The Legislature finally approved a 2007-8 state budget, 51 days after the new fiscal year began on July 1. The final budget leaves intact child only CalWORKs benefits that the Governor proposed to eliminate but it fails to provide a Cost of Living Adjustment for the third straight year. The 2007-8 budget does not include any new measures to improve TANF work participation but instead may result in a decline in work participation. Contrary to expectations, the Governor did not make additional "blue pencil" cuts to CalWORKs.

SSI recipients fared a bit better with the final budget providing both the federal and state COLA for the first time since the 2004-5 budget. The state SSP COLA was, however, delayed permanently until June 1 of each year rather than the current January 1 of each year. This means recipients will get two increases in their SSI check in 2008, one when the federal COLA is applied in January and a second in June when the state COLA goes into affect.

The Administration's Child Only Cuts Rejected

The Administration's decision to propose fundamental change to CalWORKs by eliminating the commitment to provide for children established a confrontational tone with the Legislature from the outset. It replaced a highly successful approach to policy making that relied on data, research and consensus building among all stakeholders. Instead, the Administration put forth proposals that had not been thoroughly vetted and which did not stand up to scrutiny. DSS staff were put in the position of having to defend the undefendable, taking away valuable time and resources that could have been used more effectively. For a complete analysis of the Governor's child only cuts see our March 2007 edition of Welfare Watchers.

Democrats in the Legislature expressed their disapproval early and never wavered in their opposition to the Governor's proposals. Though the Administration's child only cuts failed to make it out of the budget sub-committees, this did not prevent Senate Republicans from publicly demanding the Administration's child only cuts and a San Diego County inspired pre-eligibility home visit program. The Senate Republicans touted the cuts for a few days in the media but got mixed responses. Senate Democrats and Speaker Nunez flatly rejected the Republican CalWORKs proposals and they did not become law.

As was reported in our June edition, the 2007-8 budget made no major CalWORKs changes. Proposals by counties, advocates and the Legislative Analyst to create subsidized employment slots, provide a stipend for families in the Safety Net program meeting work participation requirements, adding Food Stamp only cases that were working to the CalWORKs program or mandating pre-sanction personal contacts prior to issuing a notice of sanction were not adopted.

While DSS data shows that California is likely to meet federal work participation rates in federal fiscal year 2008, it is a close call. This budget should have been a time to make improvements to CalWORKs and move the state further away from the prospect of federal penalties. Unfortunately, the Administration's proposal to cut children off aid distracted all parties and prevented the state from making improvements. In 2008 it will be important to focus on implementing AB 1808 as effectively as possible, particularly the TAP program. The state may also wish to consider a limited number of targeted changes that could make a substantial improvement in work participation while improving family self-sufficiency.

CalWORKs and SSI Grant Levels for 2008

The maximum CalWORKs grant of $723 a month for a family of three will stay the same for the third straight year. This is just $29 higher than the amount the state provided welfare families in 1989.

Because the budget was completed nearly two months late, the statutory CalWORKs COLA was not suspended on July 1 as the budget proposed. This means CalWORKs families should see a temporary increase in their CalWORKs checks for two months by up to $27 a month. DSS has not announced when the COLAs will be paid.

The 2007-8 budget makes one major change to SSP; the statutory date for passing on the SSP COLA has been permanently moved from January 1 to June 1 of each year. The SSI COLA will continue to be provided in January of each year. The thinking is that by moving the date closer to the end of the state fiscal year there will be less incentive to take the SSP COLA because it will only amount to one month of savings.

SSI recipients will see two increases in their benefits for 2008. First on January 1, recipients will see an increase of up to $7 for an individual and up to $18 for couples. Then in June 2008 single SSI recipients will receive an additional $25 and couples will receive another $38 a month.

SSI Grant Changes

All amounts reflect the maximum grant level.

No "Blue Pencil" Cuts But

Budget May Impact Excess MOE Credits

As part of the final budget agreement with the Senate Republicans, the Governor agreed to cut $700 million in General Funds using his "blue pencil" authority. But the Governor did not make any further reductions in CalWORKs as part of his final budget actions. The Senate Republicans proposed reducing by half the $90 million increase given to counties to implement AB 1808 reforms. Another possible cut was eliminating the $40 million in funding for CalWORKs Pay for Performance. If either cut had been adopted by the Governor it may have reduced the state's work participation rate according to estimates from the Department of Social Services.

One unexpected development in CalWORKs was reducing the TANF reserve by $84 million. The TANF funds were placed in the CalWORKs budget and a like amount of state General Funds were diverted to the state's budget reserve. Language was placed in a budget bill (Section 49 of SB 78) authorizing the Department of Finance to appropriate additional funds if CalWORKs caseloads exceed budget estimates.

While this reduction will not affect grants, child care or services it may reduce the state's excess MOE caseload reduction credit. Under federal rules states can reduce the 50 percent work participation rate if eligible state spending exceeds 80 percent of what was spent in 1994. California is currently in line to get an excess MOE credit of 14.4 percent. Unless the state finds a way to make the transferred funds MOE eligible the state will suffer a 2% loss in excess MOE credit that the state can not afford to lose.

CAPI Citizenship Penalty Fixed In the Budget

The state budget made a beneficial change regarding the Cash Assistance Program for Immigrants (CAPI). Under previous law eligibility for CAPI was limited to persons who were not eligible for the federal SSI program due to their immigration status. To keep the caseload costs manageable the state has promoted naturalization for CAPI recipients. Once a CAPI recipient becomes a citizen they become eligible for SSI and the federal government picks up nearly 75% of the cost of the grant.

Becoming a citizen though created a problem. Once a CAPI recipient became a citizen their eligibility for CAPI ended. On the other hand SSA will not process SSI applications until a person is a citizen. Some counties terminated CAPI benefits when they learned the recipient had become a citizen. This meant that while they waited for their SSI application to be approved they were without income. In effect, CAPI recipients were being punished for becoming citizens.

WCLP, the National Immigration Law Center and the National Senior Citizen Law Center brought the issue to the Legislature to see if language could be added to the human service trailer bill to eliminate the unintended gap in benefits. Speaker Nunez's office was very supportive of the fix and quickly took the lead in negotiating the issue out with the Administration and advocates. Section 40 of SB 84 permits CAPI recipients to keep their CAPI benefits after naturalizing until a final decision is rendered on their SSI application.

Thus if a CAPI recipient gets a notice of intent to terminate benefits due to citizenship status, the county should not terminate those benefits if the recipient has an application for SSI that is not a final decision. If a CAPI recipient lost their benefits in the past and is still awaiting a final decision on their SSI application, they are eligible to begin receiving CAPI benefits as of August 24, 2007.

Budget Calls for Child Care Fraud and TANF Studies

SB 84, the human services trailer bill to the budget, includes several new mandated policy reports for state agencies.

Section 42 requires the Department of Education to do a study and issue a report on best practices and options for reducing improper payments and fraud in all subsidized child care programs. The report will focus on detection and prevention for agencies as well as recipients and providers. It is anticipated that legal services, other child care and CalWORKS advocates will provide input along synthesized with input form other stakeholders, best practices form other states and from California programs.

The Department of Social Services was directed to do two studies related to CalWORKs and TANF. Section 46 of SB 84 requires DSS to submit a report to the Legislature by October 1, 2007 on how to improve the state's work participation rate. Advocates and counties have already been working with DSS in the preparation of this report.

Section 19 of SB 84 requires DSS and CWDA to review county practices that encourage sanctioned families and time limited families to participate and to submit a report of their findings to the Legislature by September, 2008.

The one major policy proposal that the Legislature considered seriously in the budget was a proposal to allow participants in the federal Food Stamp and TANF programs to only report their income changes once every six months rather than every three months. California is the only state with a quarterly reporting system. 47 states require recipients to report on a semi-annual (every six months) basis. California has a waiver from Food Stamp rules to operate the quarterly system but the waiver expires October 1, 2007. Federal officials have informed California that they are not in support of ongoing extensions of the waiver though the state has applied for and are likely to receive an extension of the current waiver.

Semi-annual reporting allows families who make more income than anticipated to keep it for six months rather three months without having either their CalWORKs or Food Stamps benefits reduced. For many families this will increase their household income from paid work and allow families to keep more than $200 million in Food Stamps that are currently returned to Washington.

Additionally semi-annual reporting will:

· Reduce paperwork for counties and allow workers to spend more time helping participants go to work

· Reduce Food Stamp errors rates that lead to large penalties

· Reduce incidents of overpayment and fraud

· Increase our state's abysmal Food Stamp participation rate

· Act as an incentive to work and earn more hours for CalWORKs participants that may lead to an improvement in the state's TANF work participation rate.

In the January budget the Administration proposed their version of semi-annual reporting and followed that by introducing legislation, SB 179 (Ashburn). This measure was panned by both advocates and counties because while it purported to be semi-annual reporting, the income reporting threshold (IRT) was just $100 a month. That meant that anytime a participant's income went up by $100 over their anticipated income, the family would have to report to the county. If families know that even a small increase in income must be shared with the state, they have less incentive to work extra hours or earn extra pay. Rather than rewarding initiative, lower thresholds discourage work.

Advocates and counties worked closely with Assemblymember and Budget Committee chair John Laird on crafting trailer bill language to meet the administration halfway. The Laird approach established the IRT for a family as the lesser of either $800 a month or the difference between anticipated income and the current income threshold for CalWORKs of 130% of the federal poverty level ($1,800 for a family of 3 adjusted by family size). According to DSS data, an $800 threshold generates $16 million in grant savings and $27 million in administrative savings.

Though an $800 threshold makes a small percentage of participants (about 3,200 over 6 months) report earlier than under current law, the vast majority of the employed caseload would be better off or the same as current law. As the below chart shows, a family of 3 with little or no income when they come on aid but that then gets a job in the first month making the state median income of $723 a month of a CalWORKs participant will be better off with an $800 threshold than both current law and the Administration's $500 threshold.

Comparison of Outcomes for Family with Income of

$723 a Month

The Administration, however, would not go beyond $500 as an income reporting threshold and the proposal fell out of the budget in early July. The issue, however, is not dead as Assemblymember Laird has a bill, AB 1060, that may be sent to the Governor this year for consideration.

Several major human service bills continue to move through the legislative process. If approved, collectively they would put more than $800 million in federal funds in the pockets of low income families while generating significant General Fund savings for the state at a time when the state is trying to tighten its' belt.

Many of the bills would improve California's dismal last place ranking in Food Stamp participation while others would improve income for CalWORKs families. Among the significant bills to watch as the Legislature wraps up the year in mid-September:

AB 433 (Beall) makes families categorically eligible for federal Food Stamps if they are MediCal eligible. According to the Senate Human Services Committee if AB 433 passed "Californians could receive almost $200 million in federal food stamp benefits, over $30 million dollars in additional federal funding for free school lunches and breakfasts, and several million dollars in increased federal child welfare services funds." The cost to the state would be just $10 million in administrative costs offset by $5 million in new sales tax revenue.

AB 1382 (Leno) eliminates the requirement that households be finger imaged if they are applying for Food Stamp only assistance. According to the Assembly Appropriations Committee the bill would result in $125 million in new Food Stamp funds, $20 million in new school lunch funds and millions more in additional child welfare funds at a cost of only $2 million to the General Fund.AB 1060 (Laird) changes California from a quarterly reporting system to a semi-annual system for re-determining Food Stamps and CalWORKs eligibility and grant amounts. This change saves the state $43 million, increases sales tax revenue by $6 million and brings in $250 million in new Food Stamp funds, $40 million for school lunches and millions more for child welfare.AB 176 (Jones) implements federal child support pass through increases for TANF families. New federal law allows states to pass through up to $100 for one child and up to $200 for two or more children without reducing the families grant. The state currently spends $30 million from the GF and for just $4 million more can draw down $34 million in federal funds for poor families.AB 167 (Bass) eliminates the asset test for CalWORKs. This will mean that families with a car worth more than $4,650 or with more than $5,000 in other assets could still be eligible for assistance assuming the family met all other eligibility criteria. Eliminating the asset test will reduce county administrative costs by $6 million annually according to the Assembly Appropriation's Committee analysis while costing the state just $12 million in new CalWORKs benefits.The Administration, however, has come out in opposition to all of these measures or raised concerns with authors. For many of these bills, the issues are not new since they have been considered before. In the final weeks of session, authors will have to decide whether to push these measures to the Governor's desk now or wait until next year.

There wasn't much funny about the budget stalemate but there was one unexpected source of humor. During the week the Assembly voted on the budget in July the New York Times printed an opinion piece by Adam Liptak that took to task the County of San Diego for its "Project 100%" program which conducts pre-sanction home visits of CalWORKs applicants. The program withstood a court challenge by WCLP and the ACLU but Liptak was urging the litigators to pursue the case to the US Supreme Court.

The NYT piece caught the attention of faux conservative newsman Stephen Colbert who did a hysterical piece called "Premium Package" that mocked the San Diego program and its limitation on the right to privacy for poor people. As if on cue the next day the Senate Republican caucus included in their proposed CalWORKs cuts a proposal to make Project 100% a mandatory statewide program. A reporter for the San Diego Union Tribune followed with a well read blog comment on the ironic circumstances. Advocates who opposed Project 100% barely had to lobby to kill the proposal with ammunition like that in the public domain.

The NYT Liptak piece can be found on our website and here is the link to the Colbert piece. There is a brief commercial before the Colbert piece begins:

://www.comedycentral.com/motherload/player.jhtml?ml_video=90169&ml_collection=&ml_gateway=&ml_gateway_id=&ml_comedian=&ml_runtime=&ml_context=show&ml_origin_url=%2Fmotherload%2F%3Flnk%3Dv%26ml_video%3D90169&ml_playlist=&lnk=&is_large=true