Fiscal Note - SB 0429 - Imposes Penalties of Illegal Use of Electronic Benefit Transfer Cards (EBT) Used by Public Assistance Recipients
L.R. NO. 1656-01
BILL NO. SB 429
SUBJECT: Public Assistance
TYPE: Original
DATE: March 20, 1997
FISCAL SUMMARY
ESTIMATED NET EFFECT ON STATE FUNDS
FUND AFFECTED FY 1998 FY 1999 FY 2000
General Revenue Unknown Unknown Unknown
Total Estimated
Net Effect on All
State Funds Unknown Unknown Unknown
ESTIMATED NET EFFECT ON FEDERAL FUNDS
FUND AFFECTED FY 1998 FY 1999 FY 2000
Federal Unknown Unknown Unknown
Total Estimated
Net Effect on All
Federal Funds Unknown Unknown Unknown
ESTIMATED NET EFFECT ON LOCAL FUNDS
FUND AFFECTED FY 1998 FY 1999 FY 2000
Local Government $0 $0 $0
FISCAL ANALYSIS
ASSUMPTION
The Office of State Courts Administrator assumes there would be substantial
compliance with this proposal and do not anticipate a significant increase in
the workload of the courts.
The Office of Prosecution Services states that since this proposal creates a
new crime, it may impact the caseloads of prosecutors. However, the impact
is unknown.
The Office of State Public Defender (SPD) assumes this proposal would result
in 150 additional class D felony cases per year and would require .75 FTE to
represent indigent persons accused of electronic benefit transfer fraud.
Total costs associated with the FTE would be $35,665 in FY98, $37,536 in
FY99, and $38,500 in FY00.
The Department of Social Services (DOS) assumes that establishing a statewide
electronic benefits transfer (EBT) system and outlawing EBT access in the
businesses described in this proposal would have no fiscal impact on their
agency, as current resources could be used for these purposes.
DOS states that this proposal authorizes them to finger print welfare
recipients, and DOS will develop a system that will enable live-scanned
gray-scale finger images to be stored in data files with a photograph and
identifying demographic data. These finger images will be used to positively
identify adult recipients of selected benefits to prevent duplicate
participation and to provide a secure basis for tracking and identifying
recipients of time-limited welfare benefits. DOS estimates that costs for
system development, remote site equipment installation and training,
maintenance, and contracting with experts to verify computer identified
matches would total $5,562,700 for FY98, and $623,664 for each fiscal year
thereafter. These costs would be allocated among general revenue and federal
funds. Costs were based on the assumptions that existing networks are
sufficient to manage additional traffic, the total database will consist of
approximately 600,000 people, matching will be overnight and batch processed,
and there would be a one-year "ramp-up" to establish the full caseload
database.
DOS further states that this proposal mandates electronic funds transfer and
direct deposit if the recipient has a bank account. DOS estimates that
direct deposits cost the state approximately $.40 per payment per month less
than producing a paper check or making the payment via EBT. Assuming 20% of
the 80,000 cash benefit recipients have bank accounts, 2% of these recipients
currently have direct deposit, and there would an implementation phase-in
period, this would result in a savings of $26,400 for FY98, $68,640 for FY99,
and $69,120 for each fiscal year thereafter.
In addition to these savings, DOS assumes they would experience long-range
savings due to the reduction in incidences of fraud and the lower costs to
distribute food stamp and TANF benefits; however, DOS could not provide an
estimate of these savings. The state of New York implemented a
fingerprinting program in 1995 and according to officials of the New York
Department of Social Services, it saves the state $28,000,000 annually in
fraud reduction. Oversight assumes the annual savings related to fraud
reduction would be substantial and would exceed the costs of implementing
this proposal.
FISCAL IMPACT - State Government FY 1998 FY 1999 FY 2000
(10 Mo.)
GENERAL REVENUE
Savings-Department of Social Services
Direct deposit savings $26,400 $68,640 $69,120
Reduction in fraud cases Unknown Unknown Unknown
Costs - State Public Defender (SPD)
Personal Service ($20,656) ($25,417) ($26,052)
Fringe Benefits ($5,893) ($7,251) ($7,433)
Expense & Equipment ($9,116) ($4,868) ($5,015)
Total Costs-SPD ($35,665) ($37,536) ($38,500)
Costs-Department of Social Services (DOS)
Professional Service ($67,000) ($67,000) ($67,000)
Expense & Equipment ($3,660,009) ($350,855) ($350,855)
Total Costs-DOS ($3,727,009) ($417,855) ($417,855)
ESTIMATED NET EFFECT ON
GENERAL REVENUE Unknown Unknown Unknown
FEDERAL FUNDS
Savings-Department of Social Services
Reduction in fraud cases Unknown Unknown Unknown
Costs-Department of Social Services (DOS)
Professional Service ($33,000) ($33,000) ($33,000)
Expense & Equipment ($1,802,691) ($172,809) ($172,809)
Total Costs-DOS ($1,835,691) ($205,809) ($205,809)
ESTIMATED NET EFFECT ON
FEDERAL FUNDS Unknown Unknown Unknown
FISCAL IMPACT - Local Government FY 1998 FY 1999 FY 2000
(10 Mo.)
$0 $0 $0
FISCAL IMPACT - Small Business
This proposal will affect small businesses who are electronic benefits
transfer (EBT) merchants, as EBT should result in cost savings and/or
increased revenues to these merchants. Merchants who are currently
authorized food stamp retailers have the option of continuing to participate
in the food stamp program without cost by requesting the state to provide
equipment and a direct connection to the EBT processor. Merchants may also
choose to connect to EBT via commercial transaction processors and will do so
if they determine the benefits of the commercial connection exceed the cost.
The primary benefit to merchants is operating cost savings since EBT will
eliminate staff time and effort currently allocated to counting, bundling,
and depositing paper food coupons.
Merchants and ATM operators may also choose to participate in EBT via
commercial arrangements, but would incur costs to do so. Merchants who
provide cash withdrawal services through their stores will be paid $.30 for
each cash withdrawal. ATM operators will receive an interchange fee based on
their agreements with the network arranging the EBT access.
DESCRIPTION
This proposal requires the Director of the Department of Social Services to
adopt a means which will be used to personally identify every applicant for
public assistance. The method adopted may include fingerprinting, digitized
fingerprinting, retinal scanning, or any other method which will allow the
unique identification of each individual and permit comparisons with
databases in Missouri and other states.
This proposal also allows for electronic access to public assistance funds.
It provides that when applicants have a personal account in a Missouri
financial institution, cash assistance will be direct-deposited into that
account. The existing trial electronic benefit transfer (EBT) system will be
made permanent and statewide. The EBT system would be used only when the
recipient does not have a personal bank account. The proposal imposes
penalties for fraud involving illegal use of an EBT card corresponding with
the amount of money involved. If the EBT fraud involved an amount greater
than $150, it would be classified as a Class D felony.
This legislation is not federally mandated, would not duplicate any other
program, would not require additional capital improvements, and would require
rental space.
SOURCES OF INFORMATION
Department of Social Services
State Public Defender
Office of Prosecution Services
Office of State Courts Administrator
This Fiscal Note is not an official copy and should not be quoted or cited.