB 1400 (Committee on
Human Services) both amend Welfare and Institutions Code
Section 11265.1, which is repealed by this legislation.
Chaptering language will eventually be necessary in all three
bills.
Analysis Prepared by : Julie Salley-Gray / APPR. / (916)
319-2081
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