Legislative Analyst's Office, October 1996

Welfare Reform's Immigrant Restrictions
County Costs Probably Less Than Projected

Counties Fear Major Costs

This projection of potential county costs primarily stems from a provision in the federal legislation which prohibits most legal immigrants who are noncitizens from receiving benefits under the Supplemental Security Income/State Supplementary Program (SSI/SSP). This program, which is administered by the Social Security Administration, provides federal grants and state supplemental payments to low-income persons who are elderly, blind, or disabled. (These benefits have not been available to illegal immigrants.) About 200,000 legal immigrants currently receiving SSI/SSP benefits in California could lose those benefits by August 1997, and potentially become eligible for county GA grants. We estimate that shifting all of the immigrants currently on SSI/SSP to county GA could cost counties roughly $500 million dollars annually (with somewhat smaller savings to the state from reduced state supplemental payments).

Several Factors Likely to Limit Additional County GA Costs

Citizenship Would Reduce Impact. Citizenship, of course, would permit legal immigrants to retain eligibility for SSI/SSP. According to information reported by the state Department of Social Services, more than 90 percent of the immigrants receiving SSI benefits in California have been in the U.S. five years or more, generally making them eligible to apply for citizenship immediately.

Obtaining citizenship usually requires passing tests in English competency and civics (and clearing an FBI background check). However, exemptions are available. About one-third of the immigrants on SSI have been in the U.S. for more than 15 years, which would qualify those who are 55 or older for an exemption from the English test. Furthermore, exemptions from both tests are available for immigrants with disabilities (such as Alzheimer's Disease) that would make them unable to pass the tests.

These data, in conjunction with the fact that SSI/SSP grants are roughly twice as much as GA grants, suggest that a large number of immigrants are likely to apply for citizenship as a result of the new federal provisions.

Other Factors. Other factors could limit additional county GA costs. Specifically, not all immigrants who lose their SSI/SSP benefits will seek GA grants. The GA grants are smaller than SSI/SSP grants, and GA grants often have more conditions imposed on recipients. Also, GA is generally perceived as "welfare," whereas SSI/SSP is sometimes perceived as an adjunct to Social Security. For these reasons, GA is probably less attractive than SSI/SSP, and some immigrants may be able to rely on support from their family or other sponsor rather than applying for GA benefits.

Immigrants Will Retain Health Benefits

Counties Still Face Challenges

Delays in Citizenship for Current Legal Immigrants. Counties may need to provide interim GA benefits to immigrants who temporarily lose their SSI/SSP benefits while their citizenship applications are pending.

Restrictions for New Legal Immigrants. Immigrants arriving after enactment of
welfare reform are not eligible for SSI, federal benefits under the new Temporary Assistance for Needy Families (TANF) Program, or food stamps for their first five years in the U.S. (except for refugees and certain other immigrants). During this time, new immigrants in the Medi-Cal program generally will be limited to emergency health care. These restrictions may increase the number of immigrants who will apply for county- funded GA and indigent health benefits.

Loss of Food Stamp Eligibility for Current and New Legal Immigrants. Welfare reform ends food stamp eligibility for most noncitizen immigrants. (The federal budget legislation makes this effective April 1, 1997 for those already receiving benefits.) Lack of food stamps will place more pressure on counties and local charitable agencies to support indigent immigrants.

Illegal Immigrants. The welfare reform legislation (directly or in concert with Proposition 187) could eliminate state-funded prenatal care and nonemergency county indigent health services that currently are provided to illegal immigrants. The immediate effect of this prohibition would be to reduce state and county costs, but with potential higher future health care costs for emergency care and for care of the citizen children of illegal immigrants.

Facilitating the Citizenship Process Could Reduce County Costs

• Informing immigrants about how to attain citizenship.
• Ensuring that adequate citizenship classes are available.
• Assisting eligible immigrants in obtaining appropriate test exemptions.

Several counties already have taken steps to facilitate citizenship, such as establishing offices to assist immigrants in the application process. By facilitating citizenship, the fiscal pressures on counties will be reduced, and most of the elderly and disabled immigrants currently on SSI/SSP will be able to continue to receive this assistance.

Revenue Developments

• About $130 million of the increase is due to unusually large estate tax payments in September. These payments represent a one-time gain to the General Fund.
• About $79 million of the gain is due to General Fund receipt of trial court revenues that the budget had assumed would be allocated to a trust fund beginning in 1996-97, consistent with a restructuring of the trial court program. However, since implementing legislation was not passed, the revenues continue to be deposited into the General Fund. Assuming the trial court revenues are appropriated to local trial courts, the revenue gain will be offset by higher expenditures in the months ahead. Thus, there probably will be no net gain to the General Fund's "bottom line."

The remainder of the $415 million gain is consistent with the generally positive economic trends in California. For example, personal income tax receipts were up $111 million, reflecting higher-than-expected withholding and quarterly estimated payments. Bank and corporation revenues for the first three months combined were up $24 million from the forecast. However, collections during September were somewhat disappointing. Quarterly prepayments on 1996 corporate earnings came in lower than expected during the month, potentially signaling a slowdown in taxable corporate profits. The weakness is somewhat puzzling in light of the positive industry reports on corporation earnings for the third quarter of 1996, and the continuing economic growth in California during this period.