Personal Responsibility Act of 1995:
Fiscal Effect on California

Summary

In March 1995, the House of Representatives passed H.R. 4--the Personal Responsibility Act (PRA) of 1995. If enacted, it would repeal or amend the provisions of several major public assistance programs and replace them with several block grants. The act consists of the following titles:

In this policy brief, we summarize the key features of the Personal Responsibility Act and its potential fiscal effects on California. We conclude that:


Summary of Fiscal Effects on California

Figure 1 summarizes the effect of the PRA on federal funds allocated to California. It shows that the net fiscal effect is estimated to be a loss of $580 million in federal funds in 1995-96 (state fiscal year) and $13 billion over the first five years. It should be noted that in one program--child protection--the state is projected to receive more federal funds under the PRA than under current law.

Figure 2 summarizes the major fiscal effects of the act on state funds. As shown, the net effect varies considerably among the different titles of the act and depends on several variables, including the following:

Thus, the fiscal effect on state funds could range from a cost of about $13 billion over five years, if the state chooses to backfill for the loss of federal funds in order to maintain current service levels, to a savings of roughly $4 billion (net of potential county costs) if the state does not backfill and conforms its policy to the restrictions on the eligibility of immigrants for federally funded programs.

We note that while not included in our estimate of fiscal effects, the act would effectively eliminate federal requirements that states provide matching funds for certain programs--notably AFDC--and would thereby permit the state to operate such programs only with federal block grant funds. Viewed in this perspective, the act would have a potential additional state savings of about $4 billion annually, provided the state chose to reduce service levels accordingly. Much of these savings, however, could be offset by costs at both the state and local levels for general assistance and services such as emergency health care.

Finally, we also note that this analysis includes only the major direct fiscal effects of the act. Thus, some fiscal effects--such as potential state administrative savings (which would not be major in the context of other fiscal effects identified) and the indirect revenue losses that the state would experience as a result of the economic impact of the loss of federal funds--are not included.


Figure 2
Personal Responsibility Act--House Version
Summary of Fiscal Effects on California
State Funds

Summary: State fiscal effect ranges from (1) costs of $13 billion if state backfills for loss of federal funds to
(2) savings of $4 billion if state does not backfill lost federal funds and conforms its policy to federal restrictions
on aid to immigrants.

Program and Five-Year Fiscal Effects
----------------------------------

Title I: 
Temporary Family Assistance
    Potential costs of up to $3.9 billion if the state backfills for reduced
     federal funds.
    Unknown, potentially significant savings due to paternity establishment
	provisions and the effect of the work requirement.

Title II: 
Child Protection
    Potential savings of $250 million to the extent increased federal
     funds offset state spending.

Title III: 
Child Care and Nutrition Assistance
    Child Care: Potential cost of $200 million if the state backfills for
     reduced federal funds.
    School Nutrition: Potential $578 million cost if the state backfills
     for reduced federal funds.
    WIC Program: Potential $1.2 billion cost if the state backfills for
     reduced federal funds.

Title IV: 
Restricting Welfare for Aliens
    Potential costs of up to $5.6 billion if the state backfills for loss of
     federal funds in order to maintain current eligibility and service
     levels.
    Potential savings of up to $7.2 billion in SSP, Food Stamps administration,
	Medi-Cal, and AFDC programs if state 	conforms to federal eligibility 
	restrictions regarding aliens; partially offset by unknown costs, 
	potentially several billion dollars, due to health and cash assistance 
	cost shifts to counties.
    Savings and costs would be less to the extent aliens become
	citizens.

Title V: 
Food Stamps and Commodities
    Unknown state administrative costs, probably in the tens of millions
     of dollars annually.
    Potential cost of $1.6 billion if state backfills for federal funds loss.

Title VI: 
Supplemental Security Income
    Savings of about $250 million due to substance abuse provisions.
    Potential cost of $108 million if state backfills for federal funds loss.

Title VII: Child Support
    Costs of about $5 million.

Title VIII: Miscellaneous Provisions
    No fiscal effect.


Title I--Temporary Family Assistance Block Grant

Title I of the Personal Responsibility Act (PRA) eliminates all existing federal requirements in the Aid to Families with Dependent Children (AFDC) Program, the Job Opportunities and Basic Skills Program (GAIN Program), and the Emergency Assistance Program, and consolidates federal funding into a Temporary Family Assistance Block Grant.

Figure 3 summarizes the major program changes and Figure 4 summarizesthe work participation requirements under the block grant. Figure 5 describes the principal fiscal provisions of Title I. Finally, Figure 6 summarizes Title I's fiscal effects on California.


Figure 5
Personal Responsibility Act--House Version
Title I: Temporary Family Assistance Block Grant
Major Fiscal Provisions

Provisions and Amounts
----------------------

Federal Funds
         $15.39 billion available nationwide in federal fiscal year (FFY) 1996
          and $15.49 billion in FFY 1997 through 2000 for block grants to the
          states. The block grants would replace federal financial participation
          for AFDC benefit payments, AFDC administrative costs, AFDC emergency 
	assistance benefits, and the Job Opportunities and Basic Skills program (GAIN).

State's Share of Federal Funds
         Beginning in FFY 1996, based on state's share of FFY 1994 outlays.

Potential Adjustments to State Share of Federal Funds
         Beginning in FFY 1997, state eligible for a share of an additional
          $100 million annually nationwide for states experiencing population increases.
         Beginning in FFY 1998, additional funds available to states as an incentive/reward 
	for reducing the rate of out-of-wedlock births and abortions (illegitimacy ratio). 
	State's block grant could increase by 5 percent (about $170 million annually in 
	California) for a 1 percent reduction in the illegitimacy ratio and 10 percent for 
	a 2 percent reduction (or more) in the illegitimacy ratio.

Federal Loans
         Establishes a $1 billion Federal Rainy Day Fund for borrowing by
          states under conditions of high unemployment. States must repay the
          loans with interest within three years.

Federal Fund Transfers
         Permits states to transfer up to 30 percent of the block grant to other
          specified block grants.

State Penalties
         Up to 25 percent of the quarterly block grant payment for misuse of funds.
         Up to 5 percent of block grant for failure to meet work participation rates.
         3 percent of block grant for failure to submit an annual report.
         1 percent of block grant if state does not participate in certain automated 
	fraud detection programs.



Figure 6
Personal Responsibility Act--House Version
Title I: Temporary Family Assistance Block Grant
Major Fiscal Effects on California


Effect on Federal Funds to California
----------------------------------

Based on Current Law
    Estimated cumulative loss of $3.9 billion (19 percent) in federal funds
     over five years (1995-96 through 1999-2000 see Figure 7).

Based on the Governor's Budget Proposal
    Estimated cumulative increase of $260 million (1.5 percent) in federal
     funds over five years. (See Figure 8.)

Illegitimacy Ratio
    Potentially up to $1 billion in additional federal funds (first five years) if
     California reduces illegitimacy ratio.

Sanctions
    Potential loss of federal funds due to sanctions (including up to
     $680 million in the first five years for failure to meet work participation
     requirements).

Effect on State Funds
--------------------

Replacing Lost Federal Funds
    Potential state costs of up to $3.9 billion over five years if state backfills
     for reduced federal funds. (Potential state savings of $260 million over
     five years in relation to the Governor's Budget proposal.)

Paternity Establishment
    Unknown potentially significant savings, beginning in 1997-98, from the
     required grant reductions to families with children unable to establish
     paternity.

Work Requirements
    Potential unknown grant savings, increased General Fund tax revenues,
     and administrative costs due to the effect of the work requirements. 



Title II--Child Protection Block Grant Program

Title II of the act would replace existing categorical programs by establishing a block grant for various child protection programs, including child welfare services, foster care, adoptions assistance, and child abuse prevention. Figure 9 summarizes the major provisions. Figure 10 shows the major fiscal effects.


Figure 9
Personal Responsibility Act--House Version
Title II: Child Protection Block Grant Program
Major Provisions

Program Provisions
-----------------

Federal Requirements
    Repeals current federal requirements for various child protection programs,
     including eligibility and use of funds, and provides new requirements. 

State Plan 
    State plan must outline the child protection program and certify that specific
     components are in place. For example, the state must describe procedures for
     reviewing and maintaining case plans for children removed from their homes.

Standards
    Establishes minimum standards, including timelines for case reviews.

Citizen Review Panels
    States must establish at least three citizen review panels for program oversight.

Reporting Requirements
     Includes various data collection and reporting requirements. 

Fiscal Provisions
---------------

Block Grant
   Consolidates funding for various programs into a block grant, which would
     eliminate current entitlement funding for the foster care and adoptions assistance 
     programs. The block grant for states consists of two components: (1) a
     capped entitlement and (2) an "additional grant" subject to annual appropriation. 

Block Grant Amount
    Provides that the entitlement portion of the block grant shall be $3.93 billion
     nationwide in FFY 1996 and includes annual increases through FFY 2000. Also
     provides that the "additional grant" shall not exceed $486 million each year
     (nationwide) in FFY 1996 through 2000. 

State's Share
    Defines the state share of the block grant as the greater of (1) the proportion of
     federal funds received for the block grant programs in FFY 1994 or (2) one-third
     of the proportion of funds received for the programs for fiscal years 1992-1994.

Transfer of Funds
    States may transfer up to 30 percent of the funds to other specified block grant
     programs beginning in FFY 1998.

Maintenance of Effort
    States must maintain nonfederal spending at no less than the amount spent in
     FFY 1995, during the first two years of the block grant.

Penalties
    Penalties for misuse of funds, failure to submit a specific report, failure to meet
     the maintenance of effort, or violation of interethnic adoption provisions.



Figure 10
Personal Responsibility Act--House Version
Title II: Child Protection Block Grant Program
Major Fiscal Effects on California


Effect on Federal Funds to California
----------------------------------

Increase in Federal Funds
    California will receive approximately $329 million more in federal funds
     over the next five years than under current law (see Figure 11).
    The increase occurs primarily because (1) the state's initial allocation is
     based on the state's share of FFY 1994 expenditures and caseload
     growth since that time has been low relative to other states and (2)
     projected caseload growth is relatively low under current law. 

Effect on State Funds
--------------------

Offset to State Spending
    Potential state savings of up to $250 million over five years, to the
     extent that the increase in federal funds offsets state spending in the
     program, after accounting for the maintenance of effort provision for the
     first two years. 



Title III--Child Care Programs

Title III consolidates funding of child care and nutrition programs into three block grants a Child Care and Development Block Grant, a School-Based Nutrition Block Grant and a Family Nutrition Block Grant. First, we discuss the child care block grant.

Child Care.The act would redirect funding from seven federal child care programs into the existing Child Care and Development Block Grant (CCDBG). California receives funding through five of these programs, as follows: the existing CCDBG, the AFDC/JOBS child care program, the AFDC Transitional Child Care program, the AFDC At-Risk Child Care program, and the Dependent Care Grant program. The act also would modify the program provisions of the CCDBG. Figures 12 and 13 summarize the major provisions and their fiscal effects. Figure 14 describes the existing federal child care programs operating in California.


Figure 12
Personal Responsibility Act--House Version
Title III: Federal Child Care Programs
Major Provisions


Program Provisions
-----------------

Existing Set-Asides
    Eliminates existing set-asides for program improvement (5 percent of
     the state grant) and for specific center-based care (20 percent). The bill
     also would eliminate detailed health and safety requirements that apply
     to the existing block grant programs.

Administrative Cap
    Sets an administrative cap of 5 percent. Under current law, most services are
      afforded 15 percent for state and local administration. 

Other Changes
    Increases state reporting requirements and reduces the time the state
     may take to obligate and expend funds. Illegal aliens would not be
     eligible for subsidized child care services under this bill.

Fiscal Provisions
---------------

Funding Cap
    Eliminates the existing entitlement to child care for families receiving
     AFDC who are working or are in an approved training or education
     program. The bill also would eliminate the required state match for
     these services.

Spending Authorization
    Authorizes funding for the new block grant at $2.1 billion annually
     through 2000, which is about 5 percent below what is currently spent by
     the federal government through the existing programs. The program
     authorization would not increase over the five-year period.

Transfer of Funds
    Permits states to use up to 20 percent of the new block grant for the
     support of five block grants created in the act, including the income
     support, child protection, and nutrition block grants.



Figure 13
Personal Responsibility Act--House Version
Title III: Federal Child Care Block Grant
Major Fiscal Effects on California


Effect on Federal Funds to California
----------------------------------

Loss of Federal Funds
    Compared to current law, federal funding to California for child care services
     under the bill would be reduced by about 9 percent, or $23 million, in
     1995-96 and 16 percent or $200 million over the five-year period 1996-2000.

Effect on State Funds
--------------------

Replacing Lost Federal Funds
    If the state replaces the lost federal funds with state funds, the costs would
     be up to $200 million over the five-year period. 



Figure 14
Personal Responsibility Act--House Version
Existing Federal Child Care Programs
Operating in California

Child Care and Development Block Grant
    Subsidizes child care programs for low-income families through SDE-operated programs.

AFDC/JOBS Program 
    Provides child care for AFDC recipients who are working or attending
     approved job training or education programs.

Transitional Child Care Program 
    Provides child care assistance to AFDC families who terminate welfare by
     getting a job.

At-Risk Child Care Program 
    Subsidizes child care services for families who are likely to go on welfare. 

Dependent Care Grant 
    Supports the operation and improvement of resource and referral agencies, which provide information and counseling to families in need of child
     care services.




Title III--Nutrition Programs

The act would replace nine existing nutrition programs (see Figure 17) with two new block grants, a School-Based Nutrition Block Grant and a Family Nutrition Block grant. The School-Based Nutrition Block Grant supports school nutrition programs, including breakfast, lunch, and summer meal programs administered through schools and other agencies. The Family Nutrition Block Grant provides the funding for the Special Supplemental Food Program for Women, Infants, and Children (WIC) or the Family Nutrition Programs. Figures 15 and 16 summarize the major provisions and fiscal effects of these two block grants. Figure 17 describes existing federal nutrition programs operating in California.


Figure 15
Personal Responsibility Act--House Version
Title III: Federal Nutrition Programs
Major Provisions

Program Provisions
-----------------
Nutrition Standards
    Repeals current federal nutrition requirements and authorizes
     states to use model nutrition standards determined by the National
     Academy of Sciences or set their own nutrition standards.


Other Changes
    Mandates collection and reporting of specified program data. In
     addition, the bill would make illegal aliens ineligible for nutrition program services.


Fiscal Provisions
---------------
Funding Cap
    Eliminates the funding entitlement of all of the school nutrition programs. 
	There is no funding entitlement for the WIC program.

Spending Authorization
    Authorizes $11.3 billion as the total amount for nutrition programs
     funded from the block grants in 1996, which is about 3.8 percent
     below what is currently spent by the federal government through
     the existing programs. The program authorization includes annual
     increases of about 4 percent through 2000. 

State Share
    Provides states in FFY 96 with the same share of federal funds as the state 
	received in the previous year. 	Beginning 1997, an increasing amount of state 
	allocations would be based on the state's share of (1) meals served in the 
	previous year under the School-Based	Nutrition Block grant or, (2) individuals 
	assisted in the previous year under the Family Nutrition Block grant. By 2000, 
	5 percent of state allocations from the two nutrition block grants would be 
	based on meals served or individuals assisted. 

Transfer of Funds
    Permits states to transfer up to 20 percent from the nutrition block
     grants to other block grants or programs. 


Figure 16
Personal Responsibility Act--House Version
Title III: Nutrition Block Grants
Major Fiscal Effects on California

Effect on Federal Funds to California
----------------------------------

Loss of Federal Funds
    Compared to current law, California would receive about 12 percent, or
     $200 million less in federal funds in 1996. Over the five-year period of
     1996 2000, federal funding to the state would be reduced by about
     $1.8 billion, or 18 percent. 


Future Federal Fund Share
    Potential gains or losses in federal funding in future years may result if
     other states increase or decrease their share of the number of meals
     provided or individuals served relative to California.


Effect on State Funds
--------------------

Replacing Lost Federal Funds
    Depending on state policy choices, the nutrition portions of Title III could
     result in significant state costs. 

                              -School Nutrition Programs-
     Significant General Fund (Proposition 98) costs would result 
     if the state desired to maintain the existing level of
     support for nutrition programs operated by schools and other agencies.
     Because existing funding for school nutrition programs is included in
     both block grants, we assumed that 20 percent of the Family Nutrition
     Block Grant would be transferred to support school nutrition programs.
     Under this assumption, replacing the lost federal funds with state funds
     for school nutrition programs would require up to $578 million over the
     five-year period. 

	        -Special Supplemental Food Program for 
		    Women, Infants, and Children (WIC)-
     Significant General Fund (non-Proposition 98) costs would also  
     result if the state desired to maintain the existing level of
     support to local service providers. Assuming that 20 percent of the
     Family Nutrition Block Grant would be transferred to support school
     nutrition programs, state backfill of federal funding losses for the WIC
     program would cost the General Fund up to $1.2 billion over the five-year period.



Figure 17
Personal Responsibility Act--House Version
Existing Federal Nutrition Programs
Operating in California

National School Lunch Program 
    Provides free and reduced price meals to needy children.

School Breakfast Program
    Provides morning meals to needy children. 

Summer Food Service
    Provides meals to needy children when they are not in school.

Child and Adult Care Food Program 
    Enables child care centers and family day care homes to provide meals
     and snacks to children 12 years of age and under.

Special Milk Program 
    Provides milk to children in public and private nonprofit schools and
     child care institutions that do not participate in another federal meal
     program.

Special Supplemental Food Program for Women, Infants, and Children (WIC) 
    Provides food, nutrition education, counseling, and health care referrals
     to low income women and children up to age 5.

Federal Commodities Aid
    Provides additional resources to the federal nutrition programs in the
     state in the form of goods such as meat, dairy products, and fruits and
     vegetables.

Nutrition Education and Training
    Establishes nutritional and professional standards and provides training
     for meal service providers in the state.

State Administrative Expense 
    Provides funds to the state to manage and coordinate the federal
     nutrition programs.


Title IV--Restricting Welfare for Aliens

Title IV of the act would make all illegal aliens and most immigrants ineligible for federal benefits in five programs: (1) Supplemental Security Income (SSI), (2) the Temporary Family Assistance Block Grant, (3) the Title XX Social Services Block Grant, (4) Medicaid, and (5) Food Stamps. Figure 18 summarizes the major program and fiscal provisions of this title. Figure 19 summarizes the title's fiscal effects on California.


Figure 18
Personal Responsibility Act--House Version
Title IV: Restricting Welfare for Aliens
Major Provisions

Program and Fiscal Provisions
---------------------------

Eligibility Restrictions
    Makes immigrants (except as noted below) ineligible for federal benefits in five
     programs one year after enactment of the act: Supplemental Security Income
     (SSI), Temporary Assistance for Needy Families, Title XX Social Services Block
     Grant, Medicaid, and Food Stamps.

    Makes illegal aliens ineligible for all federal, state and local means-tested public
     benefits programs except emergency assistance and certain housing assistance.

    Makes nonimmigrant aliens (people admitted for temporary periods and limited
     purposes such as tourists, diplomats, and temporary workers) ineligible for all
     federal and state means-tested public benefits programs except for emergency
     assistance.

    Authorizes states to limit eligibility of immigrants for state and local means-tested
     public benefits programs (for example, General Assistance).


Exceptions
    Refugees for the first five years of residency in the U.S.

    Refugees and legal immigrants over age 75 who have lived in the U.S. for five years.

    Legal immigrants who are veterans.

    Legal immigrants unable to comply with naturalization requirements because of a
     physical, developmental, or mental impairment (including Alzheimer's disease).

    Temporary agricultural workers.


Sponsorship
    Extends indefinitely the period of time for which a sponsor's income is deemed
     available to support an immigrant and makes this a legally binding requirement.

    Authorizes government agencies to recoup from sponsors federal, state, and local
     government benefits paid to immigrants (except certain housing assistance).


Figure 19
Personal Responsibility Act--House Version
Title IV: Restricting Welfare for Aliens
Major Fiscal Effects on California

Effect on Federal Funds to California
----------------------------------

SSI Program
    Reduction of up to $2.4 billion over the first five years of the act. 

Food Stamps
    Reduction of up to $1.5 billion over the first five years of the act.

Medi-Cal
    Reduction of up to $1.7 billion over the first five years of the act.

Citizenship Effects
    The actual reduction could be significantly less than indicated, depending
      on the number of immigrants who become citizens.

Effect on State Funds
--------------------

Replacing Lost Federal Funds
    Potential costs of up to $5.6 billion over five years if the state backfills
     for loss of federal funds in order to maintain current eligibility and
     service levels.

SSP Program
    Potential savings of up to $350 million from the General Fund in
     1996-97 and $470 million annually thereafter in SSP grants unless state
     backfills to maintain current service levels.

Food Stamps
    Potential savings of up to $15 million annually from the General Fund,
     beginning in 1997-98, from lower administrative costs due to reduced
     caseloads unless state backfills to maintain current service levels.

Medi-Cal
    Potential savings of up to $650 million from the General Fund in
     1996-97 and $900 million annually thereafter unless state backfills to
     maintain current service levels.

Temporary Family Assistance (AFDC)
    Potential state savings of about $400 million in 1996-97 and
     $550 million annually thereafter to the extent the state chooses to
     conform to federal eligibility restrictions on block grant funds.

Impact on Counties
    Unknown costs to the counties potentially in the hundreds of millions of
     dollars annually to the extent additional aliens use general assistance
     and county health services (if the state does not backfill for federal fund loss).

Citizenship Effects
    Savings and costs indicated above could be significantly less than
     shown, depending on the number of immigrants who become citizens.

Sponsorship Provisions
    Minor savings from recoupment of benefits from alien's sponsors.


Title V--Food Stamps

Title V of the act would set a cap on annual increases in food stamp expenditures, terminate food stamp benefits after 90 days for certain able- bodied recipients without children, and combine several food distribution programs into one consolidated grant. Figure 20 summarizes the major program and fiscal provisions of this title. Figure 21 summarizes the title's fiscal effects on California.


Figure 20
Personal Responsibility Act--House Version
Title V: Food Stamp Reform and Commodity Distribution
Major Provisions

Program Provisions
-----------------

Work Requirement
    Requires the termination of benefits after 90 days, for able-bodied
     adults between the ages of 18-55 with no dependents and not employed at 
     least 20 hours per week. 

    Authorizes a waiver of the work requirement if (1) the unemployment
     rate exceeds 10 percent in all or part of the state, or (2) the state does
     not have a sufficient number of jobs to provide employment for individuals 
     subject to the requirement. (Waiver determinations would be made by the 
     Secretary of the Department of Agriculture.)

    Eliminates the food stamp employment and training program (currently
     $75 million nationally) and instead provides $75 million nationwide
     annually for operation of "workfare programs."

    Specifies that the Governor determines standards for employment and
     training.

Quality Control
    Makes more restrictive the threshold for determining whether states are
     subject to penalties for errors in calculating food stamp eligibility. 

Electronic Benefit Transfer (EBT)
    Authorizes states that have a statewide EBT system to elect to receive
     food stamp benefits as a block grant. Maryland is the only state that has
     EBT statewide.

Fiscal Provisions
---------------

Inflation Adjustment
    Caps annual increases in the maximum food stamps benefit at
     2 percent per year beginning in FFY 1996. (Under current law, increases
     in the maximum benefits are determined by a specified inflation index.) 

Income Deductions and Resource Limits
    Freezes the standard deduction and the excess shelter deduction at
     $134 and $231 respectively (current levels).

    Changes the treatment of state energy assistance and payments from
     the Low Income Home Energy Assistance Program (LIHEAP) for
     calculating available income in determining benefits. 

    Freezes the vehicle allowance at $4,550 for purposes of determining
     eligibility (current level).

Commodities
    Repeals and revises certain commodities programs (for charitable and
     other institutions) and authorizes $260 million annually nationwide in
     FFY 1996 through FFY 2000 for commodities and $40 million annually
     for related administration. 


Figure 21
Personal Responsibility Act--House Version
Title V: Food Stamp Reform and Commodity Distribution
Major Fiscal Effects on California

Effect on Federal Funds to California
----------------------------------

Inflation Adjustment
    Reduction of $25 million in 1995-96 and $600 million over the first five years.

Deductions
    Freeze in deductions and vehicle allowance: Reduction of $20 million in
     1995-96 and $500 million over the first five years.

Energy Costs
    Change in treatment of state energy and LIHEAP payments: Unknown
     reduction, probably in the range of $15 million in 1995-96 and
     $85 million over the first five years.

Work Requirements
    Reduction of up to $45 million in 1995-96 and $420 million over the first
     five years.

Commodities
    Unknown effect on federal funds, probably an increase or decrease of
     less than $5 million over five years.

Effect on State Funds
--------------------

Replacing Lost Federal Funds
    Potential cost of $1.6 billion over five years if the state backfills for loss
     of federal funds in order to maintain current service levels.

Quality Control
    Unknown potential costs associated with more restrictive error rate threshold.

Work Requirements
    Unknown costs, probably in the tens of millions of dollars annually for
     administration of workfare programs and monitoring work effort.


Title VI--Supplemental Security Income (SSI)

Title VI of the act makes major changes in the Supplemental Security Income (SSI) Program. Figure 22 summarizes the major program and fiscal provisions of this title. Figure 23 summarizes the title's fiscal effects on California.

Figure 22
Personal Responsibility Act--House Version
Title VI: Supplemental Security Income (SSI)
Major Provisions

Program and Fiscal Provisions
---------------------------

Substance Abuse
    Eligibility. Eliminates drug addiction and alcoholism (DA/A) as a qualifying
     disabling condition for SSI and Medicaid benefits beginning
     October 1, 1995. Effectively eliminates DA/A as a qualifying criterion for
     the State Supplementary Program (SSP). (Current law imposes a three-year limit on eligibility.)

    Funds for Treatment and Research. Appropriates $100 million annually
     nationwide in FFY 1997 through FFY 2000 for drug treatment ($95 million)
     and research ($5 million). Funds would be allocated to the states based on
     the formula used for the existing alcohol and drug treatment block grant.

Disabled Children
    Eligibility. Eliminates benefits to children (existing and new cases) who
     are relatively less disabled. (Currently, children may be eligible on the
     basis that an impairment exists that precludes them from performing age-appropriate activities.)

    New Cases. Applicants would qualify for cash benefits only if the child is
     severely disabled and needs institutionalization or full-time attention by
     parent. Other applicants (not needing institutionalization but who meet
     specified eligibility criteria) would not receive cash benefits but would be
     eligible for block grant services.

    New Block Grant. Establishes a new block grant, beginning in January
     1997, for services to children remaining eligible for cash benefits and
     applicants not eligible for cash benefits but who qualify for SSI based on
     disabling medical conditions.

    Block Grant Services. Requires the Commissioner of Social Security to
     develop a list of authorized services that can be provided using new block
     grant funds. 

    Block Grant Amount. Specifies that the state's share of the block grant is
     determined by a formula based on the number of children eligible for block
     grant services.

    Maintenance of Effort Requirement. Requires states to maintain previous levels 
     of nonfederal expenditures, adjusted for inflation, for children  receiving new block grant services.

State Supplementary Program
    SSP Maintenance of Effort Requirement. Eliminates the maintenance of
     effort requirement.

Figure 23
Personal Responsibility Act--House Version
Title VI: Supplemental Security Income
Major Fiscal Effects on California

Effect on Federal Funds to California
----------------------------------

Substance Abuse Eligibility
    Loss of $100 million in 1995-96 (state fiscal year), about $135 million in
     1996-97 and 1997-98, and about $80 million annually thereafter.

Drug Treatment Funds
    Gain of about $9.5 million in 1996-97, and $12.6 million in each of the
     next three years (1997-98 through 1999-2000).

Restrictions on Children
    Loss of $60 million annually ($15 million in 1995-96) for elimination of SSI
     benefits to children not meeting more restrictive definition of disability. 

New Block Grant
    Gain of about $90 million in 1996-97 and $180 million in each of the
     next three years (1997-98 through 1999-2000). 

Effect on State Funds
--------------------

Replacing Lost Federal Funds
    Potential cost of $108 million over five years if the state backfills for loss
     of federal funds in order to maintain current service levels.

Substance Abuse Eligibility
    The Governor's Budget assumes this policy change, effective October
     1995, for a state General Fund savings of $52 million in 1995-96 and
     $70 million in 1996-97 and 1997-98. Ongoing savings of roughly
     $40 million annually. Unknown, costs (potentially in the tens of millions
     of dollars annually) to county indigent health and general assistance
     programs to serve persons no longer eligible for SSI/SSP and Medi-Cal.

Disabled Children
    Unknown state costs or savings, depending on potential effect of
     increase in state costs to the AFDC Program.

Disabled Children's Maintenance of Effort
    Minor increased General Fund cost for mandatory inflation adjustments
     using specified index.

Elimination of SSP Maintenance of Effort
    No direct effect, but increases state flexibility to achieve major savings
     by reducing grants.


Title VII--Child Support Enforcement

Title VII of the Personal Responsibility Act includes numerous provisions related to child support enforcement. Figure 24 summarizes the key provisons and Figure 25 summarizes the fiscal effect on California.


Figure 24
Personal Responsibility Act--House Version
Title VII: Child Support Enforcement
Major Provisions


Program Provisions
-----------------

Case Registry and Disbursement System
    Requires a centralized registry of child support cases and centralized
     disbursement of collections. California is developing a centralized registry as
     part of its automation system. Payments are disbursed through the counties.

New Hire Directory
    Requires implementation of a new hire directory for all occupations, effective
     October 1997, designed to assist in locating noncustodial parents. California
     currently requires a directory for some occupations.

Interstate Enforcement
    Includes provisions to enhance interstate coordination.


Fiscal Provisions
---------------

$50 Pass-Through
    Eliminates the requirement that the first $50 of monthly collections for AFDC
     families be distributed to the custodial parent, effective October 1995.
     (Instead, the $50 would offset grant expenditures.)

Arrearage Payments
    Requires that collections on arrearages in specified cases be paid to the
     custodial parent rather than used to offset government expenditures for
     AFDC grants, effective October 1999.

Federal Incentive Payments  
    Replaces the collections-based federal incentive payments with "performance" incentives. 
     The new incentive payments would be a percentage of administrative costs, ranging from 
     0 to 24 percent, as determined by the Secretary of HHS, based on the state's performance 
     in establishing paternity and other performance measures, effective FFY 1999.

     --Requires the Secretary of HHS, in awarding incentive payments, to
        ensure that the nationwide cost not exceed the corresponding cost as of
        June 1994 unless aggregate performance improves.

Maintenance of Effort  
    Establishes a maintenance of effort provision for state funding, based on
     FFY 1996, beginning in FFY 1997.

Automation Funding  
    Establishes a nationwide cap ($260 million over five years) on enhanced
     federal funding for automation requirements included in the act.


Figure 25
Personal Responsibility Act--House Version
Title VII: Child Support Enforcement
Major Fiscal Effects on California


Effect on Federal Funds to California
----------------------------------

Loss of Federal Funds
    Reduction of about $85 million in federal funds during the first five years
     due to changes in federal incentive payments.

Effect on State Funds
--------------------

Incentive Payments
    State costs of about $85 million during the first five years due to the
     change in federal incentive payments. This assumes that California will
     receive half of the maximum amount of incentives and will increase
     state funding to offset the anticipated reduction in federal incentive
     payments. State costs could be more or less, depending on the state's
     performance with respect to the incentive payments. 

$50 Pass-Through
    State savings of $110 million over the first five years due to elimination
     of the $50 monthly "pass-through" of collections to the custodial parent.

Arrearages
    Unknown state costs, probably about $20 million during the first five
     years, due to the change in the procedures for distributing collections on
     arrearage obligations. 

Ongoing Costs
    After the first five years, estimated state costs of roughly $45 million
     annually due to the ongoing net effects of the above provisions.

Other Provisions
    Unknown potential savings annually to the extent the act's other provisions 
     (such as enhanced interstate child support enforcement) result in  increased 
     collections, particularly for AFDC families.


This report was prepared by Bill Lucia, Alva Johnson, Agnes Lee, and Daniel Kim, under the supervision of Chuck Lieberman and Paul Warren.

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