CalFresh Underutilization Means Lost Dollars and Empty Plates For Local Residents

In November 2010, the California Food Policy Advocates (CFPA), a statewide organization focused on improving the health and welfare of low-income Californians by increasing their access to affordable and nutritious food, released a report entitled “Lost Dollars, Empty Plates.”  The CFPA’s report analyzes the impact of CalFresh, known previously as California’s Food Stamp Program and federally referred to as the Supplemental Nutrition Assistance Program (SNAP), participation rates on state and local economies.

According to the United States Department of Agriculture (USDA), California is second to last among US states with regard to participation in the federally run Supplemental Nutrition Assistance Program (SNAP) and has continually ranked alongside states with the worst participation rates in the country.  The report claims that the lack of participation in this food-assistance program is harmful to both state and local economies, not to mention low-income households.

CalFresh benefits are funded exclusively by federal funds.  The federal government “funds 50 percent of CalFresh administrative costs, with the state and counties contributing the remaining 35 and 15 percent, respectively.”  Additionally, “CalFresh has federal entitlement status, which means that federal funding must be made available to provide all eligible applicants with benefits.”

According to the USDA’s most recent data, slightly less than half of all individuals eligible for CalFresh actually participated in 2007. The California Department of Social Services (CDSS) figures illustrate a percent change in California households participating in the program of over 19 percent between fiscal years 2007-2008 and 2008-2009, which coincided with the economic recession.  However, despite the apparent increase in CalFresh participation, the CFPA claims that these federal nutrition funds are still being greatly underutilized by local and state governments, as well as households eligible for such assistance.

According to the USDA’s October 2010 research report, “The Food Assistance National Input-Output Multiplier (FANIOM) Model and Stimulus Effects of SNAP,” the utilization of CalFresh benefits by participants has a multiplier effect, which is described as “a ratio between changes in two economic variables.”  The report goes on to state that the initial increase in CalFresh expenditures “has a direct effect on the economic activity of the producers of the goods and services purchased, retail establishments, and the wholesale and transportation systems.” Moreover, their research suggests that these effects will be experienced relatively quickly, as the recipients of CalFresh benefits spend them the same month in which they are received. 

The short-term effect on producers of goods and services is dependent upon inventory levels.  For example, USDA research indicates that if inventory levels are low, “the producer will increase production during the current or next month following the expenditures and will order new inputs.”  Subsequently, “new input orders will stimulate production by the industries that make them, generating the next round of the multiplier process and the first round of indirect effects.” The input orders will likely take place the same quarter as the initial CalFresh expenditure.

During this first quarter, an increase in labor income associated with those industries and their input suppliers who’re directly affected by the “direct effects and initial indirect effects” of the CalFresh expenditures.  The USDA report states that the additional labor income creates an “induced effect” on economic activity, which “occur as households receive their paychecks, which will happen during the first quarter.”

The USDA report concludes that the “direct effects and initial rounds of indirect and induced effects, will arguably occur quickly and most probably during the first quarter of the initial expenditures.”  Further, the “subsequent rounds of indirect and induced effects take place sequentially over time.”  The researchers state that although they cannot set a fixed timeline for the indirect and induce effects, they find it “reasonable to argue that each round of effects will take an additional quarter.”  Their supposition is that four rounds of these effects are likely to occur over a year’s time.

These effects, as previously stated, are said to be felt soon after the CalFresh benefits are issued to the recipient “as eligible households are, by necessity, more likely to spend (rather than save) any additional income within weeks of its being received.”

The California Legislative Analyst’s Office asserted in its “Analysis of the 2004-05 Budget Bill- Food Stamps Program,” the following:

“Research done at the University of California and elsewhere indicates that individuals with income low enough to be eligible for food stamps would, on average, spend about 45 percent of their income on goods for which they would pay sales tax. The state General Fund receives about 5 cents for every dollar that is spent on a taxable good. Local governments and special funds receive the remainder of the sales tax revenue (generally about 2.25 percent). Because additional food coupons would result in low-income families spending more of their other resources on taxable goods, the receipt of federal food coupons helps to generate revenue for the state and for local governments.”

By implementing a methodology used by the California Legislative Analyst’s Office, the CFPA “calculates that these dollars would result in an estimated $131 million of additional sales tax revenue for the state general fund.”  Additionally, by applying the same method, the lost monies would create $27 million in sales tax revenue for California’s non-general fund expenditures.  In total, they say this would add $158 million to the state budget.

With complete participation, the state’s county budgets stand to gain a sum of $40 million brought about by an increase in state and county sales tax revenue.

For full participation of the CalFresh program to be achieved, 3.6 million eligible non-participants must participate.  The CFPA’s most recent data shows that 6.9 million Californians are eligible to participate in the program, but only 48% (3.3 million) actually do.

The intent of finger imaging is to increase program integrity, with the primary objective being to “deter multiple-aid fraud (i.e. receiving CalFresh benefits from multiple counties or under multiple names).”  Interestingly, the State Auditor has twice declared that the benefits of the finger-imaging requirement do not outweigh the costs. 

The CFPA report claims there “is no fiscal evidence that the amount of multi-aid fraud in California warrants the use of a statewide finger imaging system that costs $17 million per year to maintain.”  However, they argue that such evidence of its harmful effects do exist.  For example, a report produced by the USDA in 2009 suggests that states that have implemented biometric technologies, such as finger imaging, may have SNAP participation rates that are seven percentage points lower than states that do not.

It’s believed by the CFPA that there are several more recent protective measures, none of which are mentioned specifically in their report, that have been proven effective in 47 states.  Therefore, they believe it’s in the best interest of the state to abandon the finger imaging policy altogether.

Only two other states (Texas and Arizona) and New York City use finger imaging.

Reducing Paperwork: California is the only state requiring that CalFresh (SNAP) participants “report their income and household status every three months to maintain benefits.”  Moreover, unlike quarterly reporting, the CFPA states that “semi-annual reporting decreases errors in processing cases, improves the continuity of participation, and alleviates administrative burdens on county CalFresh offices.”

Through waivers issued by the USDA, the California Department of Social Services (CDSS) was permitted to operate using the quarterly reporting system.  In September 2009, the USDA declined a CDSS request to continue operating under the quarterly system and required that they develop a plan to simplify reporting.  The UDSA is said to assess the state’s improvements in simplified reporting sometime in February of this year.

To eliminate this barrier, the CFPA calls for the California State Legislature to embrace the semi-annual reporting method, which they say will increase CalFresh participation and improve administrative efficiency.  As it stands, California is the only state who is not using semi-annual reporting.

Utility Assistance Initiative: Several housing and income costs are used in determining a household’s CalFresh benefits. Among those included in the calculation used to deduct housing costs from household income-when determining CalFresh benefits-is the standard utility allowance (SUA).

For households to have the SUA considered in their CalFresh benefit calculation, they must furnish records of such expenses, often a heating or air conditioning bill.  The CFPA claims that the problem, however, is that many applicants do not use the SUA, despite incurring the corresponding costs.  They think this might be attributable to the fact that a “CalFresh applicant may pay utility expenses that are included in rental costs but are not discretely billed.”  With the use of the SUA, some households see an increase in their CalFresh benefits.

The report calls for utility assistance initiatives or “Heat and Eat” programs to be implemented statewide.  Such an initiative would need the cooperation of the CDSS and Department of Community Services and Development, who is charged with overseeing California’s Low-Income Heating and Energy Assistance Program (LIHEAP). 

Under this initiative, the CFPA asserts that CalFresh applicants would receive a “nominal LIHEAP benefit qualifying them to claim the SUA.”  Moreover, a “utility assistance initiative would eliminate the requirement that households provide documentation of utility costs because all CalFresh applicants would be able to claim the SUA based on the provision of the nominal LIHEAP benefit.”

This legislative agenda echoes the CFPA report in that it calls for the elimination of the finger imaging requirement, a transition towards semi-annual reporting and the implementation of a utility assistance initiative.

Consequently, the CFPA developed its own participation formula, which is modeled after the USDA’s, to measure the number of eligible individuals participating in CalFresh by county. Moreover, this calculation, the Program Access Index (PAI),  “takes into account three FSP [Food Stamp Program] criteria: income, FDPIR [Food Distribution Program on Indian Reservation] participation, and SSI [Supplemental Security Income] status.” 

According to the CFPA’s PAI, Yolo County ranks 50th out of the state’s 58 counties with regard to county participation rates in CalFresh.  Nearby Yuba (1st) Sacramento (2nd) and Solano (4th) counties each had a PAI indicating greater success in getting income-eligible residents participating in CalFresh.

The Yolo County Department of Employment and Social Services’ total budget for “food stamps” was listed as 3,599,000 according to the 2009-10 Yolo County Budget.  $3,240,000 of the funds came from the state and federal government, while the local government allotted $359,000.

An inquiry to the CFPA as to what county policies might differentiate counties with higher index ratings from those with low ones has not received a response.

The Yolo County figures below were generated by incorporating the CFPA’s 2008 Program Access Index (PAI) data and were included in their report, “Lost Dollars, Empty Plates.”

Participation and Eligibility in Yolo County

• Average Monthly CalFresh Participation: 10,606
• Estimated # of Income-Eligible Individuals: 33,958
• Estimated # of Income-Eligible Non-Participant: 23,352

With 100% CalFresh Participation in Yolo County

• Estimated Additional Fed Benefits Received through CalFresh: $30,424,909
• Estimated Increase in Economic Activity Per Year Resulting from 100% Participation: $54,460,587
• Estimated Additional State Sales Tax Revenue (General Fund): $821,473
• Estimated Additional State Sales Tax Revenue (non-General Fund): $171,140
• Estimated Additional Sales Tax Revenue for Yolo County: $136,912

The CalFresh Forum is set to take place on February 9th, 2011. Registration opens at 8:30 am and the forum will begin at 9:00am.  It will take place at the Crest Theater, 1013 K Street, Sacramento, CA. Registration is free and lunch will be provided.

The CFPA and CDSS have opened the forum up to anyone interested in improving CalFresh.

If you would like to check out the “Lost Dollars, Empty Plates” report  or just check out the California Food Policy Advocates’ website.