BILL ANALYSIS Ó
SENATE HUMAN
SERVICES COMMITTEE
Senator Carol Liu, Chair
BILL NO: SB 417
S
AUTHOR: Dutton
B
VERSION: As introduced
HEARING DATE: April 12, 2011
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FISCAL: Appropriations
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7
CONSULTANT:
Hailey
SUBJECT
Electronic benefit transfer cards: prohibition of use for
alcohol and tobacco purchases
SUMMARY
Requires the electronic benefits transfer (EBT) system used
in the CalWORKs and CalFresh programs to be designed to
prevent recipients from using the EBT card to purchase
alcohol or tobacco products.
ABSTRACT
Current federal law
1. Establishes the Supplemental Nutrition Assistance
Program (SNAP), formerly called food stamps, to provide an
electronic benefit enabling eligible persons to purchase
food.
2. Establishes Temporary Assistance for Needy Families
(TANF) to provide cash grants to eligible persons as part
of a welfare-to-work program.
Continued---
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3. Prohibits retailers from accepting SNAP benefits to pay
for non-food items or to purchase tobacco and alcohol
products.
4. Establishes penalties for retailers that accept SNAP
benefits to pay alcohol products or for non-food items
including tobacco products.
Current state law
1. Establishes CalFresh as the state's SNAP program,
providing benefits to eligible recipients in the form of an
account accessible using an EBT card at participating
stores and markets.
2. Establishes CalWORKs as the state's TANF
(welfare-to-work) program, providing eligible participants
cash benefits accessible at participating banks, stores,
and other participating sites using an EBT card.
3. Through an executive order, prohibits ATM machine and
point of sale devices at gambling establishments from
accepting a California-issued CalWORKs EBT card for any
purchase or for accessing cash.
This bill
1. Directs the state to prohibit the use of an electronic
benefits transfer card for the purchase of alcohol or
tobacco products.
2. Makes clear that changes necessary to put the
prohibition in place not be construed to prohibit the use
of an electronic benefits transfer card to access federal
SNAP (state CalFresh) benefits in any manner authorized by
federal law.
FISCAL IMPACT
Unknown.
BACKGROUND AND DISCUSSION
The author's statement
The author states that food stamps and welfare grants are
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designed to help the neediest individuals meet basic
requirements of food, clothing, and shelter. However,
recipients use their benefits to purchase non-essential
items such as alcohol and tobacco products. This practice
violates the spirit of the program. The author points out
that the Los Angeles Times reported in 2010 that EBT cards
were being used to withdraw an average of $227,000 per
months from ATMs at Indian Casinos. Subsequent Times
articles reported use of EBT cards on cruise ships, in
strip clubs, and in Las Vegas. The author observes that
Governor Schwarzenegger issued an executive order to stop
or to limit use of EBT cards at these locations but did not
take steps to stop the purchase of alcohol or tobacco.
Because federal law prohibits the use of CalFresh benefits
for alcohol or tobacco products - and those benefits are
accessed through the use of the same EBT card that CalWORKs
participants use to access their cash benefits -- the
author believes that extending the prohibition to both EBT
accounts would not be complicated or burdensome.
How do CalWORKs participants and CalFresh recipients access
their benefits?
For the past several years, participants in the
California's welfare to work program, CalWORKs have
received cash aid accessible to them through an EBT card.
They receive a list of surcharge-free ATMs and stores where
they can get cash back at no cost. The state strives to
provide reasonable access to locations where particpants
can withdraw cash with no or minimal costs. Recipients of
CalFresh benefits - previously called food stamps - use
their EBT card at participating stores and markets to
purchase those items that can be purchased with CalFresh
benefits. Note: aged and disabled persons who are
recipients of cash grants through SSI/SSP (Supplemental
Security Income/State Supplementary Payment) do not receive
CalFresh benefits; the value of those benefits are included
in the basic SSI/SSP cash grant.
How are CalFresh purchases monitored?
CalFresh is a food program overseen at the federal level by
the Department of Food and Agriculture (USDA). CalFresh
benefits are not to be used to purchase items that are not
for human consumption, such as diapers and cat food. It is
the responsibility of recipients and retailers to ensure
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that CalFresh benefits are used as intended: some grocers
have computer programs that can scan items and then
calculate what items can be paid for with CalFresh benefits
and which items cannot. Other grocers have CalFresh
recipients separate CalFresh and non-CalFresh items; the
two groups of items are then rung up and paid for
separately. The EBT card does not "read" through a list
of items purchased; it simply transfers funds from the
buyer to the seller. The integrity of CalFresh as a food
program depends on recipients and retailers. There can be
stiff penalties to recipients and to vendors who violate
the terms of CalFresh purchases.
An executive order has eliminated EBT cash access at
certain business locations
In June, 2010, Governor Schwarzenegger ordered the
Department of Social Services (DSS) to ensure that CalWORKs
EBT cards not be used in gambling establishments. DSS,
working with the Office of Systems Integration and the
State's EBT service provider, identified and eliminated EBT
case access at ATMs in casinos, card rooms, poker rooms,
and adult entertainment businesses.
In January, 2011, DSS informed counties that EBT cash
access was being deactivated at ATM and point-of-sale
devices located in liquor stores that are not authorized by
the USDA to accept CalFresh benefits, in bail bonds
businesses, bingo halls, cannabis shops, cruise ships, gun
and ammunition stores, night clubs, saloons, and taverns,
psychic readers, race tracks, smoke shops, spa and massage
salons, and tattoo and piercing shops.
According to DSS, it deactivated automated teller machines
and point-of-sale devices at approximately 1,575 liquor
stores and 550 tobacco shops in California so that EBT
cardholders could not use their EBT cards at these
locations. This effort did not require any redesign or
reprogramming of the EBT system. Instead, DSS and the
Office of Systems Integration (OSI) engaged in a laborious
manual process to identify all liquor stores and smoke
shops located in California. Once identified, OSI located
and provided the terminal identification numbers of these
ATMs and point of sale devices to the state's EBT vendor
who in turn contacted the third party processors that own
or manage these devices and asked them to deactivate the
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devices for EBT cardholders. The third party processors
complied with the state's request. The state's vendor
continues to monitor these and other locations that have
been deactivated to be sure they do not come back online
for EBT cardholders.
DSS also reports that the state did not deactivate ATMs of
point-of-sale devices at those businesses that have been
authorized by FNS to sell food to CalFresh recipients
(e.g., grocery stores).
In response to criticism received that some of these ATM
machines were the only ones within a reasonable distance of
populations of CalWORKs participants, DSS promised in its
January 2011 all-county letter that "every effort will be
made to add new ATM and/or POS locations so that the cash
access standard is met."
Arguments in support
The author believes that using CalWORKs benefits to
purchase tobacco products and alcohol is a violation of the
spirit of the law, which is designed to assist needy
families to meet basic requirements of food, clothing, and
shelter. In its response to reports of use of EBT cards to
withdraw cash or to make purchases at casinos and other
establishments that offer services that are not congruent
with the goals of CalWORKs, the state has moved to close
off use of EBT cards at those businesses. This bill
extends that effort to these non-essential products.
Arguments in opposition
The Western Center on Law and Poverty believes that this
bill undermines the goals of CalWORKs and the EBT system -
to integrate welfare recipients into the world of work and
personal responsibility and that it promotes negative
stereotypes of low-income people. The Center also believes
the bill will bring confusion to vendors, puts unnecessary
responsibility on retailers, and will have little or no
impact on alcohol and tobacco use. The Coalition of
California Welfare Rights Organizations believes there is
no evidence that EBT cards are being used to buy alcohol or
tobacco.
COMMENT AND QUESTIONS
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Enforcement and penalties
Does the bill need to assign enforcement responsibility for
its provisions and delineate a penalty for CalWORKs
participants or vendors who use or permit the use of an EBT
card to purchase tobacco products or alcohol?
POSITIONS
Support: Howard Jarvis Taxpayers Association
Oppose: Coalition of California Welfare Rights
Organizations
County Welfare Directors Association
Western Center on Law and Poverty
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