Title IX: Miscellaneous. This title reduces the Social Services Block Grant (Title XX) by about 15 percent. During 1996-97, California is using its Social Services Block Grant funds primarily to support (1) regional centers, administered by the Department of Developmental Services; and (2) the In-Home Supportive Services program, administered by the Department of Social Services.

Current-Year Update of AFDC/TANF Program

Major Changes in 1996-97

Budget legislation provides that the statewide 4.9 percent reduction sunsets on October 31, 1997.

Cost-of-Living Adjustment (COLA). Budget legislation extends the suspension of the statutory COLA for AFDC/TANF grants through October 1997. This results in estimated General Fund savings of $10.1 million in 1996-97.

Pregnancy Benefits. Budget legislation limits eligibility for the state-only AFDC/TANF pregnancy benefits to recipients who are eligible for the Cal Learn program (teen parents who have not graduated from high school.) This results in estimated General Fund savings of $10.5 million in 1996-97 and $13.3 million in 1997-98.

1997-98 Budget Issues

Caseload Projection is Overstated

The Governor's budget assumes that caseloads will decline by 1.9 percent in 1996-97 and 0.9 percent in 1997-98. In making its projections of the AFDC/TANF caseload in 1996-97 and 1997-98, the department reviewed the trend of actual caseloads through June 1996. We note that during the first five months of 1996-97 (beginning in July 1996), the AFDC/TANF caseload was 3.8 percent below the same period during 1995-96. The downturn in welfare caseloads is due to several factors including an improving economy with lower unemployment, lower birthrates for young women, and a decline in legal immigration to California. Based on this recent information, and using our model for projecting AFDC/TANF caseloads, we estimate that the caseload will decline by 4.2 percent in 1996-97 and 2.1 percent in 1997-98. Based on these projections, we estimate that General Fund expenditures for AFDC/TANF grants are overstated in the budget by $117 million in the current year and $161 million in 1997-98. Accordingly, we recommend that the budget be reduced to reflect these estimates.

Budget Proposes To Continue Past Reductions And Eliminate Grant Reduction Exemptions

The budget contains three separate proposals that would have the effect of reducing AFDC/TANF grants below the levels required by current state law. These proposals are to (1) make permanent the statewide 4.9 percent grant reduction enacted in 1995-96 and subsequently extended through October 1997; (2) delete the requirement to resume the statutory COLA, which has been suspended since 1991-92; and (3) eliminate exemptions for certain persons from previously enacted grant reductions. As Figure 20 shows, these changes result in combined General Fund savings and cost avoidance of $294 million.

Figure 20
Governor's AFDC/TANF Grant Proposals General Fund Savings 1997-98
(Dollars in Millions)
Proposal		Amount
Make permanent the statewide 4.9 percent grant reduction		$160
Delete the requirement to restore the statutory COLA		85
Eliminate grant reduction exemptions:
Statutory exemptions		11
Additional exemptions imposed by DHHS waiver process		38
Total		$294

Budget Proposes to Make Temporary Reduction Permanent. Budget trailer bill legislation for 1996-97 (SB 1780, Committee on Budget and Fiscal Review) extended the 4.9 percent statewide grant reduction (enacted in 1995) through October 1997. The Governor proposes to make this reduction permanent, for a General Fund cost avoidance of $160 million in 1997-98.

Budget Proposes Deleting Requirement to Resume Statutory COLA. SB 1780 also extended the suspension of the statutory COLA through October 1997. Deleting the requirement to restore the COLA (estimated at 2.6 percent for 1997-98) would result in a General Fund cost avoidance of $85 million in 1997-98.

Budget Proposes Eliminating All Exemptions to Certain Previously Enacted Grant Reductions. In 1992-93, 1993-94, and 1994-95, budget legislation reduced AFDC grants by 5.8, 2.7, and 2.3 percent respectively. There are two types of exemptions to these grant reductions. First, there are statutory exemptions pursuant to Chapter 307, Statutes of 1995 (AB 908, Brulte). The AB 908 exemptions are for cases in which each adult caretaker is (1) receiving Supplemental Security Income (SSI) or In-Home Supportive Services (IHSS); (2) a non-needy caretaker relative; or (3) disabled and receiving State Disability Insurance, or Workers' Compensation Temporary Disability benefits. The Governor proposes to eliminate these exemptions (about 7 percent of AFDC/FG cases) on January 1, 1998, resulting in General Fund savings of $11 million in 1997-98.

Second, there are additional exemptions that were imposed on California by the federal Department of Health and Human Services in order to obtain federal approval of a waiver request by the state. These expanded exemptions are (1) teen parents in high school, (2) cases in which each adult caretaker has been determined to be temporarily incapacitated, and (3) cases in which the adult caretaker stays home to care for other household members who are ill or incapacitated. Elimination of these exemptions (about 18 percent of AFDC cases) on January 1, 1998 would result in General Fund savings of $38 million in 1997-98.

Comments on the Governor's Proposals. As indicated, the Governor's proposals will result in significant savings. To assist the Legislature in evaluating these proposals, we offer the following comments and findings on how the proposals would affect the income of nonworking families and how they would affect the financial work incentives for AFDC/TANF recipients.

Impact on Families. Figure 21 shows how both current law provisions and the Governor's proposals would affect monthly grants for a family of three (assuming the family is not exempt from past grant reductions). As the figure shows, the proposed maximum grant in Region 1 (counties with high rental costs) is $565, or $45 below the level required by current law in 1997-98. Under the Governor's proposal, the combined maximum monthly grant and food stamp allowance is $826 (76 percent of the poverty level), or $31 below the level required by current law ($857, 79 percent of poverty). In Region 2, the proposed grant level is $538, or $42 below the level required by current law. When combined with food stamps, total benefits under the Governor's proposal are $807 (75 percent of poverty), which is $29 less than the level required by current law ($836, 77 percent of poverty).

Figure 21
AFDC/TANF Maximum Monthly Grant and Food Stamps Family of Three Current Law and Governor's Proposal 1997-98
	Current Law	Governor's Proposal	Change From Current Law
Region 1: High-cost counties
January 1, 1997 actual grant	$565
1997-98 grant assuming:
Make 4.9 percent statewide reduction permanent and delete statutory COLA	--	$565
Restore 4.9 percent statewide grant reduction 11-1-97	594	--
Restore COLA (2.56 percent) 11-1-97	610	--
Food Stamps	247	261
Totals	$857	$826	-$31
Region 2: Low-cost counties
January 1, 1997 actual grant	$538
1997-98 grant assuming:
Make 4.9 percent statewide reduction permanent and delete statutory COLA	--	$538
Restore 4.9 percent statewide grant reduction 11-1-97	565	--
Restore COLA (2.56 percent) 11-1-97	580	--
Food Stamps	256	269
Totals	$836	$807	-$29

Figure 22 (see page 82) summarizes how both current law and the Governor's proposal would affect monthly grants for a family of three that is exempt from previously enacted grant cuts. Under the Governor's proposal, the combined maximum monthly grant and food stamp allowance would be $80 less than under current law in Region 1 and $77 less than under current law in Region 2. Under the Governor's proposal, recipients would be at about 75 percent of the poverty level. Under current law, recipients would be at about 83 percent of poverty.

Figure 22
AFDC/TANF Monthly Grant and Food Stamps Family of Three Exempt from Previous Grant Reductions 1997-98
	Current Law	Governor's Proposal	Change From Current Law
Region 1: High-cost counties
January 1, 1997 actual grant	$631
1997-98 grant assuming:
Eliminate exempt status 1-1-98	--	$565
Restore 4.9 percent statewide grant reduction 11-1-97	663	--
Restore COLA (2.56 percent) 11-1-97	680	--
Food Stamps	226	261
Totals	$906	$826	-$80
Region 2: Low-cost counties
January 1, 1997 actual grant	$601
1997-98 grant assuming:
Eliminate exempt status 1-1-98	--	$538
Restore 4.9 percent statewide grant reduction 11-1-97	631	--
Restore COLA (2.56 percent) 11-1-97	648	--
Food Stamps	236	269
Totals	$884	$807	-$77

Impact on the Work Incentive. Under current law, there are two work incentives in the AFDC (FG) grant structure: (1)"fill the gap" and (2) the "$30 and one-third disregard." Under "fill the gap," the difference between the need standard (the benchmark for calculating grants) and the maximum grant represents an amount that recipients can earn without these earnings reducing their grant. For a family of three, this gap is $170 per month (need standard of $735 less the maximum grant of $565). Under the "$30 and one-third disregard" the first $30 of earned income plus one-third of remaining earnings are not counted as offsets to the grant.

Using the 1996-97 grants as the reference point, the effect of current law would be to increase maximum grants. Raising maximum grants could reduce the work incentive because it reduces the "gap." We note, however, that the interim evaluation of the work incentive provisions enacted in 1991-92--a combination of grant reductions and expansion of the $30 and one-third disregard--indicates that these changes in work incentives had no significant impact on the percent of AFDC (FG) parents who worked. Thus, it could be argued that these preliminary results suggest that raising grants (pursuant to current law) may not significantly reduce the percent of AFDC/TANF parents who are working.

Elimination of Statutory Exemptions to Grant Reductions--Budget Internally Inconsistent

As discussed above there are two types of exemptions to previously enacted grant reductions: (1) the statutory exemptions pursuant to AB 908, and (2) the additional exemptions imposed by the federal government in granting a state waiver. In the current year, an exempt family of three receives a monthly grant of $631, compared to $565 for a non-exempt family of three (in the high-cost counties).

The administration proposes to eliminate all exemptions effective January 1, 1998. The budget, however, includes funding for the statutoryexemptions for all of 1997-98. Without regard to the merits of this proposal, we recommend that the amount proposed for AFDC/TANF grants be reduced by $10.8 million (General Fund) in order to make the budget consistent with its own assumptions.

Whether to eliminate the statutory exemptions and/or the additional exemptions imposed by the federal government is a policy issue for the Legislature. The principal rationale for the exemptions is that these cases face substantial barriers to employment and probably would not be able to compensate for grant reductions by working. An assessment of this proposal will involve balancing the benefits of budgetary savings against the adverse effects of lower grants for families who face substantial barriers to employment.

Governor's Welfare Reform Initiative

Governor Proposes to Redesign the AFDC/TANF Program

The Governor proposes legislation to replace the existing AFDC/TANF program with the California Temporary Assistance program (CalTAP), effective January 1, 1998, midway through the budget year. Key program changes include:

• Time Limits. Recipients on aid prior to January 1, 1998 would be limited to two years of cash assistance in any three-year period. New recipients (on or after January 1, 1998) would be limited to one year of cash assistance in any two-year period. Recipients removed from cash assistance pursuant to these time limits may return to cash assistance after staying off of aid (both cash assistance and the noncash assistance safety net program described below) for one year. All recipients face a five-year lifetime limit on receipt of cash assistance; however, noncash assistance pursuant to the safety net program has no time limit. Families with non-needy caretaker relatives, minor parents, and families with severely disabled parents or children are exempt from the time limits.

• Grant Reduction After Six Months. Beginning January 1, 1998, CalTAP recipients on aid for more than six months would receive a grant reduction of 15 percent.

• Safety Net. Families reaching the time limits described above would be eligible for a state-funded "safety net" program, under which noncash benefits are provided. The noncash benefits are roughly 15 percent below the cash benefit, having been reduced by the portion of the grant that is attributed to the adult. All safety net benefits would be paid in the form of vouchers. The state would provide 100 percent of the funding. No additional funding would be provided for county administration, but the counties would be permitted to use funds provided for the safety net program for administration.

• Participation Mandate. To receive the full amount of the cash grant, recipients must participate for 32 hours per week (35 hours for two-parent families) in work and/or county-approved education or training activities. After conducting an assessment, counties would determine how recipients will fulfill their participation requirement through various allowable activities, such as limited job search, employment training (for up to one year), education, community service/work experience, and nonsubsidized employment. Families unable to meet their participation requirement would have their grants reduced proportionally, based on the number of hours they fail to participate. Families with less than 16 hours of participation per week would lose their entire grant, and would not be eligible for the safety net program. Weekly hours of required participation for families in the safety net program, if any, would be determined by each county, pursuant to its state-approved county Cal-TAP plan. (No state funding would be provided for employment preparation activities in the safety net program.)

• Modification to Grant Structure. Families with earnings would have lower grant payments (roughly 30 percent) than under current law as a result of reducing the amount of income that is excluded when calculating the grant.

• Paternity Establishment Requirements and Penalties. For cases coming on aid after January 1, 1998, a family's grant would be reduced by the portion for the adult (between 10 and 39 percent, depending on family size) until paternity is established. Failure by the custodial parent to cooperate completely on all child support issues would result in aid being denied to the entire family. Under current law, failure to cooperate results in a grant reduction.

• Eligibility Conditioned Upon Child Immunizations and School Attendance. In order to be eligible for CalTAP, applicants must provide proof of certain childhood immunizations and school enrollment (no outstanding truancies).

Program Flow. Following eligibility determination, counties would have the flexibility to meet temporary emergency needs of families (such as rent, car repairs, relocation expenses, or referrals to other assistance programs) for the purpose of diverting a family from aid. (Under current law, qualified applicants are eligible for Medi-Cal and child care benefits if they choose not to go on AFDC/TANF.) Families that go on aid would proceed to job club/job search for approximately three weeks. Adults unable to find employment would be assessed for employment readiness. An individual participation plan would be developed, which specifies how the 32-hour or 35-hour participation requirement would be met. After six months on aid, recipients who are not employed would have their grants reduced by 15 percent. These recipients would continue to receive the reduced grant for six months (eighteen months for those on aid prior to January 1, 1998), at which time they would be transferred to the safety net program.

Benefit Levels. Figure 23 shows the maximum monthly grant and food stamps allowance for a family of three in Region 1 (high rental-cost counties) and Region 2 (low rental-cost counties). For example, in Region 1, recipients (with no earnings)would have their total benefits reduced by $60 after six months and an additional $64 when they reach their time limit and transition to the safety net. The full safety net benefit--if counties do not reduce benefits to fund their administrative costs--would be approximately 65 percent of poverty in Region 1 and 63 percent of poverty in Region 2.

Support Services. To the extent funding is available, child care, transportation, and other work expenses would be provided to recipients to complete their participation plan. The child care "disregard" (which accounts for child care costs in the grant structure) would be replaced by a system of direct child care payments.

Program Administration. The state would set basic program elements such as eligibility, time limits, and maximum grant levels. Counties would administer the program pursuant to county plans that are subject to state review and approval. Counties would have the option of contracting with private firms for administration of the program but would remain responsible for their share of costs. Beginning in 1998-99, counties would receive funds for administration and employment/training services in the form of a block grant, if they satisfy unspecified maintenance-of-effort (MOE) requirements for local expenditures. Counties would continue to pay their share (5 percent) of non-federal costs for grants. Counties would be able to share in up to 25 percent of program savings. If the federal government assesses a penalty for noncompliance with federal requirements, the penalties would be passed on proportionally to counties that failed to meet the requirement, unless the state concludes that the failure was beyond the county's control.

Figure 23
California Temporary Assistance Program Maximum Grants and Food Stamps Family of Three
Region	First 6 Months on Aida	After 6 Monthsa	1-Year/2-Year Safety Netb c
Region 1: High-cost counties
Grant	$565	$480	$388
Food Stamps	261	286	314
Totals	$826	$766	$702
Percent of Poverty	76%	71%	65%
Region 2: Low-cost counties
Grant	$538	$457	$369
Food Stamps	269	293	315
Totals	$807	$750	$684
Percent of Poverty	75%	69%	63%
aAssumes families meet their 32-hour or 35-hour participation mandate.
bSafety net benefit is paid in vouchers. Amounts shown assume that counties do not reduce benefits to cover administrative costs.
cFamilies on aid prior to January 1, 1998 move on to the safety net after two years on aid. Families coming on aid after January 1, 1998 move to safety net after one year on aid.

Entitlement Status. The administration indicates that the individual entitlement to benefits would be eliminated; however, it is not clear whether any provision would be made to appropriate additional funds in years when the caseload is higher than budgeted.

Fiscal Effects. Figure 24 (see page 88) summarizes the estimated General Fund fiscal effects of the CalTAP components. We note that the department has not provided any fiscal and caseload impact projections beyond the budget year.

Comments on the Governor's CalTAP Proposal

Any welfare reform proposal must address at least three competing goals: provide support for children, establish incentives for parents to work, and control public costs. There are few easy answers in resolving the conflicts among these goals. In January 1997, we presented our approach to welfare reform in our policy brief, Welfare Reform in California: A Welfare-to-Work Approach (reprinted in The 1997-98 Budget: Perspectives and Issues). In the following discussion we describe the Governor's proposal in comparison to our approach and current law, and comment on the CalTAP proposal. Figure 25 summarizes the CalTAP proposal and our approach as they apply to AFDC/TANF recipients (families with children).

Time Limits. Time limits are an important component in both CalTAP and our Welfare-to-Work approach. In both cases, reaching the time limits result in benefit reductions rather than termination of aid; however the time limits are much shorter in the Governor's proposal.

Time limits will result in savings to the government, but these savings may be the result of actions that increase family income (that is, from obtaining employment) or decrease family income (that is, grant reductions from reaching the time limits). A consideration of time limits therefore involves balancing the potential advantages of the behavioral effects of these limits in bringing about increased employment against the potential adverse effects of reducing grants when recipients do not obtain jobs. In this respect, it is important to consider how many recipients might be subject to these time limits. According to the department's October 1995 AFDC Characteristics Survey, about 85 percent of recipients were on aid for more than one year, 70 percent for more than two years, and 35 percent for more than five years. Other studies have estimated that over 40 percent of persons receiving AFDC will eventually accumulate five years on aid.

Figure 25
California Temporary Assistance Program (CalTAP), Legislative Analyst's Office Approach, and Current Law AFDC/TANF Recipients (Families with Children)
Current Law	CalTAP	LAO Welfare-to-Work
Time Limits
No limit on eligibility. After two years from commencing GAIN program, recipients must accept work slot (if offered) or their grant is reduced.	One year out of any two-year period for recipients entering after January 1, 1998. Two years out of any three-year period for current recipients. Five-year lifetime limit for cash assistance. After time limit, recipients are eligible for noncash safety net described below. Exemptions from Limit: Non-needy caretaker relatives, minor parents, families with severely disabled parent or child.	Work requirement after two years on aid (see "services" below). Five-year limit followed by safety net (described below). Time is not counted when recipient is working 20 hours per week in a non-subsidized job. Exemptions from Limit: Families with relative or disabled caretaker, adult caretaker is disabled. Extension when limit reached: If jobs not available or medically verified illness or disability.
Safety Net
Not applicable.	Amount varies with family size--$388 for a family of three (Region 1). Will be less if counties fund administration from safety net allocation, or county plan calls for lower amount. Non-cash (vouchers). State will fund 100 percent of benefits equivalent to child-only case. Counties may pay for administration from these funds.	$300 for family of 2, $375 for family of 3, $450 for family of 4 or more. Cash benefits. Grant costs will be shared 75/25 state/ county. Administrative costs 85/15 state/county.
Employment Preparation/Services
Only GAIN participants are required to engage in work-related activities.	Recipients must participate in 32 hours (35 hours for two-parent families) of work and/or county-approved education and training activities. Proportional sanction for participation at less than required hours. Family loses entire grant if participation is below 16 hours.	For first two years, required to participate in job search, training, education, treatment pursuant to case plan. After two years, recipients must work 20 hours per week. Community service job provided if needed--increases to 25 hours in fourth year and 30 hours in fifth year. Proportional sanction for participation at less than required hours.
Paternity Establishment
Recipients must provide all known information to assist in paternity establishment or their grant can be reduced by the portion for the adult. Specific information is not required if applicants attest they do not have it.	Paternity must be established before adult can be included in the family's grant. Failure to cooperate with paternity establishment (without good cause) results in ineligibility for entire family.	Same as current law.
Grant Structure
Families with earnings may "fill the gap" between the need standard and the maximum grant with no grant reduction. About one-third of earnings are disregarded in calculating grants ("$30 and one-third disregard").	Eliminates all existing disregards, and replaces it with a new grant structure (lower grant for working recipients but increased incentive to move from part-time to full-time work).	Retains "fill the gap", but phases out "$30 and one-third disregard" within first two years of recipient's time in employment.

We note that these estimates assume a continuation of the AFDC program as it has operated in past years. It is important to keep in mind that welfare reform interventions--such as the GAIN program, community service jobs, and the time limits themselves--are designed with the intent of increasing the number of participants who obtain employment, thereby reducing the number of recipients who actually reach the time limit.

While several states are beginning to implement various forms of time-limited aid, no evaluations have been completed on such provisions. An interim report on Florida's time-limited welfare program should be available soon, but the findings will be preliminary.

After adjusting for the number of families that would be exempt from the time limits, we estimate that about 600,000 families potentially could be affected by a one-year limit, 500,000 by a two-year limit, and 250,000 by a five-year limit. The number that would actually reach these limits in the future depends on the success of the various welfare reform provisions in increasing the level of employment among recipients.

Several factors affect a recipient's prospects of obtaining a job. One of these is job availability. By the end of 1999, approximately 600,000 cases could reach their CalTAP time limit. We estimate that the California economy will create approximately 330,000 new jobs per year for the next three years. Based on the current pattern of job creation, less than half of these jobs (each year) would be at a skill level where most welfare recipients could realistically expect to compete. These data suggest that there will be considerable competition for these and other job openings, and that we cannot expect all existing welfare recipients to obtain jobs without some job loss on the part of others (in other words, an increase in the unemployment rate).

Safety Net. Families reaching the time limit would be eligible for the state-funded, county-administered safety net. Under CalTAP, safety net benefits must be paid in the form of vouchers or other types of non-cash assistance. The state would provide funding equivalent to a child-only case, but would not provide any additional funding for administration. Pursuant to their state-approved CalTAP plan, counties would have the flexibility to set (1) benefit levels lower than the equivalent of the child-only case, (2) income disregards (for working recipients), and (3) participation requirements. We note that by not providing separate funding for administration of the safety net, counties would have a fiscal incentive to reduce the level of aid to recipients in order to cover their administrative costs.

Eliminating cash benefits in the safety net program has two potential advantages. First, it makes the benefit package less attractive to recipients, thus increasing their incentive to work. Second, in cases where parents may have difficulty managing money, it may help to assure that most of the benefit will go toward meeting basic needs such as food and housing. We note, however, that providing benefits in voucher form results in additional administrative costs; and, as noted above, the counties would have a fiscal incentive to further reduce benefits in order to cover these additional administrative costs. We also note that inability to obtain employment within one or two years cannot be equated with inability to manage aid in the form of cash. We believe that most AFDC/TANF recipients are probably capable of handling cash.

The voucher proposal may stem from a concern that adult recipients with substance abuse or other personal problems may not use the grant to benefit their children. In this respect, we note that an alternative approach would be to give case managers the flexibility to provide aid in the form of vouchers in those cases where they believe it is in the best interest of the children.

Modified Grant Structure. The existing grant structure contains the following work incentives: (1) the $30 and one-third disregard, whereby about one-third of work earnings are disregarded in determining the amount of a recipient's income that offsets his or her grant and (2) the "fill-the-gap" grant structure, whereby recipients can earn the "gap" between their grant ($565, family of three) and the need standard ($735, family of three) without having their grant reduced. The Governor proposes to eliminate the current system of disregards and replace them with a single "work incentive." Working recipients would keep 54 percent of every dollar that they earn until they reach an income of $996 per month (full time work at the minimum wage). Earnings above $996 would reduce the grant payment on a dollar for dollar basis.

Compared to current law, the CalTAP provision results in lower levels of family income (grant plus earnings) for working recipients and others with income, regardless of the amount of income. As shown in Figure 26, combined grant and earnings under current law are always greater than under CalTAP. Thus, for welfare recipients who are not working, the CalTAP reduces the work incentive in comparison to current law. However, for recipients who are earning over about $400 per month, the CalTAP provides a greater incentive to earn more money because recipients retain 54 percent of additional earnings, compared to retaining about 33 percent under current law. Thus, for the policy objective of moving recipients into the work force, current law provides the stronger work incentive. However, if the policy objective is to motivate those with half-time earnings to increase hours toward full-time work, then CalTAP has the stronger work incentive for this segment of the caseload. We note, however, that in the latest survey (October 1995), only about 13 percent of AFDC cases reported earned income, and this includes full-time as well as part-time workers.

Services and Participation Requirements. As noted above, CalTAP would require able-bodied adults to participate for 32 hours per week (35 hours for one member of a two-parent family) in some combination of work and/or county-approved education and training activities.

County administrators would determine how this 32-hour or 35-hour requirement breaks down between the number of hours that recipients would be required to work, and the hours required in employment preparation activities. We note that the administration has proposed no guidelines for determining the mix of required work and employment preparation activity in meeting the work component of the requirement. Consequently, counties may vary considerably in how they determine this requirement. The combination of a fixed 32-hour or 35-hour participation requirement and a block grant allocation for services could lead to a situation where the work requirement is primarily a function of the amount of funds a county receives for services, rather than a function of an assessment of the recipient's prospects of obtaining and keeping a job. This could have significant consequences for the recipients, who will be sanctioned for not meeting the 32-hour (or 35-hour) requirement.

In this respect we note that the Governor's budget includes about $140 million in additional funds for employment preparation services in 1997-98, and earmarks $53 million for education of welfare recipients in the community colleges. This would not be sufficient to provide 32 hours of job search and training activities to all eligible recipients, if such activities were provided at a service level comparable to the GAIN program.

Paternity Establishment Provisions. For cases coming on aid after January 1, 1998, paternity must be established before the custodial parent is included in the household for purposes of calculating the family's grant. For a family consisting of a mother and one child, this represents a sanction of approximately 39 percent. For larger families, the sanction is between 10 and 20 percent.

The Department of Social Services estimates that each month 8,800 CalTAP applicants will need paternity establishment and will become subject to this sanction. The department assumes that paternity will be established in an average of seven months in 95 percent of the cases. For the remaining 5 percent, the department assumes that paternity will never be established. The department does not know the comparable rate of paternity establishment currently, but in our judgement 95 percent would be a very significant increase.

We make the following observations regarding this proposal:

• There is no analytical basis for projecting the 95 percent rate. It rests, in large part, on the assumption that in almost all of the cases where paternity is not established, it is due to a lack of cooperation by the custodial parent in identifying and locating the noncustodial parent. (Establishing paternity generally requires that the noncustodial parent be located.) We note, in this respect, that according to a national survey of 46 state child support enforcement directors conducted in 1994, about two-thirds indicated that AFDC applicants are usually willing to cooperate in establishing paternity, and will provide complete and correct information to the best of their ability. To the extent respondents perceived noncooperation as a problem, they most often viewed this as "passive" noncooperation (in other words, applicants volunteer no more information than directly asked or are vague in their response), rather than overt noncompliance (clients deliberately providing false information).