Schwarzenegger Plans Cuts to California Welfare

California Gov. Arnold Schwarzenegger plans to cut cash payments to welfare parents who don't work. Farai Chideya explores what this could mean for thousands of welfare families in — and out — of California. She'll talk with George Passantino, a senior fellow with the Reason Foundation and former director of Gov. Schwarzenegger's California Performance Review.

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FARAI CHIDEYA, host:

From NPR News, this is NEWS & NOTES. I'm Farai Chideya.

California Governor Arnold Schwarzenegger is making national news again. First, he plans to offer health coverage to California 6.5 million uninsured, including citizens and undocumented residents. The residents would have to buy their own insurance, but people who couldn't afford it would receive subsidies. Massachusetts already has a similar system.

At the same time, however, the Schwarzenegger administration plans major cuts to California's welfare system, according to The Los Angeles Times. The impetus - new federal rules that will fine states which, like California, aren't doing a good job of getting aid recipients to work.

Cutting back payments to unemployed parents and some payments ear-marked for children would save the state millions of dollars in potential fines and another half a billion dollars in program costs.

For more, I spoke with George Passantino, a senior fellow with the Reason Foundation and former director of Governor Schwarzenegger's California Performance Review. He says one in four welfare recipients lives in California and the state has no choice but to crack down on those who do not work.

Mr. GEORGE PASSANTINO (Senior Fellow, Government Reform for the Reason Foundation): In California, there are approximately 500,000 families that are provided cash payments through the state. And so those folks in this system that do not meet the necessary work eligibility requirements over the course of five years would be effected. The desire here is to create a set of incentives that encourage self-sufficiency and personal responsibility. You know, California dramatically lags the nation in terms of meeting those federal work standards, and this proposal would be one effort to deal with that.

CHIDEYA: Some figures show that California has 25 percent of families who receive the aid who were meeting the minimum work requirements; in Ohio, 65 percent; in Massachusetts, 60 percent. California, although it's an enormous and wealthy state, certainly has a lot of pressure on low-income workers, including some being undercut by workers who are undocumented.

Does that have any effect on the situation facing people who are trying to meet these minimum work requirements?

Mr. PASSANTINO: It's important to remember that approximately a quarter of the nation's welfare recipients are in California. California is shouldering a very large share of that population of welfare recipients. So I think given the strength in the economy - California's unemployment rate is the lowest that's been in 30 years - that this actually a very sensible proposal. We also have to remember that California confronts a structural deficit estimated to be at least $5.5 billion this year. Now if you can't keep your fiscal house in order, it's incredibly difficult to provide services to anybody.

CHIDEYA: Why these cuts now? Is it because of the ongoing deficit? Is it because of other political timing reasons? Why now?

Mr. PASSANTINO: Well, I think now is, you know, we've got to do it sooner rather than later. As I mentioned, California faces a serious fiscal crisis that's ongoing and we've failed to address that effectively over the past several years.

At the same time, California is not in compliance with federal work standards as it relates to this program. Failure to meet those standards or make a good faith effort to meet those standards will result in fines that the state will have to pay, which could be as much as the $150 million per year starting in 2008. And within five years, it could be $500 million. I mean, that is a serious concern that the state has got to address. So now is precisely when these efforts should be undertaken.

CHIDEYA: These cuts could target kids who receive financial help even if their parents have been disqualified from the system. In other words, you have kids who may for whatever reason not - they don't have a lot of agency over whether or not their parents choose to meet these work requirements. Is there any trepidation that an issue like this, as much as the state needs to save money, as much as the state needs to meet federal requirements, is actually punishing people who cannot make decisions on their own?

Mr. PASSANTINO: You know, anytime you deal with a policy that affects children, one has to do so with very careful concern for their wellbeing. It's important to remember that this cash payment assistance is one of many, many, many types of assistance provided both to families and to children. We've got to tackle the incentives somewhere, and this seems like the most sensible way to do so.

I believe that most families, given the opportunity to provide for their kids and the incentives to encourage it, will do just that.

CHIDEYA: There was a quote from state Senator Don Perata. He said, it's ironic that the governor's proposing healthcare for poor kids while taking away their breakfast. Is he right, and does the timing of this announcement or revelation about the cuts in the aid program really undercut the governor's ability to push forward his new healthcare program?

Mr. PASSANTINO: Well now, one could question the governor's plans to expand state-funded healthcare. One way to look at it, however, is that he's got to figure out someway to pay for it. Some I don't thinks it's necessarily inconsistent. We have got to create incentives that encourage personal responsibility and self-sufficiency, and I believe that this is a very sensible way to do that.

CHIDEYA: Well, Mr. Passantino, thank you so much.

Mr. PASSANTINO: Thank you.

CHIDEYA: George Passantino is a senior fellow with the Reason Foundation and former director of Governor Schwarzenegger's California Performance Review.

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