The 2022-23 Budget: Analysis of the Governor’s CalWORKs Proposals

The 2022-23 Budget: Analysis of the Governor’s CalWORKs Proposals FEBRUARY 2022 Summary. In this post, we provide some basic federal TANF funding). Starting in 2011, California background on the California Work Opportunity reduced this to a 48-month time limit. (The 2020-21 and Responsibility to Kids (CalWORKs) program, spending plan included language to restore the an update on recent program changes original 60-month limit starting in May 2022.) and caseload trends, and an overview of the Adults who exceed the time limit are no longer Governor’s CalWORKs budget proposals. included as part of the CalWORKs caseload for purposes of determining the family’s grant amount. Background (Children and other eligible adults in these families CalWORKs was created in 1997 in response continue to receive assistance.) This has the effect to the 1996 federal welfare reform legislation of reducing the family’s monthly grant amount, that created the federal Temporary Assistance typically by about $100 to $200 per month for each for Needy Families (TANF) program. CalWORKs ineligible member. Throughout the public health provides cash grants and job services to emergency caused by COVID-19, the state has low-income families. The program is administered suspended these lifetime limits. Consequently, locally by counties and overseen by the state additional months on aid during the COVID-19 Department of Social Services. pandemic do not count against an adult’s CalWORKs Provides Cash Assistance to Low- 48-month lifetime limit, though they do still count Income Families. Grant amounts generally are against the 60-month maximum set by federal law. adjusted for family size, income level, and region. Work Participation Requirements Scheduled Recipients in high-cost counties receive grants that to Become More Flexible. Although federal law are 4.9 percent higher than recipients in lower-cost generally requires adults receiving TANF funding counties. As an example, a family to participate in certain work-related activities, of three in a high-cost county that has no other California historically has allowed some recipients earned income currently receives $925 per greater flexibility in selecting work-related activities month, whereas a similar family in a lower-cost that suit their individual needs. Starting in 2012, county receives $878 per month. In 2021-22, the all adults on CalWORKs were allowed to meet the administration estimates the average CalWORKs more flexible state standards for up to 24 months grant amount to be $717 per month across all while receiving aid. The 2020-21 spending plan family sizes and income levels. These grants are included language to increase the duration of this funded through a combination of federal TANF flexibility. Effective May 1, 2022, all adults will be block grant funding, state General Fund, and allowed to meet these more flexible state standards county dollars. Families enrolled in CalWORKs during their entire time on aid. typically are also eligible for CalFresh food In More Than One-Half of Cases, Family assistance and Medi-Cal health coverage. Size Differs From CalWORKs Assistance Unit Lifetime Limit on Aid to Adults Scheduled (AU) Size. Monthly CalWORKs grant amounts to Increase From 48 to 60 Months. When are set according to the size of the AU. The size CalWORKs first was established, adults in the of the AU is the number of CalWORKs-eligible program could collect cash assistance for a total of people in the household. Grant amounts are 60 months (the maximum allowed for recipients of adjusted based on AU size—larger AUs are eligible 2022-23 Budget Series 1 to receive a larger grant amount—to account for Under State Law, Local Revenue Growth the increased financial needs of larger families. Automatically Triggers CalWORKs Grant In about 35 percent of CalWORKs cases, everyone Increases. Following a major realignment of state in the family is eligible for CalWORKs and therefore and local responsibilities in 1991, some funds the AU size and the family size are the same. In generated by the state sales tax and vehicle the remaining 65 percent of cases, though, one license fee accrue to a special fund with a series or more people in the family are not eligible for of subaccounts which pay for a variety of health CalWORKs and therefore the AU size is smaller and human services programs. Under state law, than the family size. sufficient revenue growth in the Child Poverty and Family Members May Be Ineligible for Family Supplemental Support Subaccount triggers CalWORKs for Several Reasons. Most an increase in CalWORKs cash grant amounts. In commonly, people are ineligible for CalWORKs the past, this account funded grant increases of because they (1) exceeded the lifetime limit on 5 percent in 2013-14 and 2014-15, of 1.43 percent aid to adults, (2) currently are sanctioned for in 2016-17, and 5.3 percent in 2021-22. In addition, not meeting some program requirements, or this account has funded the repeal of the maximum (3) receive Supplemental Security Income/State family grant policy starting in 2016-17. Supplementary Payment (SSI/SSP) benefits (state 2021-22 Budget Act Made Several Changes to law prohibits individuals from receiving both CalWORKs Program, All of Which Still Appear on SSI/SSP and CalWORKs). Additionally, many Schedule. Among the most notable changes made individuals are ineligible due to their immigration to CalWORKs in the most recent budget are: status. Undocumented immigrants, as well as • Augmented the single allocation by $68.3 million most immigrants with legal status who have lived above its normal, caseload-determined amount. in the United States for fewer than five years, are • Increased the earned income disregard ineligible for CalWORKs. for applicants (or the amount CalWORKs Federal, State, and County Governments applicants can earn before further income Share CalWORKs Costs. Federal law allows for effects their eligibility for the program) from a degree of state flexibility in the use of federal $90 to $450 per month. (The 2022-23 budget TANF funds. The state receives $3.7 billion annually includes $79.5 million General Fund to for its TANF block grant, about $2 billion of which implement this change starting in March 2023.) goes to CalWORKs (an additional $1 billion helps • Used $203 million in federal funding to provide fund aid for some low-income college students a one-time pandemic relief payment of $640 to and the remainder helps fund a variety of smaller each CalWORKs family in July 2021. human services programs). To receive its annual • Effective January 1, 2022, increased the TANF block grant, the state must spend a amount of child support that could be “passed maintenance-of-effort (MOE) amount from state through” to CalWORKs families from $50 to and local funds to provide services for families $100 a month for small families, and from eligible for CalWORKs. This MOE amount is $50 to $200 for larger families (those with two $2.9 billion. State and federal CalWORKs funding or more children). (Under state and federal generally is allocated to the counties, all of whom law, additional child support payments made directly serve eligible families. In addition to beyond this pass-through level are retained by funding for cash grants, counties receive several the state as reimbursement for the state and other funding allocations to administer and federal costs of CalWORKs.) operate CalWORKs. The main funding allocation— known as the “single allocation”—currently funds • Provided $3 million in 2021-22 and an additional employment services, eligibility determination, and $10 million for 2022-23 to conduct racial equity administrative costs. and implicit bias trainings for county-level CalWORKs staffers. These trainings commenced in November 2021. 2022-23 Budget Series 2 • Increased the additional monthly stipend each of our investigations into these caseload provided to pregnant women on CalWORKs dynamics, we have independently decided from $47 to $100, and also allowed women to to assume caseload would resume growing become immediately eligible upon verification in line with historic trends beginning around of their pregnancies (as opposed to waiting September 2021, when federal enhancements until the second trimester). The eligibility to unemployment insurance expired. Because change occurred on July 1, 2021, and the we both share this untested assumption, our enhanced stipend is scheduled to begin two caseload forecasts are nearly identical May 1, 2022. (In 2022-23, the Governor through 2022-23. includes $10.6 million for these changes.) Recent Data Suggest Caseload May Be • Restricted counties from collecting older Growing, but Still Too Soon to Tell. At the overpayments made to CalWORKs recipients time of writing, the most recent caseload data (specifically, overpayments that are more available are from October 2021, just one month than two years old). Because this change is past our assumed inflection point. Consistent scheduled for July 1, 2022, the Governor’s with this assumption, caseload does appear to budget includes $2 million for this purpose. have increased by about 2,000 cases a month in both September and October. Although this CalWORKs Caseload May Be is a marked change from the previous decrease Reaching an Inflection Point (which averaged about 3,000 fewer cases per month), it still lags the pace of caseload growth Caseload Has Mostly Decreased at assumed by both our office and the administration a Historic Rate Throughout the Current (about 10,000 cases added per month). We will Pandemic. Figure 1 shows how CalWORKs continue to monitor the caseload as more data caseload decreased rapidly between June 2020 becomes available in the coming months. and September 2021. We have discussed this decrease in previous posts. The bottom line is that this Figure 1 decrease is anomalous by historic standards, as CalWORKs caseload CalWORKs Caseload Projected to historically has increased during Increase Following Recent Decline times of higher unemployment. This anomaly possibly is due to 450,000 the unprecedented economic CDSS January Budget 400,000 assistance provided to individuals Actual by both the state and federal 350,000 LAO November Outlook governments throughout 300,000 the pandemic. 250,000 Administration and Our Office Both Project Caseload 200,000 to Resume Growing in Current 150,000 Year. Throughout this pandemic, 100,000 both the administration and our 50,000 office have struggled with how to project CalWORKs caseload changes because recent trends 2020 2021 2022 2023 have directly contradicted CDSS = California Department of Social Services. historical norms. Based on 2022-23 Budget Series 3 Budget Overview of General Fund going towards CalWORKs (77 percent), although the state still accounts Total CalWORKs Spending Projected for a fairly small share of overall program costs to Increase Alongside Growing Caseload. (19 percent). This increase reflects costs from the As shown in Figure 2, the Governor’s budget growing caseload, nearly all of which are borne by proposes $6.9 billion in total funding for the the General Fund. CalWORKs program in 2022-23, a net increase of $291 million (4 percent) relative to the most recent Budget Estimates 7.1 Percent Grant estimate of current-year spending. This increase Increase Triggered by Local Revenue Growth. is the net effect of higher underlying costs due to The administration estimates a budget year cost growing caseload partially offset by the expiration of $201 million (annual cost of $268 million) to fund of some one-time funding for COVID-19 relief to a 7.1 percent increase to cash grants starting in both individuals and counties. Although caseload October 2022. This increase was triggered and will and overall costs are expected to increase in be funded by revenue growth in the Child Poverty CalWORKs, the funding for county administration is and Family Supplemental Subaccount. As part of proposed to decline. There are a number of reasons the 2018-19 Budget Act, the Legislature set a goal this could be the case, and we are continuing to to increase CalWORKs grants to 50 percent of the work with the administration to understand whether federal poverty level for a family that is one person the decrease is justified. larger than the AU size. Figure 4 on page 6 shows this increase would raise grants for all AU sizes General Fund Accounts for Small, But in high-cost counties to between 40 percent and Growing, Share of CalWORKs Costs. Figure 3 45 percent of the federal poverty level for a family shows how CalWORKs costs are shared between one person larger than the AU size, and to slightly federal, state, and local revenue sources. The lower levels for families in lower-cost counties. budget proposes a notable increase in the amount Figure 2 CalWORKs Budget Summary All Funds (Dollars in Millions) Change From 2021-22 2021-22 2022-23 Revised Proposed Amount Percent Number of CalWORKs cases 353,974 398,409 44,435 13% Cash grantsa $3,457 $3,880 $423 12% Single Allocation Employment services $1,138 $1,182 $44 4% Cal-Learn case management 15 18 3 17 Eligibility determination and administration 679 624 -55 -8 Subtotals ($1,832) ($1,824) -($8) (–) Stage 1 child care $384 $451 $68 18% Other allocations COVID-19 relief payments $203 — -$203 — Home Visiting Program 89 $97 8 9% Housing Support Program 285 285 — — Other 313 314 1 — Subtotals ($889) ($695) -($194) -(22%) Otherb $5 $7 $2 41% Totals $6,567 $6,857 $291 4% a Does not include the cost of an estimated 7.3 percent grant increase funded by certain realignment revenues, which the Governor’s budget projects beginning in October 2022. We roughly estimate this would increase cash grants by about $200 million in 2022-23. b Primarily includes various state-level contracts. 2022-23 Budget Series 4 The administration has emphasized that this is their current estimate Figure 3 of the size of the grant increase CalWORKs Funding Sources that could be afforded by the subaccount, but that they will be (Dollars in Millions) updating (and possibly changing) Change From 2021-22 the estimated size of the grant 2021-22 2022-23 Revised Proposed Amount Percent increase at the May Revision. Administration’s Caseload, Federal TANF block grant funds $3,138 $2,786 -$352 -11% State General Fund 745 1,320 575 77 Grant Increase Forecasts Realignment and other county 2,684 2,750 67 2 Appear Reasonable. Our office fundsa independently forecasts CalWORKs Totals $6,567 $6,857 $291 4% caseload as well as grant increases a Primarily various realignment funds, but also includes county share of grant payments, about triggered by growth in realignment $60 million. revenue. Though our estimates for TANF = Temporary Assistance for Needy Families. both figures have often diverged widely from the administration’s in the past, at this time, our two offices broadly agree on both forecasts. We will revisit both these forecasts in the spring when additional data are made available. 2022-23 Budget Series 5 Figure 4 Governor’s Budget Includes 7.1 Percent Increase to CalWORKs Grants As Shown, for CalWORKs Families With No Other Income Low-Cost Counties Before 7.1 Percent After 7.1 Percent Increase Increase As Share AU As Share As Share of FPL, Sizea of FPLb of FPLb AU+1c Amount Amount 1 $548 49% $587 52% 38% 2 696 46 745 49 39 3 878 46 940 49 41 4 1,060 46 1,135 49 42 5 1,243 46 1,331 49 43 High-Cost Counties Before 7.1 Percent After 7.1 Percent Increase Increase As Share As Share A Si U zea Amount A of s F S P h L a b re Amount of FPLb of FPL, AU+1c 1 $579 51% $620 55% 41% 2 733 48 785 51 41 3 925 48 991 52 43 4 1,116 48 1,195 52 44 5 1,308 48 1,401 52 45 a AU size is the number of family members who are eligible for CalWORKs. b Share of 2022 federal poverty guideline for a family size that is equal to the AU size. c Share of 2022 federal poverty guideline for a family size that is one person larger than the AU size. AU = assistance unit and FPL = federal poverty level. 2022-23 Budget Series 6 2022-23 Budget Series 7 LAO PUBLICATIONS This post was prepared by Ryan Anderson, and reviewed by Ginni Bella Navarre and Carolyn Chu. The Legislative Analyst’s Office (LAO) is a nonpartisan office that provides fiscal and policy information and advice to the Legislature. 2022-23 Budget Series 8