LAO 2003-04 Budget Analysis: Health and Social Services

Legislative Analyst's Office

Analysis of the 2003-04 Budget Bill

Department of Social Services CalWORKs Program (5180)

In response to federal welfare reform legislation, the Legislature created the California Work Opportunity and Responsibility to Kids (CalWORKs) program, enacted by Chapter 270, Statutes of 1997 (AB 1542, Ducheny, Ashburn, Thompson, and Maddy). Like its predecessor, Aid to Families with Dependent Children, the new program provides cash grants and welfare-to-work services to families whose incomes are not adequate to meet their basic needs. A family is eligible for the one-parent component of the program if it includes a child who is financially needy due to the death, incapacity, or continued absence of one or both parents. A family is eligible for the two-parent component if it includes a child who is financially needy due to the unemployment of one or both parents.

The budget proposes an appropriation of $5.1 billion ($1.5 billion General Fund, $718 million county funds, $21 million from the Employment Training Fund, and $2.8 billion federal funds) to the Department of Social Services (DSS) for the CalWORKs program. In total funds, this is a decrease of $893 million, or 15 percent. This decrease is primarily attributable to savings from (1) adults reaching their time limits on cash assistance, (2) the Governor's grant reduction proposal, and (3) no new funding for county performance incentives. (These issues are discussed below.)

The budget proposes a reduction in General Fund spending of $553 million (26 percent). This decrease is possible while still meeting the federal maintenance of effort (MOE) spending requirement because, under the Governor's realignment proposal, the county share of costs (with a corresponding amount of revenues) would increase by $561 million. Specifically, the Governor proposes to increase the county sharing ratio for employment services and administrative costs from an effective rate of about 5 percent to 50 percent. (Please see The 2003-04 Budget: Perspectives and Issues for our discussion of the realignment proposal.)

The General Fund savings in CalWORKs due to realignment are partially offset by the $66 million cost associated with satisfying the remaining Welfare-to-Work match obligation, which must be satisfied by July 2004.

We note that Congress extended funding for the Temporary Assistance for Needy Families (TANF) block grant through September 30, 2003. The Governor's budget assumes that the block grant will eventually be reauthorized at current funding levels ($3.7 billion annually for California).

Caseload and Grants

Caseload Projection is Overstated

We recommend that proposed spending for California Work Opportunity and Responsibility to Kids grants be reduced by $250 million (federal Temporary Assistance for Needy Families funds) in 2002-03 and $100 million in 2003-04 because the caseload is overstated. (Reduce Item 5180-101-0890 by $100 million.)

The CalWORKs caseload has declined every year since 1994-95, when caseloads reached their peak. During 2001-02, the average monthly caseload decreased by approximately 3 percent from the prior year. However, the Governor's budget projects that the caseload decline will end in 2002-03, resulting in a 2 percent caseload increase compared to 2001-02. Caseloads are projected to essentially level off by the end of the budget year, resulting in a modest year-over increase of 0.5 percent in 2003-04.

In fact, as shown in Figure 1, actual caseload data through October 2002 (the last month for which actual data are available) indicate that the overall caseload decline has continued. As a result, the budget's caseload forecast for the first four months of 2002-03 is well above the actual caseload for those months, as indicated in the figure. Our review of caseload trends, birth rates, and unemployment rates provides no reason to believe that the caseload decline will end in the current year or the budget year. Thus, we believe the budget overstates the caseload for both 2002-03 and 2003-04.

As a result, we believe the budget overstates CalWORKs costs by about $250 million in 2002-03 and by an additional $100 million in 2003-04, for a total of $350 million (federal TANF funds) over the two-year period. We believe our estimate is conservative in that it takes into account the uncertain impact of time limits on the caseload by adjusting for potentially lower time limit savings than assumed in the budget. Therefore we recommend that the budget be reduced to reflect the savings associated with lower caseloads. This would increase the TANF reserve by $350 million. Recognizing this higher TANF reserve ($550 million—$200 million Governor's budget plus $350 million) creates options for the Legislature, which we present later in our CalWORKs analysis.

Budget Suspends Statutory Cost-of-Living Adjustments and Reduces Grant Payments

The Governor's budget proposes to (1) suspend the statutory cost-of-living adjustments and (2) reduce grant payments by 6.2 percent. Compared to current law, these proposals result in combined General Fund/federal Temporary Assistance for Needy Families block grant savings of $502 million in 2002-03 and 2003-04.

Cost-of-Living Adjustment (COLA) Suspensions. The Governor's budget proposes to suspend the statutory COLAs effective June 2003 and October 2003. Compared to current law, suspending the June 2003 COLA results in General Fund/TANF savings of approximately $12 million in 2002-03 and $146 million in 2003-04. Suspending the October 2003 COLA results in General Fund/TANF savings of $106 million in the budget year. The June COLA is based on the change in the California Necessities Index (CNI) from December 2000 to December 2001 (3.7 percent). The October 2003 COLA is based on the CNI change from December 2001 to December 2002 (3.5 percent).

Grant Reduction. In addition to the COLA suspensions, the Governor proposes to reduce the maximum monthly aid payments by 6.2 percent, effective July 1, 2003. This reduction results in General Fund/TANF savings of approximately $238 million. Together, the grant reduction and COLA suspensions result in General Fund/TANF savings of $12 million in 2002-03 and $490 million in 2003-04.

Figure 2 shows the maximum CalWORKs grant and food stamps benefits for a family of three under current law, and what the maximum grant and benefits would be under the Governor's proposals. As the figure shows, under the Governor's proposals, in October 2003 grants for a family of three in high-cost counties would be $637, compared to $728 under current law. Grants for a family of three in low-cost counties would be $607 under the Governor's proposals, compared to $694 under current law.

As a point of reference, the federal poverty guideline for 2002 (the latest reported figure) for a family of three is $1,252 per month. (The federal poverty guidelines are adjusted annually for inflation.) Under current law, in October 2003 the combined maximum CalWORKs grant and food stamps benefits in high-cost counties would be $1,007 per month (80 percent of the poverty guideline). Under the Governor's proposals, combined benefits in high-cost counties would instead be $957 per month (76 percent of poverty). Combined benefits in low-cost counties would be $988 per month (79 percent of poverty) under current law, compared to $937 (75 percent of poverty) under the Governor's proposals.

Grant Reduction Proposal—Budget Internally Inconsistent

We recommend a technical adjustment to reduce proposed expenditures for California Work Opportunity and Responsibility to Kids (CalWORKs) administration by $7.3 million (federal Temporary Assistance for Needy Families funds) because the budget does not reflect the administrative savings from the Governor's proposal to reduce CalWORKs grant payments. (Reduce Item 5180-101-0890 by $7.3 million.)

As discussed above, the Governor proposes to reduce CalWORKs grants effective July 1, 2003. Specifically, the Governor proposes to reduce the maximum aid payment (MAP) levels by 6.2 percent. Reducing the MAP levels has the effect of lowering the income threshold at which working families become income-ineligible for cash assistance. This means that families with relatively high earnings would lose aid more quickly under the Governor's proposal than under current MAP levels. As families leave aid, administrative costs decrease. The department's estimate of savings from the grant reduction does not account for the administrative savings associated with working families leaving aid as a result of this change.

Figure 2

CalWORKs Maximum Monthly Grant and Food Stamps Governor's Budget and Current Law

Family of Three


Current Law

Governor's Budget

Change From Current Law

High-cost counties




January 1, 2003 actual grant


2003-04 grant assuming:




 Implement June 1, 2003 COLA (3.7 percent)


 Reduce grants by 6.2 percent effective July 1, 2003


 Implement October 1, 2003 COLA (3.5 percent)


Plus Food Stampsa







Low-cost counties




January 1, 2003 actual grant


2003-04 grant assuming:

 Implement June 1, 2003 COLA (3.7 percent)


 Reduce grants by 6.2 percent effective July 1, 2003


 Implement October 1, 2003 COLA (3.5 percent)


Plus Food Stampsa







a Based on maximum food stamps allotments effective October 2002. Maximum allotments are adjusted annually each October by the U.S. Department of Agriculture.

Based on our estimate of cases with relatively high earnings and low monthly grant payments (averaging about $50 or less), we estimate that the Governor's grant reduction proposal would result in administrative savings of approximately $7.3 million. Without regard to the merits of this proposal, we recommend that the amount proposed for CalWORKs administration be reduced by $7.3 million in order to make the budget consistent with its own assumptions.

Maintenance-of-Effort Spending Requirement And TANF Surplus

Achieving General Fund Savings While Meeting MOE Requirement

The Governor's budget proposes to spend the minimum amount of General Fund monies needed to meet the maintenance-of-effort (MOE) spending requirement for the California Work Opportunity and Responsibility to Kids program in 2003-04. Because of the MOE requirement, any net augmentation to the program will result in General Fund costs, while any net reduction will generally result in federal Temporary Assistance for Needy Families (TANF) savings, not General Fund savings. However, we identify two methods by which TANF savings may be converted into General Fund savings.

Maintenance-of-Effort Requirement. To receive the federal TANF block grant, states must meet a MOE requirement that state spending on assistance for needy families be at least 75 percent of the federal fiscal year (FFY) 1994 level, which is $2.7 billion for California. (The requirement increases to 80 percent if the state fails to comply with federal work participation requirements.) Although the MOE requirement is primarily met through state and county spending on CalWORKs and other programs administered by DSS, $377 million in state spending in other departments is also used to satisfy the requirement.

Proposed Budget Is at MOE Floor. For 2003-04, the Governor's budget for CalWORKs is at the MOE floor. The budget also includes $66 million to satisfy the remaining state matching obligation for federal Welfare-to-Work funds. However, these funds cannot be counted toward the MOE because they are used to match other federal funds.

The Governor's budget also proposes to spend all but $200 million of available federal TANF funds in 2003-04, including the projected carry-over of unexpended funds ($262 million) from 2002-03. The $200 million will be held in a reserve for unanticipated future program needs. Any net augmentation to the CalWORKs program above the reserve amount would result in additional General Fund costs above the MOE requirement.

Because the budget proposes to spend the minimum amount of General Fund monies required by federal law, any net program reductions would generally result in TANF savings rather than General Fund savings in the CalWORKs program. However, below we identify two ways by which TANF savings may be converted into General Fund savings.

Method 1: Recognize Other MOE-Countable Expenditures. As noted above, the Governor's budget assumes that $377 million in spending in other departments and programs will be used to satisfy the MOE spending requirement in 2003-04. If additional non-CalWORKs MOE-countable expenditures were identified, the required level of CalWORKs MOE spending would decrease by the same amount. Thus, General Fund spending in CalWORKs could be reduced while still maintaining MOE compliance. Achieving General Fund savings in this way would require either (1) a program reduction in CalWORKs or (2) drawing on the TANF reserve in order to keep the program whole. Later in our analysis of this program, we recommend that additional current state spending for subsidized child care be counted toward the MOE requirement.

Method 2: Transfer TANF Funds Into the Child Care and Development Fund (CCDF) Block Grant. The federal TANF block grant provisions allow California to transfer up to $961 million in TANF funds to the CCDF. Once transferred, the funds become subject to CCDF spending requirements. The Governor's budget proposes to transfer $344 million in TANF funds to the CCDF in 2003-04, to be used for child care assistance for former CalWORKs recipients. Up to an additional $617 million in TANF funds could be transferred to the CCDF ($961 million less $344 million).

The Governor's budget proposes to realign most child care programs to the counties. If the Legislature were to adopt the Governor's proposal, we believe that about $400 million of TANF funds transferred into the CCDF could be used to replace a like amount of proposed realignment revenues for child care programs. Converting those freed-up realignment revenues into General Fund savings could be accomplished in one of two ways. One option is to maintain the Governor's proposed level of realignment revenues designated for the counties, but shift to counties an additional $400 million in proposed General Fund spending in other programs, thus freeing up General Fund revenues. The second option is to "capture" $400 million of the proposed realignment revenues designated for the counties. Due to the interaction with Proposition 98 spending requirements, we estimate that roughly $200 million of the freed-up revenues could be used to offset General Fund spending for non-Proposition 98 programs, while the remaining $200 million would have to be spent on K-14 education, without suspension of Proposition 98.

Alternatively, rather than using the $400 million in freed-up realigned revenues to achieve General Fund savings, the Legislature could reduce the Governor's proposed tax increases for realignment by $400 million.

In the event the Legislature rejects the Governor's realignment proposal, the fund shift described above could be modified so as to achieve a similar level of state savings.

Issue for Consideration. Both the TANF and the CCDF block grants are due to be reauthorized during 2003. Using a relatively large amount of federal block grant funds to replace state spending on child care may hinder efforts to persuade Congress to increase states' TANF or CCDF block grant allocations.

Count Additional Spending Toward MOE Requirement

We recommend that the department count toward the California Work Opportunity and Responsibility to Kids (CalWORKs) maintenance-of-effort requirement additional General Fund expenditures for subsidized child care. We estimate such countable expenditures to be in the range of $50 million to $100 million. Counting such expenditures would increase legislative flexibility in allocating General Fund monies for CalWORKs.

Countable MOE Funds. Pursuant to the federal welfare reform legislation, California may count all state spending on families eligible for CalWORKs, even if they are not in the CalWORKs program, for purposes of meeting the MOE spending requirement. To be countable, such spending must be consistent with the broad purposes of federal welfare reform. These include providing assistance to needy families so that families can become self-sufficient. The federal regulations specifically identify child care assistance as an allowable MOE expenditure.

Subsidized Child Care. As indicated earlier in our analysis of this program, state expenditures for subsidized child care in 2003-04 are estimated to be approximately $1.5 billion. Of that total, the budget recognizes approximately $315 million as countable towards the MOE spending requirement. This amount generally reflects only expenditures for families who are current or former CalWORKs recipients. However, as noted above, spending for families that are eligible but not receiving assistance is also countable towards the MOE requirement. We estimate that between $50 million and $100 million of the $1.5 billion total estimated expenditures in 2003-04 will be for such eligible families, and therefore would be countable towards the MOE requirement.

Analyst's Recommendation. We recommend that the CalWORKs budget reflect all child care expenditures that are countable toward the MOE requirement in 2003-04. Recognizing additional MOE-countable spending increases legislative flexibility in allocating General Fund monies for CalWORKs, which we discuss below.

Additional Maintenance-of-Effort Expenditures And TANF Surplus Create Options

We identify several options available to the Legislature for spending federal Temporary Assistance for Needy Families reserve funds.

Earlier in our analysis of the CalWORKs program, we recommended that the budget for grant payments be reduced by $350 million (TANF funds) to reflect savings associated with lower caseloads. This would increase the TANF reserve to $550 million ($350 million plus $200 million proposed by the Governor's budget). Below we present various options for spending TANF funds, two of which would result in General Fund savings.

Achieving General Fund Savings. One option for achieving General Fund savings is to reduce General Fund spending in CalWORKs by the same amount by which recognized MOE-countable child care expenditures increase ($50 million to $100 million as identified earlier in our analysis). Achieving such General Fund savings without reducing the level of CalWORKs grants or services would require backfilling the General Fund reduction with funds from the TANF reserve.

The second option for achieving General Fund savings is to transfer some TANF reserve funds to the CCDF block grant, as described earlier in our analysis of this program. The new CCDF funds could then be used to replace about $400 million in proposed realigned revenues for subsidized child care. In our earlier write-up we describe how some or all of these freed-up revenues could be converted into General Fund savings.

Increasing Child Care Access. Alternatively, the Legislature could use TANF funds transferred to the CCDF to supplement current resources available for subsidized child care. We note that the Governor's December revision proposed to reduce funding for CalWORKs Stage 3 child care in the current year by approximately $100 million. (The Stage 3 "set-aside" was created to provide continuing child care for former CalWORKs recipients.) Compared to the Governor's budget, fully funding Stage 3 in 2003-04 would require about $100 million more than proposed under the Governor's realignment proposal. To the extent that the broader subsidized child care system is unable to absorb families who will lose child care as a result of these reductions, some former CalWORKs recipients may return to aid due to a lack of child care. The costs to the CalWORKs program could increase as a result.

Restoring Grant Reductions. The Legislature could also use the freed-up TANF funds to restore the Governor's proposed 6.2 percent grant reduction, described earlier in our analysis of this program. Compared to the Governor's budget, fully restoring the grant reduction would cost approximately $238 million.

TANF Reserve Outlook. Our forecast of CalWORKs costs indicates that the TANF reserve will remain above $400 million through the end of 2004-05 under specified assumptions. Namely, our projections assume (1) a TANF reserve of $550 million by the end of 2003-04, as indicated above; (2) all of the Governor's budget proposals are adopted; (3) caseloads will continue to decrease, though at a slower rate than in 2003-04; and (4) the statutory COLA is provided July 1, 2004. However, by the end of 2005-06, the reserve will be exhausted, and funding CalWORKs at the same service level will require General Fund spending above the MOE requirement. Given our projections of the TANF reserve, using TANF funds either (1) for program augmentations or restorations or (2) to reduce General Fund spending, may not be sustainable in the long term.

At least two factors increase the uncertainty inherent in any spending forecast. These are (1) the still uncertain impact of time limits on caseload trends and (2) pending federal welfare reform reauthorization, which could result in a higher work participation mandate, a decrease in the annual TANF block grant level, or both.

Given the potential for unanticipated future costs in the CalWORKs program, we believe that maintaining a TANF reserve is prudent. Thus, whichever option, or combination of options the Legislature chooses to pursue, we recommend preserving some TANF savings as a reserve against potential future cost pressures within CalWORKs.

Other Budget and Policy Issues

Update on County Performance Incentives

The Governor's budget proposes no funding for county performance incentives in 2003-04. During 2002-03, the budget redirected $297 million in incentive funds to basic program costs, thus increasing the state's unpaid obligation to the counties for performance incentives to $394 million.

Background. Prior to 2000-01, the CalWORKs statute provided that savings resulting from (1) exits due to employment, (2) increased earnings, and (3) diverting potential recipients from aid with one-time payments would be paid to the counties as performance incentives. The 2000-01 budget trailer bill for social services—Chapter 108, Statutes of 2000 (AB 2876, Aroner)—changed the treatment of performance incentives in several important ways. Among these changes, it:

By the end of 1999-00, the last year for which an appropriation for new performance incentives was made, counties had earned approximately $1.2 billion in performance incentives, and had been paid $1.1 billion (approximately $97 million less than what they had earned).

Budget "Recaptures" Unspent Incentives. The 2002-03 Budget Act provided that (1) any paid incentive funds that remained unspent at the end of 2001-02 would be recaptured; (2) $297 million of the recaptured funds would be redirected away from performance incentives to pay for grants, basic services, and administration; and (3) the remaining balance would be reappropriated as performance incentive funds for 2002-03.

The unspent balance at the end of 2001-02 was about $760 million. After redirecting $297 million for basic program costs, the department allocated $385 million to the counties as reappropriated performance incentives. The department indicates that the balance—about $78 million—will eventually be allocated to the counties in the current year. Thus, by the end of 2002-03, counties will have received approximately $463 million in reappropriated performance incentives. We note that in 2001-02, counties spent approximately $190 million in performance incentives.

Budget Proposal. The Governor's budget proposes no funding for performance incentives in 2003-04. Once the remaining balance of unspent prior-year incentive funds is allocated in the current year, the state's unpaid obligation to the counties for previously earned incentives will be $394 million ($97 million in previously unpaid incentives plus $297 million in redirected incentive funds).

Withhold Recommendation on Time Limit Savings

We withhold recommendation on the estimated savings due to adult California Work Opportunity and Responsibility to Kids recipients reaching their lifetime limit on cash assistance, pending review of the Governor's May Revision of the budget.

CalWORKs Time Limit. Under CalWORKs, adults are generally limited to 60 months of cash assistance. Adults began hitting the CalWORKs time limit in January 2003. The Governor's budget projects that by the end of 2003-04, a total of 123,000 cases will have reached their time limit.

Withhold Recommendation. The budget estimates that the program savings resulting from time limits in 2003-04 will total approximately $440 million (including grants, employment services, and child care savings). Based on limited available information, we believe that this estimate probably (1) overstates the child care savings but (2) ignores the administrative savings associated with families with low grants losing aid altogether. We therefore withhold recommendation on the budget's estimate of time limit savings pending review of the Governor's May estimates, when more complete information will be available.

Prospective Budgeting: Delay in Federal Approval Creates Budget Uncertainty

The federal government has not approved the department's original proposal to implement a prospective budgeting system for the CalWORKs and Food Stamps programs. Please see the "Food Stamps" section of this Analysis, where we recommend that the department report at budget hearings on (1) the status of its negotiations with the federal government and (2) the cost implications associated with alternative approaches to prospective budgeting.

Legislature Needs Better Participation Data

In creating the California Work Opportunity and Responsibility to Kids (CalWORKs) program, the Legislature required the Department of Social Services (DSS) to implement a system of performance outcomes for evaluation purposes. The current outcome reporting system for work participation is unreliable and incomplete, thereby making it difficult for the Legislature to monitor program performance. We recommend enactment of legislation requiring DSS to submit to the Legislature a master plan for CalWORKs data needs, particularly with respect to participation data.

Background. The CalWORKs program requires able-bodied adult recipients to work or engage in some type of work-related activity in exchange for cash assistance. Nonexempt individuals who fail to comply with participation requirements are subject to a financial sanction equal to the adult portion of the family's grant payment.

Just as CalWORKs recipients must meet individual participation requirements, California must meet statewide participation rate requirements set forth by the 1996 federal welfare reform legislation. (We note that California's participation standards differ from federal requirements—in general CalWORKs hourly requirements are higher, but the number of countable activities is greater.) States that fail to meet the federal requirements are subject to a financial penalty of up to 5 percent of the state's block grant. The penalty increases each consecutive year of noncompliance, up to a maximum of 21 percent of the block grant (up to about $750 million in California). In addition, noncompliant states are also subject to a higher maintenance-of-effort spending requirement (in California, this represents a potential additional cost of $180 million).

California's performance in meeting both the federal participation rates and the CalWORKs goal of universal participation among able-bodied adults is a mixed story, as we reported in our 2002-03 Perspectives and Issues. On the one hand, California has met the federal requirements each year, avoiding federal penalties. Further, California's rate of participation, particularly in unsubsidized employment, is higher than ever before. On the other hand, only 33 percent of able-bodied adults are meeting their participation requirements, and over 40 percent are not participating at all. These figures contrast with CalWORKs' goal of universal engagement among able-bodied adults. We concluded that the state clearly has room for improvement in terms of both engaging more recipients, as well as increasing the work effort among those who are currently participating, but are doing so for too few hours to satisfy their participation requirements. As discussed below, we believe that better participation reporting could eventually result in improved program outcomes.

Funding for the CalWORKs welfare-to-work component, which includes employment services and child care assistance, totals $2.5 billion in the current year. This represents approximately 40 percent of the total CalWORKs budget.

Statewide Participation Data Necessary for Program Monitoring. Information on the extent to which recipients are participating in welfare-to-work activities is important for three reasons. First, participation data can help the Legislature and the administration prioritize expenditures within the program. For example, decisions about the overall level of funding for employment services, as well as individual county funding levels, could be informed by data indicating county success in moving their caseloads into employment and other welfare-to-work activities. Second, information on rates of participation, noncompliance, and sanction status can give the Legislature a sense of how counties are enforcing program requirements, whether recipients are receiving the work services they need before they reach their five-year lifetime limit on aid, and whether any program adjustments are appropriate. Third, in order to avoid federal penalties, California must ensure that it meets the federal participation requirements. This is especially critical given pending Congressional welfare reform reauthorization proposals which could result in higher participation mandates.

CalWORKs Statute Required State-Level Monitoring. Anticipating the need for participation and other program data to evaluate CalWORKs, the program's enabling legislation required DSS to develop and implement a system of performance outcomes. Among other goals, the performance outcome system was meant to provide information that would (1) ensure compliance with the federal TANF participation requirements and (2) assist the counties, the Legislature, and state agencies in determining what program adjustments, if any, would be appropriate. With respect to participation outcome information, we believe the current data system does not meet these goals, as discussed below.

Current Participation Data Are Limited. The department currently maintains three sources of participation data, all of which have certain limitations. Figure 3 summarizes the strengths and weaknesses of each source. The "Q5" survey provides reliable state-level information on whether or not California met the federal participation rate requirements in the previous year. However, given the survey's sample size and sampling methodology, the Q5 does not allow county-by-county or regional comparisons. The Q5 data are only available on an annual basis, and it typically takes more than one year for the data to be compiled into a report that is available to the federal government and the Legislature.

The Work Participation Rate Monthly Report, or WTW 30, was created to monitor individual county success in meeting the federal participation rate requirements. However, although the WTW 30 was implemented in October 1999, DSS has yet to release the report, due to concerns about data inconsistencies. Even if the WTW 30 reliability problems were solved, the report is limited to the overall percentage of adult recipients meeting the federal requirements. It would provide no information about which activities recipients are engaged in or the number of weekly hours completed in each activity.

Further, neither the Q5 nor the WTW 30 capture the extent to which recipients are meeting their hourly CalWORKs participation requirements.

Figure 3

CalWORKs Participation Data Reports





Annual statewide survey designed to calculate California's federal participation rates. (CalWORKs has different participation requirements than federal law.)

Captures California's statewide federal participation rates.

· Does not capture the state’s participation rates.

· Available only on an annual basis, typically at least one year after the reporting year.

· Sampling methodology does not permit county-by-county or regional analysis.

WTW 30

Monthly report designed to monitor county success in meeting federal participation rates.

Captures individual county performance with respect to meeting federal participation rates.

· Has not yet been released due to data inconsistencies.

· Does not capture how recipients met the federal participation requirements.

· Does not report how many recipients met their hourly CalWORKs requirements.

WTW 25

Monthly report designed to provide information on how many recipients participate in welfare-to-work activities.

Captures number of recipients who participate in federally and CalWORKs-allowable welfare-to-work activities.

· Does not capture actual hours of participation.

· Does not report number of recipients who are meeting their individual participation requirements.

This is because both data sources were designed to reflect the federal definition of participation, rather than the CalWORKs definition. These definitions differ both in terms of the hours required (state requires more hours than federal government for single-parent families) and allowable welfare-to-work activities (state counts more activities).

The Welfare-to-Work Monthly Activity Report, or WTW 25, was designed to provide county level information on how many CalWORKs recipients are participating in welfare-to-work activities, the types of activities in which recipients are engaged, and nonparticipation status. Although this report does capture participation in CalWORKs-specific activities, it does not capture either (1) the actual hours of participation or (2) the number of recipients who are meeting their individual participation requirements.

In summary, the current statewide participation data and reports do not permit a timely and accurate county-by-county analysis of whether and how recipients are meeting their participation requirements. In fact, the data used to determine compliance with federal participation requirements are derived from an annual survey, rather than a monthly or quarterly administrative report prepared by the counties.

New Automation Systems Will Increase Data Capabilities. The Statewide Automated Welfare System (SAWS) was developed to provide uniform data reporting and case management capabilities to county welfare departments. Counties belong to one of four SAWS consortia. Currently, counties in two of the four consortia are in the process of replacing their separate eligibility and welfare-to-work systems with one of two single case management systems (one system is in the piloting phase; the other is under development). All remaining counties except Los Angeles are scheduled to eventually replace their current systems with one of the two new integrated systems.

County officials we talked to indicated that the new case management systems will improve case management capabilities because they will integrate the eligibility and benefit information with welfare-to-work participation data. The new systems will also improve counties' automated participation data reporting capabilities. For example, the systems could automatically generate reports on employment and other welfare-to-work activity status, including the number of hours of participation and whether or not recipients are meeting the requirements of their individual welfare-to-work plans.

Opportune Time to Reexamine Data Needs. Given the lack of reliable, comprehensive statewide participation data, we believe the phase-in of new case management systems with greater data reporting capabilities presents an opportunity for the Legislature and the department to reexamine the state's data needs. We believe the new automated case management systems themselves do not require any changes at this point. Rather, as these systems are implemented, the Legislature should assess which CalWORKs performance outcome data should be part of the automated reports that these systems are capable of generating.

Further, as mentioned above, certain pending Congressional welfare reform reauthorization proposals would increase the federal work participation mandates. We believe the prospect of higher participation mandates—and the associated increased risk of incurring federal fiscal penalties—makes reliable participation data important for three reasons.

First, knowing which activities recipients are participating in, and for how many hours, would assist the Legislature in making appropriate program adjustments in order to meet new federal requirements. For example, if recipients were generally participating in federally allowable activities but for insufficient hours, the CalWORKs hourly requirements could be adjusted. If, on the other hand, too few recipients were participating in any activity, the Legislature could amend the sanction process in order to increase participation.

Second, reliable county-by-county participation rate information would allow for comparisons of counties' success in increasing participation—in terms of both the number of recipients who participate, and the hours for which they participate. We believe that such comparisons would naturally focus the attention of state level policymakers, county officials, and CalWORKs case managers on improving these participation outcomes, and may thereby lead to better program results. As noted earlier, the rate of participation in the CalWORKs program is relatively low given the program's goal of near-universal engagement.

Finally, the CalWORKs statute specifies that if California were subject to a federal penalty, counties that did not meet the federal rate requirements may be subject to a share of the penalty. Without reliable county-by-county data, it would be difficult for DSS to implement this penalty sharing provision.

Analyst's Recommendation. Given the concurrent timing of federal welfare reform reauthorization and the phase-in of new automated case management data systems, we believe the Legislature should reexamine CalWORKs data needs. Specifically, we recommend enactment of legislation requiring DSS to prepare and submit to the Legislature a master plan for California's CalWORKs data needs. The CalWORKs Steering Committee, comprised of senior DSS staff, members of the Legislature, and representatives of the counties and the public, would provide policy direction for the preparation of the plan. We believe that this committee, which was established by the CalWORKs statute, could accomplish this task at no cost. The Master Plan would have at least three required elements. These are:

In developing the Master Plan, the state will need to strike a balance between comprehensive and accurate data reporting, which could require additional case worker time, and maximizing case worker time with CalWORKs recipients. Given the improved data capabilities of the new automated case management systems that will come on-line over the next few years, we believe a new report—which would either replace both the WTW 30 and the WTW 25, or improve the existing reports—could be implemented with minimal additional burden on county case workers, and therefore minimal cost to the CalWORKs program. To this end, the steering committee should consider whether this report should be published monthly, quarterly, or even semiannually.

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