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What’s Penny-wise, Pound-foolish, and Completely Heartless?

CalWORKS Cuts

By Salvatore Babones

Governor Jerry Brown proposes to carve $946 million out of CalWORKs, in a total 2012-2013 budget of over $94 billion. That’s about a one percent swing in state government spending. Is it worth it?

Most of the proposed $946 million savings will come from reducing full CalWORKs eligibility from 48 months to 24 months. Benefit levels will also be frozen or cut. The total result will be payment cuts for about 432,000 low-income families, according to Legislative Analyst’s Office (LAO) estimates.

Salvatore Babones
Click to enlarge photo

Salvatore Babones

All budget cuts, and all tax increases, have undesirable side-effects. But governments have to raise and spend money. The question is which spending items justify the cost in taxes. On this metric, how do the proposed CalWORKs cuts compare?

From the budget-maker’s perspective, a spending cut is a spending cut and that’s the end of the story. Money not spent is money saved. But squeeze a balloon here and it puffs out there. Squeeze it too much and it explodes.

What will happen if spending in support of low-income families is cut by $946 million? The first thing that will happen is that hundreds of thousands of very low-income families will have to cut their own budgets. This will immediately harm the rest of the California economy.

Families living at or under the poverty line don’t put aside their income to invest in business opportunities out-of-state or overseas. They spend their money – every cent, every month.

When they spend it, they employ people in grocery stores, child-care centers, discount stores, anywhere people spend money. That keeps other people employed, who then go on to spend money as well. Economists call this the multiplier effect: a dollar of government spending doesn’t just generate a dollar in the state economy. It generates much more, especially when the people who get it spend it quickly and locally.

The second thing that will happen if CalWORKs is cut is that CalWORKs families will start to feel additional financial strain. Sadly, family financial pressures are well-known to predict future child abuse – physical, sexual, and emotional. The rise in violence against children resulting from additional financial pressures being placed on their families is predictable and preventable.

In addition to the terrible human impacts, the rise in child abuse will result in increased parental interaction with the criminal justice system and higher levels of child assignment to foster care.

It is impossible to predict the amount of additional abuse that will be generated and the proportion of this abuse that will result in state intervention, but even a small rise could wipe out any immediate cost savings from reductions in CalWORKs spending.

Third, when the state pulls back from helping mothers care for their own children, growth in the state’s foster care caseload is inevitable.

As children move from CalWORKS-subsidized home care to state-supported foster care there is a direct increase in state costs. The average per-child foster care payment is about equal to the average per-family CalWORKS payment. The indirect costs, however, will be even higher.

For example, the chance that mothers will be medicated for severe psychoses is 60 percent higher when their children are placed in foster care (once proper statistical controls have been made).

Mothers trying to complete drug programs are also much more successful when their children live with them than when their children are in foster care.

Foster care should be an option of last resort to remove children from dangerous family environments, not a financial substitute for keeping families together.

The LAO estimates that 432,000 California families in all will be affected by the proposed cuts, with 104,000 families to have their benefits completely eliminated within one year.

There are only about 4,151,000 families with children in California.

The cuts will thus affect more than one-tenth of all California families. The proportion of California’s children affected will be even larger, since CalWORKS participants have more children, on average, than non-participants.

We must ask: Would it cause more damage to increase taxes on the richest 10 percent of California families, or to cut benefits for the poorest 10 percent?

Put that way, it is hard to believe that the correct answer is to cut CalWORKs.

Cutting the CalWORKS budget won’t eliminate the problems CalWORKs exists to address. It will make them worse, potentially much worse. The proposed cuts are penny-wise, dollar-foolish, and completely heartless. They should be abandoned.

Salvatore Babones is writing on behalf of the sisters of St. Vincent’s, Santa Barbara, who commissioned him (pro bono) to author a study of the effects of the proposed CalWORKs cuts on California families. He is a senior lecturer in sociology and social policy at the University of Sydney, Australia, and an associate fellow of the Institute for Policy Studies, Washington DC.

This story has been amended to correct a typo that in the second reference to the CalWORKS cut substituted the m in millions with b!

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