BILL ANALYSIS �
Senate Appropriations Committee Fiscal Summary
Senator Kevin de Le�n, Chair
AB 1613 (Stone) - CalWORKs: benefits overpayment.
Amended: June 15, 2014 Policy Vote: Human Services 3-1
Urgency: No Mandate: Yes
Hearing Date: June 30, 2014
Consultant: Jolie Onodera
This bill meets the criteria for referral to the Suspense File.
Bill Summary: AB 1613 would revise the thresholds for collecting
CalWORKs overpayments, as follows:
Authorizes the Department of Social Services (DSS) to
establish a minimum cost-effective threshold for collecting
CalWORKs overpayments, as specified.
Raises the minimum overpayment threshold amount for
recovery from $35 to $125 for non-fraudulent claims, or the
DSS threshold if greater, for former CalWORKs recipients.
Prohibits a county from establishing an overpayment for
current CalWORKs recipients if 1) the overpayment is less
than $125, or the DSS threshold if greater, or, 2) if the
costs of collecting the outstanding overpayments are
expected to exceed the average amounts to be recovered by
the county.
Revises the recoupment methodology from a reduction to the
CalWORKs grant of five or 10 percent of the maximum aid
payment (MAP) to five or 10 percent of the recipient's
monthly payment, dependent on the cause of the overpayment.
Reduces the case records retention period from four years
to three years, and prohibits commencement of administrative
actions against persons based on erroneous application for
or receipt of CalWORKs benefits if the case record has been
destroyed subject to the shortened retention period.
Fiscal Impact:
Ongoing potentially significant reduction in CalWORKs
overpayment recoveries of $1.1 million to $2.7 million
(General Fund) for every two to five percent reduction in
overpayments collected annually due to the higher minimum
thresholds for collection and the extended period of time
required to collect overpayments under the revised
recoupment methodology. Over $842 million in CalWORKs
overpayments representing 1.4 million claims were
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outstanding (CA812 report) as of March 2014, with $54.8
million collected over the 12 months ending March 2014.
Annual ongoing state-reimbursable county administration
costs (General Fund) for extended collection periods
resulting from reduced recoupment amounts based on a
percentage of a recipient's grant amount rather than the
MAP, offset by administrative cost savings due to raising
the overpayment threshold and commencing fewer
administrative actions due to expiration of the shortened
records retention period requirement.
Unknown, potentially significant ongoing reduction in
overpayment recovery collections (General Fund) due to the
revised case records retention period requirement shortened
from four years to three years, and prohibition against
commencement of administrative actions based on erroneous
application for or receipt of aid after destruction of
records based on the shorter retention period.
One-time costs (General Fund) potentially in excess of
$50,000 to modify automation systems.
Potential one-time DSS workload increase to revise
regulations and complete a cost-benefit analysis to
determine a minimum cost-effectiveness threshold.
Ongoing potential cost savings in averted administrative
hearings related to challenges to CalWORKs overpayments. At
an estimated cost of $1,025 per hearing, elimination of
every 100 hearings per year would result in cost savings of
over $100,000 (General Fund) annually.
Background: Existing law establishes in federal law the
Temporary Assistance for Needy Families (TANF) program to
provide assistance to needy families so that children may be
cared for in their own homes or in the homes of relatives, and
to end the dependence on government benefits by promoting job
preparation, work, and marriage. Existing state law establishes
the CalWORKs program administered by the DSS to provide cash
benefits, employment training, and other supports to low-income
families through a combination of federal TANF block grant
funds, as well as state and county funds.
Under existing law, counties are authorized to reduce current
and future CalWORKs grant amounts due to prior overpayments, and
requires grant payments to be reduced by five percent of the MAP
if the overpayment is due agency or county error, and by 10
percent for any other reason. Existing law requires a county to
advise a CalWORKs recipient of the proposed grant reduction and
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of his or her entitlement to a state hearing on the propriety of
the reduction prior to effectuating the grant reduction.
Counties retain 2.5 percent of overpayment collections, which is
equal to the county share of costs for assistance payments.
State and federal funds are returned to the General Fund.
Federal funds are not returned to the federal government when
overpayments are collected but are instead kept and reused for
TANF purposes.
Under existing law, a county is prohibited from attempting to
collect overpayments from a recipient who is no longer receiving
CalWORKs benefits if the overpayment is less than $35, and
requires that reasonable cost-effective efforts at collection be
implemented if the amounts owed are $35 or more. In cases
involving fraud, every effort must be made to collect the
overpayments regardless of the amount.
Proposed Law: This bill would authorize the DSS to establish a
minimum cost-effectiveness threshold consistent with federal
regulations for collecting a CalWORKs overpayment that is
greater than $125, that if established, the counties would be
required to implement. Additionally, this bill:
Revises the CalWORKs overpayment recoupment rate for
overpayments caused by the agency from five percent of the
MAP to five percent of the monthly grant received by the
family.
Revises the CalWORKs overpayment recoupment rate for
overpayments for any other reason from 10 percent of the MAP
to 10 percent of the monthly grant received by the family.
Prohibits a county from establishing an overpayment for
current CalWORKs recipients if at least one of the following
conditions is met:
o The costs of collecting the outstanding overpayments
are expected to exceed the average amounts recovered by
the county.
o The amount of the overpayment is less than $125 or
the minimum cost-effectiveness threshold established by
the department, whichever is greater.
Raises the overpayment recovery threshold for former
CalWORKs recipients from $35 to $125, or the minimum cost
effectiveness threshold established by DSS, whichever is
greater.
Authorizes the DSS to establish a minimum
cost-effectiveness threshold consistent with federal
regulations for collecting CalWORKs overpayments that is
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greater than $125. If the DSS establishes such a threshold,
each county is required to implement the new threshold.
Revises the case records retention period from four years
to three years in which a civil or criminal action may be
commenced against a person based on alleged unlawful
application for or receipt of public social services, and
expands the commencement of actions against a person to
include administrative actions for erroneous application for
or receipt of public social services if the case record has
been destroyed after the expiration of now shortened records
retention period.
Requires the DSS to implement the provisions of the bill
through an all-county letter or similar instructions no
later than April 1, 2015, and requires the DSS to adopt
regulations as necessary no later than July 1, 2016.
Prior Legislation: SB 1391 (Liu) Chapter 491/2012 authorized DSS
to establish a minimum cost-effective threshold for collecting
overissuances of CalFresh benefits.
Staff Comments: DSS would likely incur one-time costs to modify
automation systems in order to effectuate the overpayment
threshold changes as well as reprogram recoupment rates against
the monthly grant received by each recipient instead of the MAP.
The costs are unknown at this time but could be significant.
The CA812 Quarterly Report of Overpayments and Collections -
CalWORKs indicated over 1.4 million outstanding claims totaling
over $842.5 million in CalWORKs overpayments as of March 2014,
representing an average overpayment claim of nearly $593. Over
$54.8 million in overpayment recoveries were collected over the
12 months ending March 2014. Increasing the minimum threshold
for collection from former CalWORKs recipients, establishing a
minimum threshold for current recipients (currently there is no
minimum threshold), and extending the period of time required to
collect overpayments under the revised recoupment methodology
could result in ongoing significant reductions in CalWORKs
overpayment recoveries of $1.1 million to $2.7 million for every
two to five percent reduction in overpayments collected
annually.
Because the provisions of this bill revise the existing method
of collection for overpayments as a CalWORKs grant reduction
against a percentage of a recipient's monthly payment instead of
the MAP, the length of time it would take counties to recover
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overpayments would be extended, resulting in increased
administrative costs to collect overpayments for each case.
Under current law, overpayments caused by agency error are
collected at a 5 percent rate of the MAP. As an example,
collecting a claim caused by agency error at the rate of 5
percent of a monthly payment of $300 would equate to $15/month,
whereas 5 percent of the MAP for an AU of 3 ($703 as of April 1,
2015) would equate to over $35/month. At these amounts, the
average overpayment of $593 could take an additional 23 months
to collect (40 months at $15/month versus 17 months at
$35/month).
As it is much less administratively burdensome to collect from
current recipients via grant adjustment than to collect from
former recipients, the extended collection periods could result
in the need to continue to collect overpayments after cases
transition off aid, resulting in additional administrative costs
to the counties. Further, the lengthier collection periods would
result in a reduction in annual ongoing collection revenue to
the state and counties.
This bill prohibits a county from establishing an overpayment
for current CalWORKs recipients if "the costs of collecting the
outstanding overpayments are expected to exceed the average
amounts to be recovered by the county." It is unclear if this
could potentially be interpreted to mean that a county would be
prohibited from establishing overpayments based on a calculation
of an overall average recovery amount to the county (2.5 percent
of total recovery), exclusive of the amounts that are returned
to the state (97.5 percent of total recovery). This could result
in significant reductions in overpayment recoveries.
This bill changes the required case records retention period
specified in this section of the Welfare and Institutions Code
from four years to three years, and additionally prohibits the
commencement of administrative actions against a person based on
erroneous application for or receipt of public social services
if the case record for that person has been destroyed after the
expiration of the shortened retention period. Although the
general records retention period specified in subdivisions (a)
and (c) of WIC � 10851 is three years, WIC � 10851(d) states,
"The retention requirements imposed by subdivisions (a) and (c)
of this section are for public social services purposes only and
are superseded to the extent another statute requires retention
of the same records for a longer period for a different
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purpose." As existing WIC � 11004(j) currently requires a
four-year retention period for overpayment records, this change
could potentially impact a county's ability to establish and
collect overpayments.
While this bill could increase county administrative costs for
extended collection periods resulting from reduced recoupment
amounts based on a percentage of a recipient's grant amount
rather than the MAP, several other provisions of this bill will
result in significant ongoing administrative cost savings.
Raising the overpayment threshold to $125 and prohibiting an
overpayment if costs to collect will exceed the average amounts
collected, as well as commencing fewer administrative actions
due to expiration of the shortened records retention period
requirement will all reduce county administrative workload and
costs.
Recommended Amendments: To maximize county administrative cost
savings and avoid extended collection periods as well as delays
in revenue recovery, the author may wish to consider an
amendment to retain grant reduction rates at five and 10 percent
of the CalWORKs MAP.
To address the potential for significant reductions in
overpayment recoveries, avert a potentially state-reimbursable
mandate, and ensure that fraudulent claims of any amount
continue to be collected, the author may wish to consider the
following amendments to WIC � 11004(d):
(2) A county shall not be required to establish an overpayment
if at least one of the following conditions is met:
(A) The cost s of collecting the outstanding overpayment s are is
expected to exceed the average amount s to be recovered by the
county .
(B) The amount of the overpayment is less than $125 or the
minimum cost-effectiveness threshold established by the
department pursuant to subdivision (n), whichever is greater.
(3) Notwithstanding paragraph (2), in cases involving fraud,
every effort shall be made to collect the overpayments
regardless of the amount.
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