© 2019 California Center for Jobs and the Economy
 

Supported by a grant from the James Irvine Foundation, in collaboration with the California Business Roundtable.

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TODAY'S PUBLIC ASSISTANCE

California Public Assistance Programs & Economic Mobility

Scope and Structure of this Report

 

Under a grant from The James Irvine Foundation, California Business Roundtable (CBRT) has convened a collaborative process among a broad range of stakeholder groups to address the issues affecting poverty, jobs, and upward mobility in California.  As part of this effort, this report identifies the various federal, state, and related local programs that provide income assistance, training, and other services associated with the overall goal of assisting Californians in preparing for, joining, and moving up within the workforce.  The report describes the major programs along with funding sources and a general assessment of the applicability of each program to providing Californians with the skills and/or resources to pursue upward mobility in the state’s evolving economy.

 

In discussing these programs, most are necessarily associated with the federal/state/local social safety net and were created as or evolved into primarily anti-poverty programs, both programs seeking to eliminate poverty and increasingly in California, programs to alleviate the effect of poverty in the face of rapidly rising costs of living.  The focus of the overall research project, however, is not on poverty in California but rather the challenges, barriers, and effectiveness of existing efforts public and private to facilitate upward economic mobility in the state, in particular paths to pursue higher income employment.  This broader approach considers these and related programs from their potential as they are currently structured to promote this goal.

 

Scope of Existing Programs

 

As contained in the Summary Table below, this report discusses programs with total expenditures of at least $209.8 billion in 2017-18 ($214.5 billion when combined with estimates for other state workforce development and job training programs contained in other state program areas).  The state and local administrative costs associated with this program delivery was at least $12.5 billion, but in total was substantially higher due to the fact that this financial information is not directly available in the budget documents for many of the listed programs.

 

The programs contained in this table cover the traditional anti-poverty programs such as CalWORKS and CalFresh (food stamps), but also include various efforts to address barriers or challenges facing low income Californians such as the recent Local Control Funding Formula (LCFF) for K-12 schools and various utility assistance programs attempting to compensate for the state’s rising energy costs.  When incorporating the effect of transferring general fund programs and related revenues to the counties in 2011 along with substantial increases in federal funds especially for healthcare, the amount of expenditures for these purposes has essentially risen continuously since just before the recent recession in 2007-08.

 

To put these numbers into context—using 2015-16 as the year with the most complete data—the amount spent on these programs was equivalent to 7.4% of the state’s total GDP.   Using simple averages—distributing the cost of each program over its eligible/target income group expressed as the number of persons within each income-to-poverty band—the numbers in this table work out to about $20,200 per person below poverty, composed of direct assistance, program services, and targeted spending intended to improve conditions faced by those in poverty.  To put this per person number into context, the CalWORKS Benefits Model in 2016 was based around a structure to provide from $15,800 ($0 earned income) to $16,800 (maximum eligible earned income) in cash benefits for a family with 1 adult and 2 children in poverty.  The full range of local, state, and federal programs providing these benefits or providing services to augment the cash assistance works out—in this simple comparison—to about $60,600 for this size family.

 

Caseload projections for the traditional income assistance programs show a decline both in current and the next budget year.  This trend arises from two basic factors:  (1) unemployment is declining, and although labor force participation also remains near historic lows, the California caseload continues to track changes seen in prior economic cycles, and (2) minimum wage is rising under current law.  Assuming no attendant effects on available weekly hours or the supply of jobs at this wage level, the caseload projections assume rising wages alone will reduce eligibility and the size of potential benefits per household. 

 

Caseload also continues to be affected by the ongoing trade-offs between providing assistance in cash or in services, grounded in the continuing issue over whether cash assistance provides a disincentive to seek work or, especially when tied to earned income levels, is the most efficient means to deliver on the goals of welfare reform.  For example, while other states have allocated their TANF grant funds more to programs, California has been on the upper end of cash assistance, allocating just over 40% to direct benefits in 2015 (Center on Budget and Policy Priorities, January 2017).  This amount has declined, however, as the range of allowable activities to meet the work requirements beyond actual employment has grown, although the effect of recent changes to family eligibility and grant amounts has not yet been picked up in this data.

 

The potential population served has also been affected as the cost of delivering program services continues to rise.  IHSS and childcare benefits in particular will face cost pressures as a result of rising minimum wage and recent expansions of benefits.  The ongoing steep rise in pension payments and retired employee healthcare costs continues to crowd out actual service delivery in both state and local agencies.

 

The largest increases shown in the Summary Table have been in areas such as education, health care, IHSS, food stamps, and refundable tax credits.  Federal rental payment assistance has also seen significant growth, but driven more by the cost of the assistance required rather than expansion of the number being assisted.

 

The programs in the Summary Table and this report do not cover all the efforts intended to improve individual incomes and economic opportunities, but instead focus on those more applicable to overcoming barriers to upward mobility faced by individuals and families.  Not included are additional components of the social safety net that apply more to an individual’s situation related to age, health, veteran status, and other factors rather than means-tested income.  These additional components, however, in some cases have far greater effects on cash income levels and income-to-poverty levels than the assistance programs contained in the Summary Table.  Programs not covered include:  Social Security, Medicare, Unemployment Insurance, Worker’s Compensation, Social Security Disability Insurance, Veteran’s Disability and other veteran’s programs, programs under Department of Developmental Services, programs under Department of Rehabilitation, State Hospitals, and other transfer payments including child support, alimony, and other cash payments.  The Summary Table also does not include most of the broader economic and community development grant and loan programs that are intended to improve employment and wage opportunities within targeted areas, including those of the Economic Development Administration, Small Business Administration, most expenditures from prior and the most recent state housing bonds, and other related federal and state programs.

 

In addition, the administrative cost estimate only covers those elements where aggregated data is readily available.  Not included are programs where these details are not broken out (e.g., most of the education and training programs), county programs for which the costs are not broken out in the state budget or annual financial reports to the State Controller, and the associated federal agency administrative costs related to the state and local grants and direct payments to individuals and families.

 

General Observations

 

Public Assistance Programs have Changed from Combating Poverty to Making Poverty Conditions More Tolerable.  While many of the programs listed in the Summary Table retain their original focus of moving Californians out of poverty, others have evolved more into a purpose of income support and ameliorating the effects and conditions of poverty rather than combating the underlying causes.  This policy shift is perhaps best seen in the increased prominence given to expansion of spending on the state’s poverty programs in recent Governor’s Budget Summaries, under the general heading of “Counteracting the Effects of Poverty.”

 

This policy shift is also fundamentally grounded in an assumption that many of the core conditions defining the challenges to upward mobility in the state—in particular, the increasing prevalence of low wage, part time jobs outside the Bay Area and the growing cost of housing, energy, and other costs of living—are an inevitable feature of the state’s economic future instead of challenges that can be changed and not just offset through government assistance.  This outcome is seen in the increasing use of targeted funds and programs, as contained in the Summary Table, to compensate for the cost effects of state policies in areas such as in energy and housing. 

 

Using these Programs to Mitigate—Rather than Resolve—Rising Costs of Living Only Capable of Reaching a Portion of Those Affected.  The difficulty, however, is that as the project’s related focus group and polling research revealed and as the caseload data in this report confirms, these ameliorative programs are not reaching the full range of people affected, are not easily accessible due to qualification limits or application burdens, or at best are capable at reaching only a portion of the populations affected due to available funding.  For example, cost of housing was repeatedly cited as a barrier in the project’s focus group and polling research, yet the housing assistance programs focused on the lowest incomes as described in this report remain the primary state response rather than broader reforms to reduce the cost of construction and development and increase overall supply available to low and moderate incomes overall.  Rising utility and fuel costs are accepted as a consequence of the state’s current energy policies, yet the assistance programs contained in this report provide at best a modest offset to monthly bills or instead fund consulting services capable of retrofitting only a small percentage of households affected each year. 

 

As a result, only a portion of those in poverty can benefit at a high and increasing per household cost, and those attempting to transition from low to moderate income now face an imposing and growing cost barrier once assistance eligibility vanishes, that with each year becomes harder to overcome.

 

Barriers to Accessing the Programs Limit Just How Many Californians They Can Reach.  While programs exist to address many of the issues identified in the project’s focus group and polling research, access remains a challenge.  These are multiple programs created over time, each within separate funding silos with associated administrative, oversight, application, and other transaction costs for those seeking to access these services.  Rather than a coherent system, these programs in many cases have evolved as federal priorities evolved over time, with the state programs following and then sent down to the counties to administer.  Program services accordingly have developed as separate entities, instead of creating uniform standards of performance and providing recipients with the resources and options to secure what best addresses their situation on their own.  The large and somewhat uncertain number of workforce and job training programs pursuing comparable but duplicative and overlapping services is a case in point.

 

Programs Decide what Benefits Lower Income Californians Will Get, Rather than Providing Resources Allowing Them to Decide What They Need.  While support services can be essential in assisting people in upwards mobility, the dominant mind frame of the programs is to provide these through government funded sources rather than allowing beneficiaries to develop these skills through their family, community support networks, and other avenues of their choosing.  Yet, the project’s polling reinforced the critical nature of these other sources in coping with the challenges faced in this state.  While 61% of the low income Californians polled indicated they had considered moving primarily for lower housing costs, the other 39% cited living close to family/friends as the primary reason (55%) for not doing so.  The benefits obtained from these networks outweighed the high costs of remaining in place.  The assistance resources discussed in this report, due to their nature as government programs, continue to shift instead to services offered through agencies or contractors that remain based on the agencies’ determinations of what is in the best interests of a household.

 

Program Eligibility Standards Do Not Reflect Income Challenges in California and Its Regions—Severely Restricting Their Potential Effectiveness as Currently Operated.  Individual programs, especially those adopted separately by California, challenge applicants with a broad and inconsistent range of income eligibility criteria.   But in particular, the guidelines of the poverty programs and programs supported largely by federal funds are based primarily on federal poverty level either as a hard dividing line or as the base for eligibility determined as a multiple of this income level.  As such, the potential for the programs’ effectiveness varies widely due to the significant differences in costs of living between California and other states in general, and specifically through the wide differences in living costs between regions in the state.  While these disparities reinforce the critical need for actions to reduce rather than subsidize living costs in the state, at least in the near term these cost differences—especially when considering the barriers to labor mobility raised by housing—make the potential effect and eventual success of the current programs structure heavily dependent on geography and where the program beneficiaries live.

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