Q&A Archives

Having a place to call home is the most basic foundation for health and well-being no matter one’s age, gender, race, or zip code. But many thousands of individuals in California each year experience homelessness and its destructive effects. Polling shows that Californians continue to rank homelessness as one of the most serious challenges facing the state, and policymakers have paid increasing attention to this issue in recent years. Understanding the scale, impact, and drivers of homelessness in California can help guide effective policy solutions and action to end this crisis.

jump to question

How does homelessness affect the people who experience it?
How many people in California experience homelessness?
Who experiences homelessness in California?
What are the key drivers of homelessness in California?
What public systems and supports can address the needs of people experiencing homelessness or play a role in preventing homelessness?
What are effective, evidence-based ways to address homelessness?
State funding to address homelessness has recently increased, but the number of people experiencing homelessness did not decrease. Why is that the case?

How does homelessness affect the people who experience it?

Homelessness has devastating effects on the individuals who experience it because having a home is a basic necessity to maintain health, work, school, and dignified living conditions. Lack of stable housing seriously disrupts individuals’ ability to obtain or keep a job or to make sure that children are able to attend and focus on school. Homelessness exposes individuals to serious health risks and makes it difficult to take care of one’s health and access health care, and therefore homelessness can exacerbate chronic or acute health conditions. In fact, adults experiencing homelessness often have health problems and difficulty with daily living activities that are more typical of people 20 years older. Unhoused individuals have also faced serious health risks throughout the COVID-19 pandemic.

“

This devastation to people’s lives is why homelessness in California is a crisis that requires urgent attention by federal, state, and local leaders.

”

The stress of homelessness can also seriously harm individuals’ mental well-being. Research shows that the trauma of experiencing homelessness can cause people to develop mental health problems for the first time and can worsen existing behavioral health challenges. Longer time spent without a home is linked to higher levels of mental distress and more damage from coping behaviors like substance use.

This devastation to people’s lives is why homelessness in California is a crisis that requires urgent attention by federal, state, and local leaders.

How many people in California experience homelessness?

When Californians experience homelessness, urgent action is needed, because no one should be without a home. According to the most recent point-in-time data, as of January 2020 there were 161,548 people in California experiencing homelessness on a given night. The majority of these individuals – about 70% – were unsheltered, meaning that they were living on the street, in their vehicle, or in other places not meant to serve as homes.

Another way to understand how many Californians experience homelessness is to consider how many people received homelessness services (like shelter or outreach) over the course of a full year. More than 270,000 homeless individuals across the state received some kind of services during calendar year 2021, and the total number receiving services likely increased the following year. This number is larger than the point-in-time number because many people who fall into homelessness at some time during the year return to stable housing relatively quickly, and the point-in-time count only captures the number of individuals experiencing homelessness on one night of the year.

Who experiences homelessness in California?

People of all ages and backgrounds fall into homelessness, and Californians experience homelessness in every county of the state. The majority of unhoused individuals are single adults, but an important share are also families with children and unaccompanied and parenting youth. A substantial share of single adults experiencing homelessness in California are older adults.

There are deep racial inequities in who experiences homelessness in California, with individuals who are Black facing a greatly disproportionate risk of homelessness, as well as American Indian or Alaska Native and Pacific Islander individuals. The number of Latinx Californians experiencing homelessness also increased substantially in the most recent point-in-time count. These disparities reflect the effects of structural racism and inequitable treatment and access to opportunities in education, employment, health, the justice system, and other domains.

In addition, there are disparities in experiences of homelessness by gender identity and sexual orientation. In terms of gender, the majority of unhoused Californians are male. Individuals who identify as transgender or gender-nonconforming are more likely than cisgender individuals to be unsheltered when they experience homelessness. Among youth, those who identify as LGBTQ+ are especially likely to experience homelessness, in many cases as a direct result of family rejection of their gender identity or sexual orientation.

MORE in this series

See our 5 Facts: Who is Experiencing Homelessness in California? to learn more about California’s diverse unhoused population.

What are the key drivers of homelessness in California?

Many systemic challenges rooted in classism, racism, and sexism that harm individuals and families put people at greater risk of becoming homeless at some point in their lifetime.

The severe shortage of affordable housing — particularly housing that is affordable to people with the lowest incomes — is the number-one driver of California’s homelessness crisis. For Californians with the very lowest incomes — those categorized as “extremely low-income” under the definition used for most state and federal housing policies — there were only 23 housing units that were affordable and available for every 100 renter households as of 2020. Statewide, an estimated 1.2 million new affordable homes are needed by 2030 to meet the housing needs of Californians with low incomes.

Because affordable housing is in such short supply in California, many renters with low incomes must pay much more than they can afford for housing, so that even a minor financial emergency can cause them to be unable to cover the rent and face the risk of eviction and homelessness. Black and Latinx renters are especially likely to face unaffordable housing costs, reflecting the effects of explicitly and implicitly racist policies and practices in housing, employment, and other arenas.

Other factors have also contributed to California’s homelessness crisis, including the decades-long trend of stagnant wages for lower-wage workers and past failure to fund adequate mental and behavioral health services to meet needs in the community. The shortage of deeply affordable housing, however, is a fundamental driver of the crisis.

What public systems and supports can address the needs of people experiencing homelessness or play a role in preventing homelessness?

Many different local, state and federal public systems and services intersect with homelessness in important ways.

Nearly 1 in 8 Californians did not have enough resources to meet their basic needs, according to the most recent California Poverty Measure data. This reflects the high cost of living in many parts of the state. In addition, the share in poverty is expected to increase for 2022, as pandemic-era public supports like the expanded federal Child Tax Credit expired. For all individuals experiencing homelessness, public supports that help people meet basic needs are important both to prevent and exit homelessness. These supports include but are not limited to: cash supports like SSI/SSP and CalWORKs, refundable tax credits like earned income tax credits (EITCs) and child tax credits, nutrition assistance programs like CalFresh and WIC, and Medi-Cal health coverage.

While only a minority of unhoused individuals struggle with serious mental health or substance use disorders, behavioral health services are vital supports for maintaining stable housing over the long term for those individuals.

Among youth, abusive or neglectful family situations can cause young people to leave their homes and become homeless, pointing to a role for the child welfare system in preventing and addressing youth homelessness.

Domestic violence can also be the trigger that pushes individuals into homelessness, especially women and mothers with children. Services that directly address the experiences and needs of domestic violence survivors are important to prevent and address homelessness for these individuals.

The justice system has an impact on many unhoused individuals as well. This is both because of laws that criminalize homelessness (e.g., laws that make public camping punishable by citation or arrest) and because individuals who have a conviction record or are reentering the community after incarceration face daunting barriers to securing and maintaining stable housing. These factors compound challenges in helping individuals find safe, affordable housing.

What are effective, evidence-based ways to address homelessness?

Extensive research shows there are several evidence-based approaches that are effective in helping people successfully exit homelessness and maintain stable housing.

For all individuals experiencing homelessness, interventions that use a “housing first” approach have a strong track record of success. Housing first — as its name suggests — focuses on moving people into permanent housing as the first priority, before focusing on meeting other needs or connecting with other services.

For the minority of individuals who are chronically homeless and have serious physical or mental health challenges, supportive housing — or permanent housing paired with case management and support services — is an approach that research shows is effective in enabling individuals to exit homelessness and achieve housing stability. About one-third of Californians experiencing homelessness on a given night are chronically homeless with serious health challenges.

“

Having a place to call home is the most basic foundation for health and well-being no matter one’s age, gender, race, or zip code.

”

Housing vouchers, shallow rental subsidies, and targeted programs for specific subpopulations — such as veterans, homeless youth, or domestic violence survivors — are additional tools to help individuals successfully return to stable housing.

Interim housing, like motel stays, emergency shelters, and tiny homes, can also be necessary short-term strategies to get people off the street so that they are not unsheltered. These options can contribute to solving homelessness if coupled with services that focus on moving individuals into permanent housing as quickly as possible.

State funding to address homelessness has recently increased, but the number of people experiencing homelessness did not decrease. Why is that the case?

Effectively addressing homelessness requires a system of housing and services with enough capacity and investment to meet the needs of all Californians who are experiencing homelessness in every region of the state. Building that capacity requires investing in proven effective approaches at a scale that meets the need — and then providing reliable ongoing funding so that effective efforts can be sustained. Partnership between the state, federal, and local governments is important to mobilize the resources needed for impact at scale.

California first dedicated significant state dollars to address homelessness only a few years ago, and state investments have primarily consisted of one-time funding. The 2021-22 state budget first included a multi-year commitment of $1 billion annually to support local homelessness efforts, with intent to continue “based on performance and need.” In addition, there were significant investments in housing supports for special populations, such as families with children, and support to acquire and develop housing specifically to meet the needs of individuals experiencing homelessness. The 2022-23 state budget further built on these investments, including maintaining the $1 billion support for local homelessness efforts and incorporating $1 billion to expand bridge housing for individuals experiencing homelessness with serious mental illness.

These recent increases in state funding have not been accompanied by a drop in the number of Californians experiencing homelessness. Why? The COVID-19 pandemic is a key factor. Both health and economic effects of the pandemic have directly affected homelessness services and put more individuals at risk of homelessness.

At the start of the pandemic, to protect the health of vulnerable individuals experiencing homelessness — and public health more broadly — policymakers and service providers pivoted remarkably quickly to implement new models of non-congregate shelter, with California leading the way in developing innovative new approaches. Launching these new models required significant up-front investment of time and funding, which was necessary in the short-term to protect the health of individuals, and is expected to produce sustained payoff by building a safer and more effective long-term model for interim housing.

At the same time, the economic effects of the pandemic have put more Californians at risk of falling into homelessness. Since the start of the pandemic, rents have increased significantly. Record-high inflation more generally has pinched household budgets, and Californians with the lowest incomes have been hit the hardest.

Given these significant pandemic headwinds, the recent increases in state funding to address homelessness have likely played several vital roles. These include preventing many unhoused Californians from experiencing severe health effects or dying from COVID-19; preventing a substantially larger increase in the number of Californians experiencing homelessness; and building California’s long-term capacity to address homelessness more effectively.

When addressing a complex challenge like homelessness — particularly in the shadow of a global pandemic — progress takes time, and sustained commitment by policymakers is critical. Maintaining and building on recent state budget investments to address homelessness, to meet the full scale of need, can enable California to achieve a functional end to homelessness. The experience of homelessness for Californians would then be rare, brief, and non-recurring for individuals and across communities.

At the same time, the widespread shortage of affordable permanent housing continues to drive Californians into homelessness. As a result, it is also critical to invest in expanding the state’s supply of affordable housing, especially rental housing affordable to households with the lowest incomes. Both housing development and tenant-based rent subsidies can play a role in making more housing available that is deeply affordable.

Bottom line: Ending homelessness is possible, but persistence is required. There are many opportunities for the state to leverage its resources to ensure all Californians have a home.

Support for this report was provided by the Conrad N. Hilton Foundation.

Housing & Homelessness

Stay in the know.

Join our email list!

Building a just and equitable California for every person no matter their race, ethnicity, gender, age, or zip code requires investments to create health, housing, economic, and educational opportunities. But an archaic spending limit approved by some California voters under a 1979 ballot measure challenges our state’s ability to meet the ongoing needs of Californians. Known by many names — the spending cap, appropriations limit, or Gann Limit — this convoluted budget constraint blocks the state’s ability to build a better and more equitable future.

“The Gann Limit is a convoluted budget constraint that blocks the state’s ability to build a better future.”

This Gann Limit Q&A addresses top questions on the spending cap and why California leaders and voters need to rethink the disco-era measure to create healthy, thriving communities for all Californians.

What are the origins of the Gann Limit?
How does the Gann Limit work?
Why does this spending limit matter today?
How does the Gann Limit threaten ongoing investments to help Californians thrive?
Does the Gann Limit affect local governments and school districts?
What can state leaders do about the Gann Limit?

1. What are the origins of the Gann Limit?

The Gann Limit is a constitutional spending cap approved by voters via Proposition 4 in a 1979 special election. Prop. 4 emerged from California’s anti-tax movement of the 1970s. The measure’s key proponent, Paul Gann, also co-authored Prop. 13 — the 1978 initiative that severely restricted property taxes and drastically limited the ability of local jurisdictions to raise revenues for education and community services such as libraries, parks, and fire protection.

Prop. 4 and Prop. 13 were approved by a majority-white electorate during a time when the state’s population was becoming more diverse and white Californians’ support for robust public services was in decline.

2. How does the Gann Limit work?

The Gann Limit applies to both state spending and, as explained in question #5, spending by local governments and school districts. At the state level, the limit is based on California’s 1978-79 spending level, which is then adjusted each year for changes in population and per capita personal income. In essence, the Gann Limit enshrined into the state’s Constitution the budget priorities of the late 1970s — even though the needs of Californians have dramatically changed since the disco era.

If revenues exceed the limit over a two-year period, state policymakers must provide half of the revenue over that limit to taxpayers and the other half to K-14 education. Policymakers have some discretion over how to distribute the portion going to taxpayers. In contrast, the portion going to K-14 education must be distributed on a per-pupil basis, which is an inequitable approach that treats all schools the same regardless of their students’ needs.

Alternatively, policymakers have limited options to structure budgets to avoid going over the limit, as explained in question #6. In either case, state leaders lose the flexibility to spend revenues in ways that address critical ongoing needs of Californians, including health care, child care, and housing assistance. For an in-depth explanation of how the Gann Limit works, see this April 2021 report by the Legislative Analyst’s Office.

3. Why does this spending limit matter today?

For most of the last two decades, state revenues were far enough below the Gann Limit that it did not have a significant impact on budgeting decisions. However, when the state’s revenues grow faster than population and personal income, as they have in recent years, the Gann Limit comes into play and dictates how a large share of the budget can be spent.

Big revenue gains primarily come from personal income taxes paid by high-income households, who experience much faster income growth than the typical Californian, and who pay higher tax rates under the state’s progressive income tax system. While there will be years when the Gann Limit is less of a factor in state budget decisions, over the long run the spending cap will likely continue to impose budget constraints to the extent that state revenues grow faster than the limit itself, as has been the case historically.

4. How does the Gann Limit threaten ongoing investments to help Californians thrive?

The Gann Limit challenges California’s ability to maintain current service levels and to raise revenues to make bold new investments to help more Californians prosper.

The Gann Limit is just one of several budget formulas in the state Constitution that dictate how revenues can be spent. Prop. 98, approved by voters in 1988, creates a guaranteed annual minimum funding level for K-14 education. Prop. 2, approved by voters in 2014, requires the state to direct some revenues to paying down debts and adding to the state’s main budget reserve (the Budget Stabilization Account). When revenues exceed the Gann Limit, each dollar above the limit must meet all three requirements: Gann, Prop. 98, and Prop. 2. This means that each $1 of “excess” revenue results in more than $1 in state budget obligations. Addressing all three obligations could force state leaders to cut public services outside of K-14 education, such as health care, child care, and cash assistance as well as the state university systems.

In addition to undercutting the state’s ability to support current service levels, the spending cap, if left unchanged, will undermine efforts to raise enough revenue to fund significant new ongoing investments to help all Californians thrive. These include investments to expand affordable child care, increase pay for child care providers, and adequately address the homelessness and affordable housing crises.

Cutting critical services and failing to address the biggest challenges facing the state would significantly harm Californians with low incomes who may not be able to make ends meet without the help of public supports. Many Californians of color are at particular risk because of historical and ongoing discrimination that has often limited them to low-paying, undervalued jobs and blocked them from opportunities to build wealth.

5. Does the Gann Limit affect local governments and school districts?

The Gann Limit generally applies to local governments — cities, counties, and special districts — as well as to K-12 and community college districts, all of which could be impacted in the years to come. Many school districts regularly exceed their spending caps, although the state is currently able to provide relief to these districts by counting certain district expenditures toward the state’s own limit. In general, few cities or counties are currently at risk of exceeding their limits.

However, in future years, the Gann Limit could put pressure on local budgets, particularly for cities and counties that seek revenue increases to bolster local services like affordable housing, health care, parks, and libraries.

6. What can state leaders do about the Gann Limit?

State leaders have some ability to structure budgets to avoid exceeding the limit in the near term. For example, they can spend more on things that are excluded from the limit, such as:

infrastructure projects, including housing;
emergency response;
tax refunds;
some transfers of state funds to local governments; and
spending to comply with court and federal mandates.

Policymakers can also reduce revenues to avoid going over the limit, such as by expanding tax credits like the California Earned Income Tax Credit and Young Child Tax Credit.

Finally, some of the Gann Limit rules are spelled out in state statute rather than in the state Constitution. In these cases, lawmakers have limited opportunities to change the law to ease some Gann Limit pressures. For example, state leaders made some changes in the 2021-22 and 2022-23 state budgets to avoid exceeding the limit, including allowing more flexibility in deciding whether to count state funding for local governments under the state or local limits.

However, in the long run, the Gann Limit’s restrictive rules may jeopardize existing services and many kinds of ongoing expenditures, such as big new investments in affordable child care or health care.

Even though a period of weak revenue growth may temporarily keep the state under the spending cap, the Gann Limit will roar back to life when revenues pick up again. In order to address the long-run threats posed by the limit, state leaders should ask California voters to change the state Constitution to modify or eliminate the spending cap. This would allow the state to both support the rising costs of current services and leave room for significant new ongoing investments to address the critical needs of Californians.

Housing & Homelessness

Stay in the know.

Join our email list!

Every Californian deserves to feel secure in their ability to keep a roof over their head, put food on the table, have transportation to get to their jobs, school, and other activities, and meet their basic needs. But even as California’s economy has recovered the jobs lost due to the COVID-19 recession, California workers, families, and individuals have been hit with another challenge in the rising costs of goods and services — including but not limited to gas prices. At the same time, corporations have been reaping record profits.

“State leaders must prioritize the pressing needs of Californians who are struggling the most with the costs of living.”

Governor Newsom proposed a “windfall tax” or “price gouging penalty” in fall 2022 to capture a share of the extraordinary recent profits of oil companies operating in the state and return it to Californians impacted by high gas prices. The governor has said that he will call a special session of the Legislature to take up this proposal. This Q&A discusses the concept of a windfall profits tax, why Governor Newsom is calling for such a tax on oil companies, and how it could impact Californians.

jump to question

What is a windfall profits tax?
What is the difference between a windfall profits tax and a corporate income tax?
Why is Governor Newsom proposing a windfall profits tax on oil companies now?
Should California policymakers adopt a windfall profits tax on oil companies?
How should California use the revenues from a windfall profits tax or other corporate tax increases?

What is a windfall profits tax?

In general, a “windfall profits tax” or “excess profits tax” is intended to tax the portion of a corporation’s profits that exceed some specified “normal” level. Excess profits might represent advantages a corporation has due to market concentration and lack of competition or due to an external event like a war, natural disaster, or a pandemic — or a combination of these factors.

For example, during WWI, WWII, and the Korean War, the US put in place excess profits taxes that were intended to discourage some corporations, such as weapons manufacturers, from receiving outsized benefits due to war.

In the 1980s, the US instituted a “Crude Oil Windfall Profits Tax,” but it was not a true tax on excess profits. Instead, it was an excise tax on domestic oil production applied to the difference between the market price of a barrel of oil and a base price.

There have also been proposals by some academics, advocacy groups, and federal policymakers for windfall profits taxes on corporations that have seen record profits during COVID-19 while many Americans have suffered the health and economic consequences of the pandemic.

What is the difference between a windfall profits tax and a corporate income tax?

There are several ways to structure a windfall profits tax. But the main difference between a windfall profits tax and a corporate income tax is:

A regular corporate income tax takes a percentage of a corporation’s total profits (revenues minus costs and other deductions allowed for tax purposes).
A windfall or excess profits tax is designed to get at those profits above a normal rate of return on investment or above the average profits during a baseline period.

And while a corporate income tax is levied on corporations’ profits every year, a windfall profits tax is generally a temporary tax in place for a specified period of time such as during a war or a period of high oil prices.

However, an excess profits tax could be implemented on a permanent basis if designed to tax profits above a specific rate of return or profit margin. In this case, the intent would be to capture some of the extraordinary profit a business receives by virtue of having a high degree of market power, control of some natural resource, or some other advantage, rather than just capturing the windfall profits received due to some external event like a war, pandemic, or natural disaster. In fact, a permanent tax may be a more effective policy since it is less likely to discourage investment as it is more stable and predictable.

Why is Governor Newsom proposing a windfall profits tax now?

Governor Newsom has drawn attention to the fact that oil companies have seen record profits recently while many Californians are struggling with high gas prices. He has suggested that oil companies are using their market power to price-gouge Californians. To the extent that this is true, it may be sensible for policymakers to recapture some of the undue profits oil companies have made and return them to Californians.

If policymakers do enact a windfall profits tax, California would likely be the first state to do so. However, some European countries have recently enacted various versions of temporary windfall taxes targeted at energy companies in response to rising prices in that sector.

Should California policymakers adopt a windfall profits tax on oil companies?

In general, it’s reasonable to tax excessive profits a corporation receives due to monopoly power or taking advantage of a crisis. Corporate profit margins have been at or near long-time highs, and not just for the energy sector. And corporate profits have accounted for a significantly larger share of price increases over the past few years compared to the average over the previous four decades, while many corporate executives have recently discussed on investor calls how they have benefited from keeping prices high.

However, if policymakers choose to move forward with this proposal, they should be prudent when designing it to minimize unintended consequences that could harm Californians, such as reductions in supply leading to even higher prices. The “Crude Oil Windfall Profits Tax” that was in place in the US from 1980 to 1988 — which was actually a tax based on the price of a barrel of oil instead of oil company profits — was not very successful, raising significantly less revenue than projected and contributing to a reduction in domestic oil production and an increased reliance on foreign imports.

Policymakers have many options for ensuring that corporations making excessive profits — including but not limited to oil companies — are paying their fair share in state taxes. Since the early 1980s, the share of corporations’ California income that they pay in state taxes has fallen by about half. This significant drop is a result of factors including reductions in the official corporate tax rate in the 1980s and 1990s as well as the enactment of multiple corporate tax breaks which disproportionately advantage large and multinational corporations, have uncertain economic effects, and cost the state billions in revenues each year.

Policymakers can eliminate or limit some of these costly tax breaks and increase the corporate income tax rate on the most profitable corporations. State leaders could also explore adopting a permanent tax on oil and gas extraction — known as a “severance tax” — as many other states already have. The additional revenue raised from these measures could then be used to help ensure all Californians can thrive in their communities.

How should California use the revenues from a windfall profits tax or other corporate tax increases?

Californians have been hit by rising costs of almost everything this year — from gas to groceries to rent and more. These price increases are especially harmful to Californians with low incomes, who struggle to afford the basics even in times when inflation is low. About 2 in 3 California households with incomes below $35,000 reported having trouble paying for their usual expenses in September and October 2022, as did nearly half of those with incomes between $35,000 and $75,000.

People with low incomes are hit hardest by inflation because they need to spend larger shares of their income to meet their basic needs like food, housing, and transportation, which have been subject to large increases. They also have less ability to change their spending patterns to reduce the impact of inflation on their budgets, such as by switching to lower-cost versions of products, since they are likely already purchasing the lowest-cost versions. Black and Latinx households may also be disproportionately harmed by inflation as they are more likely to be renters than homeowners and rental inflation is generally higher than overall inflation.

Policymakers should keep these facts in mind when deciding how to distribute the revenue from a windfall tax — which likely would be much smaller than recent rounds of tax rebates for Californians — or other strategies to improve the taxation of profitable corporations. Additionally, as state leaders work to craft the state’s 2023-24 budget, they should avoid giving away tax breaks to corporations and prioritize the pressing needs of Californians who are struggling the most with the costs of living, such as by protecting and strengthening cash assistance and other supports to help families with the costs of child care, health care, and housing.

Housing & Homelessness

Stay in the know.

Join our email list!

All Californians deserve to be able to put food on the table, pay the rent, and meet their basic needs. In short, no Californian should ever live in poverty.

Our state should aspire to be a place where no child or adult struggles to afford their basic needs, and there’s proof that it can be a reality. Recent data released by the US Census Bureau show that poverty — especially for children — significantly dropped nationally and in California in 2021, and would have been much higher if not for public supports.

That’s good news that may be unexpected as the effects of the pandemic and inflation are still very real for California children, adults, and families struggling to make ends meet. So many may be wondering: How did poverty rates drop across the US and California? And amid the pandemic no less.

The answer is simple: Poverty is a policy choice. When we choose to provide the basic support families and individuals need to thrive — as policymakers did via tax credits and other support — it really works.

Jump to question

What is the Supplemental Poverty Measure? And why is it important?
Poverty dropped from 2020 to 2021 nationally and in California — what’s behind the drop in poverty, especially for kids?
How did housing costs affect California’s poverty rate?
Why does it matter for everyday Californians that the poverty level dropped?
What were the primary forms of assistance people received to help meet their basic needs?
What can policymakers learn from the latest poverty data?

What is the Supplemental Poverty Measure? And why is it important?

Public policies work best when they are crafted with reliable data and provide positive and measurable results at both the macro level and personal level for our communities.

To measure poverty in California and the success of poverty reduction strategies, we rely on data from the US Census Bureau which routinely surveys households across the country. Each September the Census releases new data that show what share of the population experienced poverty in the prior year — under the official poverty measure and the Supplemental Poverty Measure — for California and states across the country, as well as the United States as a whole.

The Supplemental Poverty Measure (SPM) is vital because it provides a more accurate picture of poverty by accounting for local differences in the cost of housing and accounting for expenses that families must pay like health care and child care. The SPM also accounts for a wide variety of safety net supports, including those that are not direct cash payments — including tax credits, food assistance, and housing subsidies. The official poverty measure does not adjust for differences in the costs of living and ignores non-cash benefits. This makes the official poverty measure less useful to evaluate poverty in California as well as the effectiveness of poverty reduction measures.

Bottom line: The SPM captures how much it costs to pay for basic needs and the resources people have available to pay for them.

Want to learn more about poverty measures?

Check out the Budget Center’s guide to understanding poverty measures in California.

Poverty dropped from 2020 to 2021 nationally and in California — what’s behind the drop in poverty, especially for kids?

Multiple factors likely contributed to the drop in poverty year over year, including the improving job market. Data show too that strong public policies played an especially key role in the low poverty rates seen in 2021. To combat the uncertainties of the pandemic and our economy, state and federal governments provided additional support directly to people, and this made the difference for many families in having the resources to pay for food, housing, diapers, and other basic necessities.

Refundable tax credits were especially effective in boosting family resources in 2021, particularly because of temporary expansions of federal credits last year. Without these credits, overall poverty would have been significantly higher in 2021.

Unfortunately, the temporary expansion to the federal Child Tax Credit that lifted nearly 3 million children out of poverty nationally last year has now expired due to Congress’ failure to permanently expand the credit. The temporary expansion of the federal Earned Income Tax Credit (EITC) for workers without dependent children has also expired. But the evidence is clear — federal policymakers can significantly lower poverty by permanently expanding the Child Tax Credit and the EITC and state policymakers can build on the success of California’s refundable tax credits, the CalEITC and Young Child Tax Credit.

How did housing costs affect California’s poverty rate?

There is no question safe, stable housing is the foundation to families’ basic needs being met, yet the cost of housing is a challenge in many parts of the state — and high housing costs directly affect California’s SPM poverty rate.

California’s poverty rate in 2021 was higher under the Supplemental Poverty Measure than under the official poverty measure — and this has been true in every year that SPM poverty data have been available, going back more than 10 years. This is mainly because, as previously noted, the SPM accounts for local differences in housing costs, so that families need more resources to be categorized as above the SPM poverty threshold (and not experiencing poverty) in places where housing is expensive, which include many parts of California. These data point to another way policymakers can effectively reduce poverty — by addressing California’s housing affordability challenges, through boosting the supply of affordable housing, protecting tenants, and providing direct support to help people afford housing costs.

Why does it matter for everyday Californians that the poverty rate dropped?

The lower 2021 poverty rate shows that our economy and safety net can work better for everyday Californians when good policy and investment come together to help people meet their basic needs. It reveals how many people can meet basic expenses like housing, food, child care, and other necessities — and it also reveals where our public policies are sorely failing.

A lower poverty rate under the Supplemental Poverty Measure means fewer families worrying about where their next meal comes from or wondering if they can keep the lights on. And while the encouraging Census data does not diminish the fact that the high cost of housing and recent high inflation have made it even more difficult for families to flourish in California communities, it does help us understand how we can build on public policies that work to help families now and in the future.

Poverty data from 2021 show that when increased state and federal support was provided, more people were able to count on having enough resources to make ends meet.

What were the primary forms of assistance people received to help meet their basic needs?

Safety net programs that help people pay for food, health care, housing, child care, and other basic needs are essential to the well-being of our people and state.

Current safety net programs — including those used to successfully lower poverty rates in 2021 — are a combination of state and federal supports aimed at helping individuals and families pay for basic needs. These programs can be divided into three categories including cash supports, tax credits, and non-cash benefits.

Cash support through tax credits: Federal Child Tax Credit and EITC, state CalEITC and Young Child Tax Credit, as well as child and dependent care tax credits and pandemic stimulus payments.
Other cash supports: Social Security, TANF (known as CalWORKs in California), Supplemental Security Income/State Supplementary Payment (SSI/SSP), Unemployment Insurance.
Non-cash benefits: SNAP food assistance (known as CalFresh in California), Supplemental Nutrition Program for Women, Infants, and Children (WIC), school meals, energy assistance, and housing subsidies like federal Housing Choice Vouchers.

Together, these programs significantly reduced poverty, particularly child poverty, in California in 2021.

Additional programs that help reduce the out-of-pocket costs people must pay for necessary expenses — particularly Medi-Cal health coverage and subsidized child care — also reduced the number of Californians experiencing poverty last year.

It’s important to remember that each program has unique and sometimes burdensome processes to receive assistance. Moving forward, policymakers should streamline and strengthen existing programs in order to further reduce poverty every year.

What can policymakers learn from the latest poverty data?

First and foremost, the latest Census data show us that poverty is a policy choice — we can choose to provide support needed so that families and individuals can thrive.

Federal and state governments have effective tools — like refundable tax credits — for getting cash to people and rapidly reducing poverty. When we prioritize the health and well-being of everyday people regardless of their race, age, or immigration status the result will be a country where far fewer people experience poverty and its devastating consequences.

State and federal policymakers should boost investment in the policies and tools we know are effective in helping families and individuals meet their basic needs to end poverty in California and across the country.

Housing & Homelessness

Stay in the know.

Join our email list!

A California where all individuals – regardless of zip code, race, gender, immigration status, or education status – have the resources to provide for their needs through unrestricted cash payments as well as unconditional, easily accessible support through the safety net. That is the vision of Guaranteed Income, also sometimes called basic income or guaranteed basic income. And government has a critical role in building an income floor below which no one can fall. As the COVID-19 pandemic and economic crisis amplified long-standing racial, gender, and income inequities in California and the US, as well as highlighted the critical need for bold investments to strengthen the safety net so that all people can meet basic needs, there is a growing and renewed movement around making Guaranteed Income a reality.

But policy and implementation questions abound around how it can be done in California. This is the second of a two-part Q&A on Guaranteed Income with this report focused on practical questions about how a basic income could be implemented through state policy and how that could complement and strengthen existing public supports so that more people can meet their basic needs and thrive. For questions on what Guaranteed Income is, what values it supports, and where it has been tried in California and the US, take a look at the Budget’s Center’s part one Q&A: Understanding Guaranteed Income & Safety Net Support for Californians.

Jump to Question

What are key issues for policymakers and community leaders to consider when implementing Guaranteed Income through ongoing public policy?
How can cash payments work together with other kinds of public supports and safety net services to help children, families, and individuals meet their basic needs and not live in poverty?
What options does California have at the state level for delivering Guaranteed Income payments?
How could Guaranteed Income cash payments be funded at the state level?
Who could state or local policymakers consider targeting with Guaranteed Income payments?
What are some examples of current policy proposals that would implement aspects of Guaranteed Income through state policy?

What are key issues for policymakers and community leaders to consider when implementing Guaranteed Income through ongoing public policy?

Implementing Guaranteed Income in California and across the US through policy means both providing new or expanded unrestricted cash support to individuals and improving existing safety net programs in ways that align with Guaranteed Income values. These values include recognizing that basic income should be guaranteed regardless of work status or any other status, providing unrestricted cash, and minimizing red tape and burdensome requirements for participants.

Making improvements within existing safety net programs is an important approach to implementing Guaranteed Income values in ongoing policy, with opportunities particularly to streamline access and remove burdensome or inequitable participation requirements, as discussed in our part one Understanding Guaranteed Income Q&A.

Significantly increasing cash support to individuals as an ongoing policy, at the state or local or federal level, requires thinking about options and tradeoffs in several areas, including:

Problem-solving how payments interact with or wrap around other public supports to maximize economic security for participants and efficient use of state or local funds
Choice of administrative systems to use for identifying eligible participants and delivering cash payments
Source of ongoing revenue to pay for the cash support
Scale of the program, including which individuals or groups to prioritize for eligibility

These issues are discussed in more detail throughout this Q&A.

How can Guaranteed Income cash payments work together with other kinds of public supports and safety net services to help children, families, and individuals meet their basic needs and not live in poverty?

Most California individuals and families with low incomes who would especially benefit from Guaranteed Income payments are also eligible for other types of public supports including:

Food assistance, such as CalFresh or WIC
Health insurance, such as Medi-Cal
Other cash supports, such as CalWORKs or SSI/SSP
Housing subsidies, such as Housing Choice Vouchers or LIHTC housing
Student financial aid, such as Pell Grants and Cal Grants
Refundable tax credits, such as federal EITC and Child Tax Credit, and state CalEITC and Young Child Tax Credit

These supports are vital in helping people meet their basic needs – California’s poverty rate would be more than one and a half times as high without them, according to data from the California Poverty Measure. But these supports are not available to all Californians and on their own are often not sufficient to cover the costs of living in California. In fact, about 1 in 6 Californians were still living in poverty in 2019, after accounting for safety net programs – demonstrating the need for additional support such as Guaranteed Income payments.

To make sure Guaranteed Income truly can improve an individual’s or family’s economic security, it is important for cash payments to add to a family or individual’s total resources, on top of other available supports, and not reduce the total support they receive from all sources.

Doing this in practice can be challenging. Eligibility for other safety net programs often depends on how much income someone has, and even a slight increase in income from Guaranteed Income payments can sometimes make a recipient lose eligibility or get reduced benefits from other public supports. Specific rules for how Guaranteed Income payments affect eligibility are different for different supports. Some of these rules can be changed by local or state policymakers, while others are set by the federal government, since federal dollars provide part or all of the funding for most existing public supports available to Californians with low incomes. Different strategies for structuring and administering Guaranteed Income can help minimize reductions in other supports, often with tradeoffs in terms of which supports are most affected and how well administrative structures serve other Guaranteed Income priorities, like reaching the target population or allowing for recurring payments.

Thinking through the interactions of Guaranteed Income payments with other public supports is important for two reasons: first, to make sure individual recipients fully benefit from Guaranteed Income through increased economic resources; and second, to make sure Guaranteed Income funding is spent efficiently, with as much funding as possible going toward increasing recipients’ total family resources rather than replacing other supports that could have been paid for with federal dollars or other state or local funds.

More in this series

See the Budget Center’s part one Q&A: Understanding Guaranteed Income & Safety Net Support for Californians.

What options does California have at the state level for delivering Guaranteed Income payments?

California can most feasibly and efficiently provide Guaranteed Income cash payments through existing systems that reach millions of children, families, and individuals with low incomes.

One option is to use the state’s tax system, which provides tax refunds to millions of Californians with low incomes each year. A key advantage of using the tax system is that it would help ensure that the Guaranteed Income payments would not reduce the assistance people get from other public supports, such as CalFresh, as long as the payments were provided annually, since lump-sum tax refunds do not affect eligibility for most safety net supports. However, a key drawback of using the tax system is that some Californians with low incomes would likely miss out on the payments because they aren’t required to file taxes or because they don’t have a Social Security number or Individual Taxpayer Identification Number, which is required to file. Another disadvantage of using the tax system is that many people pay for-profit tax preparers to file their taxes, so some portion of the Guaranteed Income payments would go to tax preparers rather than the intended recipients.

Another potential option for providing Guaranteed Income payments is to piggyback on the systems the state uses to distribute payments for existing safety net programs such as CalWORKs, CalFresh, and SSI/SSP, by providing additional cash payments to individuals through these same systems. This approach would help address some of the challenges with providing cash through the tax system because it would reach Californians who don’t file taxes and be available without tax preparation fees. However, a key disadvantage is that Californians in need who are not already eligible for and accessing existing programs would be left out — unless a new program were developed to reach them. Addressing the changes that would be needed to state IT systems, as well as implications of payments for recipients’ eligibility for existing programs (as described in question 2), would also require problem-solving.

In the spring of 2021, California made use of both of these approaches simultaneously to provide cash payments on a one-time basis through the Golden State Stimulus I to around 6 million households with low incomes. Specifically, these payments went to tax filers claiming the CalEITC as well as recipients of CalWORKs, SSI/SSP, and the Cash Assistance Program for Immigrants (CAPI).

How could Guaranteed Income cash payments be funded at the state level?

California would need to raise significant new revenues to fund meaningful Guaranteed Income payments if they were provided to all Californians with low incomes because the amount needed would far exceed the resources available in the state’s budget, even given strong recent revenues projected in the proposed 2022-23 budget. For example, providing $1,000 per month to the 6.3 million Californians who couldn’t meet basic needs in 2019 would cost $63 billion annually – more than California spent on K-12 schools and community colleges that year. This cost could go up by tens of billions of dollars in years when many Californians lose jobs, face health and economic crises, and fall into poverty.

There are a number of important issues to consider in raising new revenues for a California Guaranteed Income payments policy. Most notably, California’s constitutional spending limit – the Gann Limit – restricts how much the state can spend each year and limits the state’s flexibility in spending additional revenues over that limit. Given that Gann limit spending restrictions are very likely to be triggered in the coming years, using new revenues to fund sizeable Guaranteed Income payments would likely not be feasible unless the Gann Limit were changed or eliminated, or the revenues raised for them were excluded from the Gann limit – all of which would require voter approval.

Another important issue to consider is how to ensure that sufficient funds are available for a sizable Guaranteed Income policy in times of recession. Though state revenues have remained strong during the economic disruption of COVID-19, revenues have declined dramatically during past recessions. Because California cannot spend more revenue than it has, it could be harder – if not impossible – to maintain state funding for large Guaranteed Income payments precisely when more Californians would likely need economic support.

One way California could implement a Guaranteed Income policy without needing to generate major new revenues would be to target payments to specific groups of Californians in need, which would lower the cost of the policy, making it feasible to fund with existing resources. One sensible strategy would be to provide Guaranteed Income payments to people who are not already benefiting – or not benefitting enough to meet basic needs – from other public supports. Locally-funded Guaranteed Income policies could use a similar approach. In this way, the Guaranteed Income policy would wrap around existing programs, helping to establish an income floor across programs by filling in gaps in eligibility and aid.

more in this series

Watch our Empower event: The Future of Cash Supports to learn about the future of cash supports in California.

Who could state or local policymakers consider targeting with Guaranteed Income payments?

Californians who could particularly benefit from Guaranteed Income payments because they often fall through the cracks of existing safety net services and supports include adults who are not supporting children in their homes, Californians who are undocumented or live in mixed-status families, people who were formerly incarcerated, transition-age youth in foster care or exiting the foster care system, domestic violence survivors, and people experiencing homelessness. Guaranteed Income payments that reach large numbers of Black Californians, indigenous people, and other Californians of color can help the state and local governments advance racial equity by providing support to individuals who have been blocked from income and wealth building opportunities through centuries of racist policies and practices.

What are some examples of current policy proposals that would implement aspects of Guaranteed Income through state policy?

Many proposals moving through the state budget and policymaking process for 2022-23 incorporate Guaranteed Income components or values and could help children, families, and individuals with low incomes have additional cash and resources to pay for food, housing, and other day-to-day life needs.

Some examples of current proposals to increase unrestricted cash payments include:

Providing a larger minimum refundable tax credit to low-income workers eligible for the CalEITC
Backfilling the expired expanded federal Child Tax Credit by providing a large per-child tax credit payment to low-income parents eligible for the CalEITC
Providing a flat refundable tax credit for young adults who are former foster youth
Providing a monthly cash payment for three years to Californians who age out of the Extended Foster Care Program
Accelerating the start of the proposed boost to the state-funded SSP payments for SSI recipients
Increasing CalWORKs grants above the deep poverty threshold for families that include a family member ineligible for assistance
Providing unrestricted state-funded “baby bonds” savings accounts, accessible at age 18, for children in foster care or whose parent has died from COVID-19

Some examples of current proposals to improve existing safety net programs by adopting Guaranteed Income values, such as unconditional support and streamlined access to health care, food, and economic support, include:

Including undocumented Californians age 26 to 49 (the final excluded age group) in eligibility for Medi-Cal
Including all undocumented Californians in eligibility for nutrition assistance through the California Food Access Program, which provides benefits identical to CalFresh
Allowing children ages 0 to 5 who enroll in Medi-Cal to maintain continuous eligibility without having to resubmit paperwork
Reforming the CalWORKs Work Participation Rate policy to remove the financial incentive for counties to push CalWORKs parents into paid employment instead of addressing longer-term barriers to work and well-being
Removing the requirement that parents document at least $1 in earnings to be eligible to claim the Young Child Tax Credit

These proposals represent potential next steps in implementing Guaranteed Income through state policy. Taking these kinds of steps now – while working toward longer-term improvements and investments at the federal, state, and local levels – can move California toward a time when all Californians are respectfully supported with the resources they need to meet their basic needs and thrive.

Housing & Homelessness

Stay in the know.

Join our email list!

Introduction

The COVID-19 pandemic and economic crisis amplified long-standing racial, gender, and income inequities in California and the US and highlighted the critical need for bold investments to strengthen the safety net so that all people can meet basic needs, crisis or not.

In particular, the pandemic accelerated a growing movement around Guaranteed Income – the idea that government should provide people with unconditional cash support to ensure that everyone has a minimum level of income to meet basic needs. This once radical concept went mainstream during the pandemic as the federal response to the crisis centered on cash-based policies, including recovery rebates, new federal unemployment benefits, and a significantly expanded federal Child Tax Credit. The success of these policies, together with emerging success stories from local Guaranteed Income pilots that started before the pandemic, helped build energy around providing unconditional cash as a permanent public policy.

Understanding what Guaranteed Income is, what values it promotes, and what it means for our existing safety net is important as policymakers and advocates look to guide the state in recovering from the pandemic and building an equitable California for its people and communities. This is the first of a two-part Q&A series on Guaranteed Income and California’s safety net; part two will focus on key questions about implementation of Guaranteed Income.

Jump to question

What is Guaranteed Income and how does it compare to Universal Basic Income and to other safety net supports?
What are the origins of Guaranteed Income in this US?
What are the key ideas and values behind Guaranteed Income and providing direct cash support to people?
Are there opportunities to improve existing safety net programs and public supports in ways that align with promising features of Guaranteed Income?
Where has Guaranteed Income been tried in California and around the US?
What do recent changes to the federal Child Tax Credit show us about opportunities to expand unconditional cash support to families, similar to Guaranteed Income?

What is Guaranteed Income and how does it compare to Universal Basic Income and to other safety net supports?

Guaranteed Income (sometimes called basic income or guaranteed basic income) is an unconditional, often recurring cash payment provided by the government intended to help build an income floor below which no one can fall. Unlike Universal Basic Income (or UBI), which is envisioned to reach all people – even those with significant income or wealth – Guaranteed Income is intended to target communities most in need of cash. In this respect, Guaranteed Income is similar to other need-based cash supports and safety net programs, which aim to help people meet basic needs.

Proponents of Guaranteed Income envision it as more accessible to people than existing safety net programs because it comes without the policy and administrative strings often attached to other supports, such as work requirements – though as discussed below, there are also opportunities within existing safety net programs to remove barriers and improve access. Guaranteed Income is also often envisioned to reach Californians who are blocked from existing supports due to discriminatory federal and state policies, such as people who are undocumented or people who were formerly incarcerated.

What are the origins of Guaranteed Income in the US?

The modern concept of a guaranteed income in the US can be traced to racial and gender justice movements of the 1960s. The Black Panther Party’s platform declared that government has a responsibility to guarantee everyone a job or a minimum income. Similarly, Martin Luther King, Jr. called for a job for everyone who wants to work or a guaranteed income in his final book, Where Do We Go From Here? Chaos or Community. In addition, the National Welfare Rights Organization, which was led primarily by Black mothers, fought to change racist and sexist narratives around welfare and argued that everyone should be guaranteed a decent standard of living as a right, regardless of whether they work for pay.

What are the key ideas and values behind Guaranteed Income and providing direct cash support to people?

Three key ideas included in the concept of Guaranteed Income have a strong basis in equity values that guide how a society can enable people to live and thrive in their communities. Research evidence also backs up the effectiveness of these approaches for supporting people in meeting their basic needs:

1. Recognizing that basic economic security should be guaranteed regardless of work status: All people should have access to the support they need to meet their basic needs. This core value should hold firm regardless of whether an adult has a job or not and whether a child’s parent or guardian is working for pay or not. Work requirements have a long racist history in the US, directly contributing to racial inequities in who struggles to meet basic needs. Yet many public supports in the US require that individuals or families show that they have earned income or have completed work requirements in order to be eligible for support. The share of public support that is only available to people who are working has increased in recent years, blocking access for many individuals and families at the highest risk of experiencing homelessness, hunger, and other hardships.

Research shows that most California households with low incomes are already working anyway – they simply do not earn enough to get by because of low wages combined with unaffordable costs for housing, child care, and other necessities. Research on welfare-to-work programs also has found that work requirements were not linked to meaningful improvements in stable employment or reductions in poverty for program participants. Providing basic needs support without excluding people who are not working for pay is a more effective and more equitable policy approach.

2. Providing unrestricted cash support: In terms of values, unrestricted cash support respects the dignity and autonomy of recipients by allowing people to choose for themselves the best way to spend their resources. Also, when support is provided as unrestricted cash, families and individuals have the flexibility to address whichever needs are most pressing. In this way, cash can be more effective and efficient than providing support in the form of in-kind benefits (like food or clothing) that may or may not address a family’s most urgent current needs.

Studies have demonstrated that unrestricted cash support for households with low incomes is linked to better physical health, mental health, and school achievement, and increases in children’s employment and earnings in adulthood. Emerging research specifically from recent Guaranteed Income pilot projects has also shown promising results.

3. Minimizing red tape and burdensome requirements for participants: Simplifying and streamlining access to supports is important to ensure that complicated paperwork and burdensome participation requirements do not block individuals and families from receiving the support they need.

Research in California and nationally documents that people who are eligible for support often fall through the cracks simply because of bureaucratic processes that are difficult to navigate. In fact, burdensome administrative processes have often been intentionally deployed to block eligible people from accessing public support – particularly Black and brown people. Removing these barriers is important to make public support systems more equitable.

more in this series

See the Budget Center’s part two Q&A: Implementing Guaranteed Income Through Cash and a Strong Safety Net

Are there opportunities to improve existing safety net programs and public supports in ways that align with promising features of Guaranteed Income?

Existing public safety net programs are critical to helping millions of Californians make ends meet. Safety net programs that help people meet their needs for health care, food, housing, child care, and other basic needs provide support to more than 1 in 3 Californians every year, and research shows that California’s poverty rate (under the California Poverty Measure) would be more than one and a half times as high without these important public supports.

There are many policy and administrative opportunities to apply key ideas from Guaranteed Income to improve these existing public supports – particularly in terms of streamlining access and removing burdensome or inequitable participation requirements. For example, in the early stages of the COVID-19 pandemic temporary changes were adopted for supports such as CalWORKs (or TANF), CalFresh (or SNAP), and Medi-Cal (or Medicaid) that reduced required paperwork and office visits and removed work requirements in order to facilitate access to needed assistance. Maintaining and building on these types of changes would make existing supports more equitable and would align with Guaranteed Income values and practices. Proactively coordinating eligibility and application processes across the systems that administer different supports would also streamline access to needed resources. Some of these changes can be made by state and local policymakers, while others would require action by federal policymakers.

Where has Guaranteed Income been tried in California and the US?

Guaranteed Income has not yet been implemented at scale as an ongoing federal, state, or local policy, but dozens of smaller-scale pilots are underway in California and the US, typically spearheaded by mayors or other local leaders. (See maps compiled by Mayors for a Guaranteed Income and the Stanford Basic Income Lab.) Two of the most well-known recently completed pilots include the Magnolia Mother’s Trust in Jackson, Mississippi, and the Stockton Economic Empowerment Demonstration (SEED), in Stockton, California.

At the state level, California recently became the first state to provide state funds to support local Guaranteed Income pilots. In 2017, Hawaii was the first state to explore Guaranteed Income as a possible state policy through a “basic economic security working group,” and Alaska has had a Universal Basic Income-like policy in place since 1982 – the Alaska Permanent Fund, which pays annual dividends to every state resident based on state oil revenues.

What do recent changes to the federal Child Tax Credit show us about opportunities to expand unconditional cash support to families, similar to Guaranteed Income?

Recent changes to the federal Child Tax Credit show how policymakers can modify existing safety net programs to make them more like Guaranteed Income. The American Rescue Plan Act, signed into law in March 2021, made the Child Tax Credit fully available to families with the lowest incomes – without any work requirements. This change is expected to extend the credit to 27 million more children, essentially establishing a Guaranteed Income for families with children in the US, helping to ensure that all children can grow up with support to meet their basic needs, whether or not their parents or guardians are working for pay. Although this change was put into place for just one year, advocates are working to make it permanent and to ensure that the credit is permanently extended to immigrant children who were excluded during the Trump Administration, so that all families with children can count on having a guaranteed income each year to meet their basic needs.

Housing & Homelessness

Stay in the know.

Join our email list!

Introduction

Millions of California workers turned to unemployment insurance benefits over the last 18 months after suddenly losing their jobs – a reality that can hit workers, families, and communities, pandemic or not. In trying times, everyone should have the opportunity to buy food, pay rent, and care for their families as they look for new, stable employment. State and federal unemployment insurance benefits are the lifeline that help families keep their homes and put food on the table.

But with federal unemployment benefits expiring soon, and families seeing a drop in support, California policymakers must develop a plan to finance an increase in state unemployment benefits. This will allow workers – particularly those paid low wages and struggling to find gainful employment that allows them to afford the cost of living in California – to support their families any time they lose a job, not just when the federal government steps in to help.

Understanding the role of unemployment benefits in workers’ lives, how benefits are financed, and the true costs of covering benefits is key as policymakers look to guide the state in recovering from the pandemic and building an equitable California.

Why are unemployment benefits important for Californians?

Losing a job is devastating for working Californians and their families. Suddenly losing a primary source of income and not knowing how long it will take to find new work to restore income affects the health and social well-being of families and their community. That’s why it’s important for policymakers and businesses to share responsibility in making sure that workers have a strong safety net to turn to when layoffs or a recession hit, including access to unemployment benefits that help workers pay for rent, food, and other basic needs while they search for new employment.

State unemployment benefits – supplemented with temporary federal unemployment benefits – have been helping millions of Californians pay for basic needs while they cannot work as COVID still moves through homes and communities. Without the combination of state and federal benefits, many workers would not be able to put food on the table or keep their homes.

How much support do unemployment benefits provide Californians?

California’s unemployment benefits are a lifeline when someone suddenly loses a job, but the benefits on their own don’t provide enough money for most workers to support their families while they search for new jobs. The state’s benefits replace only about half of a worker’s lost earnings, up to a maximum of $450 per week – the equivalent of living off of $23,400 per year.

For many California workers, it’s not possible to afford the cost of living on half of their income, and economic barriers only further stack up for workers paid low wages. Workers in low-wage jobs typically have a hard time making ends meet even when working full-time and are blocked from opportunities to build savings to turn to in times of crisis. For example, the majority of California renters with low incomes who spend at least half of their income on rent would have to spend their entire unemployment benefit on rent alone if they had no other income, leaving nothing at the end of the month for food or other basic needs.

Workers of color, including American Indian, Black, Latinx, and Pacific Islander Californians – and particularly women – are especially at risk of being unable to support their families while out of work because many have been segregated into low-paying jobs where unemployment benefits are too low to cover basic living costs.

How much support are unemployment benefits providing Californians during the pandemic, and what will happen on September 6 when federal unemployment support ends?

The average Californian has been getting just $319 per week from state unemployment benefits during the pandemic, which amounts to annual earnings of $16,588 – well below what’s needed to support a family no matter where they live in the state. However, recognizing that state unemployment benefits don’t provide enough money to cover basic living costs, the federal government supplemented workers’ state benefits throughout most of the pandemic with an additional $300 to $600 per week. Together, these benefits fully replaced the earnings many workers had lost, helping keep food on the table and preventing evictions for families as they endured months of unemployment. State and federal unemployment benefits also supported businesses and the economy by making sure that millions of people who had lost work could keep spending money and supporting businesses in their communities.

On Labor Day – September 6, 2021 – these additional federal unemployment benefits will expire, and Californians who remain out of work due to the pandemic – as well as those who lose work in the future – will have to get by on state unemployment benefits alone. This will make it harder – if not impossible – for many Californians to meet basic needs, particularly Black Californians, who persistently face high rates of unemployment due to hiring discrimination and other barriers to work created through centuries of structural racism.

Who pays for unemployment benefits in California?

California businesses finance unemployment benefits for their workers, and businesses play a critical role in determining how much support this vital safety net provides to Californians. Specifically, California’s unemployment benefits are financed through payroll taxes paid by employers, which generate revenues that are deposited into the state’s unemployment insurance fund. Revenues accumulate in this fund and are available to pay unemployment benefits whenever workers lose their jobs through no fault of their own. How much an employer pays into the fund each year is determined by applying a payroll tax rate based on schedules in state law to a portion of each employee’s annual pay – called the “taxable wage base.”

Each state determines its payroll tax rates and taxable wage base. In California, employers pay payroll taxes based only on the first $7,000 of each employee’s annual pay. That’s the lowest “taxable wage base” allowed under federal law, and just five states have bases this low. California’s base has been frozen at just $7,000 since 1983, and has never been increased to keep up with inflation or rising wages. Consequently, businesses currently pay payroll taxes on just 12% of the average California worker’s earnings – the smallest share in the nation. This severely limits the amount of revenue California can generate for unemployment benefits.

California’s low taxable wage base essentially amounts to a tax break for the state’s businesses. It means that for decades, California employers – particularly large, profitable corporations – haven’t been required to cover the true cost of state unemployment benefits, leading to chronic underfunding of the state’s unemployment fund. This is why California had to borrow billions of dollars from the federal government to pay for unemployment benefits during the pandemic – a repeat of what happened during the Great Recession. It also makes it virtually impossible for state policymakers to increase unemployment benefits so that they cover working families’ basic living costs.

Over the next decade, state policymakers do not need to take any action to ensure that businesses share in the responsibility for paying down the unemployment fund debt – other than avoiding a shift in responsibility for the debt to the state. Under federal law, California businesses will automatically and very gradually pay off the principal of the federal loans the state took out to pay for unemployment benefits during the pandemic through small increases in the federal payroll tax rate. (California will have to pay the interest on these loans.) Since the debt resulted from decades of businesses not paying the true costs of unemployment benefits before the pandemic, businesses will now be required to pay more in the years to come to make up for insufficient contributions.

Longer-term, California’s leaders should permanently modernize the state’s unemployment insurance system to 1) ensure that businesses pay the true costs of benefits for their workers – avoiding debt – and 2) make it possible to increase benefits so that workers can meet basic needs and provide for their families during layoffs or recessions. This can be achieved by substantially increasing the taxable wage base for employer payroll taxes so that it applies to a much larger portion of workers’ earnings and adjusting that base annually to keep up with rising wages.

Housing & Homelessness

Stay in the know.

Join our email list!

Introduction

Policymakers are preparing to make decisions on the 2021-22 state budget — and just as there are signs the pandemic is starting to ease in California. Still, data and experience show the economic and health effects of the recession will linger on for Californians, especially people in low-wage jobs, families in low-income households, and Californians of color. How can policymakers address the challenges and barriers for Californians now and meet their ongoing needs, look beyond this budget year to equitably allocate the state’s resources, and confront the widening wealth and income inequality in our state?

Our new Q&A shares key information to keep in mind as policymakers make decisions on behalf of Californians and our local communities.

1. Governor Newsom will soon release his “May Revision” budget proposals. What is the May Revision, why is it important, and how does it relate to the 2021-22 state budget that the Legislature will pass in June?

State law requires California governors to revise their proposed budget for the upcoming fiscal year by May 14. This update, known as the “May Revision,” is a key part of the annual state budget process that determines policy priorities and the allocation of resources to support Californians and local communities. Governors use the May Revision to unveil new proposals or to amend or withdraw the policy recommendations they advanced in January as part of their initial proposed spending plan. In addition, the May Revision:

Updates the governor’s revenue forecast, which estimates the amount of funding that state leaders will have to invest in public services and systems;
Adjusts key budget-related estimates, such as the projected number of K-12 students and the number of people who are expected to receive health care services through Medi-Cal;
Revises spending estimates across a broad range of programs and systems, from K-12 schools and higher education to health and human services and the state prison system.

The May Revision gives governors a high-profile opportunity to influence budget and policy decisions by promoting their own priorities for California just weeks before the Legislature’s June 15 deadline to pass the budget bill. The May Revision also sets the stage for budget negotiations in late May and early June between the governor and the leaders of the state Senate and Assembly (collectively known as the “Big 3”), who must reach an agreement on the contours of the final budget. While the 2021-22 state budget will incorporate many of Governor Newsom’s May Revision proposals, it will also reflect many of the Legislature’s own spending and policy priorities.

2. State revenues have been coming in ahead of projections for several months now, despite the pandemic and the recession. Why is that? Who is continuing to do well during this devastating public health emergency, and who has been left behind?

The state’s main revenue sources, the personal income tax, sales tax, and corporation tax, have all performed better than expected for a few main reasons. First, Californians with high incomes — who contribute a large share of personal income taxes due to the state’s progressive income tax system — have largely been shielded from job and income losses during the pandemic and have benefited from the strong growth in the stock market. Additionally, the federal relief to individuals and businesses has buoyed consumer spending and business investment and, in turn, sales tax revenues. Finally, many large corporations have been able to weather the crisis and some have even seen large profit increases.

Meanwhile, Californians in low-paying jobs, and particularly Black and Latinx Californians and women, have borne the brunt of the job and income losses and other hardships. For example, about 3 in 5 Black and Latinx households lost earnings during the pandemic, compared to less than half of white and Asian households. More than 1 in 3 California women lived in households that struggled to pay the bills last fall, and Black and Latinx women were the most likely to live in households that struggled to pay the bills, stay current with their rent or mortgage, and afford enough food.

3. Earlier this year, the governor projected a $15 billion budget “windfall,” and since then state revenues have continued to surge. The federal American Rescue Plan also will bring in another $26 billion in direct fiscal aid to the state. How should the state spend these funds?

In January, Governor Newsom proposed a $165 billion spending plan that included a $15 billion budget “windfall.” Moreover, in recent months state revenues have continued to outpace projections by billions of dollars. These gains are the result of stronger-than-expected economic conditions, the state’s progressive tax system, and the fact that state leaders underestimated revenues in this year’s budget. This also means that state spending is trending back to where it might be expected to be in a normal year. But, this is clearly not a normal period for California and, while economic projections are for continued growth, the state is facing significant needs stemming from the public health and economic effects of COVID-19.

In addition, the American Rescue Plan will deliver $26 billion in direct fiscal aid to the state. These funds are one-time and can be spent over multiple years.

State policymakers should use unanticipated state revenues and the new federal aid to:

Continue to address the ongoing public health crisis;
Provide assistance to the households and organizations harmed by the pandemic, particularly people of color that were disproportionately affected;
Fill gaps in federal assistance, particularly for people who are undocumented and have been excluded from federal aid;
Invest one-time dollars in ways that achieve longer-term impact, such as capacity-building and infrastructure investments in child care, behavioral health, housing, and homelessness, as well as capitalized operating reserves that can support future investments; and
Restructure vital state supports so that they include the people previously excluded because of ableist, ageist, racist, sexist, and classist policies that have blocked Californians’ access to benefits, security, and opportunity.

4. The governor’s January proposal included a lot of “one-time” investments. California is also receiving substantial federal “one-time” funding. Yet, the state and Californians had significant ongoing needs pre-COVID, and the pandemic exposed and created a set of greater needs. What are some key ongoing needs and investments that state leaders need to address?

One-time spending is not adequate to support Californians who struggled to meet their basic health, housing, and child care needs even before the pandemic, with an inequitable burden on Black and brown Californians and those with low incomes. Nor is one-time spending adequate to support critical systems and service providers that face ongoing operating costs and need long-term funding commitments to responsibly budget and plan. Clear needs for boosted ongoing state support include:

Investing in local efforts to address homelessness through reliable, flexible state funding at a scale that responds to the scale of the crisis.
Addressing housing affordability by focusing on the needs of California’s low-income renters — through direct assistance, robust legal aid and enforcement, and affordable housing production.
Expanding comprehensive Medi-Cal coverage to all undocumented Californians who are otherwise eligible, with special urgency to cover seniors, and ensuring that all income-eligible Californians have access to nutrition assistance regardless of immigration status.
Providing ongoing funding for local public health departments to ensure they can respond to COVID-19 and other threats to population health.
Bolstering funding for mental health care and substance use treatment and expanding the behavioral health workforce.
Addressing the long-standing underfunding of subsidized child care to ensure all families have access to affordable care and providers are paid fair rates.

State leaders need to be bolder in committing to ongoing support — while also boosting support to a level that meets the scale of need — for the systems and services Californians rely on to meet basic needs and that are vital to public health and well-being. State leaders should seek to increase revenues in equitable ways and make structural changes to revenue and budget policies to ensure ongoing investments can be made to support Californians.

5. California is home to tremendous wealth yet the needs of Californians in low- and middle-income households are vast and Californians of color have been blocked from economic and health opportunities for generations. Why has there been so little urgency among state policymakers to consider new revenues to address ongoing needs and confront the widening wealth and income inequality that preceded and was exacerbated by the pandemic?

Raising new state revenues to support ongoing investments is often an uphill battle, even when there are significant needs for Californians and communities. This year, several factors are further dampening the sense of urgency among policymakers for new revenues. The better-than-expected revenues the state has been receiving — largely due to the continued prosperity of wealthy households — and the influx of federal relief funds have given state leaders more options to balance the budget for the upcoming fiscal year. In subsequent years, options may be more limited to balance the budget, and policymakers may need to consider how to increase revenues, reduce spending, or a combination of these and other strategies. Additionally, the strong revenue growth has raised concerns that revenues are approaching the state’s constitutional spending limit, known as the “Gann Limit.” If this limit is exceeded, policymakers must spend revenue over that limit in specific ways, so they lose the flexibility to spend those funds to best address the needs of Californians. The looming gubernatorial recall likely creates even more hesitancy among state leaders to advance tax policy changes.

These factors combine to create an especially challenging year for the prospect of raising revenue. However, many of the needs faced by Californians — particularly for Californians of color, who have been disproportionately affected by the health and economic consequences of the pandemic — existed long before this crisis and will exist long after if the state does not make the investments required to address those needs. State policymakers can take steps that raise revenues to support those investments and make the tax and revenue system more equitable for all Californians, not just the wealthy few.

Housing & Homelessness

Stay in the know.

Join our email list!

Understanding Homelessness in California & What Can Be Done

jump to question

How does homelessness affect the people who experience it?

How many people in California experience homelessness?

Who experiences homelessness in California?

MORE in this series

What are the key drivers of homelessness in California?

What public systems and supports can address the needs of people experiencing homelessness or play a role in preventing homelessness?

What are effective, evidence-based ways to address homelessness?

State funding to address homelessness has recently increased, but the number of people experiencing homelessness did not decrease. Why is that the case?

You may also be interested in the following resources:

Policymakers’ Inaction Will Force Thousands of Formerly Unhoused Californians to Lose Their Homes

Protecting Progress: State Housing and Homelessness Funding Must Continue

Stay in the know.

Jump To:

1. What are the origins of the Gann Limit?

2. How does the Gann Limit work?

3. Why does this spending limit matter today?

4. How does the Gann Limit threaten ongoing investments to help Californians thrive?

5. Does the Gann Limit affect local governments and school districts?

6. What can state leaders do about the Gann Limit?

You may also be interested in the following resources:

Policymakers’ Inaction Will Force Thousands of Formerly Unhoused Californians to Lose Their Homes

Protecting Progress: State Housing and Homelessness Funding Must Continue

Stay in the know.

jump to question

What is a windfall profits tax?

What is the difference between a windfall profits tax and a corporate income tax?

Why is Governor Newsom proposing a windfall profits tax now?

Should California policymakers adopt a windfall profits tax on oil companies?

How should California use the revenues from a windfall profits tax or other corporate tax increases?

You may also be interested in the following resources:

Policymakers’ Inaction Will Force Thousands of Formerly Unhoused Californians to Lose Their Homes

Protecting Progress: State Housing and Homelessness Funding Must Continue

Stay in the know.

Jump to question

What is the Supplemental Poverty Measure? And why is it important?

Want to learn more about poverty measures?

Poverty dropped from 2020 to 2021 nationally and in California — what’s behind the drop in poverty, especially for kids?

How did housing costs affect California’s poverty rate?

Why does it matter for everyday Californians that the poverty rate dropped?

What were the primary forms of assistance people received to help meet their basic needs?

What can policymakers learn from the latest poverty data?

You may also be interested in the following resources:

Policymakers’ Inaction Will Force Thousands of Formerly Unhoused Californians to Lose Their Homes

Protecting Progress: State Housing and Homelessness Funding Must Continue

Stay in the know.

Jump to Question

What are key issues for policymakers and community leaders to consider when implementing Guaranteed Income through ongoing public policy?

How can Guaranteed Income cash payments work together with other kinds of public supports and safety net services to help children, families, and individuals meet their basic needs and not live in poverty?

More in this series

What options does California have at the state level for delivering Guaranteed Income payments?

How could Guaranteed Income cash payments be funded at the state level?

more in this series

Who could state or local policymakers consider targeting with Guaranteed Income payments?

What are some examples of current policy proposals that would implement aspects of Guaranteed Income through state policy?

You may also be interested in the following resources:

Policymakers’ Inaction Will Force Thousands of Formerly Unhoused Californians to Lose Their Homes

Protecting Progress: State Housing and Homelessness Funding Must Continue

Stay in the know.

Introduction

Jump to question

What is Guaranteed Income and how does it compare to Universal Basic Income and to other safety net supports?

What are the origins of Guaranteed Income in the US?

What are the key ideas and values behind Guaranteed Income and providing direct cash support to people?

more in this series

Are there opportunities to improve existing safety net programs and public supports in ways that align with promising features of Guaranteed Income?

Where has Guaranteed Income been tried in California and the US?

What do recent changes to the federal Child Tax Credit show us about opportunities to expand unconditional cash support to families, similar to Guaranteed Income?

You may also be interested in the following resources:

Policymakers’ Inaction Will Force Thousands of Formerly Unhoused Californians to Lose Their Homes

Protecting Progress: State Housing and Homelessness Funding Must Continue

Stay in the know.

Introduction

Why are unemployment benefits important for Californians?

How much support do unemployment benefits provide Californians?

How much support are unemployment benefits providing Californians during the pandemic, and what will happen on September 6 when federal unemployment support ends?

Who pays for unemployment benefits in California?

How can state lawmakers ensure that businesses share in the responsibility for supporting their workers during layoffs?

You may also be interested in the following resources: