BILL ANALYSIS �
SENATE HUMAN
SERVICES COMMITTEE
Senator Carol Liu, Chair
BILL NO: AB 493
A
AUTHOR: Perea
B
VERSION: May 27, 2011
HEARING DATE: June 28, 2011
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FISCAL: Appropriations
9
3
CONSULTANT:
Hailey
SUBJECT
Electronic benefit transfer cards: use restrictions
SUMMARY
Codifies parts of an executive order by banning the use of
electronic benefit transfer cards at automated teller
machines located in gambling establishments and adult
entertainment establishments
ABSTRACT
Current law
1) Establishes that counties must provide cash
assistance and other services to needy families
through the California Work Opportunity and
Responsibility to Kids program (CalWORKs) using a
combination of federal, state and county funds.
CalWORKs uses federal Temporary Assistance to Needy
Families (TANF) block grant funds for partial support
of the program.
2) Directs the Department of Social Services (DSS) to
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contract with a vendor or vendors to enable the use of
an electronic benefit transfer card at automated
teller and point of sale machines.
3) Provides for the deposit of benefits in accounts
that CalWORKs participants can draw on using
electronic benefit transfer (EBT) cards and select
automated teller and point of sale machines.
This bill
1) Directs DSS to prevent CalWORKs recipients from
using their electronic benefits
transfer card to access automated teller
machines that are located in gambling
establishments and adult entertainment
establishments.
FISCAL IMPACT
The Assembly Appropriations Committee identified costs,
potentially up to $100,000 for the oversight and monitoring
associated with prohibiting the use of EBT cards at
gambling establishments and adult entertainment businesses.
Executive Order S-09-10 prohibited the use of EBT cards at
ATMs located in gambling establishments. According to
information provided by the Office of Systems Integration,
the initial vendor costs associated with the executive
order exceeded $50,000. Those costs do not include staff
time at DSS to identify businesses affected by the
executive order or for on-going monitoring required.
DSS points out to the committee that compliance with
statute will necessitate a more thorough review of
telephone books, business licenses, and other records to
ensure that all gambling and adult entertainment
establishments are identified; an executive order may allow
some slippage that the administration of a statute does
not, bringing attendant costs.
BACKGROUND AND DISCUSSION
A report in the Los Angeles Times
On June 24, 2010, the Los Angeles Times published an
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article with the headline and sub-headline, "Welfare aid
cards valid at casinos. State-issued debit cards work at
some gaming floor ATMs. Officials vow cutoff."
The opening paragraphs read, "California welfare recipients
are able to use state-issued debit cards to withdraw cash
on gaming floors in more than half of the casinos in the
state, a Los Angeles Times review of records found. The
cards, provided by the Department of Social Services to
help recipients feed and clothe their families, work in
automated teller machines at 32 of 58 tribal casinos and 47
of 90 state-licensed poker rooms, the review found."
The rest of the article described the CalWORKs program, the
introduction of EBT cards to distribute benefits, some of
the settings where EBT cards can be used at ATM machines at
gambling establishments, and included quotations from
spokespersons for the Assembly Speaker and the Assembly
Republican Caucus.
The clear implication of the article and its supporting
quotations was that welfare recipients were withdrawing
cash in order to gamble.
Executive Order S-09-10
Also on June 24, 2010, in response to the attention brought
to the issue by the Los Angeles Times article, Governor
Schwarzenegger issued Executive Order S-09-10. In part, it
reads:
NOW, THEREFORE, I, ARNOLD SCHWARZENEGGER,
Governor of the State of California, by virtue
of the power vested in me by the Constitution
and statutes of the State of California, do
hereby order effective immediately:
1. DSS shall immediately take all necessary
steps to ensure that CalWORKS recipients may
not access state-provided cash benefits from
ATMs in gambling establishments.
The executive order also included additional subsections
that addressed family responsibility and a DSS action plan
to identify fraud, waste, and abuse in the disbursement of
CalWORKs benefits.
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As part of its required action plan, DSS added additional
venues to a list of places where ATM machines would no
longer accept CalWORKs EBT cards: adult entertainment
businesses, smoke shops, tattoo and piercing parlors,
nightclubs, taverns and bars, liquor stores, cannabis
shops, bingo halls, racetracks, smoke shops, spa and
massage salons, two cruise ships, and a gun dealership.
As a result of the executive order and DSS's action plan, a
total of 5,531 ATM machines no longer take EBT cards. Of
these, 403 are gambling establishments (casinos and race
tracks) and 327 are adult entertainment businesses.
What is the force of an executive order?
According to the office of legislative counsel, the force
of governors' executive orders has been established in case
law based on analogy to presidential executive orders. A
governor's executive order has the force of law or of a
regulation; it continues to be in effect until it is
superseded by an executive order, by a regulation, or by
statute.
Limits of the Los Angeles Times investigation
At no time in the initial Times article or in subsequent
articles did either the reporter or the various people
quoted suggest any other reasons that an EBT card would be
used at a casino or poker room besides gambling. No one
asked if employees at the establishment might be CalWORKs
recipients working as dealers, wait staff, or janitors; nor
did anyone ask if these ATM machines might be convenient to
nearby residents.
Some simple analysis suggests that people jumped to
conclusions. In Los Angeles County, DSS identified seven
gambling establishments where the ATMs accepted EBT
cards. Of the seven, two are large: the Commerce Casino
has 243 tables, and the Bicycle Club has 200 tables. In
2007, 2008, 2009, and 2010 there were zero dollars in cash
disbursed to EBT card holders at these two large clubs.
That was also the case at two smaller casinos: zero
withdrawals. The ATMs at one casino, however, Hawaiian
Gardens Casino, disbursed $30,000 in both 2007 and 2008,
$33,000 in 2009, and $28,000 in 2010. A quick check
discloses that the location of the Hawaiian Gardens Casino
is convenient to a low-income, residential neighborhood
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that lacks other ATMs. Given this pattern of EBT card
usage in Los Angeles, there are more data present to
suggest that no CalWORKs funds withdrawn at casinos were
used for gambling than there are to suggest - or to draw
conclusions from the Times articles - that the principle
use of CalWORKs funds withdrawn at casinos was for
gambling.
A similar quick analysis discloses that a handful of Indian
casinos - those farthest from other retail and business
centers - were the most frequently used by CalWORKs
recipients among the state's many such businesses.
It should be pointed out that Governor Schwarzenegger
issued his executive order on the same day that the Los
Angeles Times' initial story was printed. No investigation
of patterns of usage of EBT cards at gambling
establishments conducted by the administration informed the
order.
Assembly votes
Floor 59 -10
Appropriations11 - 1
Human Services 4 - 2
Related legislation
SB 417 (Dutton) would have prohibited the use of CalWORKs
and CalFresh electronic benefit transfer cards for the
purchase of alcohol or tobacco products. Held in the
Senate Human Services Committee, April 2011.
Arguments in support
CalTax notes several press reports of the use of EBT cards
at casinos and adult venues and concludes that such action
amounts to fraud and is a gross misuse of tax dollars. In
addition to fraud, CalTax notes that these reports attract
negative publicity. The bill would improve the efficiency
of the EBT card program and eliminate areas where the
program is subject to abuse.
Arguments in opposition
Western Center on Law and Poverty believes that the bill
reinforces negative stereotypes about low-income families,
brings added costs to the state's contract with its EBT
vendor, and is unnecessary - given both the executive order
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and evidence that CalWORKs participants used the ATMs in
question because they were convenient to the neighborhood
or to employees. The Coalition of Welfare Rights
Organizations believes that recipients should have the
opportunity to make the case for a particular ATM to remain
available for EBT card use: in those neighborhoods where it
is the only available machine or where its fees are lower
than those of others.
COMMENTS AND QUESTIONS
Is the bill necessary?
The bill codifies a part of an executive order issued by
Governor Schwarzenegger and executed by the Department of
Social Services. DSS has worked with the state's ATM/EBT
contractor to identify gambling and adult entertainment
establishments and to program their ATMs to reject the use
of EBT cards. While the bill would have no impact on
current policy and practice, it could well be followed by
additional proposals to codify additional parts of DSS's
action plan in response to Executive Order S-09-10 or new
restrictions beyond those in the current DSS action plan.
Does the bill address a documented problem?
The executive order that this bill codifies was released
with no study or review, either publicly or internally. A
quick look at data available from DSS suggests that there
is no actual problem here, but one of implication and
inference. The committee may want to direct staff to work
during the next few months with the author and with DSS to
investigate the geographic patterns of usage of EBT cards
at gambling establishments, their connections to the
employment of CalWORKs participants, and the comparative
costs of ATM machine charges at casino machines compared to
those at machines nearby.
POSITIONS
Support: The California Taxpayers Association
Oppose: Coalition of California Welfare Rights
Organizations
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Western Center on Law and Poverty
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