California Budget Perspective 2018-19

The California Work Opportunity and Responsibility to Kids (CalWORKs) program provides modest cash assistance to about 860,000 low-income children while helping parents overcome barriers to work and find jobs. Despite modest increases in recent years, CalWORKs grants still fall far short of allowing families to maintain a decent standard of living.[1] Although Governor Brown projects substantial positive state General Fund balances for the next few years, his proposed 2018-19 budget does not make any new investments in CalWORKs grants, leaving the maximum monthly grant for a family of three living in a high-cost county $9 lower than it was in 2006, without even adjusting for inflation.[2]

This lack of investment in CalWORKs is especially striking given that median monthly rents have steadily increased in recent years, widening the gap between housing costs and cash assistance. In other words, the Governor has chosen not to prioritize new investments in one of the state’s most vital supports for low-income families with children, even though these families are finding it harder each year to keep a roof over their heads.

Median Rents Far Exceed CalWORKs Grants

Regardless of where families live in California, the typical monthly rent far exceeds monthly CalWORKs grants. For example, the maximum monthly grant for a family of three in a high-cost county in 2018 ($714) covers just 43% of the median monthly rent for a two-bedroom unit ($1,658). This is down from covering 61% of the cost of rent in 2006, when the maximum monthly grant was $723 and the median rent was $1,180.[3] Viewed another way, the maximum monthly CalWORKs grant for a parent with two children now falls $944 short of covering the monthly cost of a two-bedroom rental, more than double the gap of $457 in 2006. Even in low-cost counties, median rents have exceeded maximum grant levels in recent years, although the gap between rents and grants is somewhat narrower than in high-cost counties. In these counties, the maximum grant for a family of three in 2018 ($680) falls $344 short of covering the cost of a two-bedroom rental ($1,024).

Unstable Housing Is Harmful to Children

Children in CalWORKs families pay the price when grants fall short of rent costs. Housing instability and overcrowding increase children’s stress and contribute to poor health, behavior problems, and difficulty learning.[4] When parents face high rent burdens, they have fewer resources to meet other basic expenses and to invest in their children’s development. Furthermore, high housing costs put children at risk of homelessness. According to the US Department of Housing and Urban Development (HUD), on a single night in 2017, a total of 21,522 people in families with children were homeless in California.[5] In Los Angeles County, the number of CalWORKS families who reported lacking a stable place to live almost tripled between 2006 and 2017, even as the number of all families served by the program declined by nearly 10% during that period.[6] Insufficient grants could therefore undermine the first goal of CalWORKs: reducing child poverty in California.

How Can Policymakers Help CalWORKs Families Better Afford Housing?

Helping families afford stable housing in California will require significant, sustained efforts by federal, state, and local leaders, and a long-term solution to the state’s housing crisis will likely take time to develop and implement. In the meantime, however, policymakers can provide families in the greatest need, such as CalWORKs families, with some relief by increasing their incomes through grants and reducing their costs of housing.

State Policymakers Should Raise CalWORKs Grants, Restore the Annual State Cost-of-Living Adjustment (COLA), and Improve Housing and Homelessness Assistance

Due to the elimination of the annual state COLA along with grant reductions during and after the Great Recession, the maximum CalWORKs grant for a family of three has lost more than one-quarter of its purchasing power since 2007-08. Moreover, since 1998-99, the first full fiscal year after the program was created, the maximum grant has lost 37% of its purchasing power.[7] While state leaders have provided some grant increases in recent years, they have not fully restored cuts made in prior years. The current grant is equal to just 41% of the federal poverty line (FPL), leaving it well below the deep-poverty line (50% of the FPL).[8] The Governor’s proposed budget for 2018-19 does not call for increasing CalWORKs grants or reinstating the annual COLA, despite the fact that state revenues are projected to exceed expenditures by billions of dollars.

In the short term, state policymakers should raise maximum grants to at least 50% of the FPL to ensure that no CalWORKs family lives in deep poverty, which is particularly detrimental to children.[9] Over the longer term, policymakers should boost grants further so that families can better meet our state’s high housing costs. Moreover, grants should more accurately reflect regional differences in the cost of living. In high-cost counties, the maximum monthly CalWORKs grant for a family of three is just $34 more than in low-cost counties, even though the actual median rent differential for two-bedroom units is $634. Lastly, state leaders should allow CalWORKs families to access housing and homelessness assistance when they need it throughout the year and should also expand the types of housing providers and arrangements for which families may receive assistance.[10]

Federal Policymakers Should Expand Rental Assistance

Federal rental assistance — particularly through the Housing Choice Voucher program — helps hundreds of thousands of Californians afford rent.[11] Research shows that by subsidizing rental costs, housing vouchers decrease overcrowding, housing instability, and homelessness.[12] Vouchers also free up resources that families can put toward other basic needs. However, voucher receipt has fallen due to federal budget cuts and rental assistance does not reach many struggling families. CalWORKs families face dire circumstances, as nearly 9 in 10 families (88%) did not receive federal housing assistance in 2016, based on Center on Budget and Policy Priorities (CBPP) estimates.[13] California’s needs gap is exacerbated by regional differences: a smaller share of families living in poverty with young children receive housing subsidies in high-cost counties than in low-cost counties.[14]

Despite this tremendous unmet need, President Trump’s proposed budget for the 2019 federal fiscal year (which begins on October 1, 2018) actually calls for raising rents on a substantial number of people receiving rental assistance, potentially affecting over 138,000 Californian households.[15] Additionally, the President’s call for cuts to housing vouchers could cause about 27,000 households in California to lose their housing vouchers.[16] Rather than taking steps backward, federal policymakers should instead strengthen investments in rental assistance so that families can better afford a roof over their heads.

Endnotes

[1] Kristin Schumacher, CalWORKs Grants Are Overdue for a Significant Investment (California Budget & Policy Center: February 2018).

[2] Accounting for inflation, the proposed 2018-19 maximum grant for a family of three in a high-cost county is $269 lower than in 2007-08. See Kristin Schumacher, CalWORKs Grants Are Overdue for a Significant Investment (California Budget & Policy Center: February 2018).

[3] Median rents reflect gross monthly rents, which include the cost of utilities and fuels. The median rent for high-cost counties reflects the median rent for all high-cost counties combined, while that for low-cost counties reflects the median rent for all low-cost counties combined. High-cost and low-cost counties were determined based on the definitions in California’s Welfare and Institutions Code (WIC), Section 11452.018, with one exception: San Benito County. Specifically, the US Census Bureau data used in this analysis do not allow San Benito County (a low-cost county) to be distinguished from Monterey County (a high-cost county). As such, San Benito County is grouped with high-cost counties. Since San Benito is not a very populous county, combining it with high-cost counties is unlikely to substantially affect the analysis. Rents for years 2006 to 2016 are from the US Census Bureau’s American Community Survey. For 2017 and 2018, median rents are estimated based on the compound annual growth rate in median rents between 2011 and 2016.

[4] Claudia D. Solari and Robert D. Mare, “Housing Crowding Effects on Children’s Wellbeing,” Social Science Research 41.2 (2012), pp. 464-476.

[5] The 21,522 figure from HUD is a point-in-time estimate and refers to “a person who lacks a fixed, regular, and adequate nighttime residence” on one day of the year. The number of homeless families with children is likely far greater, as this estimate does not include people who are living with friends or family or in motels because they do not have places of their own. For more on the gaps in HUD point-in-time numbers, see Alissa Anderson, Many People in Our Communities Lack a Home for the Holidays (California Budget and Policy Center: November 23, 2015). For HUD’s estimates, see US Department of Housing and Urban Development, The 2017 Annual Homeless Assessment Report (AHAR) to Congress: Part 1—Point-in-Time Estimates of Homelessness (December 2017). For HUD’s methodology, see US Department of Housing and Urban Development, Point-in-Time Count Methodology Guide (September 2014).

[6] Personal communication with the Los Angeles County Department of Public Social Services on February 12, 2018. These figures reflect CalWORKs families in Los Angeles County in July 2006 and July 2017.

[7] Budget Center analysis of data from the Department of Social Services. If CalWORKs grants had been adjusted annually using the California Necessities Index, in the 2018-19 fiscal year the grant would have been $1,136. This would have been greater than the deep-poverty line (50% of the FPL), but still well below the poverty line.

[8] Kristin Schumacher, CalWORKs Grants Are Overdue for a Significant Investment (California Budget & Policy Center: February 2018).

[9] Emily Cuddy, Joanna Venator, and Richard V. Reeves, In a Land of Dollars: Deep Poverty and Its Consequences (The Brookings Institution: May 7, 2015).

[10] Current law provides homeless CalWORKs families temporary housing assistance, but mandates that families use the assistance for up to 16 consecutive days within 12 months or else lose their eligibility. In other words, even if a family accepts assistance for fewer than 16 days in a row, they become ineligible for additional assistance for the rest of the year even if they experience another spell of homelessness later. Additionally, the law allows families to receive funds once every 12 months to secure longer-term housing or to avoid eviction. However, this assistance only pay­­­s for housing arrangements through hotels and motels, shelters, or those with a history of renting properties. According to the County Welfare Directors Association of California, in some counties, families trying to secure housing through a shared housing arrangement such as a sublease have been unable to receive aid because of this restriction. For more, see Assembly Committee on Human Services, Analysis of AB 1921  (March 2, 2018).

[11] Douglas Rice, Ehren Dohler, and Alicia Mazzara, How Housing Vouchers Can Help Address California’s Rental Crisis (Center on Budget and Policy Priorities: February 12, 2016).

[12] Will Fischer, Research Shows Housing Vouchers Reduce Hardship and Provide Platform for Long-Term Gains Among Children (Center on Budget and Policy Priorities: October 7, 2015).

[13] Personal communication with the Center on Budget and Policy Priorities (CBPP) on March 29, 2018. CBPP divided the number of households receiving federal housing assistance who report participating in CalWORKs by the annual monthly average CalWORKs caseload. CalWORKs caseload data come from California’s Department of Social Services and exclude Work Incentive Nutritional Supplement cases. Federal housing assistance data come from US Department of Housing and Urban Development (HUD) administrative data and reflect the following HUD-administered rental assistance programs: Public Housing; Section 8 Housing Choice Vouchers; Section 8 Project-Based Rental Assistance (including Moderate Rehabilitation); Supportive Housing for the Elderly (Section 202); Supportive Housing for People With Disabilities (Section 811); Rent Supplement; and the Rental Assistance program. This analysis does not include a relatively small number of households receiving assistance through homelessness programs, Housing Opportunities for Persons With AIDS, or the US Department of Agriculture’s Rural Rental Assistance program (Section 521).

[14] Sarah Bohn and Caroline Danielson, Reducing Child Poverty in California: A Look at Housing Costs, Wages, and the Safety Net (Public Policy Institute of California: November 2017).

[15] The Center on Budget and Policy Priorities (CBPP) estimates rent increases for nearly 1.8 million low-income households nationally. See Will Fischer, Trump Rent Plan Would Squeeze Low-Wage Workers, Others Struggling to Afford Housing (Center on Budget and Policy Priorities: February 9, 2018). President Trump’s proposed budget would “mitigate” the rent increase for “the elderly and persons with disabilities.” CBPP’s estimates assume an exemption for these households. For the budget proposal, see Office of Management and Budget, Efficient, Effective, Accountable: An American Budget—Major Savings and Reforms (Federal Fiscal Year 2019), p.52.

[16] Douglas Rice, Trump 2019 Budget Slashes Aid for Families Struggling to Pay Rent (Center on Budget and Policy Priorities: February 12, 2018).