In this presentation, I’m going to delve in to the impact that the Governor’s budget proposal would have on California children.
The Children’s Defense Fund is a nonprofit advocacy organization that has worked relentlessly for 40 years to ensure a level playing field for all children by championing policy and running programs. CDF was founded in 1973 in Washington D.C., and the California office was opened in 1998.
The Children’s Defense Fund knows that children don’t come in pieces, and that why we work, together with partners, on a variety of policy priorities that support the whole child, and their families and communities.CDF’s main priorities for children are to: end child poverty; guarantee comprehensive health and mental health coverage; protect children from abuse and neglect; provide high quality early childhood development; guarantee quality education; stop the criminalization of children and invest in prevention.
This year is the 50th anniversary of the War on Poverty, and a key moment to evaluation whether we’re doing right by our children. This is a powerful quote from last week from CDF Founder and President Marian Wright Edelman.
And Mrs. Edelman’s words ring true here in California, where we have an unacceptable number of children in poverty. In 2012, almost one in four California children (23.8%) lived in poverty.That means their families had an income below $18,284/year (in 2012) for a family of three. 10% of California children live in extreme poverty,with a family income of less than half of the poverty level. And children of color are disproportionately poor – more than 1 in 3 black children and nearly 1 in 3 Latino children in California live in poverty.I bring up these statistics because they provide critical context about poverty that should inform the budget decisions California policymakers make. Budgets express our values and priorities as a society, and I know you all agree that California should have a budget that protects every one of our children from poverty.
Before we jump into the impact of this year’s budget proposal on children, it’s worth taking a look back at what’s happened over the past 5 years. California’s most vulnerable children have been disproportionately impacted by devastating state budget cuts to education, health care, and social services. Over the past five years, California has made billions of dollars of cuts to programs serving children and families, and children of color and poor children have been hardest hit.
Now, let’s move on the Governor’s budget. The fantastic news is that California’s budget ship has finally been righted. After years of huge budget deficits and devastating cuts, we have budget that is in the black for the second year in a row, and one that has budget surplus forecasted for the years to come. The Governor’s budget reflects $6.3 billion in unanticipated revenues from 2012-13 to 2014-15 (primarily due to growth in personal income tax revenues). The big budget question of the year is not what do we cut, but rather what do we do with the surplus funds?The Governor is proposing to use much of that money to pay down debt and building the rainy day fund – Gov. Brown had redoubled his focus from last year on fiscal restraint. His proposal reduces budgetary debt by $11.8 billion, and proposes eliminating budgetary debt altogether by 2017-18. He also proposes a reserve of $2.3 billion ($1.6 billion in the rainy-day fund and $693 million in the General Fund’s traditional reserve).As I’ll discuss, there are substantial increases for education, but the proposal does not include any major restorations in funding for a variety of areas that were subject to deep cuts in recent years, including child care and preschool programs, CalWORKs and health care. The Governor’s proposal basically assumes that the weakened safety net is the new normal, and doesn’t make repairing the social safety net a priority – although the budget introduction does give the safety net some lip service. The budget package included $151 billion in spending from the General Fund and special funds, an $11 billion increase over the revised 2013-14 level. $815 million in one-time funds for deferred maintenance of the state’s existing infrastructureThe Governor proposes a $2.3 billion reserve at the end of 2014-15—comprised of $1.6 billion in the rainy-day reserve created by Proposition 58 (2004) (For the first time since 2007-08, the Governor’s budget reflects his intent to transfer funds to the Budget Stabilization Account) and $693 million in the General Fund’s traditional reserve. Recent, sharp increases in personal income tax (PIT) collections—driven largely by soaring stock prices in 2013—have improved the state’s budget condition significantly.
Now, I’m going to go into how the budget affects children on various issues – except for child care, which we will cover later. Let’s start with K-12 education.How the state allocates education dollars is especially important in California, because its schools rely more heavily on state funding – and less on local property taxes – than those in the rest of the US.First, a little bit of background on Proposition 98. Proposition 98 (1988) constitutionally guarantees a minimum level of funding for K-12 schools, community colleges, and the state preschool program. Increases in state General Fund revenues tend to boost the Proposition 98 guarantee.With the increase in revenues this year due to both Prop. 30 and the recovering economy, the Prop. 98 minimum guarantee went up considerably this budget year (and the Prop. 98 calculations for 2012 and 2013 also went up). In total, the budget proposal reflects $9.7 billion in additional Prop. 98 funding. It’s important to note that this is the amount of school spending that is constitutionally mandated – the Governor hasn’t funded education above what is required.Brown is proposing to split the new money between making one-time expenditures and awarding school districts more dollars for ongoing spending.This budget provide $5.6 billion to repay all of the remaining deferred payments to K-12 school districts. During the recession, the state relied heavily on deferring payments to schools as a way to achieve budgetary savings. Paying down deferrals means school districts will have to borrow less to manage their cash flow during the school year. The Governor devotes $4.5 billion to implementing the Local Control Funding Formula, which steers additional dollars to low-income students, English learners and foster youth.Provides $188 million in one-time Proposition 98 funding for the Emergency Repair Program. (The Governor’s proposed budget would reduce the state’s current obligation of $462 million to schools under the Williams v. California settlement agreement. In 2004, the Legislature agreed to provide $800 million to pay for emergency facility repairs in schools ranked in deciles one through three of the Academic Performance Index as part of the Williams agreement.) Other proposals:Allocates $316 million from Prop. 39 revenues for energy efficiency grants to school districts Includes $46.5 million to implement and administer a new school assessment system aligned to the Common Core State Standards. (Last year, Brown was persuaded to include $1.25 billion in one-time money to help school districts prepare for the Common Core State Standards, and education groups had hoped the governor would do the same next year. But Brown wants to provide only $46 million more for Common Core, to pay for new assessments.)Proposes changes to the independent study program, in an effort to streamline and expand opportunities for non-classroom based instruction. Provides $33.3 million for a 0.86% cost-of-living adjustment for categorical programs outside the Local Control Funding Formula.
Here’s a graph from the Governor’s budget that shows the projection Prop. 98 investment in education. You can see that the proposed funding level for 2014-15 is substantially higher than the lows of 2011-12, although we’re now back to only a bit over the spending levels before the recession. Due to the projections for increased revenues, the Prop. 98 minimum guarantee will continue to go up over the next several years, which will mean billions of additional dollars for education.
And the Governor hopes to channel a big portion of the new education funds over the next several years into his landmark school finance system, which passed last year – the Local Control Funding Formula (LCFF). I want to provide a quick background of the key components of LCFF is a really fundamental overhaul that made our education funding system more rational and equitable, although it’s not without its challenges and drawbacks.Districts used to receive money through categorical funds that could only be spent on specific programs. There were over 40 categorical programs, the majority of which have been eliminated under LCFF.The rest of the money, called the revenue limits, was given out using a complicated formula.The LCFF establishes a uniform per-student base grant (with different rates for different grade spans). Districts also receive a "supplemental" grant based on the number of low-income students, English learners and foster children they serve, worth an additional 20% of the adjusted base rate per student.Districts that have a high proportion of high-needs students receive a “concentration” grant, worth an additional 50% of the adjusted base rate for each student above 55% of enrollment.LCFF also grants school districts more flexibility and local control to make spending decisions, with the hope being that they make decisions that are more responsive to the needs of their students.(This year, the Governor also proposes to create a continuous appropriation for LCFF funding so that a yet-to-be-specifiedpercentage of annual Prop. 98 funding automatically be dedicated to LCFF each year.)
It’s important to note that the LCFF addressed the equity of our school finance system (which students and schools were getting the money), and not the adequacy of our education funding. California has among the lowest levels of per-pupil spending in the country. According to an annual Education Week report released this month, California was 49th in the nation in per-pupil spending, after adjusting for regional cost differences. We may start closing those gaps slightly with the Prop. 98 investments coming in this and following years, but will still be lagging behind other states in how much we invest in our children’s education.
Community college funding is also part of Prop. 98, so it receives increases. The Governor’s budget provides $200 million to improve and expand student success programs - $100 million to increase funding for orientation, assessment, placement, counseling, and other education planning services, and $100 million targeted toward underrepresented student groups to close achievement gaps.He also proposes to eliminate all $590 million in deferral to community colleges, similar to his K-12 education proposal. There’s $175 million in one-time funding for deferred maintenance, which follows a theme throughout the Governor’s budget of devoting a large portion of surplus funding to one-time, rather than ongoing, funding. There’s also a 3% increase for enrollment growth at community college.Other proposals:$48 million COLA$1.1 million to develop leading indicators of student success and to monitor districts' performance. $2.5 million more to provide local assistance to support implementation of effective practices across all districts, with a focus on underperforming districts.
Higher education is the main area affecting services and programs for children, youth and families where the Governor proposes investing significantly more funding beyond any constitutional requirements (one reason may be that Gov. Brown is a University of California regent, so sees the higher education system closer up). The Governor’s proposed budget continues a plan, included in last year’s budget agreement, that increases General Fund spending for the University of California (UC) and the California State University (CSU) with the expectation that this additional funding would be used to avoid tuition and fee hikes. For 2014-15, the Governor proposes increases of $142.2 million each for UC and CSU.The budget proposal provides $107 million in 2014-15 to begin implementation of the Middle Class Scholarship (MCS) Program. The MCS Program would provide scholarships to eligible California resident undergraduates from families with annual household incomes up to $150,000 who attend a UC or CSU. Upon full implementation, participating students would be eligible for awards that, combined with other publicly funded student financial aid, would cover up to 40%of tuition and fees. Full implementation of the MCS is expected in 2017-18.Includes $50 million in one-time funds to create the Awards for Innovation in Higher Education program. These awards would be given to a UC, CSU, or community college – or a partnership – that proposes innovative ways to increase the number of individuals earning bachelor’s degrees, allow students to earn bachelor’s degrees within four years, and simplify transfer through the state’s higher education system.Universities will also have to adopt three-year sustainability plans that set targets for key performance metrics and implement reforms to improve student success and institutional efficiencies. The Governor’s budget also reflects at additional $100 million for increased participation in Cal Grants.
Moving on to health care. First, I want to note that almost half of California children (4.5 million) now have health coverage through the Medi-Cal program – so when we really should be thinking about Medi-Cal as a critical children’s program. The cuts to and disinvestment in Medi-Cal during the recession had and will continue to have a dramatic impact on children, until they are restored.On the health front, though, there is a giant bright spot – the Affordable Care Act, or Obamacare. This year’s budget proposal reflects the full implementation of federal health reform here in California. Last year, after some contentious budget discussions, the Governor and Legislature did agree to expand Medi-Cal coverage for all adults, including parents, making up to 138% of the federal poverty line – 1.4 million Californians. This expansion is paid for almost entirely by the federal government, but some states have turned it down leading to a gap in coverage. A lesser known element of health reform, but critical especially for children, is the simplification of eligibility and enrollment processes that make it easier for children and families to enroll in Medi-Cal. Finally, I’ll just note the other large component of health reform, although it doesn’t have a state budget impact – Covered California is a health insurance marketplace where Californians can find quality coverage – with subsidies available for those who can’t afford coverage and don’t quality for Medi-Cal.Elsewhere in health, the Governor’s budget maintains a 10%cut to payments for doctors and other Medi-Cal providers that was passed in 2011 and implemented last year.Medi-Cal reimbursement rates are already among the lowest in the nation and lead some providers to decide not to take Medi-Cal patients, which can undermine access to care – with all the expansions of coverage, we also need to have enough providers to actually provide care to children and families when they need it. The budget does propose partially rolling back the retroactive portion of this cut. The Administration began implementing this provider payment reduction in September 2013, with the cut being retroactive to June 2011. Overall, this cut is estimated to reduce state spending on Medi-Cal by $283 million in 2014-15. However, some providers have been exempted from the reduction, and the Governor now indicates the state will “forgive” the retroactive portion of the cut for certain providers and services, including physicians and clinics, certain high-cost drugs, and dental services. Yet, even with this partial rollback of the provider rate reduction, the remaining cut still could discourage some providers from participating in Medi-Cal as enrollment rises due to the expansion. In a welcome change, the Governor’s budget actually notes the importance of early prevention and the need to increase the number of young children using dental services. The budget proposes spending $17.5 million to expand dental outreach for children ages 0-3. But I do want to flag that the Governor intends to redirect though dollars from First 5, so there’s not actually an additional investment in young children. Also, children’s health advocates are concerned that the focus is all on outreach to families without looking at ensuring there are actually enough dentists to provide care to all children in Medi-Cal, especially in rural areas.The budget also reflects a recent policy change that permanently redirects – from counties to the state – funding that counties currently use to provide health care to uninsured, low-income residents. As a result, it is uncertain whether counties will be left with sufficient funds to provide health care for the 3 to 4 million Californians who are projected to lack coverage even after full implementation of health care reform. Counties receive these dollars as part of a state-to-county transfer – or “realignment” – of services that was implemented in 1991. As part of the 2013-14 budget agreement, state policymakers shifted a significant share of these dollars to the General Fund. This shift was based on the assumption that counties will no longer need all of these funds to support their health care safety nets as many low-income adults newly enroll in Medi-Cal under the expansion. Up to $300 million will be shifted from counties to the state in 2013-14, rising to an estimated $900 million in 2014-15, with these dollars used to offset the state’s General Fund costs for the CalWORKs Program. It is uncertain whether counties will be left with sufficient funds to provide health care for the 3 to 4 million Californians who are projected to lack coverage even after full implementation of health care reform. Eliminates the Managed Risk Medical Insurance Board by transferring its remaining programs – including the Access for Infants and Mothers Program (AIM) – to the Department of Health Care Services (DHCS)
CalWORKs, which provides cash assistance and services to low-income families, including about 1 million children, was a particular target of budget cuts in the past. This year’s budget reflects the 5 percent increase in the CalWORKs grant that was adopted in the 2013-14 budget agreement (the Governor tries to claim it as his own increase, but it was already passed). There are no additional grant increase in 2014-15, and grants are still much lower than they were before the recession.The budget does maintain the cuts and changes made in previous years, includingreducing time limit for parents to receive benefits from 60 months to 24 months.The budget includes a six-county (counties yet to be determined), three-year “Parent/Child Engagement Demonstration Pilot” to provide additional targeted assistance to CalWORKs families who face multiple challenges to securing employment. The program would help approximately 2,000 families access licensed child care. Parents would also participate in “work readiness activities” and activities designed to “enhance parenting and life skills.” The Administration estimates that the pilot, which would take place over a three-year period starting in 2015, would cost a total of $115.4 million General Fund.
This graph from the California Budget Project shows that the maximum CalWORKs grant is far below the federal poverty line – and now is actually below the deep poverty threshold of 50% of the FPL. Furthermore, the grants have declined significantly in value over the past 30 years – they haven’t kept up with inflation, and then the Governor and Legislature made actual cuts to the grant size over the past few years.Welfare spending as a share of total state spending had dropped by more than half since 1996.
SSI/SSP helps 1.3 million low-income seniors and people with disabilities, including 118,000 children with disabilities, afford basic necessities. Like for other social safety net programs, the Governor’s budget does not include any increases, and maintains past cut to grant levels. The monthly grant levels were reduce to federal minimums in 2011 – there is also no COLA for the program. The maximum SSI/SSP grant remains below the poverty line.
I’ll finish with In-Home Supportive Services, which helps pay for home care services for 440,000 (per month) low-income seniors and people with disabilities, including children, so they can live safely in their own homes, preventing costly out-of-home care. The budget reflects an 8% across-the-board funding cut to service hours that was agreed to and implemented in 2013, and will be reduced to 7% in 2014-15.The federal government recently enacted new rules which require overtime to be paid for home care workers, including IHSS workers. Instead of funding that requirement, the Governor proposes to control costs by prohibiting IHSS providers from working overtime. The proposal would particularly affect disabled people who receive more than 40 hours of assistance a week. Instead of relying on a single caregiver — in many cases a family member — they would be likely to need additional aides.In addition, caregivers accustomed to working more than 40 hours a week would have their incomes reduced if lawmakers approve the governor's plan.Roughly 37,500 people who receive more than 160 hours of assistance a month from a single caregiver.Overtime could increase the annual cost of the $2-billion home aide program by $426 million, according to administration figures. Instead of allocating for the extra pay, Brown would reserve $153.9 million for a "backup system" that would help pair aides with those who need them when their primary caregivers use up their hours.
So – what’s next? This is only the Governor’s proposal – and the next step is for the Legislature to weigh in and pass the budget. The reaction from legislative Democrats to the Governor’s budget proposal was generally positive, with key leaders highlighting a few more items they want to prioritize. As with last year, the key discussion will be right balance between the Governor’s desire for fiscal restraint (paying down debt and building a reserve), and the Legislature wanting to restore some cuts to programs. Senate pro Temp Steinberg has said that he wants a budget that devotes 1/3 of the surplus revenue to paying down debt, 1/3 to building a reserve and 1/3 to making investments. The ratio of debt payment and reserve building the Gov had proposed is much more lopsided than that.To put on my advocate hat for a moment, I want to question whether 1/3 of funds to repairing our tattered safety net and making investments in our children & families is high enough.The Governor has a plan to pay down the entire Wall of Debt (which was build up over years) by the end of 2017-18 – but what’s his plan for paying back the $15 billion of cuts to health and human services over the past 5 years? The Governor, and even Assembly Democrats, have put a big emphasis on building a rainy day fund, but we know that for many children and families in California, it is raining right now and they are still struggling.There was a great blog post recently from the Executive Director of the California Budget Project where he looks at what makes a state budget fiscally prudent? Histake is that a strong, fiscally sound budget is one that truly improves outcomes for individuals, families, and communities, which means thinking beyond just ending up in the black. While the Governor’s proposed budget clearly is fiscally prudent on certain counts, it’s a spending plan that doesn’t work for many Californians, leaving various core programs and services operating at very low levels — and at a time when poverty and long-term unemployment remain high in many parts of the state.Is it fiscally sound to leave essential state programs and services operating at recessionary levels?
I want to say thanks to a few organizations that provide very useful budget information – their websites are here is you would like to learn more.
Questions?Thank you for yourwillingness to learn about the California budget, and how the Governor’s proposal would impact our children. If you have any questions, I encourage you to contact me – my email address is in your handout. You can also visit our website at www.cdfca.org for updated information on the budget and how it affects children. I look forward to working together with you over the upcoming year to protect California children!
How the California Budget is impacting Children
CALIFORNIA CHILDREN AND
THE STATE BUDGET
Children’s Defense Fund – California
Children’s Defense Fund
A non-profit child
that has worked
relentlessly for 40
years to ensure a level
playing field for all
Children’s Defense Fund Priorities
End child poverty
Guarantee every child comprehensive health and
mental health coverage and services
Protect every child from abuse and neglect
Provide high quality early childhood development
programs for all
Guarantee quality education through high school
Stop the criminalization of children and invest in
prevention and early intervention
Fifty years after President Lyndon
Johnson declared a War on
Poverty, the United States is still
not a fair playing field for millions
of children afflicted by preventable
poverty, hunger, homelessness,
sickness, poor education and
violence in the world’s richest
The greatest threat to America’s
economic, military and national
security comes from no enemy
without but from our failure,
unique among high income
nations, to invest adequately and
fairly in the health, education and
sound development of all of our
Marian Wright Edelman
Founder and President
Child Poverty in California
Almost one in four children
– 2.2 million – live in
One in 10 children live in
Children of color are
disproportionately poor – 1
in 3 black and Latino
children live in poverty
Children under age 6 are
the poorest age group
Deep Cuts to Children’s Programs
CalWORKs: $4 billion
Medi-Cal: $3.6 billion
Child care: $1 billion
Governor’s 2014-15 Budget
Revenues $6.3 billion higher than anticipated
– surpluses forecasted through 2017-18
Emphasizes paying down debt and building
the rainy day fund
Minimal reinvestment in social safety net
Prop. 98 spending increase of $9.7 billion
Eliminates $5.6 billion in debt owed to schools
Provides $4.5 billion to continue
implementation of the Local Control Funding
Allocates $316 million from Prop. 39 revenues
for energy efficiency grants to school districts
Provides $188 million in one-time funding for
emergency facility repairs
Local Control Funding Formula
Creates a more
rational and equitable
school finance system
Provides more funds
for students with
greater needs (lowincome students,
English learners and
control, giving school
districts more options
on how to best use
Source: California Teachers
Proposes $200 million to improve student
success programs and close achievement
Eliminates $590 million in debt owed to
Provides $175 million in one-time funding for
deferred maintenance and instructional
Provides 3% increase ($155 million) for
Proposes increase of $142 million (5%) each
for UC and CSU, with the expectation that
funding be used to avoid tuition and fee hikes
Provides $107 million for the first year of the
Middle Class Scholarship Program
Proposes $50 million in one-time funds for
grants to encourage higher ed innovation
Provides $103 million for increased
participation in Cal Grants
Child Care and Early Education
Funding for child care and preschool has been
cut by nearly 40% since 2007, resulting in the
elimination of about 110,000 “slots”
Maintains the prior year’s funding levels for
subsidized child care and the state preschool
Reflects the full implementation of federal health care
reform in California
Medi-Cal expansion for all adults up to 138% FPL
Simplification of eligibility & enrollment processes
Maintains a 10% cut to payments for Medi-Cal
providers, partially rolls back the retroactive portion of
Provides $17.5 million (First 5 funds) for dental
outreach activities for children age 0-3
Continues to redirect funding to the state that was
previously used by counties to provide health care to
CalWORKs provides cash assistance and
services to low-income families, 1 million children
Reflects a 5% increase in CalWORKs grants
adopted in the 2013-14 budget, but proposes no
Cash grants for most families will remain below
the 50% of the federal poverty line
Maintains 24-month limit for parents to receive
benefits (down from 60 months)
Proposes a 6-county pilot to provide targeted
assistance (licensed child care, work readiness
activities) to 2,000 CalWORKs families ($115
million over 3 yrs)
Supplemental Security Income
SSI/SSP helps the families of 118,000 children
with disabilities afford basic necessities
Maintains past cuts to grant levels and fails to
restore cost-of-living adjustment eliminated in
Maximum grant remains below the poverty line
In-Home Supportive Services
IHSS helps low-income seniors and people
with disabilities, including children, live in their
own homes, preventing costly out-of-home
Reflects a 8% cut to hours implemented in July
Proposes prohibiting IHSS providers from
working overtime, requiring recipients to hire
additional providers if they require more than
40 hours per week of care