Analysis of the 2008-09 Budget Bill: Health and Social Services

Supplemental Security Income/ State Supplementary Program (5180)

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 nearly $3.8 billion from the General Fund for the state’s share of SSI/SSP in 2008–09. This is an increase of $107 million, or 2.9 percent, over estimated current–year expenditures. This increase in funding is primarily due to increases in the SSI/SSP caseload.

In 2008–09, it is estimated that there will be an average of about 366,500 aged, 21,600 blind, and 859,500 disabled recipients. In addition to these federally eligible recipients, the state–only Cash Assistance Program for Immigrants is estimated to provide benefits to an average of 11,419 legal immigrants in 2008–09, for whom federal financial participation is not available.

Budget Deletes State Cost–of–Living Adjustments

The Governor’s budget proposes to delete the June 2008 and 2009 state statutory cost–of–living adjustments (COLAs), while passing through the federal COLAs. The budget estimates that this proposal will save $23.3 million in the current year, and $300.3 million in 2008–09. Due to revisions of the California Necessities Index and the Consumer Price Index, we estimate that the Governor’s budget understates the savings from deleting the state COLA by $5.3 million in 2008–09.

Background

The SSI/SSP payment is funded with federal and state funds, with the SSI component supported with federal funds and the SSP portion funded with state funds. Under current law, both the federal and state components of the SSI/SSP grant are adjusted annually for inflation. In the past, the federal and state cost–of–living adjustments (COLAs) were both applied to the SSI/SSP grant each January (with the exception of several years when the state COLA was deleted and the federal COLA was not passed through). Chapter 171, Statutes of 2007 (SB 77, Ducheny) permanently rescheduled from January to June the annual SSP state COLA.

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 COLA, which is applied each January, (based on the Consumer Price Index for Urban Wage Earners and Clerical Workers, or the CPI‑W) is applied annually to the SSI (federal) 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 estimates the General Fund cost of providing these COLAs to be $23.3 million in 2007–08 and $300.3 million ($271 million from the June 2008 COLA, and $29.3 million from the June 2009 COLA) in 2008–09.

Deleting the June 2008 COLA

The Governor’s budget proposes to delete the June 2008 COLA, and includes the pass–through of the federal COLA. Because the state COLA has been permanently rescheduled from January to June, deleting the June 2008 COLA results in a one month General Fund savings of $23.3 million in 2007–08, and annualized savings of $271 million in 2008–09. Given the lead–time required to notify the Social Security Administration about grant changes, the June 2008 COLA deletion issue must be addressed prior to March 1.

Deleting the June 2009 COLA

The Governor proposes to delete the June 2009 state COLA, while passing through the January 2009 federal COLA. The Governor’s budget estimates that deleting the June 2009 COLA will result in a one month General Fund savings of $29.3 million in 2008–09. However, our review of the actual CNI and our estimate of the CPI‑W indicates that this proposal understates the General Fund savings in the budget year.

The CNI Revised. The June 2009 COLA is based on the change in the CNI from December 2006 to December 2007. The Governor’s budget, which is prepared prior to the release of the December 2007 CNI figures, estimates that the CNI will be 4.25 percent, based on partial data. Our review of the actual data indicates that the June 2009 CNI will be 5.27 percent.

The January 2009 CPI Underestimated. The January 2009 federal SSI COLA will be based on the change in the CPI‑W from the third quarter (July to September) of calendar 2007 to the third quarter of calendar 2008. The Governor’s budget estimates that the change in the CPI‑W for this period will be 1.7 percent. Our estimate of the CPI‑W, based on additional data, is 2.41 percent. Figure 1 compares our estimates of the CNI and the CPI‑W to the Governor’s budget estimates.

Combined COLA Deletion Savings

Taken together, the changes in the CNI and the CPI‑W (in relation to the Governor’s budget) increase the 2008–09 savings associated with deleting the June 2009 state COLA by $5.3 million, to a total savings of $34.6 million. As shown in Figure 2, in total, we estimate that the Governor’s proposals to delete the state COLAs in 2008 and 2009 result in General Fund savings of $23.3 million in the current year, and $305.6 million in the budget year.

SSI/SSP Grant Levels

Figure 3 shows SSI/SSP average grant levels for individuals and couples under both current law and the Governor’s budget proposal. The 2009 grant levels have been adjusted to reflect the actual CNI, and our best estimate of the CPI‑W. As the figure indicates, under the Governor’s proposal, grants for individuals are expected to rise due to the pass–through of the federal COLA from $870 (100 percent of poverty) in January 2008 to $885 (102 percent of poverty) in June 2009. Absent the Governor’s proposal, grants for individuals would increase from $870 in January 2008 to $935 in June 2009 (108 percent of poverty).

Under the Governor’s spending plan, grants for couples would increase from $1,524 (131 percent of poverty) in January 2008 to $1,547 (133 percent of poverty) in June 2009 due to the federal COLAs. Under current law, grants for couples are estimated to increase from $1,524 in January 2008 to $1,640 (141 percent of poverty) in June 2009.

Inclusion in LAO Alternative Budget. As part of the LAO alternative budget package presented in The 2008–09 Budget: Perspectives and Issues, we recommend the deletion of the June 2008 and 2009 state statutory COLAs. This is because prior pass–throughs of the federal COLA has kept both individuals and couples above the federal poverty guideline. Moreover, the alternative continues to pass–through the federal COLA in 2009, thus ensuring that SSI/SSP recipients remain above poverty.

Additional Savings Included in the LAO Alternative Budget. Also, as part of the LAO alternative budget package, we recommend reducing SSI/SSP couples grants to 125 percent of the 2008 federal poverty guideline. This results in General Fund savings of about $89.5 million in 2008–09. As seen in Figure 3, couples grants are currently at 131 percent of poverty, while grants for individuals are at 100 percent of the 2008 federal poverty guideline. Even with this reduction, SSI/SSP couples will remain further above the poverty guideline than individuals. This proposal would reduce the SSP grant for couples by $66, from $568 to $502, well above the current federal maintenance of effort requirement ($396). This proposal does not result in any federal funds loss, since it only affects the SSP portion of the grant. Couples would continue to receive the federal COLA in January 2009, and would be entitled to future federal and state COLAs when they are provided. The SSP grant of $502, when combined with the federal SSI grant, would total $1,458 per month for a couple.