CalWORKs Provides a Huge Annual Benefit to the State’s General Fund – Here’s How

As Governor Brown and state lawmakers move toward finalizing the 2016-17 state budget this month, there are several legislative proposals in the mix that would improve the lives of very-low-income families enrolled in the CalWORKs welfare-to-work program. Proposals on the table include boosting efforts to reduce homelessness among CalWORKs families, helping families to pay for diapers, and repealing the Maximum Family Grant (or “family cap”) rule, which denies additional cash assistance for any child who is conceived and born while a family is receiving aid. None of these proposals has yet won the Governor’s support, at least in part because — taken together — they would increase spending on CalWORKs by roughly $200 million per year.

The debate over whether or how to boost support for CalWORKs in the coming fiscal year, while very important, should not obscure a much more significant fact: CalWORKs makes a huge contribution to the state’s General Fund — a benefit that state policymakers create by restricting CalWORKs spending and shifting dollars that could be invested in CalWORKs to other services. In fact, CalWORKs’ contribution to the General Fund has totaled at least $1.1 billion each year since 1998-99, after adjusting for inflation (see chart). Moreover, under the Governor’s revised budget released in May, this General Fund benefit would rise to the highest level ever – $2.3 billion — in 2016-17, according to budget data compiled by the Department of Social Services (DSS). Even if the Governor agreed to add legislators’ CalWORKs proposals in the 2016-17 state budget, CalWORKs’ contribution to the General Fund would likely still be around $2 billion in the upcoming fiscal year.

CalWORKs-Contribution-to-the-GF-as-of-2016-17-MR

Support for CalWORKs Comes Primarily From Funds That Can Be Used for a Broad Range of Services

The largest funding source for CalWORKs is California’s share of the federal Temporary Assistance for Needy Families (TANF) block grant, which has been fixed at $3.7 billion per year since it was created in 1996. A second major source of funding is linked to the TANF block grant: In order to receive TANF dollars, California must spend a minimum amount each year from state and county funds to provide services to families who are eligible for CalWORKs. This minimum amount — called a “maintenance-of-effort” (MOE) — has been set at $2.9 billion in recent years.

While TANF and MOE funds largely go to support CalWORKs, they do not have to be used exclusively for this critical safety-net program. States have wide latitude to decide how to allocate these dollars based on their own budget priorities. In California’s case, “the TANF block grant is used to fund some programs in addition to CalWORKs, and some General Fund expenditures outside CalWORKs are counted toward the MOE requirement,” as the Legislative Analyst’s Office has explained. For example, the Governor’s revised 2016-17 budget uses more than $350 million in TANF block grant dollars to fund certain Child Welfare Services and Foster Care costs that would otherwise be paid from the General Fund. In addition, the Governor’s 2016-17 budget counts $472 million in child care expenditures funded through the California Department of Education (CDE) toward the state’s MOE spending requirement. This reduces by a like amount the additional state and county spending that would otherwise be needed to reach the required MOE spending level.

By Limiting CalWORKs Spending, State Policymakers Ensure That Funds Remain Available to Shift to Other Services

How have state policymakers managed to ensure, year after year, that a large pool of TANF and MOE dollars is available to benefit the General Fund? The answer is simple: They’ve limited CalWORKs spending, which has freed up TANF and MOE dollars to be used for other purposes. The clearest way to illustrate this point is to compare CalWORKs spending in 2003-04 to the Governor’s proposed spending for 2016-17. (The 2003-04 fiscal year is a useful baseline because the CalWORKs caseload in 2016-17 is expected to be nearly equal to the 2003-04 level, which allows for an apples-to-apples comparison of expenditures across these two years.) This comparison shows that:

  • In 2003-04, when nearly 481,000 families participated in CalWORKs, spending totaled $6.4 billion, after adjusting for inflation. This reflects all funds budgeted through the DSS for “core” CalWORKs supports and services: cash assistance; eligibility determination and other county activities; employment, educational, and behavioral health services; and Stage 1 child care. This spending also includes a small amount of state funds that support the Tribal TANF program; however, it excludes funding for other CalWORKs-related child care services overseen by the CDE.
  • In 2016-17, when nearly 486,000 families are projected to participate in CalWORKs, spending would be just $5.3 billion based on the Governor’s revised budget. This is $1.1 billion below the inflation-adjusted 2003-04 spending level. (2016-17 CalWORKs spending is defined in the same way as 2003-04 spending.)

This sizeable drop in spending since 2003-04 stems primarily from policymakers’ decision to scale back the state’s overall investment in CalWORKs. For instance, policymakers have reduced grants and withheld cost-of-living adjustments more often than not since the early 2000s. As a result, the value of CalWORKs cash assistance has eroded, leaving families struggling to get by on a basic monthly income that fails to lift them above even half the federal poverty line. In addition, policymakers reduced adults’ lifetime limit on cash assistance from 60 months to 48 months beginning in 2011-12, a change that further reduced the amount of support that many families receive. From a strictly state budget perspective, restricting the growth of CalWORKs spending has freed up TANF and MOE dollars for other services, thus relieving some pressure on the state’s General Fund. However, this policy choice has done nothing to boost the economic security of very-low-income families with children.

An Alternative Approach: Boost Funding to Strengthen CalWORKs Supports and Services

Rather than limiting CalWORKs spending in order to benefit the General Fund, state policymakers should prioritize making the investments needed to strengthen this critical safety-net program. For example, increasing cash assistance to fully reflect the rise in the cost of living since the early 2000s would help CalWORKs families to better afford housing and other necessities. As noted above, CalWORKs once provided much more robust supports and services for very-low-income families with children. In the coming fiscal year, CalWORKs is expected to serve roughly the same number families as it did in 2003-04. But the Governor proposes to spend more than $1 billion less on CalWORKs than the state did in 2003-04, after adjusting for inflation.

California can and should do more to assist families living in poverty. By prioritizing new investments in CalWORKs, state leaders would significantly improve the lives, and the life chances, of the nearly 1 million children who are enrolled in this critical safety-net program.

— Scott Graves