Lottery Winners May Be Bumped Off Welfare Rolls

Striking it rich in the new state lottery could be a bittersweet experience for California welfare recipients as government officials are promising to bump them off the welfare rolls--at least temporarily--as soon as they win.

And anyone who owes the state money--such as back taxes, court-ordered child support or student loans--will have his debts deducted before the winner’s check is ever mailed. If the debt equals or exceeds his winnings, the state will keep it all.

State and local officials Wednesday said they are going to act swiftly to ensure that lottery winners don’t get more than their due from the government.

In fact, the computer in the state controller’s office already is whirring, spitting out the names of lottery winners who have reneged on payments to the state.

On Wednesday, five bad debtors owing $10,350 were found among 543 winners checked.

Sandi Harrison, a program manager at the Orange County Social Service Agency, said her office has no plans to alert its clients about how the lottery could affect their aid.

But, she said, “We don’t anticipate we’ll have a great deal of difficulty” because Orange County’s 17,000 welfare cases are a small proportion of the county population.

Cheaters will be dealt with severely, officials said. Welfare recipients who don’t report their winnings on their monthly eligibility forms will face possible court action.

“We have a system I can’t talk about for determining income,” said Carol Matsui, spokeswomen for the Los Angeles County Department of Public Social Services. “If they don’t report, they’re opening themselves up for a fraud investigation.”

State welfare officials said mothers receiving Aid to Families with Dependent Children--the most common form of welfare--who win $1,000 could see their benefits disappear for a month or more, depending on how they spend their winnings.

Recipients of food stamps and Supplemental Security Income from the federal government could also lose benefits temporarily.

Special Claim Form

Under the rules of the lottery game, all those winning between $100 and $5,000 must send a special claim form to Sacramento to be paid. The names and Social Security numbers submitted on those claims will be computer-matched to names and Social Security numbers of all those who owe the state money, according to Tom Colby, lottery project manager for the state controller. The same system will be used when the state begins awarding jackpot prizes from $10,000 to $2 million later this month, officials said.

“We’re only doing our job,” Colby said.

He said the state expects to recoup money in four major categories:

- Unpaid state income taxes.

- Child-support payments owed through the AFDC program.

- Overpayments of unemployment insurance.

- Unpaid student loans.

The length of time that welfare recipients will lose benefits will depend on the program.

For example, AFDC recipients are not allowed to have more than $1,000 in personal property. An AFDC recipient who wins $1,000 could expect to be cut off from benefits until the winnings were spent. However, officials said, if the recipient used the money to buy such luxuries as stock or jewelry, which are considered personal property, he or she could be prevented from rejoining the program afterward.

“They could go out and buy another $1,000 worth of lottery tickets,” quipped Bob Horel, deputy director for welfare program operations with the state Department of Social Services, “but if they won more money they might not be eligible again.”

Horel warned AFDC recipients who win to report the windfall quickly.

“We would go after them,” Horel said. “And the courts could jail them if it was a flagrant thing. Some people go to jail for welfare fraud.”

Limit for Aged, Blind, Disabled

For those aged, blind and disabled persons receiving federal Supplemental Security Income, a $1,000 win would not affect their eligibility. But if they scratch off a $5,000 winning ticket in the lottery, they would be disqualified while they spent the money, but would be eligible again afterward. Single people on SSI can have $1,600 in assets and married couples $2,400.

As with AFDC, federal authorities said it is important that SSI recipients not spend lottery windfalls on luxuries.

“We would advise them to spend down to the limit on necessities,” cautioned Larry Murphy, a spokesman for the Social Security Administration’s western regional office in San Francisco.

Murphy said those trying to hide their winnings from the federal government would likely be caught. He said Social Security does spot checks on bank accounts and also works closely with the Internal Revenue Service and the state Franchise Tax Board. Banks report all interest payments to the board.

Nancy Skelton reported from Los Angeles and Jerry Gillam reported from Sacramento.