The Social Security Administration (SSA) administers two programs that provide cash benefits to persons with disabilities. The Social Security Disability Insurance (SSDI) program provides cash benefits based on previous earnings to persons with disabilities who have met the program's insurance requirements through work covered by the Social Security system. The Supplemental Security Income (SSI) program provides cash benefits to aged, blind, and disabled persons, including children with disabilities, who also meet federal income and asset limitations. The definition of disability, which is generally based on an inability to work, is the same for both programs. Determinations of disability for both programs are made by state Disability Determination Services (DDS) in accordance with federal laws, regulations, and policies. The state DDS play two roles in the SSDI and SSI programs. State DDS agencies make initial determinations of the disability status of program applicants and perform continuing disability reviews on program participants, including redeterminations of disability when children in the SSI program reach the age of 18. In FY2008, DDS agencies processed more than 3.6 million SSDI and SSI initial determinations and continuing disability reviews. Information on the number of cases processed by each state DDS is provided in Table A-1 in the Appendix . When a person applies for SSDI or SSI benefits, his or her application is first processed by the SSA to determine if he or she meets the non-disability requirements of the programs, such as the insurance requirements for SSDI or the income and asset requirements for SSI. The application is then forwarded to the claimant's home-state DDS. The DDS determines whether the applicant meets the program definition of disability and when the period of disability began. In making this determination, the DDS is authorized to purchase additional medical and vocational evidence such as consultative examinations and medical tests. If an applicant is denied SSDI or SSI benefits, he or she may, in most states, ask for a reconsideration of the initial disability decision. This reconsideration is made by the DDS. A case that is appealed to an SSA Administrative Law Judge (ALJ) may be subject to an informal remand in which the ALJ returns the case to the DDS for a review of its initial decision. SSDI beneficiaries and SSI recipients are subject to continuing disability reviews (CDRs) to determine if they still meet the disability program requirements. Most CDRs, including all CDRs for children in the SSI program, and all cases in which there has been a report of medical improvement, are performed by the DDS. Children who receive SSI benefits are subject to redeterminations of their eligibility when they turn 18 and are subject to the adult definition of disability. These redeterminations are performed by the DDS. Under the Social Security Act, states can choose whether to operate DDS themselves or to allow the SSA to administer DDS for them. This authority is found in the Social Security Act at Section 221(a)(1) for SSDI applicants and Section 1633(a) for SSI applicants. The statutory language specifies that "the determination of whether or not ... [an individual] is under a disability ... and of the day such disability began, and the determination of the day on which such disability ceases, shall be made by a State agency, notwithstanding any other provision of law, in any State that notifies the Commissioner of Social Security in writing that it wishes to make such disability determinations." Currently, all 50 states, the District of Columbia, and Puerto Rico administer their own DDS. The statute requires the Commissioner of Social Security to promulgate regulations that specify "performance standards and administrative requirements and procedures to be followed in performing the disability determination function in order to assure effective and uniform administration of the disability insurance program throughout the United States." Regulations issued pursuant to this authority set forth the state's administrative responsibilities and requirements, but the regulations emphasize that the "State will provide the organizational structure, qualified personnel, medical consultant services, and a quality assurance function sufficient to ensure that disability determinations are made accurately and promptly." As a result, each state's DDS is a state agency that is required to comply with all provisions in the Social Security Act, applicable federal regulations, and guidance from the SSA. Because each DDS is a state agency, all DDS employees are state, rather than federal, employees. Each state is generally free to implement its own policies regarding DDS personnel for salaries, benefits, and other administrative matters. For example, a 2006 study by the Social Security Advisory Board found wide variance in the salaries paid to DDS employees, with initial disability examiners in Connecticut earning more than twice as much as examiners in South Dakota. Although the states do operate their own DDS agencies, some federal requirements that apply to all state DDS agencies are found in the Social Security Act and regulations. For example, the federal regulations provide some guidance for equal employment opportunity requirements, hiring and compensation issues, allowable travel, and restrictions on state personnel actions. The Social Security Act and the regulations contain no provisions that specifically prohibit states from implementing such personnel actions as furloughs, hiring freezes, or limitations on overtime with regard to DDS employees. However, the regulations do state that, "[subject] to appropriate Federal funding, the State will, to the best of its ability, facilitate the processing of disability claims by avoiding personnel freezes, restrictions against overtime work, or curtailment of facilities or activities." Although this regulation clearly addresses some types of personnel actions, the language does not create a mandatory requirement for the states with regard to furloughs or other personnel actions. Therefore, as long as a state is acting within the scope of the applicable federal statutes, regulations, and SSA guidance, each state may administer its DDS as it wishes. This includes the ability to release DDS employees on furlough or to implement other personnel actions, such as hiring freezes or limitations on overtime. The SSA reimburses the DDS for 100% of all expenditures related to the processing of initial disability determinations and CDRs. This reimbursement includes itemized costs as well as non-itemized and administrative expenses. State governments do not contribute in any way to the cost of the DDS and see no financial savings if DDS operations are curtailed. In FY2008, DDS agencies were reimbursed for more than $1.8 billion in expenses. Information on DDS expenses for each state is provided in Table A-1 in the Appendix . Each state enters into an agreement with the Department of the Treasury for the reimbursement of its DDS expenses. These intergovernmental agreements are governed by the provisions of the Cash Management Improvement Act of 1990, applicable federal regulations, and Office of Management and Budget Circular A-87. The states receive funds from SSA, either in advance or by reimbursement, for the cost of their DDS expenditures, and they may not "incur or make expenditures for items of cost not approved by ... [SSA] or in excess of the amount ... [made] available" to them. As state employees, DDS disability examiners and other workers may be subject to several types of personnel actions generally intended to reduce costs. A state may furlough some or all of its employees by requiring them to take time off without pay, or may implement a reduction in force (RIF) in which certain employees are terminated or in which certain positions are eliminated. States may also subject their agencies to hiring freezes or other personnel actions such as pay and overtime reductions. States generally claim that it would be unfair to exempt one specific group of workers, such as DDS employees, from statewide furloughs or personnel actions. In addition, because some state positions are funded partially through external sources, identifying which employees should or should not be furloughed could present administrative difficulties and costs. States may also feel that they must include all employees in furloughs or personnel actions because they may be responsible, at least initially and until reimbursed by the federal government, for these employees' benefits and pension contributions. In some states, collective bargaining agreements and civil service rules require that DDS employees be subject to same personnel actions as other state workers. Table A-2 , in the Appendix , summarizes the personnel actions taken or planned by the states that apply to DDS agencies and employees. As of October 15, 2009, statewide furloughs had been implemented or announced by 13 states. Of these 13 states, three—Colorado, Illinois, and Maryland—exempt all DDS employees from the furloughs. In two states, Maine and Nevada, some DDS employees are subject to the furloughs, whereas others are exempt. In the remaining eight states—California, Connecticut, Hawaii, New Jersey, Ohio, Oregon, Virginia, and Wisconsin—all DDS employees are subject to the furloughs. Two states, California and Hawaii, have announced RIFs. However, DDS employees in California are exempt from the RIF and DDS employees in Hawaii are not among those scheduled to be laid off. However, under Hawaii's civil service rules, it may be possible for an employee subject to the RIF from another state agency to displace a DDS employee with limited seniority. State hiring freezes can have the effect of reducing overall DDS capacity if states are not able to replace DDS employees who retire or separate from service. Nationally in FY2008, the attrition rate for DDS disability examiners was 12.5%, and the SSA Office of the Inspector General (OIG) projected a disability examiner attrition rate of 9.8% for FY2009. As of October 15, 2009, 25 states had implemented or were planning to implement freezes on the hiring of new state employees. Of these 25 hiring freezes, 19 exempt DDS agencies whereas 6 do not. Table 1 lists states that have implemented or are planning to implement hiring freezes. In addition to furloughs, RIFs, and hiring freezes, a number of states have implemented or are planning to implement other personnel actions that, if applied to DDS agencies, could reduce the capacity of the DDS to process new SSDI and SSI applications and continuing disability reviews. The SSA Office of Disability Determination has indentified 20 states that have implemented or are planning to implement personnel actions such as limitations on hiring, overtime, and travel; pay freezes and reductions; and early retirement incentives. In nine of these states, DDS agencies and employees are exempt from these personnel actions. Table 2 provides information on the 11 states with personnel actions that could impact the DDS. Because all expenses associated with the DDS, including non-itemized and administrative expenses, are paid by the SSA, states will see no cost savings as a result of furloughs of DDS employees or other personnel actions such as hiring freezes or limitations on overtime. However, such furloughs and personnel actions would likely have a negative impact on the SSDI and SSI programs as well as on the states themselves. These potential negative impacts on the programs and the states were cited by Commissioner of Social Security Michael Astrue and Vice President Joseph Biden in letters sent in 2009 to Edward Rendell, governor of Pennsylvania and chair of the National Governors Association, urging him to ask state governors not to furlough DDS employees or take other personnel actions that might limit DDS capacity. DDS agencies process nearly all initial disability determinations and most CDRs. Any furloughs or other personnel actions that would limit the total number of cases that could be processed by the DDS would likely have a negative impact on the SSDI and SSI programs. This potential reduced capacity of the DDS to process initial disability applications comes at a time of significant growth in the number of SSDI and SSI applications. The SSA projects that 2.85 million SSDI and SSI applications will need to be processed in FY2010, an 8.1% increase from the number of applications processed in FY2009 and a 12.7% increase since FY2007. A reduced capacity to process initial disability determinations because of a furlough or other personnel action would increase the time claimants would have to wait for an initial decision on their benefit applications, and for applicants ultimately determined to be disabled, would result in benefits being delayed. Although benefits would ultimately be paid on a retroactive basis to the established date of program eligibility, SSI recipients could be forced to wait up to a year beyond the date of their eligibility decisions to receive all of their retroactive benefits. The SSA OIG estimates that a two-day furlough in California would result in 2,375 initial disability determinations and reconsiderations not being performed in the month of the furlough. As a result of these cases not being processed, the SSA OIG estimates that more than $648,000 in SSDI and SSI benefits to 776 approved claimants in California would be delayed because of a two-day furlough in any given month. A furlough or other personnel action affecting DDS employees would have a specific impact on SSDI and SSI applicants with the most severe illnesses and disabilities. Under the SSA's Compassionate Allowance program, SSDI and SSI applications are pre-screened and the applications of claimants with the most severe illnesses and disabilities are processed in an expedited manner to ensure that these claimants receive benefits as soon as possible. A reduced capacity to process initial determinations resulting from a furlough or other personnel action would delay the processing of these expedited cases and the payment of benefits to this population. The processing of CDRs by DDS employees would also be affected by a furlough or other personnel action. Increased processing times for CDRs would result in some SSDI beneficiaries and SSI recipients waiting longer for decisions on their active CDRs and others seeing delays in the commencement of their CDRs. In addition to adding to the current backlog of CDRs, these delays could result in the payment of benefits to SSDI beneficiaries and SSI recipients who no longer meet the statutory definition of disability. States will see no cost savings from implementing furloughs or other personnel actions on DDS employees. Rather, states with reduced processing of DDS workloads may lose portions of their federally funded non-itemized and administrative DDS expenses. Any delays in the payment of SSDI and SSI benefits because of a furlough or other personnel action will result in a state's economy losing the purchasing power of these monthly benefits. In addition, SSDI and SSI applicants waiting for benefit payments may rely on other social programs, such as Temporary Assistance for Needy Families (TANF), Supplemental Nutrition Assistance Program (SNAP), or Unemployment Insurance (UI) that are partially funded or administered by the states. Benefit delays could also result in an increased reliance on Medicaid by program applicants. DDS employees out of work because of a RIF would also likely file for UI benefits until they are able to find replacement work, and the states would lose the tax revenue from their salaries and the purchases they would make.

Summary: Initial and continuing determinations of eligibility for the Social Security Disability Insurance (SSDI) and Supplemental Security Income (SSI) programs are made by state Disability Determination Services (DDS). These DDS agencies are fully funded by the federal government. However, because DDS employees work for the states, rather than the federal government, they are subject to furloughs, hiring freezes, and other personnel actions taken by state governments. As of October 15, 2009, 10 states had either furloughed or plan to furlough DDS employees, and 6 states have either implemented or plan to implement hiring freezes that would affect DDS agencies. Eleven states had implemented or planned to implement other personnel actions, such as limitations on overtime or reductions in pay, that would apply to DDS agencies and employees. These furloughs, hiring freezes, and other personnel actions will reduce the capacity of the DDS to process initial SSDI and SSI applications as well as continuing disability reviews (CDRs). This reduced capacity may result in delays in moving people who qualify for SSDI or SSI onto the benefit rolls, which may also result in a greater reliance by these people on benefits funded or administered by the states.