Lowest-Income Californians Lose as Federal Child Tax Credit Expansion Ends

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.

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.

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.

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.

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.

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.

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.