CDPI Information Bulletin
05/25/2010 -
Child Development Policy Institute (CDPI)
Information Bulletin
DATE: May 25, 2010
FROM: Tim Fitzharris,Ph.D.
Legislative Advocate
May 25, 2010
Budget Subcommittees Reject Governor's Proposed Child Care and CalWORKs Elimination
Both the Assembly and the Senate have rejected the Governor's May Revision proposal to totally eliminate General Child Care (except State Preschool) and CalWORKs (with its associated child care). Assembly Subcommittees #1 and #2, meeting jointly, did so last Wednesday; the Senate Budget & Fiscal Review Committee, this afternoon. In both hearings, the CalWORKs elimination and the Child Development (Proposition 98-funded) were done together, and the voting was along party line.
The Assembly Rejects
The specific motions on May 19th were:
On Child Care: "Reject the Governor's May Revision proposal to eliminate all subsidized child care programs and support services. Direct staff to work with the Department of Finance on recording the technical aspects of this action." (MSC)
On CalWORKs: "(1) Accept the estimate changes for caseload in CalWORKs per the updated numbers in the May Revision, and (2) Reject the Governor's May Revise elimination proposal with direction to staff to work with the Department of Finance on the technical aspects of the CalWORKs budget until the Subcommittee meets to close out items in its final hearings." (MSC)
(ED. NOTE: Sub #1 also rejected the Governor's proposed $637 million cut to IHSS and his proposed elimination of Drug Medi-Cal except for perinatal and youth services programs.)
At least 125 people - recipients, providers, teachers, administrators, advocates, school districts, counties, associations, and others - testified at the hearing ... and they were poignant, to-the-point, knowledgeable, and articulate. It took nearly 2 ˝ hours to hear all of the public testimony. The Field came together in a new "Campaign to Save Child Care," submitting a statement against the elimination with 97 group sign-ons. A really great show of force!
It appears that the Assembly's early rejection of the elimination of child care was prompted by the need of the Department of Education for guidance on contract-rollover. Normally, the CDE issues FY 2010-11 contracts based on the May Revision proposal, regardless whether the final Budget is signed. Contract adjustment are then made later in the year. However, no one knows what to do if the May Revise says, ZERO funding for a child care program type. Now, if the Budget committee action holds, the CDE can at least "roll-over" existing contracts and adjust downstream.
The Senate Rejects
Today, the Senate took similar action on the May Revision elimination items. Specifically, they rejected the elimination of CalWORKs, the CalWORKs grant reduction, the elimination of CalWORKs Recent Noncitizen Entrants Program (RNE), and the elimination of General Fund support for Child Care programs with shift of CalWORKs child care to CAPP. However, the Committee "held open" (until the next Thursday's hearing) the Governor's January proposals: RMR and license-exempt ceiling reductions, the lowering of Income Eligibility to 60% of SMI, and the $123 million "unallocated" cut to CalWORKs Stage 3.
CalWORKs child care caseload funding reductions (due to lowered caseload projections for FY 20101-11) were accepted. The "negative" COLA" will conform to actions eventually taken on K-12. The Department of Finance proposal to recover improper payments may be tweaked by the CDE and the LAO. The Assembly will take these items up tomorrow.
Just like last week, there was tremendous showing of impassioned "witnesses." The Campaign to Save Child Care again presented the joint statement, now signed by 150 groups.
(ED. NOTE: The next Capitol Plus will have much more on these two hearings, the hearings tomorrow and Thursday, the Campaign to Save Child Care, and what happens next.)
LAO Urges the Rejection of CalWORKs and Child Care Elimination
Legislative Analyst Mac Taylor, in his initial reaction to the May Revision, agreed with the Administration that there is a $17.9 billion gap between current-law resources and expenditures in California's 2010-11 General Fund budget. However, he said that the Legislature, in addressing the shortfall, should reject the Governor's most drastic spending cuts, especially his proposed elimination of CalWORKs and child care funding. "These programs are core pieces of the state's safety net, and we therefore recommend that the Legislature reject these proposals."
Core Programs for State's Neediest Families
"Since the 1930s, CalWORKs, or its federally authorized predecessor program, has provided low-income families with children with cash assistance to meet their basic needs. Following enactment of the 1996 federal welfare reform legislation, the program added a substantial welfare-to-work component, whereby able-bodied adult recipients were provided with child care and/or other training and services so that they could enter the labor force. The cash grants, in combination with food stamp benefits, provide families with enough support to stay out of deep poverty (which is defined as 50 percent of the federal poverty level). Similarly, subsidized child care helps current and former CalWORKs recipients as well as other low-income families maintain employment, serving as an important complement to adults' efforts to obtain and keep jobs. Because existing eligibility criteria restricts services to families earning less than 75 percent of the state median income, the child care program helps some of the neediest families in California."
Both Programs Provide Access to Large Federal Funding
"By eliminating CalWORKs and child care, the state would be foregoing major amounts of federal funding. In CalWORKs, the state would forego the annual $3.7 billion federal Temporary Assistance to Needy Families (TANF) block grant. Moreover, California would forego hundreds of millions of dollars in Emergency Contingency Funds (ECF) authorized by the 2009 federal stimulus package. (The ECF provides 80 percent federal financial participation in costs for cash grants, nonrecurring short-term assistance, and subsidized employment which exceed their corresponding costs in 2007.) Although the ECF is scheduled to expire on September 30, 2010, both the President's budget and the Governor's budget assume it will be extended for one more year.
"Despite the elimination of all state child care funding, the Governor assumes the state would continue to receive all anticipated federal funding for child care and could thereby continue to offer care to a small subset of currently served children. (Federal child care funds total about $660 million in 2010-11, including $550 million in ongoing federal block grant funds and $110 million in one-time stimulus funds.) It is unclear, however, if California could continue to receive the same level of federal funding given the absence of state funding. While California might be able to use state funding for preschool and applicable local funds to help meet some federal match requirements, the state could lose at least some federal funding."
Proposal Would Shift Costs to Counties and Elsewhere
"Counties are responsible under state law for providing cash assistance to families who are both unable to support themselves and ineligible for other state and federal programs. The elimination of CalWORKs would make most low-income families eligible for county general assistance (GA) programs, potentially resulting in county costs exceeding $1 billion annually. It is not clear how counties would pay for this obligation, particularly in the context of the recession's hit on counties' own revenues and the Governor's other proposals that would be financially detrimental to counties. Counties have no such obligation to provide welfare-to-work services and child care. Absent these services, however, it will be difficult for many families to become self-sufficient and exit county GA programs.
"The administration's proposal would also result in some eligibility determination costs being shifted from CalWORKs to Medi-Cal. The budget plan does not take this into account. We estimate these state costs to be roughly $200 million annually."
Programs Can Still Contribute Savings
"While we recommend rejecting the complete elimination of these programs, we believe that the state can generate substantial General Fund savings in these two program areas. For example, the state could make targeted child care reductions while still providing subsidized care to the neediest families. Most notably, as outlined in our February report, The 2010-11 Budget: Proposition 98 and K-12 Education, the state could reduce eligibility ceilings and provider reimbursement rates. While this would achieve notably less savings than completely eliminating subsidized child care, targeted reductions would allow the state to preserve services for the lowest income families. Moreover, by applying the same eligibility reforms across all child care programs, the state could address some existing inconsistencies between the state's CalWORKs and non-CalWORKs child care programs. (Currently, former CalWORKs recipients who begin to earn more can continue to receive child care services even as children from lower income families linger on waiting lists.)
"Given the 80 percent federal funding stream which is likely to exist through October 2011, we believe there is limited General Fund benefit from making substantial CalWORKs reductions during 2010-11. However, once the ECF expires, all savings from CalWORKs reductions accrue to the state General Fund with no loss of federal funds (because the block grant is fixed). Accordingly, given our projections of ongoing deficits, the Legislature may need to make substantial reductions in CalWORKs in 2011-12."
Look for Revenues
Alternative spending reductions could help sustain critical components of these core programs for the state's neediest families, and some of the Governor's most severe cuts could be avoided by adopting selected revenue increases. The LAO describes the Legislature's options in deciding how much education spending the state can afford in this difficult budget year and urged legislators to focus on longer-term policy changes that will better prepare California to cope with future economic downturns.
Here are some of the options he presents:
Delays in Previously Scheduled Tax Reductions or Expirations. In its January trigger proposals (withdrawn as part of the May Revision), the administration suggested delaying the implementation of recent tax changes (such as the optional single sales factor) by one year. We recommend the Legislature consider delaying these provisions for two years in recognition of the 2010-11 budget challenges, as well as the loss of nearly $10 billion in other temporary taxes in 2011-12.
Changes to Tax Expenditure Programs. Tax expenditures are credits, exemptions, and deductions intended to produce a particular policy benefit through the tax code. Yet, some of these programs have failed to prove their effectiveness-such as enterprise zones-and others result in a disparate treatment of income. As with programs on the spending side of the budget, we recommend that the Legislature eliminate those lower priority programs in order to preserve more critical ones.
Fee Increases. Some fee increases benefit the General Fund and make sense from a policy perspective. For example, we have proposed the establishment of a wildland fire protection fee - an alternative to the Governor's emergency response initiative proposal - that would place a charge on owners of structures in areas where the state has responsibility for wildland fire management. We also have recommended community college fee increases, which would not affect financially needy students (because they are eligible to receive full fee waivers) and would be fully offset for most middle-income students (who quality for federal tax credits).
Targeted Tax Rate Increases. Finally, we have suggested the Legislature could consider targeted tax rate increases. Given the fragile state of the economy and the level of these taxes relative to other states, we discourage increasing the state's broad-based big three taxes (personal income, sales and use, and corporation taxes) above their current levels. We have, however, suggested two proposals that would raise other tax rates while adhering to sound tax policy principles. First, many economists believe that taxes on alcohol do not fully compensate for the societal costs associated with drinking. Since alcohol tax rates have not been updated for inflation since 1991, such an adjustment could produce over $200 million of General Fund benefit. In addition, we suggest permanently aligning the VLF - currently increased temporarily under provisions of the February 2009 budget package - with local property tax rates, as it represents a tax on property.
The LAO's report - The 2010-11 Budget: Overview of the May Revision - may be found at www.lao.ca.gov.
Superintendent of Public Instruction Calls for Rejection of Governor's May Revise Child Care Proposal
Superintendent of Public Instruction Jack O'Connell yesterday urged Senate Budget Subcommittees to block a proposal in the Governor's May Revision to eliminate state-funded child care programs and support services. O'Connell also applauded the Assembly Education Budget Subcommittee and the Assembly Health and Human Services Budget Subcommittee for blocking the proposal last week.
"I commend the Democratic members of the Assembly Education and Health and Human Services Budget Subcommittees for their support of approximately 100,000 California working parents and their children, including babies and toddlers.
"The Governor's proposal to eliminate $1.45 billion in funding for subsidized child care programs and support services would be a severe blow to poor- and middle-class working families. Quality child care provides a critical start to the development of young minds and is a valuable tool in the efforts to help close the achievement gap. Access to child care is essential as it allows parents to continue to work and contribute to the economy. At a time when the state's child care network is already overburdened, the elimination of the subsidized child care programs and support services would be devastating.
"State-funded child care programs also employ more than 130,000 child care professionals who provide child care services in many different settings, including child care and development centers and licensed family child care homes. Eliminating these programs would simply add thousands more to the rolls of the unemployed and underemployed."
Senate Democrats Propose $4.9 billion in Tax Hikes
According to the Sacramento Bee, Senate Democrats are proposing a $4.9 billion package of tax hikes on cars, alcohol, income and corporate profits. According to a budget committee analysis, the Democratic 2010-11 plan includes:
Suspending corporate tax breaks scheduled to begin Jan. 1 (worth $2.05 billion)
extending a 0.25 percent income tax surcharge that is scheduled to end Dec. 31. (worth $1 billion)
Extending a $217 per dependent reduction in the state's dependent income tax credit, also scheduled to end Dec. 31 (worth $430 million)
Raising the vehicle-license fee on cars 0.35 percent starting July 1 of this year (worth $1.2 billion)
Increasing the state's alcohol tax by an inflation-adjusted amount; these rates currently remain at 1991 levels (worth $210 million)
Democrats also will propose extending tax hikes beyond this budget year. That includes retaining the 2009-approved temporary tax hike on vehicles for two more years (through June 30, 2013), as well as retaining the temporary tax hikes on income through the end of the 2012 tax year. It also includes suspending the corporate tax breaks through 2012.
The Majority Party sees the tax hikes as a way to avoid the safety net eliminations proposed by the Governor to bridge a $19.1 billion deficit in 2010-11. The Governor and GOP legislators already have said they refuse to consider new taxes.
"But it is early in the budget season," says the Bee, "and Democrats are trying to position themselves ahead of serious negotiations in which they will try to avoid the elimination of state-subsidized child care and welfare-to-work."
Assembly Democrats Propose "The California Jobs Budget"
Speaker John A. Perez and Assembly Budget Chair Bob Blumenfield today unveiled a new Budget-balancing proposal, called The California Jobs Budget. The centerpiece of the California Jobs Budget is a $10.1 billion Jobs Package that provides $1.5 billion for targeted Jobs Initiatives, repays debts to local governments and schools to avoid massive local government layoffs, and maintains critical employment services and training programs that get people back to work and keep them on payrolls and off government aid.
The Assembly Democrats claim the California Jobs Budget closes the $17.9 billion General Fund shortfall, and ends the year with a $1 billion final reserve.
Here are the highlights (in their words):
¨ Jobs, Jobs, Jobs. Puts job creation and protection first, with a $10 billion Jobs Package that promotes and protects private sector jobs, school, and local government jobs, invests in job training, and jump starts California's clean and green industries and other targeted jobs investments.
¨ Protects Critical Education Dollars. Rejects Governor's devastating cuts to education and instead meets the Proposition 98 guarantee and puts a stop to the endless cuts to K-12 and Higher Education in order to protect California's future.
¨ Rejects Phony Cuts to Safety Net. Rejects the Governor's slashing of safety net programs, which would actually cost the state more, and instead maintains welfare to work, childcare, and cost effective alternatives to expensive nursing homes.
¨ No New Broad-based Tax Increase. Makes no broad based tax increases, and instead delays corporate loopholes and closes the California Oil Severance Tax loophole to generate ongoing funding source for Jobs Package.
¨ Reflects Californians' Priorities. Reflects Californians' priorities as measured by the recent PPIC Poll:
o Jobs: The PPIC Poll shows "jobs and the economy" are by a wide margin the most important issues, and the California Jobs Budget rejects the Governor's proposals to cut 430,000 jobs and instead creates tens of thousands of new jobs.
o Education: The PPIC Poll shows "K-12 Education" as the most important area of the budget to protect from cuts. The California Jobs Budget rejects the Governor's $4.3 billion in Proposition 98 Cuts and instead fully funds the Constitutional requirement.
o Revenues to Maintain Education and Safety Net Funding: The PPIC Poll shows a majority of Californians support new revenues for K-12 Education, Higher Education, and Health and Human Services. The California Jobs Budget includes no new broad-based taxes, but does delay new tax business tax breaks to avoid cuts to education and the safety net.
A new $10.1 billion Jobs Fund will, says the Lower House Majority, protect against the loss of 430,000 private sector, local government, and school jobs in the Governor's proposal, and that will also generate tens of thousands of new jobs.
¨ Generates Billions for Jobs By Closing the California Oil Severance Loophole:
o $900 million from Oil Severance in 2010-11. The Oil Severance Tax will generate $900 million in 2010-11 and billions more each year, to be deposited into the Jobs and Economic Security Fund.
o $9.2 billion by Marshalling other State Resources in 2010-11. In order to maximize the immediate attack on job losses now, the Jobs and Economic Stability Fund also borrows $8.7 billion from the California Beverage Recycling Fund and $500 million from the Disability Insurance Fund (similar to Governor's proposal).
o Hundreds of Millions per Year Ongoing. Beginning in 2011-12, the Jobs and Economic Security fund will have hundreds of millions available for Jobs Priorities, even after making repayments and other required transfers resulting from the 2010-11 Jobs and Economic Security Fund Loans.
Allocation of $10.1 billion Jobs and Economic Security Funds:
¨ $1.1 Billion Targeted Jobs Investments. Provides $1.1 billion for targeted jobs strategies to develop and strengthen California industries, including green and clean tech industries. These investments can generate tens of thousands more jobs and strengthen California's economy for a generation. This provides a potential funding source for numerous Democratic and Republican jobs bills that are making their way in both houses of the Legislature this year.
¨ $900 million Repayment to Local Governments. The California Jobs Budget protects thousands of local police, fire, and other local jobs by repaying $900 million owed to local governments for past mandates. This provides local governments with $900 million in discretionary funds to assist their budget challenges and avoid layoffs to critical public service jobs.
¨ $3.8 Billion Repayment to Local School Districts. Protects tens of thousands of jobs for teachers, aides, and counselors by fully funding Proposition 98 and eliminating portions of the "Education Credit Card" rather than the Governor's proposal to cut schools by $2.8 billion, which leads to thousands of lost jobs.
¨ $900 million to Protect Higher Education's Role in Our Economic Future. Provides $1 billion to restore recent education cuts and fully fund the UC and CSU to prevent the devastating economic and jobs impact of decimating Higher Education. Also protects access to higher education by reducing the Governor's student fee hike by 50 percent, which will save UC students $628 and CSU students $202.
¨ $1.9 Billion Keeping Working Poor Parents in Workforce. Maintains necessary childcare programs funded through CalWORKs and Prop 98 to ensure working parents can stay employed and over 50,000 small business childcare providers can stay in business.
¨ $1.4 Billion Getting Californians Back to Work. Invests in critical employment services to move people from welfare to work and to retrain workers at Community Colleges. Helps make employment a reality once again to Californians struggling to get back into the workforce through increased job training and employment services.
¨ $100 Million for Oil Producing Communities. Provides $100 million to local communities impacted by the new Oil Severance Fee. Experts project the Oil Severance Fee will have little impact on jobs statewide, but there may be localized impacts. Therefore, an ongoing $100 million allocation is included to offset any negative impacts of the fee.
¨ $200 million for the Bottle Bill. Separate from the Jobs and Economic Security Fund, the package increases funding by $200 million for the Beverage Container Recycling program to strengthen and stabilize the state's recycling program. California's recycling program was nearly bankrupt due to the downturn in the economy, and this increase in support will provide long term secure funding for the program, which will protect local conservation corps, protect bottle manufacturing jobs through processing fee relief and drive green technology investment through product development grants.
Relative to Child Care, The California Jobs Budget fully-funds childcare programs, including through Proposition 98, "to ensure working poor parents can remain in the workforce and thousands of small business child care providers are not put out of business." Specifically, the $1.4 billion elimination of Prop 98 Child Care and Development, and the $1.8 billion for CalWORKs child care and employment services, would be funded from the Jobs and Economic Security Fund.
According to the Sacramento Bee, Assembly Democrats have fashioned the proposal in a way that requires only a majority vote, cutting Republicans, who have been adamant in opposing the oil severance tax, out of the process. This involves another tax-dollar swap that - from the State perspective - makes it "revenue neutral," even though the State would take in an additional $1.2 billion each year from oil taxes.
The State would lower its sales tax by one-quarter cent but receive the equivalent amount of money in oil tax dollars. Meanwhile, local governments would raise their sales tax by one-quarter cent and pass that money on to local schools. The State would then reduce its payment to local schools by a like amount. Consumers would still pay the same sales tax rate.
The Governor's office immediately denounced the plan. Assembly Speaker John A. Pérez called it "the beginning of a (Budget negotiation) process."
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