Specifics of the Governor’s Proposals

• “Modified” Safety Net actually cuts 98,000 children off all cash aid if their parents fail to meet federal work requirements.[1] Research shows the parents in these families have the most barriers to work.[2]
• 60 month time limit on child only cases where adult is not eligible due to immigration status. Cuts 82,000 children off all cash aid..[3]
• Self–Sufficiency Reviews every 6 months if adult is not meeting work requirements. Failure by parent to attend review results in children being cut from aid. Cuts 25,000 children off all cash aid.[4] 
• Six Percent Grant Cut – Will reduce the maximum grant on October 1 from $693 for a family of three down to $651 a month beginning October 1, 2009. About 18,000 children lose all cash aid.[5]
• Community College CalWORKs programs were severely reduced in 2009-10. EOPS was cut from $110 million to $55 million, CARE was cut from $16 million to $9 million and Special Services for CalWORKs Recipients was cut from $43 to $23 million. These programs are key to families moving out of poverty and helping parents meet federal work participation requirements.

• Reduce state contribution to MOE minimum, cutting $500 million over a full year from 1.25 million blind aged and disabled persons. It reduces grants for singles to $830 a month by cutting $20 a month and reduces grants for couples to $1,407 a month. This is the third cut to SSI grants this year.[6]
• Eliminates the Cash Assistance Program for Immigrants (state funded SSI for legal immigrants) that was created by Governor Wilson after the federal government eliminated assistance for legal immigrants in their first 5 years in the country. CAPI provides assistance for about 10,500 mostly elderly Asian women, many of whom immigrated here after the conflicts in Southeast Asia. The cut eliminates $114 million from the economy.[7]

• Eliminates the California Food Assistance Program (state funded Food Stamps for legal immigrants) that was created by Governor Wilson after the 1996 Congress eliminated Food Stamps for legal immigrants. About 11,000 households participate at a cost of $33 million to the state.[8]

The American Recovery and Reinvestment Act (ARRA) is intended, in part, to help states maintain their spending for safety net programs during the recession.[9] One of the most significant provisions of ARRA was $2.5 billion in funding for a new TANF Emergency Fund for states which had an increase in TANF program expenditures due to increased caseloads. The TANF Emergency Fund reimburses states eighty cents on every extra dollar of expenditures. Put another way, the federal government is paying 80 percent of the cost of increased TANF caseloads through September 2010. No other program received a federal match of this magnitude.[10]

The eligibility limits proposed by the Administration for the Safety Net, Child Only and Self Sufficiency Reviews result in 223,000 children losing all cash aid and the CalWORKs caseload dropping by approximately 100,000 cases. A caseload cut of that magnitude would eliminate all of the caseload increase that the state has seen since July 2007 and California would not meet the threshold requirement of increased caseload for accessing TANF Emergency Funds.

The state already forfeited TANF Emergency Funds when the Legislature and Governor reduced the CalWORKs grants by four percent starting in July, 2009. That cut resulted in a loss of $146 million in cash grants to CalWORKs families. Of this amount the state would have been eligible for an 80 percent reimbursement, approximately $117 million. This means that the actual gain for the state budget was just $29 million, not $146 million. CalWORKs families, and the California economy, feel the full effect of the cut however.

If the Legislature rejects the eligibility changes but permits a six percent CalWORKs grant cut, CalWORKs families cut would see a cut of about $216 million over a full year but California would lose about $168 million in federal funds resulting in a GF savings of just $48 million. Combined with the lost TANF funds from the four percent grant cut, the state will forfeit about $285 million in order to save $77 million. 

Cutting TANF Spending = Bad Economics

Spending on human service programs is one of the most effective ways to stimulate the economy. CalWORKs family incomes are in the bottom 25 percent among all earners and spend virtually all their resources each month on essentials such as food, rent and utilities. A recent study by Beacon Economics of the economic impact of human service spending in California shows that each $1 million spent on CalWORKs results in $1.34 million in economic output and $25,000 in state sales tax revenue.[11] Beacon estimated that due to the TANF Emergency Funds four to one reimbursement rate, the state will get $7.35 million in economic output for every $1 million in CalWORKs expenditures. Thus the four percent CalWORKs grant cut directly results in a significant loss of employment and state tax revenue at a time when both are badly needed.

Conclusion

The Administration’s CalWORKs, SSI, CAPI and CFAP proposals are not just bad for families, they are bad for the state. Failing to draw down $285 million in federal TANF stimulus funds is unconscionable when families are struggling to make ends meet. The Legislature and Governor should again reject the Governor’s CalWORKs eligibility changes and reject all grant cuts and program eliminations. In a time of economic hardship these programs are more crucial than ever.

By: Michael Herald, Legislative Advocate