How will the Propositions affect CalWORKs? An interview with Michael Herald

As voters debate their decisions about the May 19 budget Propositions, many have questions about how the measures will affect welfare recipients and programs.  CCRWF Executive Director Kate Karpilow interviewed longtime Summit presenter Mike Herald, Legislative Advocate with the Western Center on Law and Poverty, and a leading expert on CalWORKs.

1) Mike, many people are struggling with their decisions on the May 19 ballot propositions, and eager for more for more information about how the propositions - pass or fail - would affect California’s welfare recipients.  As one of the state’s leading advocates who works on welfare issues, thanks for sharing your insights. Let’s start with 1A and 1B.  What happens to CalWORKs families if these both pass?  What does the world look like if they both fail?  Give us a sense of the near- and long-term consequences of these propositions succeeding or failing. I think it is important for people to realize that Prop 1A and 1B will have no direct impact on the state’s budget this summer or even in the 2010-11 budget. The provisions of Prop 1A do not begin until 2011 when a new Governor will take office.

If Prop 1A and 1B pass the 2011-12 budget will include the first 3 percent contribution to the rainy day fund and would begin the process of refunding Prop 98. Unless revenues come back like a lion in 2011 there could be some real pain.

On the other hand if 1A fails, Prop 1B school repayments don’t go into effect and there is no mandated 3 percent contribution to the rainy day fund. But the downside is that the sales tax and income tax hikes go away. In any case, 2011 is looking like a very difficult year.

The campaign for Prop 1A makes it sound like the passage of the measure will prevent layoffs to firefighters and teachers. The threats of layoffs are real but not due to Prop 1A. The state is projected to have at least a $10 billion deficit for the 2009-10 budget on top of the $42 billion problem that was addressed in February. As I note below if some of the other propositions fail this number could climb. There is great fear and trepidation about the magnitude of cuts that the Governor may propose to close this gap when he releases the May Revise. But those pressures will be there even if Prop 1A passes.

One more point on IA: Of great concern to human service advocates is the cap on year-to-year budget increases to a rolling ten-year average. This provision will have the effect of ‘flatlining’ state spending over time and limiting the growth of state programs. Public education funding, however, continues to operate under the Prop 98 formula which is based on growth in population and income. If Prop 98 continues to grow at its historical rate, it will begin to consume a larger  portion of the state general fund while other state programs, such as health and welfare, will have less of the General Fund to operate.

2) What is your take on Proposition 1C?   Does it help CalWORKs families if it passes?  What are the implications if the proposition is defeated? Normally we oppose revenue measures that are regressive in nature. By that we mean that low-income families pay a disproportionate amount of their incomes compared to higher income families. Sales taxes, for example, are regressive because they consume a greater proportion of the budgets of low-income families, while income taxes are generally progressive because the more you make the higher a percentage of your income you must pay. Lotteries fall into the regressive category because data shows that low income households play more often and spend more of their income on the lottery than wealthier households. Naturally this impacts the lowest income households like CalWORKs and SSI recipients the hardest.

What makes Prop 1C tempting is that unlike Prop 1A, it provides immediate help for the budget in the form of $10 billion over the next 2 budgets. The budget that was crafted in February assumes that these funds will be available in the 2009-10 budget. If Prop 1C fails it creates an immediate $5 billion hole in the 2009-10 budget over and above the $10 billion projected hole mentioned above. In other words we are looking at a $15 billion hole to fill this summer if Prop 1C fails. Then the possibility of layoffs becomes more real.

3) Good time to ask this question:  Has the Western Center on Law and Poverty signed on in support or opposition to any of the propositions? No, we haven’t. Our policy is not to take sides on ballot propositions unless they have a direct impact on our clients (see Prop 165 to cut welfare grants by 25% in 1992 or Prop 46 in 2002, the $2.1 billion housing bond that provided help for extremely low-income households).

3) Let’s take Propositions ID and IE together.  Same set of questions.  What are the implications for welfare families if these two propositions pass - and what are the consequences if they fail? The impact is the same as Prop 1C in the sense that the combined $800 million that would be taken from Prop 10 and Prop 63 coffers would require voter approval of the changes. The 2009-10 budget already assumes that the funding that Propositions ID and IE would provide. If they both fail, they will create an additional $800 million hole in the budget.

I would also note that the opponents of both Prop 1D and 1E argue that it is not just that they are taking the money but they are permanently changing the way the measures work, particularly the children’s health initiative would allow local boards of supervisors to divert Prop 10 funds to other purposes. If Prop 1D and 1E pass, there will be reduced funding for mental health services and reduced matching funds for the popular SCHIP children’s health program, which will affect services for low-income families and households. WCLP is already suing the state over supplanting Prop 63 mental health funds for state General Fund dollars. Prop 1D would expand that practice.

4) Let’s chase out another scenario.  If all of the propositions (except 1F, which has no impact on CalWORKs) go down in defeat. . . . what happens in the months of May and June in the State Capitol?  What kind of decisions do you see the Governor and State Legislature making to deal with the deficit, and how will these decisions impact CalWORKs and other safety net programs? As I explain above, the problem is not if Prop 1A or 1B fail but having a budget deficit of nearly $16 billion and fewer options to close it.

Furthermore, many parts of the budget are protected by the constitution, federal law or court decision. The federal stimulus package adds to this problem by limiting the ability of states to reduce spending or eligibility in exchange for taking federal stimulus funds. Two areas that may be “walled off” by the federal stimulus package (ARRA) are Prop 98 and the MediCal program. If these two programs are mostly untouchable, then the remaining 40 percent of the state budget would have to absorb the entire $16 billion of cuts. That will mean CalWORKs, SSI, IHSS, Child Care, Corrections and Higher Education are left to absorb the cuts.

Another big question on the table is when a new budget will actually get adopted.

While the Governor must submit a revised budget in May (the May Revise), it is not clear if or when the Legislature will act to adopt a budget. The February budget passage met the June 15^th constitutional deadline for the 2009-10 budget so some believe the Legislature has no responsibility to pass another budget. What is likely to create pressure for a new budget is a major summer cash flow problem in which payments for a wide variety of local programs would be stopped. The state may attempt to borrow funds from the private market but lenders may be unwilling to lend to the state if we do not have a realistic way to pay the lenders back. The idea of a “tax neutral” revenue package is not dead, but if that does not materialize one wonders how long the Obama Administration would allow mass layoffs given the importance of California to the national recovery.

5) Any final thoughts about the state budget process? The CalWORKs programs? Our state’s governance? On the CalWORKs program I would encourage you to read my recent piece posted on the CCRWF site. On state governance? That is a whole new subject.