After Years of Deep Cuts, an Increase in the CalWORKs Grant Deserves Serious Consideration

June 3, 2013

Today, members of the California Legislature will meet in Budget Conference Committee to continue resolving differences between the Senate and Assembly’s versions of the 2013-14 state budget. One important item up for discussion is the size of monthly grants for families in the CalWORKs Program, which provides cash assistance to low-income families along with welfare-to-work services to help parents find jobs and overcome barriers to employment.

The Senate and the Brown Administration have proposed keeping the CalWORKs grant frozen at its current level, while the Assembly has proposed a phased-in increase that would raise the maximum grant to 50 percent of the federal poverty line over a five-year period, starting with a 12 percent increase January 1, 2014.

After years of steady decline in the purchasing power of the CalWORKs grant, followed by sharp cuts to the grant in recent years, the $638 maximum aid payment for a family of three is currently equal to about 39 percent of the poverty line, well below the “deep poverty” cutoff of 50 percent. To put things in perspective, today’s cash grant is roughly the same, in actual dollars, as the maximum grant in 1987. The critical difference is that back then, the value of that dollar amount was equal to about 80 percent of the poverty line — or double the percentage today.

The Assembly proposal to increase the CalWORKs grant acknowledges the fact that California is facing a serious poverty problem. This problem came into sharp focus last year when the Census Bureau released state rankings under the new Supplemental Poverty Measure, which compares families’ resources to the cost of housing and other necessities. California was perched at the top of the list, with 23.5 percent of residents living in poverty. Even under the official poverty measure — the basis for the federal poverty line — about one in six Californians, and nearly one in four California children, are living in poverty. (For a family of three, this means an annual income below $19,530.)

The fact that so many of the state’s children experience this daily hardship is deeply troubling in and of itself. But child poverty’s effects extend far beyond individual households. Since children who grow up in poverty are likely to have lower earnings, less education, and poorer health as adults, poverty affects all Californians who care about a strong workforce and a robust tax base for the state.

Augmenting the CalWORKs grant would help address poverty in California by lifting the household income of CalWORKs participants, who make up a large share of the state’s low-income families. Such an increase would directly benefit the more than 1 million children in CalWORKs households. Depending on how the change is implemented, the 12 percent increase in the CalWORKs grant that the Assembly proposes for 2013-14 could bring the maximum grant for a family of three from its current $638 level up to about $714 a month — still below where it was 10 years ago. This change, though modest, would be a step in the right direction after years of repeated cuts to the CalWORKs grant.

— Hope Richardson

What We Were Watching for in the May Revision — and How It Looks Thus Far

May 20, 2013

Last week, in the run-up to Governor Brown’s May Revision, we blogged about the five things we were looking for in his revised 2013-14 budget and the ensuing budget debate. Here we reflect back on what were looking for — and provide a brief take on what we’ve seen. Our initial analysis of the May Revision — published the day after the Governor released his revised budget — provides a fuller discussion of the major changes and important new proposals. In the coming days and weeks, we’ll provide continued analysis and commentary here at California Budget Bites.

1. Education Finance Reform

We were watching for: potential changes to the mix of Local Control Funding Formula (LCFF) grants as well as any new accountability provisions. Under the Governor’s proposal to restructure school finance in California – a topic the CBP recently examined in its chartbook on the LCFF — each school district would receive a base grant per student and, in addition, a supplemental grant based on the unduplicated number of English learners or students from low-income families and a concentration grant for the share of these students above 50 percent of district enrollment. We were watching for preservation of the additional dollars allocated for disadvantaged students and stronger accountability provisions that would ensure that districts are using the LCFF dollars to directly benefit the students for whom they are intended.

The May Revision: preserves the LCFF formula proposed in January, including the concentration grants. The May Revision also strengthens LCFF accountability provisions by clarifying that supplemental and concentration grants are provided “primarily for the benefit” of students for whom they are intended. Further, the May Revision requires school districts, upon full implementation of the LCFF, to report how they plan to spend supplemental grant dollars in proportion to the number of disadvantaged students at each school site.

2. Medi-Cal Expansion

We were watching for: a call for a state-led expansion that leaves existing funding with counties, for now. As part of federal health care reform, the Governor has called for expanding Medi-Cal  to cover low-income adults who currently are not eligible — a topic addressed in our recent Medi-Cal chartbook. In January, the Governor presented two approaches to expansion — a county-based approach and a state-led approach — while also linking the expansion to his proposal to “realign” some human services programs to counties. Under the Governor’s plan, counties’ new costs would be funded with dollars that counties now use to provide health care to low-income, uninsured (“medically indigent”) Californians — many of whom would enroll in Medi-Cal under the expansion. We were watching for a commitment to a state-led expansion of Medi-Cal that allows counties to retain any savings they realize and put it toward providing local health services for the remaining uninsured, at least until the impact of health care reform on both the state and the counties is better understood.

The May Revision: endorses a state-led expansion of Medi-Cal where newly eligible Californians would enroll in Medi-Cal and receive the same benefits available to other Medi-Cal enrollees. However, the May Revision also maintains — and provides new details about — the Governor’s proposal to shift costs for certain human services programs to counties. The Governor now proposes that counties “assume greater financial responsibility” for CalWORKs, CalWORKs child care, and CalFresh administration. Counties would cover these costs with dollars shifted from their health care safety nets, thereby generating state savings that the Administration estimates would exceed $1 billion per year by 2015-16.

3. State Revenue Projections

We were watching for: revised economic and revenue forecasts and the implications for state spending. Through April 2013, state revenue for the current (2012-13) fiscal year was running ahead of the Governor’s January projections by $4.6 billion, prompting speculation that the May Revision would feature revenue forecasts for 2013-14 much higher than had been expected in January. We were watching for revised economic and revenue forecasts and the implications of those revisions for the Proposition 98 minimum school funding guarantee.

The May Revision: presents somewhat weakened economic and revenue forecasts. The Administration reported that higher-than-anticipated revenues for the current year (2012-13) are spread over several fiscal years and that “the influx is expected to be short-lived.” The May Revision projects additional revenue collections in the current fiscal year ($2.8 billion higher than assumed in January), derived from taxpayers shifting revenue from 2013 to 2012 in response to federal tax changes, followed by a slight decrease in revenue in 2013-14 ($1.3 billion lower than assumed in January). The assumed Proposition 98 minimum funding level follows a similar pattern, increasing in 2012-13 and decreasing slightly in 2013-14. The May Revision also adjusts the state’s short-term economic outlook downward due to federal actions, including federal tax changes and sequester cuts, and weaker global economic growth. However, the Legislative Analyst’s Office argues that the Administration’s economic and revenue forecast “seems too pessimistic” and projects that revenues will come in more than $3 billion higher – over the three-year period from 2011-12 to 2013-14 – than the Governor assumes.

4. Pay-Down of California’s Budgetary Debt

We were watching for: any changes to the Governor’s proposed pay-down of budgetary debt. The Governor’s January proposal called for paying down $4.2 billion in budgetary debt as part of a plan to reduce this debt from $35 billion in 2010-11 to less than $5 billion by 2016-17. We were watching for any increases to the proposed pay-down as a result of higher-than-anticipated revenues or possibly a more gradual repayment schedule in order to free up dollars for other spending priorities.

The May Revision: maintains the Governor’s general plan for paying down budgetary debt to less than $5 billion by 2016-17. The adjustments to the state’s revenue forecast noted earlier alter the repayment schedule, but do not change the multiyear objective. The May Revision also maintains the Administration’s planned $1 billion contribution to the state’s Special Fund for Economic Uncertainties.

5. Enterprise Zone Reform

We were watching for: any changes to proposals to restructure the Enterprise Zone (EZ) Program. The Governor’s January proposal included a set of regulatory changes to the state’s EZ Program, which provides tax credits intended to encourage businesses to locate in economically distressed areas. While the intent of the program is to promote business development and job creation in targeted areas, research shows that the program fails to achieve its goals while placing an increasing strain on the state budget — with the cost projected to rise to $1 billion by 2015-16. We were watching for proposals to more aggressively restructure the program to better target job creation and business development, boost accountability and evaluation of program effectiveness, and reduce the costs to the state.

The May Revision: significantly alters the Governor’s proposal to restructure the EZ Program. The new proposal narrows the EZ hiring tax credit to specific areas with high unemployment and poverty rates, and limits availability to hiring of three targeted groups of individuals (as opposed to 10 groups currently). The May Revision also expands the EZ sales tax credit for manufacturing and biotech equipment purchases to be a statewide — rather than a zone-specific — incentive, in an effort to discourage within-state competition for jobs. The May Revision also creates a new business recruitment and retention fund, administered by the Governor’s Office, for use in negotiating business tax credits in exchange for investments and employment expansion in California. Early reviews of these newly proposed reforms – which as a whole the Administration projects to be revenue-neutral — suggest that the tax-credit changes would largely eliminate the EZ Program in its current form.

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Beyond the five budget issues detailed in our May Revision preview and discussed above, there were other notable components of the Governor’s revised budget proposal. The Governor essentially put on hold for two years his complete restructuring of adult education, during which time the Governor proposes to transition to a new regional partnership system. The May Revision also leaves many previous cuts to health and human services unchanged, though it does include a new funding allocation ($48 million) for CalWORKs “early engagement” strategies to better address client needs during the shortened 24-month time window imposed in 2012-13. All of these proposals are discussed in the initial May Revision analysis we issued last week.

The initial analysis we released last week also highlights some of the key choices that policymakers could face during the coming weeks as they move toward enacting a 2013-14 budget, which would take effect on July 1. California Budget Bites will provide continued analysis and commentary on the issues shaping the budget debate and what the latest policy proposals mean for low- and middle-income Californians and for the future of our state.

— Chris Hoene

The CBP Examines Governor’s Revised Budget Proposal

May 15, 2013

Governor Brown yesterday released the May Revision to his proposed 2013-14 budget. A CBP report released this morning  provides an initial analysis of the May Revision. This report examines key changes and new policy proposals in the Governor’s revised budget and discusses the issues that are likely to shape the budget debate in the coming weeks. The CBP will issue additional analysis and commentary on the May Revision in the coming days.

— Steven Bliss

Key Facts About the Governor’s Proposed Budget, Part 5: Many Californians Still Hurting in the Aftermath of the Recession

February 6, 2013

This is the latest in a CBP chart series highlighting some of the most important aspects of Governor Brown’s 2013-14 budget proposal and the context for it.

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As pointed out earlier in this chart series, the significant new revenues approved by voters in November have positioned California to turn the corner on years of severe budget shortfalls. But with the state’s fiscal situation improving, it is important that policymakers not lose sight of the fact that millions of Californians continue to suffer in the wake of the Great Recession.

California’s poverty rate is at its highest point in 15 years and has increased by more than one third — from 12.2 percent to 16.9 percent — since the year before the Great Recession began. About one in six Californians were living in poverty in 2011, according to the most recent Census figures. That means that there are more Californians living in poverty than there are residents of the cities of Los Angeles, San Diego, and San Francisco combined.

California’s child poverty rate is even higher than that of the population as a whole, with approximately one out of four children (24.3 percent) living in poverty in 2011. The long-term consequences for children raised in poverty include lower levels of educational attainment and lower earnings as adults. Childhood poverty not only can mean a life of hardship for individual children — a reason for concern in its own right — but also can impose significant costs on society as a whole through these children’s lost potential.

Meanwhile, California’s weak job market poses a serious and persistent challenge. The state’s current jobless rate of 9.8 percent is still nearly double the rate before the Great Recession began. Only recently — in November 2012 — did the jobless rate finally reach single digits after spending 45 consecutive months in double figures. Long-term unemployment remains near a record high, with more than one in three of California’s unemployed reporting that they have been searching for a job for at least one year.

Our state’s budget policy choices should reflect the fact that many Californians are still confronting the harsh aftereffects of the Great Recession. As lawmakers consider the Governor’s budget proposal and work toward a budget agreement in the coming months, priority should be given to strengthening programs and services — such as child care — that help individuals find and keep jobs and also to ensuring a strong social safety net for those struggling to make ends meet. Wise investment of state dollars can help blunt the impact of our state’s economic challenges while also speeding the state’s recovery and laying the groundwork for widely shared prosperity over the long term.

— Phaelen Parker

Key Facts About the Governor’s Proposed Budget, Part 2: Proposed State Spending Remains Below 2007-08 Level

January 24, 2013

This is the latest in a CBP chart series highlighting some of the most important aspects of Governor Brown’s 2013-14 budget proposal and the context for it.

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Last week, we described the role voters played in approving new revenues to put California back on the path to fiscal stability. Thanks in large part to the passage of Propositions 30 and 39, California’s budget is roughly in balance, after many years of severe budget shortfalls.

Turning to the other side of the ledger — state spending — under the Governor’s proposed 2013-14 budget, General Fund spending would be $4.7 billion higher than in 2012-13. Yet this year-over-year increase, while notable in light of recent years’ budget gaps, is highly targeted, with much of the additional funding channeled toward K-12 schools and higher education. Beyond these targeted increases in spending — which are largely attributable to the state’s increased minimum funding obligation for schools and community colleges due to new revenues from Propositions 30 and 39 — General Fund spending for most state programs and services would remain at or near current levels.

In fact, total state spending in the Governor’s proposed budget remains approximately 4 percent below what it was in 2007-08, the year the Great Recession began, after accounting for inflation. To help put this number in context, over the same period of time, California’s population has grown by more than 1 million.

Unfortunately, many of the state programs and services that aren’t slated for significant funding increases are currently operating at reduced levels, having been hollowed out by repeated cuts in recent years. Some of them — like subsidized child care and the state preschool program, which have been cut by nearly $1 billion, or 110,000 “slots” since 2008 — are the very services that could provide the biggest boost to low- and middle-income Californians struggling to find and keep work. While the Governor’s proposal does include a small funding increase for CalWORKs welfare-to-work services, county agencies must use these funds to implement sweeping programmatic changes made to CalWORKs as part of prior rounds of budget cuts. A reduction of the CalWORKs time limit for adults from 60 months to 24 months means that participants now face a challenging job market with less time to access resources for securing long-term employment.

As the state begins to recover from years of serious budget challenges, policymakers should seek to reinvest in the vital public services that foster economic growth, contribute to broadly shared prosperity, and ensure support for those most affected by the Great Recession and its aftermath. California’s child poverty rate — nearly one in four — and high long-term unemployment rate are sobering reminders that many Californians are still living every day with the consequences of this difficult chapter in our state’s economic and fiscal history.

— Hope Richardson