Legislative Analyst's Office Analysis of the 2003-04 Budget Bill

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 $2.3 billion from the General Fund for the state's share of SSI/SSP in 2003-04. This is a decrease of $700 million, or 23 percent below estimated current-year expenditures. This decrease is due primarily to a proposed 6.2 percent grant reduction effective July 1, 2003 and shifting all costs for the Cash Assistance Program for Immigrants (CAPI) to the counties pursuant to the Governor's realignment proposal. For a discussion of the Governor's realignment proposal, please see "Part V" of The 2003-04 Budget: Perspectives and Issues.

In December 2002, there were 334,614 aged, 21,361 blind, and 746,943 disabled SSI/SSP recipients. In addition to these federally eligible recipients, the state-only CAPI was estimated to provide benefits to about 10,800 legal immigrants in December 2002.

Budget Proposes Grant Reductions and COLA Suspensions

By proposing to reduce grants by 6.2 percent, the budget achieves General Fund savings of $662 million. In addition, the budget achieves cost avoidance of $372 million by suspending the June 2003 and January 2004 state cost-of-living adjustments.

Background. Under current law, both the federal and state grant payments for SSI/SSP recipients are adjusted for inflation each January. The cost-of-living adjustments (COLAs) are funded by both the federal and state governments. The state COLA is based on the California Necessities Index (CNI) and is applied to the combined SSI/SSP grant. The federal COLA (based on the Consumer Price Index for Urban Wage Earners and Clerical Workers) is applied annually to the SSI portion of the grant. The remaining amount needed to cover the state COLA on the entire grant is funded with state monies. Chapter 1022, Statutes of 2002 (AB 444, Aroner), delayed the January 2003 state COLA until June 2003, resulting in a five-month General Fund savings of $112 million compared to prior law.

Governor's Proposals Achieve $1.1 Billion in Savings. Figure 1 summarizes the Governor's grant reduction and COLA suspension proposals, which result in combined General Fund savings in 2002-03 and 2003-04 of nearly $1.1 billion compared to current law. Specifically, deleting the state June 2003 COLA results in savings of $24.1 in 2002-03 and $280.8 million in 2003-04. Reducing grants by 6.2 percent results in saving of $662.4 million in 2003-04. Finally, deleting the January 2004 state COLA results in a six-month savings of $91.5 million in the budget year. (We note that the Governor proposes to apply these reductions and COLA suspensions to CAPI grants as well.) Under the Governor's proposal, recipients would receive an estimated 2.4 percent federal COLA in January 2004.

Impact on Recipients. Figure 2 shows grants for individuals and couples under both current law and the Governor's budget at four points in time. In January 2003, recipients received a 1.4 percent federal COLA ($7 for individuals and $12 for couples). As the figure shows, the January 2003 maximum monthly grant for an individual is $757 (about 103 percent of the 2002 federal poverty guideline), and the grant for a couple is $1,344 (about 135 percent of the federal poverty guideline). Under current law, the June state COLA would increase grants by $21 for an individual and $38 for each couple; raising individuals and couples to 105 percent and 139 percent of the poverty guideline, respectively. The Governor's budget proposes to delete these increases. 

July Grant Reduction. In July, the Governor proposes to reduce grants by 6.2 percent compared to their January levels, and about 8.9 percent compared to current law. Under the Governor's proposal, the maximum monthly grant for an individual would be $708.40 (about 96 percent of the federal poverty guideline) and the grant for couples would be $1,225.20 (about 123 percent of poverty).

January 2004 State COLA Suspension. Under current law, recipients would receive a state COLA of 3.5 percent in January 2004. This would raise the maximum monthly grants to $805 for an individual (109 percent of poverty) and $1,430 for a couple (about 144 percent of poverty). Under the Governor's proposal, the state COLA would be suspended, but recipients would receive the "pass through" of the federal COLA—$14 for an individual and $19 for couples. The pass through of the federal COLA would raise total maximum monthly grants under the Governor's proposal to $722.40 for individuals (98 percent of poverty) and $1,244.20 for couples (125 percent of poverty).

At the time this analysis was prepared, the Legislature had not completed action on the Governor's proposed COLA suspensions or the 6.2 percent grant reduction.