New Study on Removing CalWORKs “Asset Test”

San Francisco, CA — EARN and the Californians for Shared Prosperity coalition today issued a new report that analyzes the cost that the State of California incurs verifying assets of CalWORKs recipients. Families and individuals must pass an “asset test,” in order to receive assistance. This means that a CalWORKs recipient cannot have more than $2000 in a checking or savings account, or own a vehicle with an equity value of more than $9500.  This report, “The Cost of Asset Testing for the CalWORKs Program,” commissioned by EARN and Californians for Shared Prosperity and authored by the Howard University Center for Race and Wealth, found that California spends over $6.4 million annually on asset testing and verification to find that only 1% of total cases exceed asset limits.

The California Work Opportunity and Responsibility to Kids (CalWORKs) program provides time-limited cash assistance to families with children and focuses on getting adults back to work. Asset limits prevent families from receiving cash assistance if they have savings or other assets such as a vehicle that exceeds the asset limit.

The report analyzed state and county level data on acceptance, denial, and discontinued CalWORKs caseloads from April 2012 to March 2013 and found:

  • The State of California spends an estimated $6.4 million dollars per year on cash and vehicle asset test verification to verify 1,034,074 CalWORKs cases.
  • At intake, only 2% of the cases exceeded the cash asset maximum and .001% of cases exceeded the vehicle asset limit, respectively.
  • CalWORKs cases are reevaluated once every 12 months after initial intake to determine if a participant remains eligible for ongoing benefits. Of those reevaluated cases, only 1 percent were discontinued after asset test verification.
  • Eight other states have eliminated TANF asset limits and seen very minimal or no increases in TANF cases; the same is anticipated for California. After adoption of policies to eliminate or increase asset limits, TANF recipients over time are likely to accumulate multiple types of assets including savings accounts and vehicle ownership which helps build emergency savings, increase access to jobs and ownership, and ultimately increases financially stability and less dependence on TANF assistance.
  • It’s predicted that asset accumulation due to the elimination of asset testing guidelines will lead to a reduction in the CalWORKs caseload within the first year by an estimated 5 percent, or more than 26,000 cases. This will result in $163 million in cost savings to the State of California.

Overall, the study recommends the removal of the CalWORKs’ asset test verification requirements because it will reduce unnecessary administrative costs, decrease caseloads and allow for better monitoring and oversight of CalWORKs applicants and recipients’ economic status and progress under the program.

“Families that are eligible for CalWORKs are already struggling and have few assets,” said Sheryl Lane, EARN’s Director of Public Policy and Alumni Engagement. “Asset limits send the wrong message by penalizing families for saving and it forces families that want to become financially self-sufficient spend their savings to remain eligible for CalWORKs assistance.”

In past years, the state legislature has failed several times to pass legislation to eliminate the CalWORKs asset test. Advocates are looking to sponsor a bill to eliminate the test in 2016.

 

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Californians for Shared Prosperity is a coalition dedicated to increasing opportunities for financial security and prosperity for all Californians who work hard in pursuit of their dreams. The coalition mobilize low-wage California families to stand up as champions of public policies and practices that give everyone access to quality financial products and services and to quality higher education – proven tools to build prosperity. Connect with the coalition at http://ca4sharedprosperit.wix.com/cal4sharedprosperity and www.facebook.com/californiansforsharedprosperity.

EARN is a national nonprofit that gives low-income working families the power to create prosperity for generations. As the nation’s leading microsavings provider, EARN gives families the tools to achieve life-changing goals such as saving for college, buying a first home, or starting a small business. EARN’s ultimate vision is that millions of well-informed, low-wage American families will achieve financial success through proven strategies, fair public policy, and their own hard work.