Legislative Analyst's Office Analysis of the 2001-02 Budget Bill

Supplemental Security Income/State Supplementary Program

The Supplemental Security Income/State Supplementary Program (SSI/SSP) provides cash assistance to eligible aged, blind, and disabled persons. The budget proposes an appropriation of $2.9 billion from the General Fund for the state's share of SSI/SSP in 2001-02. This is an increase of $244 million, or 9.3 percent, over estimated current-year expenditures. This increase is due primarily to the full-year cost of grant increases provided in the current year, caseload growth, the cost-of-living adjustment (COLA) to be provided in January 2002, and an increase in the federal administrative fee.

In December 2000, there were 333,259 aged, 21,762 blind, and 723,958 disabled SSI/SSP recipients. In addition to these federally eligible recipients, the state-only Cash Assistance Program for Immigrants (CAPI) is estimated to provide benefits to about 12,000 legal immigrants in December 2000.

Budget Underestimates Cost of Providing Statutory COLA

The General Fund cost of providing the statutory Supplemental Security Income/State Supplementary Program cost-of-living adjustment will be $7.7 million above the budget estimate due to an upward revision in the California Necessities Index. These costs should be reflected in the May Revision of the budget.

Background. Pursuant to current law, the Governor's budget proposes to provide a statutory COLA in January 2002. The state COLA is based on the California Necessities Index (CNI) and is applied to the combined SSI/SSP grant. It is funded by both the federal and state governments. The federal portion is the federal COLA (based on the Consumer Price Index for Urban Wage Earners and Clerical Workers, or the CPI-W) that is applied annually to the SSI portion of the grant. The remaining amount needed to cover the state COLA is funded with state monies. Based on its assumptions concerning both the CNI and CPI-W, the budget includes $156.4 million for providing the statutory COLA for six months, effective January 2002.

The CNI Revised. The January 2002 COLA is based on the change in the CNI from December 1999 to December 2000. The Governor's budget, which is prepared prior to the release of the December CNI figures, estimates that the CNI will be 4.85 percent, based on partial data. Our review of the actual data, however, indicates that the CNI will be 5.31 percent.

The CPI Overestimated. The January 2002 federal SSI COLA will be based on the change in the CPI-W from the third quarter (July to September) of calendar 2000 to the third quarter of calendar 2001. The Governor's budget estimates that the change in the CPI-W for this period will be 2.1 percent. Based on our review of the consensus economic forecasts for 2001, we estimate that the CPI-W will be 2.4 percent. This increase in the CPI-W (compared to the Governor's budget) reduces the state cost of providing the statutory COLA because it effectively increases federal financial participation toward the cost of the state COLA, which is applied to the entire grant.

Cost of Providing COLA Is Underestimated. Taken together, the changes in CNI and CPI-W (in relation to the Governor's budget) increase the General Fund cost of providing the statutory COLA by approximately $7.7 million. The administration should address this issue in the May Revision of the budget.

Supplemental Security Income/State Supplementary Program Grant Levels

Figure 1 shows SSI/SSP grants on January 1, 2002 for both individuals and couples as displayed in the Governor's budget and adjusted to reflect the actual CNI and our estimate of the CPI-W. As the figure indicates, grants for individuals will increase by $38 to a total of $750 per month, and grants for couples will increase by $67 to a total of $1,332 per month. As a point of reference, we note that the federal poverty guideline for 2000 is $696 per month for an individual and $938 per month for a couple. Thus, the grant for an individual would be 7.8 percent above the 2000 poverty guideline and the grant for a couple would be 42 percent above the guideline. (We note that the poverty guidelines are adjusted for inflation annually.)

Certain Legal Immigrants Face Benefit Termination

California established the Cash Assistance Program for Immigrants (CAPI) to provide state-only funded Supplemental Security Income/State Supplementary Program benefits to certain legal immigrants who are federally ineligible for benefits because of their immigration status. The component of this program that provides benefits for post-August 1996 immigrants is scheduled to sunset on October 1, 2001. This will result in approximately 2,700 recent legal immigrants losing their benefits effective October 2001. We review the history of the CAPI and provide policy options for the Legislature.

State-Only Program Established In Response to Federal Restrictions. With respect to legal noncitizens, current federal law generally limits SSI/SSP benefits to noncitizens who were (1) on aid prior to August 1996 or (2) in the U.S. prior to August 1996 and who subsequently became disabled. In response to these federal restrictions, Chapter 329, Statutes of 1998 (AB 2779, Aroner) created CAPI. This program provided state-only funded SSI/SSP benefits to aged immigrants who lived in the U.S. prior to August 1996 and a very limited number of post-August 1996 immigrants whose sponsors were dead, disabled, or abusive. As enacted, this program was to sunset on July 1, 2000.

Sunset Eliminated for Pre-August 1996 Immigrants; Temporary Program Created for Post-August 1996 Immigrants. Chapter 147, Statutes of 1999 (AB 1111, Aroner) eliminated the sunset for the then existing CAPI program that almost exclusively served pre-August 1996 immigrants. Chapter 147 also made immigrants arriving in the U.S. after August 1996 eligible for CAPI, however, such immigrants would be subject to a five-year deeming provision. Under this provision a sponsor's income would be counted when determining an immigrant's eligibility for a period of five years. This expansion for post-August 1996 immigrants was scheduled to sunset on September 30, 2000. Because of the deeming provision, the temporary expansion was assumed to have no cost.

Chapter 108, Statutes of 2000 (AB 2876, Aroner) extended through September 2001 the temporary expansion of CAPI for post-August 1996 immigrants.

The CAPI Serves More Post-August 1996 Immigrants Than Anticipated. As noted above, it was believed that the five-year deeming provision would prevent nearly all post-August 1996 immigrants from receiving CAPI benefits. However, actual data from 2000-01 indicates this is not the case. As of October 2000, there were approximately 1,200 post-August 1996 immigrants receiving CAPI. About 60 percent of these immigrants have no sponsor. With no sponsor to deem, these immigrants are eligible for CAPI. Most of the remaining 40 percent have sponsors whose income is too low to be deemed to the immigrant. The budget projects that by September 2001, there will be approximately 2,700 post-August 1996 immigrants receiving CAPI benefits. Pursuant to current law, these 2,700 legal noncitizens will lose their benefits when the expanded program sunsets on October 1, 2001.

Proposed Budget. The Governor's budget divides the CAPI budget into two components: (1) the "base" program which primarily serves pre-August 1996 immigrants and (2) the "expanded" program for post-August 1996 immigrants that sunsets on October 1, 2001. Figure 2 (see next page) shows the projected caseload and costs for the different components of the CAPI. For the base program, the Governor's budget estimates that General Fund CAPI costs will be $81.3 million in 2000-01 and $92.9 million in 2001-02. Most of this increase is attributable to caseload growth and the January 2002 COLA. For the expanded program, the budget estimates costs will be $11.2 million in 2000-01 and $4.7 million in 2001-02. Nearly all of the reduction in costs between the current and budget years is attributable to the sunset of the expanded program on October 1, 2001.

Options for the Legislature. The issue of whether to modify the sunset of the expanded CAPI program is a policy decision for the Legislature. To assist the Legislature in making this decision, we have estimated the fiscal impact of four different options.

• Retain Current Law. The Governor's budget proposes to follow current law, whereby an estimated 2,700 legal noncitizens would lose their benefits effective October 1, 2001. This will result in a General Fund savings of $6.5 million in 2001-02 compared to the current year.
• Extend Sunset for Existing Recipients Only. As noted above, the Governor's budget estimates that approximately 2,700 post-August 1996 immigrants will be receiving expanded CAPI benefits during September 2001. Extending the sunset for these recipients only would result in additional General Fund costs of approximately $17.3 million in 2001-02 compared to the Governor's budget.
• Extend Sunset for Immigrants Who Effectively Have No Sponsor. The $17.3 million figure noted above covers the cost of continuing benefits to the 2,700 immigrants projected to be receiving benefits during September of 2001. The Department of Social Services (DSS) estimates that this caseload is growing by approximately 100 per month. If the sunset were lifted for additional immigrants that either have no sponsor or whose sponsor has no income to deem, the General Fund cost would be approximately $20.4 million in 2001-02 compared to the Governor's budget. This is an increase of $3.1 million in comparison to the second option discussed above which does not assume any additional post-August 1996 immigrants are added to the program after September 2001.
• Extend the Sunset for All Post-August 1996 Immigrants. Extending the program sunset for all post-August 1996 immigrants has substantial cost implications because the five-year deeming provision would no longer prevent most sponsored post-August 1996 immigrants from becoming eligible for CAPI. The deeming period begins upon entry to the U.S. For example, a sponsored noncitizen who immigrated in October 1996 would no longer be subject to five-year deeming in October 2001 and thus, would be eligible for CAPI. The DSS estimates that extending the program sunset for all post-August 1996 immigrants would result in additional costs of approximately $55.5 million in 2001-02 compared to the Governor's budget. These costs would escalate rapidly in subsequent years as more immigrants become eligible for CAPI each month. To partially control such costs, the Legislature could make CAPI eligibility contingent upon a recipient attempting to become a naturalized citizen. Once an immigrant becomes a citizen they would receive federally funded SSI/SSP, resulting in significant net state savings.

Summary. The sunset of the expanded CAPI will result in approximately 2,700 legal immigrants losing their benefits on October 1, 2001. Above we have identified four options for consideration by the Legislature for addressing this situation.