Analysis of the 2007-08 Budget Bill: Health and Social Services

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 $3.9 billion from the General Fund for the state’s share of SSI/SSP in 2007-08. This is an increase of $350 million, or 9.9 percent, over estimated current-year expenditures. This increase is due primarily to caseload growth, the cost-of-living adjustment (COLA) to be provided in January 2008, and an increase in the federal administrative fee.

In 2007-08, it is estimated that there will be an average of 370,600 aged, 21,600 blind, and 872,600 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 an average of 11,400 legal immigrants in 2007-08, for whom federal financial participation is not available.

Budget Overestimates Cost of Providing Statutory COLA

The General Fund cost of providing the statutory Supplemental Security Income/State Supplementary Program cost-of-living adjustment (COLA) will be $45 million below the budget estimate due to a downward revision in the California Necessities Index and an upward revision of the Consumer Price Index. We recommend that proposed General Fund spending to provide the 2008 COLA be reduced by $45 million in 2007-08. (Reduce Item 5180-111-001 by $45 million.)

Background. Pursuant to current law, the Governor’s budget provides the statutory COLA in January 2008. 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 COLA (based on the Consumer Price Index for Urban Wage Earners and Clerical Workers, or the CPI-W) 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 $217 million for providing the statutory COLA for six months, effective January 2008.

The CNI Revised. The January 2008 COLA is based on the change in the CNI from December 2005 to December 2006. The Governor’s budget, which is prepared prior to the release of the December CNI figures, estimates that the CNI will be 4.2 percent, based on partial data. Our review of the actual data, however, indicates that the CNI will be 3.7 percent.

The CPI Underestimated. The January 2008 federal SSI COLA will be based on the change in the CPI-W from the third quarter (July to September) of calendar 2006 to the third quarter of calendar 2007. The Governor’s budget estimates that the change in the CPI-W for this period will be 1.2 percent. Based on our review of the consensus economic forecasts for 2007, we estimate that the CPI-W will be 1.4 percent. This increase in the CPI-W (compared to the Governor’s budget) slightly reduces the state cost of providing the statutory COLA because it effectively increases federal financial participation toward the cost of the state COLA.

Cost of Providing COLA Is Overestimated. Taken together, the changes in CNI and CPI-W (in relation to the Governor’s budget) decrease the General Fund cost of providing the statutory COLA by approximately $45 million. Accordingly, we recommend that the Legislature reduce the SSI/SSP budget by $45 million in 2007-08, to reflect a more recent estimate of the amount of funds needed to fund the SSI/SSP COLA.

Redirecting SSI/SSP COLA Funding to the California Work Opportunity and Responsibility to Kids (CalWORKs)

In order to more effectively utilize General Fund resources for cash assistance program COLAs to reduce poverty, we recommend redirecting $123.7 million of the funds proposed for the SSI/SSP COLA to provide the CalWORKs COLA. Please see the “Crosscutting Issues” section of this chapter for the details of this recommendation.

SSI/SSP Grant Levels

Figure 1 shows SSI/SSP grants on January 1, 2008, 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 $32 to a total of $888 per month, and grants for couples will increase by $56 to a total of $1,558 per month. As a point of reference, we note that the federal poverty guideline for 2007 is $851 per month for an individual and $1,141 per month for a couple. Thus, the grant for an individual would be 4 percent above the 2007 poverty guideline and the grant for a couple would be 37 percent above the guideline.

Caseload Overstated for CAPI

We recommend that proposed General Fund spending for the Cash Assistance Program for Immigrants be reduced by $5.3 million in 2006-07 and $3.3 million for 2007-08 because the caseload is overstated. (Reduce Item 5180-111-001 by $3.3 million.)

Background. Pursuant to current law, since September 2006, sponsored immigrants who have lived in the United States for at least ten years no longer have their sponsor’s income counted when determining their eligibility. If they meet the financial eligibility rules for SSI/SSP, and have not attained citizenship, they became eligible for CAPI.

Budget Estimate. The 2006-07 Budget Act assumes that the end of the ten-year deeming period would result in approximately 250 sponsored noncitizens becoming eligible for CAPI each month beginning in September 2006. This increase in the CAPI caseload results in a General Fund cost of $13 million in 2006-07, and $46 million in 2007-08.

Actual Caseload. Our review of the actual CAPI caseload from July through November 2006 indicates that these sponsored immigrants have not yet joined the CAPI program. Specifically, the CAPI caseload through November 2006 is about 750 cases (4 percent) below the budgeted caseload.

LAO Caseload Estimate. We have adjusted the budget’s caseload trend downward to account for the most recent actual data. To account for the possibility that some sponsored immigrants may enter the caseload later than expected, our revised forecast adds back 250 such cases in the spring and fall of 2007. After these adjustments, we estimate that the CAPI caseload is overstated by 5.6 percent in 2006-07, and 2.6 percent in 2007-08. Based on our revised caseload, we further estimate that CAPI is overbudgeted by $5.3 million in 2006-07 and $3.3 million in 2007-08. Therefore, we recommend that the Legislature recognize a General Fund savings of $5.3 million in the current year, and reduce the CAPI budget by $3.3 million in 2007-08. We will continue to monitor the CAPI caseload and report to the Legislature at May Revision on any changes.

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