BILL ANALYSIS
SENATE HEALTH AND HUMAN SERVICES
COMMITTEE ANALYSIS
Senator Martha M. Escutia, Chair
BILL NO: AB 1233
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AUTHOR: Aroner
B
AMENDED: June 29, 2000
HEARING DATE: July 5, 2000
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FISCAL: Appropriations
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CONSULTANT:
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Matosantos / ak
SUBJECT
CalWORKs Program
SUMMARY
This measure clarifies current law to provide counties the
option of implementing wage-paying community service
programs.
ABSTRACT
Existing law:
1.Establishes the California Work Opportunity and
Responsibility to Kids Program (CalWORKs) which provides
cash grants and welfare-to-work services to families
whose incomes are not adequate to meet their basic needs;
2.Establishes participation mandates and a five-year
lifetime limit of cash assistance as a condition of
receiving assistance;
3.Requires that parents who have received assistance for
that 18 or 24 months after signing a welfare-to-work plan
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meet her or his weekly participation mandate through
unsubsidized employment, community service, or a
combination of the two;
4.Specifies that community service must be performed in the
public or private nonprofit sector, provide participants
with job skills that lead to unsubsidized employment, and
comply with specified anti-displacement provisions;
5.Requires counties to develop community service plans that
identify unmet community needs, and entities responsible
for the community service job development, as well as
fiscal administration and case management services, and
supportive efforts;
6.Establishes grant-based on-the-job training as an
allowable work activity defined as employment or
on-the-job training, including community service, in
which the recipient's cash grant or the aid grant savings
resulting from employment is diverted to the employer as
a wage subsidy to offset the payment of wages to the
participant;
7.Establishes an "earned income disregard" for recipients
who obtain unsubsidized employment as a work incentive
through which the first $225 of earnings and 50 percent
of each additional dollar of earnings is disregarded when
determining a family's CalWORKs grant;
8.Requires that total grant payments do not exceed
specified maximum aid payments.
This bill:
1.Establishes that the "earned income disregard" does not
apply to wages funded by the diversion of a recipient's
cash grant or grant savings from employment;
2.Specifies that both the recipient's cash grant and the
aid grant savings resulting from employment can be
diverted as a wage subsidy to employers providing
grant-based on-the-job training;
3.Requires that the total amount diverted does not exceed
the family's maximum aid payment.
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FISCAL IMPACT
Unknown. Previous analysis reflects a previous version of
the bill.
BACKGROUND AND DISCUSSION
In 1997, the Legislature implemented federal welfare reform
legislation by creating the California Work Opportunity and
Responsibility to Kids program (CalWORKs). This program
provides cash grants and welfare-to-work services to
indigent families whose incomes are not adequate to meet
their subsistence needs. CalWORKs establishes
participation mandates and a five-year lifetime limit of
cash assistance as a condition of receiving assistance. It
also requires that 18 or 24 months after receiving
assistance and signing a welfare-to-work plan, the majority
of parents meet their participation mandate (32 hours per
week in an allowable welfare-to-work activity), through
unsubsidized employment, community service, or a
combination of the two.
Community service employment is work performed by
recipients in the public or private nonprofit sector that
provides participants with job skills conducive to
obtaining unsubsidized employment and does not result in
the displacement of other employees. There are two broad
approaches to community service: workfare and wage-based
community service. Under workfare, recipients participate
in community service as a condition of receiving their
grant. Under wage-based community service, the recipient's
grant is diverted to an employer and paid as wages to the
recipient.
Currently, counties are required to develop community
service plans that identify unmet community needs. Also
counties must identify entities responsible for the
community service job development, fiscal administration
and case management services, and supportive efforts.
Counties can adopt a workfare or a wage-based community
service model. Counties can divert a community service
participant's grant to an employer to be used to pay the
recipient's wages. However, according to the Legislative
Analyst, the provision of current law permitting counties
to divert grants to employers for the purpose of funding
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wages for community service participants conflicts with
other statutory provisions and effectively precludes
counties from providing wage-based community service. This
section, specifically as it interacts with the "earned
income disregard", conflicts with statutory requirements
that specify that total grant payments shall not exceed
specified maximum aid payments.
This bill clarifies current law and provides the option of
wage-based community service
AB 1233 clarifies CalWORKs law to provide counties the
option to implement wage-paying community service program.
Specifically, this measure establishes that the "earned
income disregard" does not apply to wages funded by the
diversion of a recipient's cash grant or grant savings from
employment. This bill further specifies that both the
recipient's cash grant and the aid grant savings can be
diverted as a wage subsidy to employers providing
grant-based on-the-job training and requires that the total
amount diverted does not exceed the family's maximum aid
payment.
Outcomes of wage-based community service programs
At least six states currently operate wage-based community
service programs. According to the Welfare Information
Network, research suggests that publicly funded jobs, such
as wage-based community service, are effective in
increasing future earnings of participants. In addition,
the Manpower Research Demonstration Project has found that
the benefits to taxpayers provided by participants in paid
and unpaid work experience usually outweigh the cost of
running the programs.
The City and County of San Francisco currently operates the
Community Jobs Initiative, a wage based community service
program for TANF clients with multiple barriers to
employment. The program serves clients who have been
unsuccessful in other employment and training activities,
and who are unemployed when they reach their 24 month time
limit. The Community Jobs Initiative offers clients
minimum wage jobs designed to teach marketable skills and
to address their interests and needs. According to the
City of San Francisco, 90% of clients who completed the
program workshop were placed in community service jobs and
96% of clients who completed their community service job
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have successfully transitioned to unsubsidized employment.
The Legislative Analyst notes that wage-based community
service results in more income for participating families.
Program participants experience an increase in their income
since they are eligible for the federal earned income tax
credit and receive additional food stamps because of a food
stamp program earned income disregard. However, they
experience a decrease in their earning directly from their
cash grant due to the Federal Employee Payroll Insurance
Contribution Act taxes. The Legislative Analyst estimates
that participants in wage-based community service will
experience a net income gain of $255 per month. According
to the Legislative Analyst, participants also benefit from
being able to report to prospective employers that they
have received wages rather than welfare grants. This
generates a more formal work history and could increase the
recipient's self esteem and confidence in seeking a job.
The Analyst notes that wage based community service
benefits the state. Specifically, the expenditure of funds
from the Earned Income Tax Credit increases sales tax
revenues. In addition, to the extent that wage-based
community service is more effective than workfare in
assisting clients to obtain unsubsidized employment, the
state will experience increased savings from reduced
welfare payments.
Community Service and Employment Law
Implementation of community service within the CalWORKs
program raises substantive policy issues as well as
technical issues. According to a "guide" issued by the
United States Department of Labor (DOL), federal employment
laws, such as the Fair Labor Standards Act (FLSA), the
Occupational Safety and Health Act, Unemployment Insurance
and anti-discrimination laws, may apply to welfare
recipients participating in community service activities.
DOL concludes that if welfare recipients are considered
"employees", they are entitled to the protection provided
by federal employment laws. DOL states that "If welfare
recipients are employees under the FLSA's broad definition,
they must be compensated at the applicable minimum wage.
Welfare recipients would probably be considered employees
in many, if not most, of the work activities described in
the new welfare law [TANF]. Exceptions are most likely to
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include individuals engaged in activities such as
vocational education, job search assistance, and secondary
school attendance, because these programs are not
ordinarily considered employment under the FLSA." This DOL
determination applies regardless of whether recipients are
receiving a wage or a grant in exchange for their work.
The Department of Social Services wrote to counties in
December of 1999, "The FLSA applies to CalWORKs employment
activities such as unsubsidized and subsidized employment
where an individual is receiving a wage. The overall FLSA
issue and its impact and implications for the CalWORKs
program are under review by the Administration, and the
Department will provide counties with the results of this
review as soon as they are available."
If the FLSA is applicable to welfare recipients, as the DOL
guidance suggests and the Legislative Analyst concludes, it
could have an effect on the weekly CalWORKs participation
requirement, as it relates community service, regardless of
whether community service is wage or grant based.
Cost of implementing a community service program
The cost of developing or creating a community service work
slot is common to both the wage paying and the workfare
approaches. Similarly, under either program there will be
a cost for providing supervision, which the employer
usually absorbs. An optional cost for both programs is
supportive services. Wage based community service, unlike
workfare, requires that employers contribute for Federal
Insurance Contribution Act taxes and workers' compensation
insurance. The costs for documenting or monitoring the
number of hours worked differs according to each model.
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The Legislative Analyst states that wage-based community
service, when compared to workfare, results in
substantially higher incomes for participants, increases
the flow of federal funds into California, and may provide
a better bridge to unsubsidized employment. The Analyst
recommends that wage based community service models be
evaluated to measure their cost-effectiveness.
QUESTIONS AND COMMENTS
1.Grants diverted to employers as a wage subsidy to offset
the payment of wages to participants in wage based
community service are subject to Federal Insurance
Employee Payroll Contribution Act taxes. Given that this
measure does not include a supplement or stipend, parents
on CalWORKs may receive less income from their grant than
the maximum aid payment.
2.The Legislative Analyst estimates that parents on
CalWORKs who participate in wage-based community service
will experience a monthly net income gain of $255.
PRIOR ACTIONS
(Prior votes are not applicable to this version of the
bill)
Assembly Floor: 41-37Do Pass
Assembly Appropriations: 14- 7Do Pass as Amended
Assembly Human Services: 5- 2Do Pass
POSITIONS
Support: County of Los Angeles (co-sponsor)
City and County of San Francisco
(co-sponsor)
Oppose: None received
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