Title
Recommendation to City Council to Consider and Provide Direction to Staff on a Proposal to Develop a Guaranteed Basic Income Pilot Program; and
Adoption of Resolution to Appropriate $4,600,000 of American Rescue Plan Act of 2021 Funds for a Guaranteed Basic Income Pilot Program. (Community Development 10061810)
Body
To: Honorable Mayor and Members of the City Council
EXECUTIVE SUMMARY
At the City Council meeting on March 16, 2021, as part of the discussion regarding the recommendations made by the Community-Led Committee on Police Reform and Racial Equity, the City Council approved a motion requesting action on a number of items. The motion included direction to staff to prepare a report on Universal Basic Income (UBI). At the July 6, 2021 City Council meeting, staff confirmed it would bring a report on UBI and present the finding to the City Council by March 2022.
Basic income programs provide a flat monthly cash payment to a defined population of residents. These programs are distinct from other financial assistance programs in that they are:
• unconditional;
• unrestricted; and
• include regular payments for a period of time.
This flexibility empowers recipients to make their own decisions on spending the money in a way that best meets their basic needs allowing for dignity and self-determination. The defined period of time associated with a pilot program allows valuable data to be collected, which may help inform larger policy and program development designed to alleviate poverty.
Research indicates that basic income programs increase expenditure on education and training, improve food security, and improve measures of well-being among the recipients. The City of Stockton’s pilot program referred to as a Guaranteed Basic Income (GBI) program is the most well-known local example. This program demonstrated increased financial stability among the recipients compared to a control group established to evaluate the effectiveness of the program. (See Exhibit 1: Guaranteed Basic Income Pilot Programs.)
This staff report provides an overview of basic income program elements, funding sources, administrative structures, and other considerations for implementation. Staff is seeking direction from the City Council regarding development of a GBI pilot program for the City of Alameda (City).
BACKGROUND
UBI vs. GBI
The term UBI is widely used in news articles and media. The terms UBI and GBI are sometimes used interchangeably. Studies make the distinction that UBI provides a minimum income uniformly to an entire population, whereas GBI is focused on specific demographic segments. This report will use the terms GBI, “basic income,” and “direct cash” programs.
Basic Income Program Overview
Basic income programs provide a flat monthly cash payment to a defined population of individual residents (as opposed to a household). These programs are distinct from other financial assistance programs-they are unconditional, unrestricted, and include regular payments for a period of time, often concurrently with collecting survey and participation data that helps inform larger policy and program development focused on alleviating poverty. Unlike other government assistance programs, direct cash recipients are empowered to make their own decisions on how to spend the money in ways that best meet their basic needs, which allows for dignity and self-determination.
Positive Outcomes
Academic research has indicated that basic income programs increase expenditure on education and training, improve food security, and improve measures of well-being among the recipients. The data shows that people keep their jobs and spend the extra money on groceries, utilities or other basic needs. Those who work fewer hours largely invest that time in education, job training, or caring for children. There is little evidence that basic income programs decrease the motivation to work, or lead to increased spending on nonessential goods. (See Exhibit 2 for a summary of research findings and source.)
Recent (Relatively) Local Programs
In recent years, GBI has moved from policy proposals to implementation of pilot programs. Through a combination of city-led, county-led, state-led, and nonprofit-led programs, there are now nearly 100 pilots in the United States. GBI programs in relative proximity to Alameda include those in the following cities and counties:
• City of Stockton
• City and County of San Francisco
• Santa Clara County
• Marin County
• City of Mountain View
• City of South San Francisco
• City of Oakland
State and Local Funding Possibilities
Currently, the State of California (State) is providing $35 million in general funds over five years to support guaranteed income program demonstrations around the State. The State funding is focused on pregnant women and young adults who have aged out of the foster-care system. Staff understands that the Alameda County Social Services Agency plans to apply for the State’s grant once the Request for Applications (RFA) is released.
At the March 16, 2021 City Council meeting, the City Council passed a motion (Motion #3) to request action on a number of items, including a request for a staff report on basic income programs. At the July 6, 2021 City Council meeting, staff confirmed it would develop a report on the topic and present the finding to the City Council by March 2022.
The City Council has also discussed using some of the funds from the American Rescue Plan Act of 2021 (ARPA) for a pilot program. The amount of ARPA funds that the City will receive total approximately $28.68 million.
A basic income pilot program is consistent with the City’s ARPA spending principles discussed at prior City Council meetings (including the July 20, 2021 meeting), emphasizing support for those in the community who were (and continue to be) disproportionately impacted by the pandemic. Under ARPA guidelines, eligible costs must be incurred or committed to approved projects by December 31, 2024, and the period for expenditure of obligated funds will run until December 31, 2026.
DISCUSSION
The discussion section of this report provides an overview of program elements, potential funding sources, administrative structure, and considerations for implementation.
I. General Information
A guaranteed income program aligns with the City’s multi-pronged approach to reducing poverty and inequity and would serve as a direct response to some of the negative impacts of the COVID-19 pandemic. At the July 20, 2021 City Council meeting, staff provided “Guiding Principles” to serve as a framework for decisions related to ARPA spending. The relevant guiding principles related to this staff report are:
A. Prioritize “one-time” expenditures-Care should be taken to avoid creating new programs or add-ons to existing programs that require an ongoing financial commitment.
B. Seek and explore state and regional partnerships.
C. Focus on City Council Priority Areas-In 2020, the City Council established five key priority areas to help guide the use of local resources. These five areas are:
a. Preparing Alameda for the Future;
b. Encouraging Economic Development Across the Island;
c. Supporting Enhanced Livability and Quality of Life;
d. Protecting Core Services; and
e. Ensuring Effective and Efficient Operations.
D. Apply an equity lens-Decisions about ARPA spending are focused on COVID-19 recovery; many of our most vulnerable and/or less affluent were impacted to a greater extent. As part of our recovery spending plan, ensure that project and program selection prioritize equity.
E. Take the necessary time to invest strategically.
F. Carefully track and report regularly to the City Council and community.
Monthly support received by residents that have been disproportionally affected by the COVID-19 pandemic will generate a wide range of benefits, as described in the above Background Section and in Exhibit 2.
II. Program Elements and Considerations
The 15 pilot programs in California contain the following common elements, which are also summarized in Exhibit 1:
• Size of the program-The number of program recipients depends upon the available funding and scope of the pilot. Based on conversations with the City of Mountain View and the advocacy/research organization Mayors for a Guaranteed Income (MGI), a minimum of 110 recipients may be required to create a statistically significant sample size to support the research component of these programs. The benefits of the research component are discussed below.
• Cash payment amount- The vast majority of GBI pilot programs in California and around the country provide payments of between $500 to $1,000 per month.
• Length of pilot programs-Most pilot programs provide cash payments between 12 to 24 months. In some instances, as is the case with the City of Mountain View, the pilot program may be extended.
• Recipients-Most pilot programs in California and around the United States have targeted specific populations that may face particular challenges. Common target groups include youth aging out of foster care benefits, low-income (30-50% AMI) individuals and/or families, artists, and pregnant and perinatal women. Some programs serve a combination of targeted groups (e.g. the City of Oakland’s pilot is organized in two phases with the first being geographically targeted and the second being open to low income families throughout the city). Others programs, such as in the City of San Francisco, have separate pilot programs targeting different groups (e.g. artists, young mothers, and Black and Pacific Islander women during pregnancy and perinatal). Pilot programs also make a distinction as to whether the recipients are households or individuals. A representative from the City of Oakland’s pilot program (Oakland Resilient Families) stated that the program’s household recipient approach was embraced due to its support of families, a desire for multi-generational benefits (indirectly helping both youth and senior populations) and greater housing stability.
• Distribution mechanisms:
o Debit cards. Some guaranteed income pilots use reloadable debit cards or prepaid debit cards in participants’ names. Debit cards can be programmed to avoid withdrawal fees at most ATMs. The benefits of using prepaid debit cards to disburse cash are that they do not require recipients to have a bank account.
o Direct deposit. Using direct deposit to recipients’ accounts or via electronic apps such as Venmo, CashApp, or Steady provide an administratively easy disbursement mechanism. However, direct deposit requires access to a bank account. For low-income and younger participant demographics, there may be a significant number of unbanked individuals.
o Checks. While easy administratively, providing written checks may be problematic because of concerns about extractive check-cashing service fees and a lack of permanent addresses for program participants.
o Multiple Payment Types. Some programs have elected to offer multiple means through which to receive payments. For example, the City of Oakland provides recipients the choice of direct deposit or prepaid physical or virtual UpTogether Card (UpTogether is the programs implementing/funding partner).
Impact on Other Benefits. A major concern in creating a GBI program is how it may affect other benefits a recipient may also be currently receiving. A goal of a GBI pilot is to provide participants with additional economic stability. Therefore, program design should seek to limit any potential negative impacts on recipients’ economic situation due to participation in the program. Receiving money through a guaranteed income pilot program may contribute to a “benefits cliff,” where a small increase in earnings or savings can lead to a reduction in public benefits such as health insurance (e.g. Medicaid/Medical), housing assistance (e.g. Section 8), and food assistance (e.g. SNAP/CalFresh).
Eligibility for safety net programs vary significantly and can include calculations of both earned and unearned income and savings. Exhibit 3 provides a short overview of some of the key public benefit programs where eligibility, under certain circumstances, may be affected due to payments received through a GBI program.
• Securing Income Exemptions. At the State level, GBI pilot programs can request that income from a GBI program be exempted for purposes of eligibility for certain programs including CalWORKS and CalFresh. It may be also possible to secure income exemptions for housing assistance benefits from the Alameda Housing Authority (AHA), Exhibit 3 notes where exemptions for particular benefit programs may be possible.
The City of Mountain View and MGI point out that securing income exemptions may be a lengthy process. Exemptions granted by the State require that the pilot program includes an approved research design. Only a few research organizations have experience in both partnering with local governments on GBI programs and working with the State to secure income exemptions. For example, the University of Pennsylvania’s Center for Guaranteed Income Research (CGIF) is currently overseeing numerous pilot programs in California and has gained income exemptions based on its State-approved research designs. However, other GBI pilot programs, including Marin County, the City of Oakland, and the City of San Francisco have secured exemptions from the State for CalWORKS benefits in partnership with other university and non-profit research organizations. Consequently, an important element of an Alameda GBI program may be identifying and working with a research partner experienced in securing income exemptions from State programs.
• Hold Harmless or Benefit Conservation Fund. To ensure that pilot participants do not suffer economically from participation, in addition to/in place of applying for income exemptions for benefit programs, other pilot programs have created a “Hold Harmless Fund” or a “Benefit Conservation Fund” that is intended to provide compensation to recipients if they become ineligible for Federal, State, County, and/or local benefits due to receiving payments.
For example, the City of Stockton Economic Empowerment Demonstration (SEED) program developed a Hold Harmless Fund modeled after the Alaska Permanent Fund Dividend (PFD). The City of Stockton’s Hold Harmless Fund was designed primarily to protect housing benefits and ensure that participation in SEED, on balance, resulted in an improved economic situation for all program participants. Of SEED participants, 13 received rental assistance through the Housing Choice Voucher or Public Housing programs. Under HUD regulations, SEED payments were considered income and had to be counted towards each household’s rent portion, increasing participating household’s rent portion by approximately $150 per month. SEED representatives agreed to make periodic payments to affected participating households equal to $150 per month. The San Joaquin County Housing Authority then allocated federal non-discretionary funds to reimburse SEED.
The City of Mountain View is establishing a $50,000 Benefit Conservation Fund that, similar to the City of Stockton, is intended to ensure that participation in its pilot program does not result in recipients suffering economic hardship due to a loss or reduction in benefits. The City of Mountain View has also been able to secure an exemption from San Mateo County for participants receiving housing support, such as Section 8, as housing assistance makes up a disproportionate share of the total benefits received by potential participants in the program. The Benefit Conservation Fund is therefore focused on providing financial assistance to participants who may lose out on benefits related to food, healthcare or other non-housing assistance programs.
• Communication to Participants about Potential Reductions in Other Benefits. Other pilot programs have pointed out the importance of being transparent with payment recipients about the potential risks of reduced or lost benefits if exemptions are not received. Recipients in the pilot program should be fully aware that their participation may result in reduced safety net benefits and should be encouraged to do their own due diligence prior to program enrollment. MGI defines this as “ensuring informed consent” and recommends:
o Building an Alameda-specific benefits chart with eligibility requirements;
o Developing a process of providing information to potential participants in accessible ways; and
o Providing benefits counseling to answer individual eligibility questions. In other GBI pilot programs, benefits counseling has been provided by governmental entities or local organizations knowledgeable about specific benefits programs. An Alameda pilot program may involve collaborating with other local organizations or a non-profit organization to help answer questions related to housing assistance benefits.
III. Funding Sources and Program Costs
Financing. Funding for GBI pilot programs is often provided through private or philanthropic dollars. For instance, the City of Oakland’s pilot program is funded entirely through philanthropic donations. Other programs have been launched using a combination of public funds and philanthropic dollars. For example, the City of San Francisco launched the Guaranteed Income for Artists Program in collaboration with the Yerba Buena Center for the Arts. The GBI pilot was supported through a combination of public funds and a donation from #StartSmall, former Twitter CEO Jack Dorsey’s philanthropic initiative.
State of California: Guaranteed Income Pilot Program. The State, through its Department of Social Services (CDSS), is preparing to launch a Guaranteed Income Pilot Program targeting former foster youth and pregnant individuals. The pilot was included in the Fiscal Year 2021-22 budget approved by Governor Newsom and the Legislature. CDSS will oversee the program which has been appropriated $35 million over five years. Although the RFA has not yet been posted, initial information suggests that this funding could be used to create new programs and/or expand or extend existing pilot programs.
Staff understands that the Alameda County Social Services Agency plans to apply for the State’s grant once the RFA is released. This will guide the development of the Alameda County’s pilot program focusing on transitional age youth emerging from foster care. The City will work closely with Alameda County to track and coordinate with Alameda County’s initiatives.
The City Council may also direct the use of ARPA funding for a GBI pilot program. Treasury’s guidance on the use of ARPA funding specifically names cash assistance as eligible.
A number of municipalities are also using federal funds such as Coronavirus Aid, Relief, and Economic Security Act (CARES Act) or ARPA funds, or other public sources such as General Fund dollars, to initiate local guaranteed income pilot programs. The following cities are utilizing public dollars to finance their guaranteed income programs:
• Mountain View, CA $1,000,000 ARPA funds
• St. Paul, MN $120,000 CARES Act
• Richmond, VA $120,000 CARES Act
• Yolo County, CA $75,000 State’s Office of Child Abuse Prevention; $100,000 Cannabis Tax
• Los Angeles, CA $6,000,000 General Fund
• Chicago, IL $30,000,000 ARPA funds
Program Costs. Overall GBI program costs are largely determined by the scope of the pilot (i.e. number of recipients, payment amounts, and duration of program). However, both MGI and the City of Mountain View state that administrative and research costs for GBI pilot programs can be significant. While costs can vary, dependent on selected partners, preliminary estimates suggest that a GBI pilot program may have the following budget allocations:
• 60 percent for disbursement of cash payments;
• 20 percent administrative cost; and
• Between $200,000 and $300,000 for research (which may provide additional benefits such as State and regional income exemptions).
As an illustrative example, the City of Mountain View’s 166 recipient (110 included in the research design), $500 per month, 12-month in duration pilot program estimates the following program costs:
• Distribution amount: approximately $1.0M
• Research component: approximately $225,000
• Administrative component (includes financial partners and a Benefit Conservation Fund): approximately $200,000
Based on preliminary estimates, pilot program costs may range from approximately $1.0M to $4.6M assuming the following program scopes:
Low estimate (assumes 110 individual recipients; $500/month; 12-month duration)
• $660,000 in disbursements
• $132,000 in administrative costs
• $200,000 in research costs
• Total program cost estimate: $1.0M
High estimate (assumes 150 recipient households; $1,000/month; 24-month duration)
• $3,600,000 in disbursements
• $720,000 in administrative costs
• $300,000 in research costs
• Total program cost estimate: $4.6M
IV. Administrative Structure Options
The most common administrative structure for GBI pilot programs involves three to four components:
• City Sponsor: As the anchor for the community, City staff provides oversight and promotion for the program, but may not necessarily be engaged in its day-to-day administration.
• Implementing Partner: Often a non-profit with existing ties to the target community serves as the implementing partner responsible for administering the program. Responsibilities often include: program support, collecting applications from potential recipients, selection and enrollment of recipients, and collaboration with other partners (e.g. the City) on outreach and communication efforts.
Examples of nonprofit partners in other California pilots are: UpTogether (Oakland), Community Services Agency (Mountain View), and United Way.
• Funding Partner: In some programs, usually when an implementing partner does not have the capacity to administer the financial components (such as the monthly payments), an additional funding or fiscal payment partner is engaged. In the City of Mountain View, the implementing partner (Community Services Agency) did not have the staffing capacity or the experience to take on the financial aspects of the pilot program. The City of Mountain View decided to contract with Community Financial Resources (CFR). Depending on the experience and capacity of its implementing partner, the City may similarly decide to work with a separate financial partner.
Examples of financial partners in other California pilots are: CFR (Mountain View) and Steady (Stockton).
Research Partners: As mentioned above, a research component is important to secure a benefits waiver so that GBI participants do not risk losing benefits from other assistance programs. The State will not grant a waiver without the research component. Center for Guaranteed Income Research (CGIR), which works with MGI, has a previously vetted research design that has been used by other municipal pilots to secure income exemptions from the State.
A research component will also determine how the GBI program contributes to creating financial stability to its recipients. In addition, the information will contribute to the knowledge obtained regarding guaranteed income programs as an anti-poverty policy tool.
Examples: The City of Oakland is working with University of California, Santa Barbara (UCSB), University of Michigan, as well as CGIR; the City of Los Angeles is working with CGIR; and the City of Long Beach is partnering with CSU Long Beach.
• MGI: MGI is funded philanthropically and provides its expertise and guidance to local governments free of charge. By joining MGI’s coalition, a City pilot program would receive technical support and recognition. Current California mayors who are members of MGI’s coalition include Libby Schaaf of the City of Oakland, and London Breed of the City of San Francisco, and Eric Garcetti former mayor of the City of Los Angeles is also a member.
V. Potential Next Steps
Both City of Mountain View staff and MGI advised that program development and finalization may be a lengthy process. The City of Mountain View has had three dedicated staff members devoted to developing its GBI pilot program. The City of Mountain View began pilot development in earnest in May 2021 and is seeking to launch the program in March 2022. To develop a GBI pilot program both thoughtfully and expediently, and with the understanding that ARPA funds must be encumbered by the end of 2024, staff proposes the following next steps be taken, should the City Council direct staff to move forward with a GBI pilot program:
• Officially join the MGI coalition. This will enable staff to have access to MGI experience on a continuing basis, without cost, and for the City to more effectively promote the program. Joining the coalition would be announced through press releases by both MGI and the City.
• Formalize the research and program design structure. This would include the selection and contracting of research and administrative partners. Staff recommends working with MGI to:
o Engage with CGIR as the research partner for the project given its depth of knowledge and experience working with the State to secure exemptions for key benefit programs.
o Develop a pilot program that provides payments of $1,000 per month for 24 months to 150 low-income households.
o Contract with an implementing partner knowledgeable about the target populations, as well as a financial partner responsible for administering payments. Payments should be provided through either prepaid debit cards or direct deposit based on recipient choice.
• Apply for income exemptions from AHA and the State. Applying for income exemptions can be conducted prior to or concurrently with implementing the pilot program. To be in the best position for the pilot program to have payments exempted from income calculations for housing assistance and other safety net programs, staff recommends engaging an experienced research partner, finalizing a research design, and beginning the process now of applying for exemptions.
• Develop and implement outreach effort to general public. In addition to traditional methods of information dissemination (e.g. social media, e-blasts, print media, etc.), outreach efforts may include the formation of an advisory panel and/or focus groups comprised of members of the community at-large, representatives of community organizations (including participation of the Social Service Human Relations Board), members of the target population, among others. These outreach efforts would be intended to both increase the applicant pool as well as raise public awareness about the City’s GBI program more broadly.
Preliminary Timeline
|
Action |
Estimated Timeframe |
|
City Council to consider and provide direction on a proposal to develop a GBI pilot program |
May 2022 |
|
Identify program partners (e.g. Implementing Partner, Funding Partner, Research Partner, and MGI); define roles and responsibilities |
May to September 2022 |
|
City Council to consider and approve contracts, agreements, and scopes of work for project partners |
September 2022 |
|
Work with Research Partner to secure benefit waivers and exemptions (estimated six to nine months) |
September 2022 to March/June 2023 |
|
Work with program partners to develop program structure, including: • Program administration • Distribution mechanisms for payments to participants • Benefits Communication Plan • Outreach Plan to general public and potential participants (possible advisory panel and/or focus groups to help inform approach) |
September 2022 to March/June 2023 |
|
Launch program |
Spring/Summer 2023 |
ALTERNATIVES
• Approve above described staff recommended approach to designing and developing a GBI program for the City and allocate $4,600,000 in ARPA funds in order to proceed with the program.
• Approve above described staff recommended approach to designing and developing a GBI program for the City and allocate $1,000,000 or another amount in ARPA funds in order to proceed with the program.
• Consider the information included in this report and direct staff to refine/modify the approach recommended by staff regarding the development of a GBI program. Staff would then return to the City Council with a refined program outline and a funding plan. Potential program elements that could be refined or modified include:
o Reducing the payment amount to $500 per month;
o Modifying the length of the program;
o Modifying the number of program participants;
o Considering whether low-income households is the right population to serve;
o Exploring alternative administrative structures (e.g. selecting an administrative partner that also has the capacity to complete financial component of the pilot program); and/or
o Exploring alternative research partners (potential partners may include local universities with existing research groups focusing on GBI such as UC Berkeley and Stanford).
• The City Council may elect to not to proceed with a City GBI pilot program until Alameda County’s GBI pilot program development progresses. At that time, staff could present more detailed information about this potential program and funding partnership.
• Direct staff to conduct additional research on best practices and return to City Council with more information to inform program design and development.
• Elect not to proceed with the development of a GBI pilot program.
FINANCIAL IMPACT
Potential funding sources for the proposed GBI program include ARPA funds and/or the State of California Guaranteed Income Pilot Program. However, State funding requires a minimum 50 percent match and would be accompanied by additional restrictions related to the target population(s) and program duration. Of the City’s $28,679,908 ARPA allocation, $11,044,600 has been obligated for ARPA-eligible programs to-date and $10,000,000 may be used for general revenue replacement, leaving $7,635,308 remaining to be allocated. In order to proceed with the staff-recommended approach for the GBI program, staff is requesting an allocation of $4,600,000 in ARPA funds to obligate funds for this program.
Should State funds become available or project costs change as staff identifies program partners and develops the scope of work and agreements for the program partners, staff will return to City Council to seek direction for re-allocating ARPA funds.
With the proposed allocation of $4,600,000 in ARPA funds for the GBI program, $3,035,308 in funds would remain to be allocated by City Council for other ARPA-eligible uses.
MUNICIPAL CODE/POLICY DOCUMENT CROSS REFERENCE
This action is consistent with the Social Services Human Relations Board Charter and Ordinance authority “to improve social services in the community” (Alameda Municipal Code Section 2-11.5).
ENVIRONMENTAL REVIEW
This action does not constitute a “project” as defined in California Environmental Quality Act (CEQA) Guidelines Section 15378 and therefore no further CEQA analysis is required.
CLIMATE IMPACT
There are no identifiable climate impacts or climate action opportunities associated with the subject of this report.
RECOMMENDATION
Consider and provide direction to staff on a proposal to develop a Guaranteed Basic Income Pilot Program; and Adopt a Resolution to appropriate $4,600,000 of American Rescue Plan Act of 2021 funds for a Guaranteed Basic Income Pilot Program.
Respectfully submitted,
Lisa Maxwell, Community Development Manager
By,
Eric Fonstein, Development Manager
Walker Toma, Development Manager
Financial Impact section reviewed,
Margaret L. O’Brien, Finance Director
Exhibits
1 Guaranteed Basic Income Pilot Programs
2 Summary of Research Findings and Sources
3 Overview of Public Benefit Programs
cc: Gerry Beaudin, Interim City Manager