Legislative Analyst's Office

Analysis of the 2000-01 Budget Bill

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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 $2.6 billion from the General Fund for the state's share of the SSI/SSP in 2000-01. This is an increase of $137 million, or 5.5 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 2001, and an increase in the federal administrative fee.

In December 1999, there were 328,998 aged, 21,813 blind, and 707,051 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 8,900 legal immigrants in December 1999.

Budget Overestimates Cost of Providing Statutory COLA

We recommend reducing the General Fund amount budgeted for the state portion of Supplemental Security Income/State Supplementary Program grants by $6.6 million because the cost of providing the statutory cost-of-living adjustment is overestimated. (Reduce Item 5180-111-0001 by $6,600,000.)

Background. Pursuant to current law, the Governor's budget proposes to provide the statutory COLA in January 2001. 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 $55.1 million for providing the statutory COLA for six months, effective January 2001.

The CNI Has Been Revised. The January 2001 COLA is based on the change in the CNI from December 1998 to December 1999. The Governor's budget, which is prepared prior to the release of the December CNI figures, estimates that the CNI will be 3.61 percent, based on partial data. Our review of the actual data, however, indicates that the CNI will be 2.96 percent.

The CPI Is Overestimated. The January 2001 federal SSI COLA will be based on the change in the CPI-W from the third quarter of calendar 1999 to the third quarter of calendar 2000. The Governor's budget estimates that the change in the CPI-W for this period will be 3.2 percent. Based on our review of the consensus economic forecasts for 2000, we estimate that the CPI-W will be 2.5 percent. This reduction in the CPI-W (compared to the Governor's budget) raises the state cost of providing the statutory COLA because it effectively reduces federal financial participation toward the cost of the state COLA, which is applied to the entire grant.

Cost of Providing COLA Is Overestimated. Taken together, the changes in CNI and CPI-W (in relation to the Governor's budget) reduce the General Fund cost of providing the statutory COLA by approximately $6.6 million. Accordingly, we recommend that the budget be reduced to reflect these savings.

Supplemental Security Income/State Supplementary Program Grant Levels

Figure 1 (see next page) shows SSI/SSP grants on January 1, 2001 for both individuals and couples as displayed in the Governor's budget and adjusted to reflect the actual CNI and the Legislative Analyst's Office estimate of the CPI-W. As the figure indicates, grants for individuals will increase by $20 to a total of $712 per month, and grants for couples will increase by $36 to a total of $1,265. As a point of reference we note that the federal poverty guideline for 1999 is $687 per month for an individual and $922 per month for a couple. Thus, the grant for an individual would be 3.7 percent above the 1999 poverty guideline and the grant for a couple would be 37 percent above the guideline. (We note that the poverty guidelines are adjusted for inflation annually.)