Turning Down Federal Money

California is on the verge of turning down a significant chunk of federal economic recovery funds intended to help states pay for cash assistance for low-income families with children. The American Recovery and Reinvestment Act (ARRA) establishes a temporary funding stream that will pay 80 percent – that’s right, 80 percent – of certain welfare-to-work program costs through September 2010. The idea is to provide states with funds that would help them avoid making draconian cuts to programs – such as California’s CalWORKs Program – that help families who are being hit hard by the current economic downturn.

Unfortunately, this extra federal money wasn’t enough to stop a 4 percent cut to CalWORKs grants from being included in the 2009-10 budget agreement. Starting July 1, this cut will reduce the maximum monthly grant for a family of three from the current $723 (an amount that hasn’t changed since 2004) to $694 – the same amount that families received 20 years ago. So, although the budget “scored” $147 million in General Fund savings from this grant cut in 2009-10, the savings really only amount to $29 million. The other 80 percent – $118 million – represents forgone federal funding.

The Legislature and Governor still have time to reverse the grant cuts. Let’s hope they all reflect on what the Governor said just last week: “Even before President Obama signed the Recovery Act, I pledged that I would act quickly to make sure California taps into every available dollar of federal funding and that we would put those dollars to work effectively.”

Sounds like a plan.

— Scott Graves

2 Responses to Turning Down Federal Money

  1. Hi Scott,

    I’m not sure I understand what is happening – CA still gets the 80% match, but the federal funds are less than we would have received if the grant stayed at its previous level? Or is the state actually declining funds? Thanks

  2. cbporg says:

    The phrase “turning down federal money” is an artful way of saying that if California cuts funding for CalWORKs, the state will automatically give up federal dollars that it otherwise would have received. This new federal funding stream allows states to receive additional federal funds for their welfare-to-work programs without having to spend any more of their own state funds — as long as their welfare-to-work spending is higher than in a base year (2006-07 or 2007-08). California meets this requirement. The only question is whether the state is going to cut CalWORKs spending anyway and thereby give up 80 federal cents for every $1 in savings.
    — Scott Graves