BILL ANALYSIS �
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Date of Hearing: April 8, 2014
ASSEMBLY COMMITTEE ON HUMAN SERVICES
Mark Stone, Chair
AJR 40 (Mullin) - As Introduced: February 21, 2014
SUBJECT : Federal poverty level measurement.
SUMMARY : Memorializes the California Legislature's request to
the U.S. President and Congress to replace the Official Poverty
Measure with the new Supplemental Poverty Measurement.
Specifically, this bill :
1)Makes a number of declarations, which include:
a) The Official Poverty Measure is determined by the
United States Census Bureau and is instrumental in
determining an individual's eligibility for a number of
government programs including the Supplemental Nutrition
Assistance Program, Medicaid, School Lunch Program, Women
Infants and Children, Housing Assistance, and others; and
b) The method we use today was developed in the 1964 by
Mollie Orshanksy of the Social Security Administration,
and that method used before-tax cash income to determine a
family's resources, which was then compared to a poverty
threshold; and
c) Other than minor changes, the method has remained the
same over time, despite significant economic and
governmental changes, including the introduction of
Medicare and Medicaid, the shift from a manufacturing to a
service economy, welfare reform of the 1990's, and the
general stagnation of wages; and
d) The Official Poverty Measure is a one-size-fits-all
policy that leads to a distorted perception of poverty and
an inefficient allocation of resources to fight poverty;
and
e) The Official Poverty Measure does not take into
account that families no longer spend one-third of their
income on food; they currently spend between 5 to 10
percent; and
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f) The Official Poverty Measure does not account for the
increase in child care expenses due to the rise in the
workforce participation of both parents; and
g) Historically, there has been widespread agreement
among analysts, advocates, and policymakers that the
Official Poverty Measure is inadequate, leading to a 1990
Congressional appropriation that was made for an
independent scientific study on a new calculation method;
and
h) The Supplemental Poverty Measure was designed to take
into account changes in the United States economy over
time, cost-of-living variations in different parts of the
country, and the changing role of government; and
i) The Supplemental Poverty Measure more accurately
measures poverty by using a basic set of goods that
includes food, clothing, shelter, and utilities, adjusted
to reflect the needs of different family types and to
account for geographic differences in living costs to
establish what is known as a poverty threshold; and
j) The use of the Official Poverty Measure can have a
detrimental effect on policies to combat poverty because
it results in less efficient and less accurately targeted
policies and expenditures; and
aa) It is vital that we implement a fair poverty measure
that allows us to efficiently allocate resources and focus
on regions and populations that need help the most.
2)Resolves that the California State Assembly and Senate call on
the President and the Congress of the United States to take
steps to transition from the outdated and inadequate Official
Poverty Measure and instead begin implementing the
Supplemental Poverty Measure to determine the allocation of
federal benefits.
EXISTING LAW
1)Annually establishes the federal poverty line based on data
available from the Census Bureau and provides that the poverty
line shall be used as a criterion of eligibility for
anti-poverty programs that fall under the community services
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block grant authorized in 42 U.S.C. 9904. (42 U.S.C. 9902)
FISCAL EFFECT : Unknown.
COMMENTS : Although the formula used to calculate the Official
Poverty Measure (OPM) relies on a formula developed in the early
1960s, it is still used as a means of measuring the number of
people living in poverty and as a baseline for determining
eligibility for federally funded anti-poverty programs. This
joint resolution seeks to apply a more appropriate standard for
assessing and addressing poverty by calling on the President of
the United States and Congress to transition from use of the OPM
to the widely researched and more accurate Supplemental Poverty
Measure.
History of the Official Poverty Measure : In the early 1960s,
amid the early conversations that eventually led federal
anti-poverty policy changes, the US Congress tasked the Social
Security Administration with determining the cost of living for
seniors and families with young children. A researcher at the
Social Security Administration named Mollie Orshansky proceeded
with a series of research projects, which quickly evolved into
defining a national poverty standard. Prior to her work, the
definition of poverty, which had been set by the Council of
Economic Advisers, was annual family income of less than $3,000.
For purposes of historical context, the average US family
income in 1962 was $6,000 ($2,800 per person), according to US
Census Bureau data. The $3,000 standard for determining poverty
was questioned by researchers and policymakers, as it failed to
take into consideration a number of variables that could
increase or decrease per-person resources, including family
size.
Mollie Orshansky's formula, which has contributed to the OPM
formula for over fifty years, attempted to be less arbitrary
than the $3,000 standard. She developed a measure of poverty by
calculating the cost of a low-cost family food plan, as
determined by the US Department of Agriculture in 1962, and
multiplying that value by three to reflect the USDAs 1955
Household Food Consumption Survey, which found that families of
three or more people persons spent an average of one third of
their total income, after taxes, on food. The USDA's food
plans, the Social Security Administration noted, had been used
for decades to represent a translation of the criteria of
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nutritional adequacy, and anything below that level would
represent deprivation. Since its development, the formula has
been modified to account for variations in household size, but
it still does not factor in certain variables that might worsen
or improve a family's financial situation.
The poverty level used today is adjusted annually by the
Consumer Price Index to reflect changes in the cost of living
throughout the nation, and is itself used, or some multiplier of
the level is used, as the foundation for setting eligibility
thresholds for numerous federal programs. Programs for which
eligibility relies on the federal poverty level include the
Supplemental Nutrition Assistance Program (SNAP), known as
CalFresh in California, the National School Lunch and School
Breakfast Programs, the Special Supplemental Nutrition Program
for Women, Infants, and Children (WIC), the Low-Income Home
Energy Assistance Program (LIHEAP), and the Children's Health
Insurance Program, to name a few.
The 2014 federal poverty guidelines provided by the US
Department of Health and Human Services set the poverty level
for a family of three at $19,790 annually. Researchers continue
to contest the accuracy of the measure, as the same level is
applied across the nation (with the exception of Hawaii and
Alaska) despite geographical differences, distinctions in labor
and housing markets, and other factors like child care and work
expenses.
Redefining poverty : After decades of controversy around the
appropriateness and accuracy of the OPM, Congress authorized an
appropriation for an independent scientific study of the measure
to be conducted. The result was a lengthy report published by
the National Academy of Sciences (NAS) in 1995, which
highlighted the inadequacy of the current measure and
recommended that a new measure be created to more accurately
reflect the pressures of current family costs. The NAS report
identified a number of factors that are essential in calculating
poverty, including child care costs, differences in medical care
expenses across population groups, and significant price
variations in housing and other costs between geographic
regions.
In 2011, and again in 2012, the U.S. Census Bureau, in
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conjunction with the Bureau of Labor Statistics and other
federal agencies, which were together called the Interagency
Technical Working Group on Developing a Supplemental Poverty
Measure (ITWG), published a Supplemental Poverty Measure (SPM)
intended to provide a more refined look at poverty in the
nation. This measure, for the first time, attempts to balance a
family's receipt of tax credits, food and other aid, and child
support with costs that otherwise are not considered, such as
housing expenses, work-related transportation costs, child care,
health care, and others.
Under the SPM, California became the state with the highest
poverty rate in the country. Whereas a three year average
calculated between 2010 and 2012 under the official measure put
California's poverty rate at 16.5 percent, applying the SPM for
the same three year period increased California's poverty rate
to 23.8 percent. According to the US Census Bureau, a primary
reason for this change is California's high housing costs.
The current poverty measure is a simple formula that identifies
resources as gross income before taxes and compares that amount
to set of presumed expenses, adjusted for family size. The SPM,
on the other hand, also includes factors such as tax benefits
and public social services benefits on the resource side of the
formula, which can potentially put a household above the poverty
level that would have otherwise been considered to be below the
poverty level under the current measure. By way of example,
most conversations about public social services exclude things
like federal nutritional benefits received through SNAP from any
income calculations because they are not flexible cash benefits
and can only be used for food purchases (a person can't use SNAP
to pay rent or buy medication). However, the SPM includes money
from all sources (liquid or not) on the resource side of its
poverty level calculation and assumes that use of a benefit,
like the nutrition supplement under SNAP, frees up other dollars
within the household income to be used for other expenses, such
as housing. The chart below, published in a U.S. Census Bureau
report, clearly shows the factors included on the resources and
expenses sides of the SPM formula for assessing poverty.<1>
-----------------------------------------------------------------
| Resource Estimates |
---------------------------
<1> Short, Kathleen. "The Research Supplemental Poverty Measure:
2012," U.S. Census Bureau, Current Population Reports, P60-247,
November 2013.
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| SPM Resources = Money Income From All Sources |
-----------------------------------------------------------------
-----------------------------------------------------------------
|PLUS: |MINUS: |
|Supplemental Nutritional |Taxes (plus credits such as |
|Assistance (SNAP) |the Earned Income |
| |Tax Credit [EITC]) |
|National School Lunch Program | |
| |Expenses Related to Work |
|Supplementary Nutrition Program | |
|for Women |Child Care Expenses |
| | |
|Infants and Children (WIC) |Medical Out-of-pocket Expenses |
| |(MOOP) |
|Housing subsidies | |
| |Child Support Paid |
|Low-Income Home Energy | |
|Assistance (LIHEAP) | |
-----------------------------------------------------------------
The effects of poverty : Researchers have established that
children who grow up in poverty often show poorer academic
performance, have poorer physical health, poorer mental health,
and lower IQ than children from families with higher
socioeconomic status. Poor children are at greater risk than
higher income children for a range of problems, including poor
socio-emotional functioning, developmental delays, behavioral
problems, asthma, poor nutrition, low birth weight, and
pneumonia. Socioeconomic status is one of the most powerful
risk factors for poor adult health, as well. People living in
poverty suffer disproportionately from nearly all diseases and
have higher rates of mortality.
Families in poverty experience increased chronic stress related
to difficulties in providing for each family member's needs,
food insecurity, living in dangerous neighborhoods and other
factors. Events in daily life associated with living in an
impoverished household and neighborhood that produce a type of
chronic stress can lead over time to wear and tear on the body
and can have a negative impact on the developing brain. A
number of researchers have linked domestic household crowding,
commonly found to be a consequence of lower socioeconomic
status, with higher psychological stress and poorer health
outcomes. Other research shows that stress specifically impairs
working memory and the ability to pay attention.
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Recommended amendments : While the author's intent is to call on
the President and Congress to abandon the OPM and rely on the
SPM for purposes of adequately gauging poverty and being able to
better provide for people living in poverty, the provisions in
this resolution may not effectively achieve the author's desired
result.
1) Using the SPM to calculate poverty shows that California has
the highest poverty rate in the nation, yet the findings in this
joint resolution do not mention California's poverty rate, in
particular, or the affect that use of the Official Poverty
Measure has on Californians.
Amendment #1
Staff recommends adding the following finding related to the
official poverty measure's affect in California:
WHEREAS, due to California's high cost of living, low-income,
working families in California are especially disadvantaged by
the Official Poverty Measure, which results in the denial of
federally-funded assistance to families who living above the
federal poverty line but are still unable to meet their basic
needs;
2) Additionally, direction from the federal Office of Management
and Budget (OMB), as well as reports from the ITWG have made it
clear that the Supplemental Poverty Measure is an evolving
measure that is not meant to replace the Official Poverty
Measure. In a March 2010 paper titled Observations from the
Interagency Technical Working Group on Developing a Supplemental
Poverty Measure, the ITWG states:
"The SPM would not replace the official poverty measure. The
Working Group has designed it as an experimental measure that
defines thresholds and resources in a manner different from the
official poverty measure. The SPM should be considered a work in
progress, with the expectation that there will be improvements
to it over time."
The ITWG goes on to state:
"The official statistical poverty measure, as defined in OMB
Statistical Policy Directive No. 14, will continue to be
produced and updated every year. This is the statistical measure
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that is released annually in the fall and is sometimes
identified in legislation regarding program eligibility and
funding distribution. For a variety of reasons, the SPM will not
be the measure used to estimate eligibility for government
programs. The SPM is designed to provide information on
aggregate levels of economic need at a national level or within
large subpopulations or areas."
Considering the firm stance expressed by federal government
officials, the author may want to reconsider the approach of
this joint resolution to ensure it does not directly conflict
with federal guidance. In order to effectively call for
improvement and reformation of the Official Poverty Measure, the
author may want to consider the following amendments:
Amendment #2
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4 Resolved by the Assembly and the Senate of the State of
5 California, jointly, That the Legislature of California urges
the
6 President and the Congress of the United States take steps to
7 transition reform from the outdated and inadequate Official
Poverty
8 Measure and instead begin implementing the Supplemental
Poverty
9 Measure to better reflect poverty and unmet needs as indicated
by the Supplemental Poverty Measure determine the allocation of
federal benefits ; and be it
10 further
REGISTERED SUPPORT / OPPOSITION :
Support
California Primary Care Association (CPCA)
Opposition
None on file.
Analysis Prepared by : Myesha Jackson / HUM. S. / (916)
319-2089
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