BILL ANALYSIS �
AB 493
Page 1
Date of Hearing: May 11, 2011
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Felipe Fuentes, Chair
AB 493 (Perea) - As Amended: April 28, 2011
Policy Committee: Human
ServicesVote:4 - 2
Urgency: No State Mandated Local Program:
Yes Reimbursable: Yes
SUMMARY
This bill prohibits CalWORKs recipients from withdrawing cash
from their electronic benefit transfer (EBT) debit cards from
automated teller machines (ATMs) located in gambling
establishments or strip clubs. In addition, CalWORKs recipients
would be prohibited from using their EBT cards to purchase
tobacco or alcohol.
FISCAL EFFECT
1)EBT reprogramming cost in the range of tens of millions of
dollars (GF/TANF). The current EBT system is not designed to
monitor what is being purchased using cash assistance, nor
does it limit the purchase of items. It merely limits where a
CalWORKs participant can withdraw their cash. Therefore, this
bill would require a complete reprogramming of the EBT system.
2)Reimbursable mandated costs of several hundred thousand
dollars (GF/TANF) for an increased fraud investigations
workload associated with ensuring that vendors are not selling
CalWORKs recipients prohibited items. Currently, state,
federal and county welfare fraud investigators conduct vendor
fraud investigations for CalFresh by trying to use CalFresh
benefits on the EBT card to purchase non-food items.
Presumably, under this legislation a similar state and county
effort would need to be launched to protect against retailers
allowing CalWORKs EBT cash benefits from being used to
purchase alcohol and tobacco.
3)Costs, potentially up to $100,000 (GF/TANF) for the oversight
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and monitoring associated with prohibiting the use of EBT
cards at gambling establishments and strip clubs. Executive
Order S-09-10 prohibited the use of EBT cards at ATMs located
in gambling establishments. This bill would codify that
executive order and expand it to include a prohibition against
using EBT cards in strip clubs. According to information
provided by the Office of Systems Integration, the initial
vendor costs associated with the executive order exceeded
$50,000. Those costs did not account for the on-going
monitoring required.
COMMENTS
1)Purpose . The intent of this legislation is to make it
difficult for CalWORKs recipients to use their cash
grants to purchase anything but basic necessities. The
author hopes that by limiting where families can access
their cash and prohibiting them from using their EBT
cards to purchase certain items that he will be able to
control how and where their money is spent. According to
the author, "Given the current climate of the state's
economy and the limited resources available to all of
California's programs, it is more important than ever to
ensure that state aid is to provide basic necessities for
California's under-resourced families."
2)Support . In support of the bill, CalTax references their
report "Making Government Work - How California Can Improve
Efficiency and Reduce Fraud." In that report the highlight
several news reports that suggest there are problems with the
state's EBT policies. They assert that withdrawing funds from
gambling establishments and adult venues "amounts to fraud and
is a gross misuse of taxpayer's dollars and reduces the amount
of resources available for Californians that struggle to make
ends meet."
The California Professional Firefighters write in support of
the bill, "AB 493 strengthens the EBT system to ensure that
funds are used for their intended purpose - meeting a
recipient's basic needs."
3)Is This A Significant Problem ? In June of 2010, the Los
Angeles Times ran a story highlighting the fact that CalWORKs
cash assistance could be accessed by recipients in card rooms
and Indian casinos. In response to the story, Governor
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Schwarzenegger signed Executive Order S-09-10 banning the use
of EBT cards at ATMs located in casinos, card clubs and strip
clubs. The EBT data distributed by the Department of Social
Services (DSS) at the time shows that less than 1/10 of 1% of
EBT cash redemptions statewide took place in a casino or card
room. In other words, out of $315 million in CalWORKs grants
that were redeemed through EBT cards in May of 2010, $237,000
was redeemed in Indian casinos and $17,000 was redeemed in
card rooms. In addition, data showed that only $12,000 had
been accessed at strip clubs over a three year period.
While it is clear that CalWORKs recipients should not be using
their cash grants to gamble, it is not clear that is what was
happening in these cases. Unfortunately, there is no way to
track how the money obtained from those ATMs was ultimately
spent. It may be that those recipients lived in remote rural
areas and the ATMs at Indian casinos were the closest ones to
their location. It may be that CalWORKs recipients were
working in those casinos and withdrawing their cash benefits
from machines at their workplace. And, as welfare rights
advocates pointed out, it may be that the fees charged at ATMs
in casinos and card rooms are less than those charged by
machines in other areas because casinos want to encourage
patrons to withdraw cash to facilitate their gambling.
Of course, it also may be that some of these CalWORKs
recipients were indeed withdrawing cash to gamble.
4)Committee Questions . Current law states that no person
concerned with the administration of a public assistance
program shall dictate how any recipient shall expend the aid
granted to him (WIC 10501). This bill seeks to contradict that
statute and does pose a difficult policy question. While the
CalWORKs grant is intended to provide assistance with basic
necessities, should the state begin to prohibit the use of EBT
cards to purchase certain items that fall outside that
definition, as this bill does with alcohol and tobacco? In
addition, where should the state draw the line in developing
that policy? Should CalWORKs recipients be prohibited from
using their grant money to pay for cable television? To
purchase magazines? It is a difficult policy road to travel
down in terms of deciding how people should be allowed to
spend their money. In addition, it is unclear why CalWORKs
recipients would be singled out for these types of
prohibitions and Supplemental Security Income recipients, for
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example, are not.
Further, nothing in this legislation would prohibit a CalWORKs
recipient from using their cash grant to purchase alcohol and
tobacco, nor would it prohibit them from using that grant in a
gambling establishment or strip club should they decide to do
so. CalWORKs recipients can withdraw their cash benefit from
their EBT card. In the case of this bill, a recipient would
need to go to another ATM machine and withdraw their cash
before using it to purchase prohibited products. The
Legislature should consider whether or not it is prudent for
the state to invest millions of dollars in reprogramming and
increased fraud investigators for a policy that is unlikely to
change a recipient's behavior.
5)Opposition . In opposition to the bill, the Western Center on
Law and Poverty writes, "AB 493 singles out poor people by
placing the restrictions only on the use of public funds
managed through the CalWORKs program and not for any other
publicly funded benefit. If enacted, it would undermine the
goal of creating a dignified and mainstreamed experience for
EBT customers and so does the rhetoric that drives these kinds
of proposals. Treating EBT customers differently than others
reinforces negative stereotypes about our low-income neighbors
and stymies our society's ability to envision an improved
future for them and their families."
Also in opposition, the California Welfare Directors
Association notes that "While it may seem logical to ban the
purchase of alcohol or tobacco products with CalWORKs funds,
given that these items are not essential to one's well-being,
starting the state down this path raises thorny questions
about what would be banned next and where the list would end.
Additionally, the EBT system cannot currently stop the
purchase of certain specified items, and would have to be
significantly reprogrammed to operate in this way."
Analysis Prepared by : Julie Salley-Gray / APPR. / (916)
319-2081