California Legislature Sends Budget Bill to Governor

The Legislature has sent their Budget bill to the Governor Jerry Brown for his signature. The bill includes key provisions for young children, in the areas of child care and health.

Here’s the summary from the First 5 Association:

Fulfilled Promises of the 2016 child care promises: 

  • $7.9 million for the addition of nearly 3,000 full day state preschool slots administered by local education agencies (LEAs). If LEAs cannot spend the allotted money, non-LEAs can apply for the funding.

Reimbursement Rate Increases:

  • $42.2 million increase to Regional Market Rate for voucher-based child care providers by using the 75th percentile of 2016 SMI, beginning 2018
  • $67.6 million increase to the Standard Reimbursement Rate and an additional 6% increase ($92.7 million) above what was promised in the 2016 budget deal for CSPP and other direct-contracted providers

Additional Child Care Investments & Activity: 

  • $25 million for updated family eligibility 12 month continuous child care, and graduated exit eligibility (to essentially implement AB 60)  — Note, this increased from $20late last week 
  • $15 million to fund emergency child care for foster children beginning January 1, 2018. An additional $31 million in ongoing funding to establish a voluntary county program to provide emergency child care vouchers.
  • Title 22 and ratios for school-run preschool programs remain in tact, and LAO will convene a stakeholder group to examine health and safety requirements under Title 22 and issue a report with recommendations by March 15, 2018.

Proposition 56 ($2 tobacco tax) Funds: 

In January, the Governor proposed that the estimated $1.3 billion from new tobacco tax revenues, passed under Prop 56 in Nov 2016, be dedicated to existing Medi-Cal services. The health care field and the legislature pushed back, citing the intent of the proposition was to in part increase provider payments for medical professionals serving Medi-Cal patients. The following compromise was struck:

  • Increased payments for medical professionals in 2017-18: $546 million (of the projected $1.3 billion in Prop 56 revenues) would go to Medi-Cal providers as “supplemental payments” to five provider groups: up to $325 million for physicians; up to $140 million for dentists; up to $50 million for women’s health providers; up to $27 million for providers serving people with developmental disabilities; and up to $4 million for providers caring for people with HIV/AIDS. The rules for allocating “supplemental payments” will be determined by the Department of Health Care Services by July 31, 2017.
  • Additional Funding for Medi-Cal: The remaining Prop 56 funds will pay for ordinary spending growth with the Medi-Cal program, which could total up to $711 million in 2017-18.
  • Contingency Plan: Supplemental payments will be disbursed only if: 1) California receives “all necessary federal approvals” to receive Medicaid matching funds (the proposed $546 million supplemental payment would receive a $613 million federal Medicaid match); and 2) The federal government does not cut funding for Medi-Cal from current projected levels.This will be monitored by the Department of Finance.
  • Beyond 2017-18: The compromise sets an expectation that supplemental payments could receive up to $800 million in 2018-19. However, these funding levels will be subject to next year’s budget negotiations.

What was NOT funded: 

  • The CalWORKs Baby Wellness and Family Support Home Visiting program was not funded. Thank you to all the commissions who worked tirelessly on this proposal. Legislators and advocates alike were very appreciative of First 5’s engagement around this effort.
  • CalWORKs ancillary diaper services for CalWORKs families also did not receive funding.
  • The Legislative Women’s Caucus requested additional funding for most child care slots. No slots were added above the 2016 child care promised.

First 5s Sign On to Letter on Governor’s Budget

The ECE Coalition – including First 5 – submitted comments on the Governor’s Budget Proposal to the Assembly and Senate Budget Committees last week, emphasizing that the proposal breaks the promise to continually increase access to early learning opportunities for low-income Californians.

The letter references new research from James Heckman and the California Budget Project.
ECE Coalition members:


Text of the letter below:
February 2, 2017
The Honorable Holly Mitchell, Chair Senate Budget Committee The Honorable Phil Ting, Chair Assembly Budget Committee
State Capitol Building, Room 4203 State Capitol Building, Room 6026 Sacramento, CA 95814 Sacramento, CA 95814

The ECE Coalition is a partnership of early childhood education advocacy and service organizations working together to secure access to high quality early learning and care for California’s low-income children and families.
The Administration recently announced the largest spending plan in California history and yet reneges on critical commitments to our state’s most vulnerable children and families. Leaders last year negotiated a multi-year plan to address the reimbursement rate crisis facing early learning providers and make steady progress toward the state’s long-term goal of preschool access for all low-income children. The 2017-2018 budget proposal not only breaks this significant promise, but fails to recognize the urgent need to further stabilize and strengthen our early care and education system.
The California Budget and Policy Center reports that a typical single mother in California would have to spend two-thirds of her paycheck to cover child care costs. More than 1.2 million children eligible for subsidized child care and preschool do not receive services, yet state programs are still funded 20 percent below pre-recession levels. Making matters worse, two parents working full-time minimum-wage jobs now earn “too much” to qualify for child care assistance, despite staggering housing costs and other economic pressures.
New data indicates not investing in early care and learning may actually slow long-term economic growth in California. Researchers at the University of Southern California and the University of Chicago and Nobel Prize-winning economist James Heckman found that high-quality early childhood development programs support economic mobility for two generations by freeing working parents to increase wages over time, while their children develop a broad range of foundational skills for lifelong success.
By freezing the commitments made in last year’s budget, as well as negating much needed additional investment, the budget proposal ignores well established research and strong public opinion on the value of early care and education. The ECE Coalition respectfully urges you to champion the following priorities in the coming months:
1. Ensure Access and Affordability
 Enact the 2016-2017 budget commitment to incrementally raise both the Regional Market Rate (RMR) and the Standard Reimbursement Rate (SRR) to keep pace with new minimum wage increases, including last year’s full 10% increase to the SRR, and begin the regionalization of the SRR;
 Adopt widely supported child care eligibility policies such as 12-month eligibility periods, income eligibility guidelines based on current State Median Income (SMI) data and increased exit eligibility levels; and
 Increase funding for the General Child Care and Alternative Payment programs to ensure flexible child care spaces are available to more infants and toddlers, enact the prior commitment to expand the number of spaces in the State Preschool Program, and adopt minor policy changes to ensure new spaces are utilized and preserve parent choice in our mixed delivery system.
2. Strengthen Infrastructure to Support Quality and Efficiency
 Ensure more children and providers benefit from quality improvement and workforce development initiatives by expanding the QRIS block grant so communities have more resources and flexibility to address local needs; and
 Fund the second phase of the California Resource & Referral Database, to allow automated data syncing across the state and ensure it is easy for families to use. These steps are a necessary cornerstone for a comprehensive early learning data system that integrates a workforce registry and Centralized Eligibility List (CEL).
 Consider the Administration’s policy changes closely once we review Budget Trailer Bill language to determine their potential impact and any modifications that may or may not be necessary.
Early care and education is critical to the current and long-term economic and education viability of California. Given the tremendous unmet need for child care among eligible families and the growing pressure on providers to meet minimum wage increases and the rising costs of quality care, now is not the time to assume lower than projected revenues and “pause” investments in the state’s early learning system. We look forward to partnering with you to ensure that that our youngest children and families are prioritized in this year’s budget.
ECE Coalition
Cc: Chair, California Legislative Women’s Caucus

ECE and the State Budget

From the First 5 Association, some good news regarding Early Childhood Education and the California Budget:
Mark your Calendars for First 5 Advocacy day in Sacramento, Tuesday, Jan. 31, 2017.

Here’s a quick summary of the State Budget for you to share with Commissioners and partners.

Signed by Governor Brown on June 27, the 2016-17 budget includes key provisions to bolster
ECE programs and services across the state. The Assembly and Senate both rejected the Governor’s proposed Early Learning Block Grant and instead replaced it with a multi-year, comprehensive reinvestments in early learning totaling over $500 million over four years.
Key ECE investments include:

Raising Provider Reimbursement Rates:
– $70 million to increase Regional Market Rate (RMR) reimbursements rates for child care providers accepting vouches to the 75th percentile of the 2014 RMR
– $68 million to increase Standard Rate Reimbursement (SRR) for providers who contract directly with the state by a 10% across-the-board increase
– Increase licensed-exempt provider rates from 65% to 70% of the family child care home (FCCH) rate

Expanding State Preschool Slots:
– Adding nearly 9,000 full-day state preschool slots phased in over four years, totaling $220 million in additional investments
– Adding nearly 3,000 full-day state preschool slots this year alone

Repealing the Maximum Family Grant (MFG):
– $200 million to backfill the repeal of the CalWORKs MFG rule

Commitment to Quality:
– Requiring the California Department of Education (CDE) to develop a quality funding expenditure plan that will prioritize funding for QRIS-supported activities

Blue Ribbon Commission
Speaker Anthony Rendon also announced his commitment to establish a Blue Ribbon Commission on early learning. First 5 CA and the Association are following the creation of the new commission closely and are working with the Assembly to inform and support the process.

For an overview of the 2016-17 State Budget, please visit the California Budget and Policy Center’s website here.

Legislative Analyst Office, California Spending Plan, July 21, 2016

Legislative Analyst Office, California Spending Plan, July 21, 2016

A Revenue Update from First 5 California

Andrea and Nancy Howatt, our fiscal consultant, are doing a wonderful job of keeping on top of the varied revenue projections from First 5 California. As discussed at our June Commission meeting, April and May receipts fell significantly below projections. The issue is further complicated by several public policy considerations which impact First 5s.

Below is an update from First 5 California’s Deputy Director, External and Governmental Affairs, Erin Gabel.

Based on questions received by our fiscal and legislative teams, I wanted to share some additional information regarding how we believe recently passed state legislation may impact our short-term revenue projections. This year, several bills were signed that impact tobacco products, and these include:

• SBX2 5 (Leno), which defined e-cigarettes as tobacco products for purposes of the STAKE Act
• SBX2 7 (Hernandez), which increased the legal tobacco consumption age to 21
• ABX2 11 (Nazarian), which increased tobacco licensing fees and changed the fee from one-time to an annual fee. This change will allow the tobacco licensing program to be self-sufficient, reducing the amount of First 5 funds the Board of Equalization draws on annually

While the long-term impacts of these measures may not be fully understood at this time, I wanted to break down the FY 2016–17 implications we do see, and share with you our process to gain better clarity.

SBX2 5 (Leno) will not impact tobacco tax revenues for First 5, as this bill applies only to the STAKE Act, and not to taxation. This bill, however, should not be confused with the California Healthcare, Research and Prevention Tobacco Tax Act of 2016, which may be on the November 2016 ballot and would change the “other tobacco products” definition for purposes of Proposition 10 to include e-cigarettes. Possible impacts to First 5 revenues from this initiative in FY 2017–18 have been estimated by the Legislative Analyst’s Office in “the low to mid tens of millions of dollars for Proposition 10 purposes” but will not be incorporated in our forecasts until after the election.

SBX2 7 (Hernandez) will have immediate fiscal year impacts on Proposition 10 tax revenues, as the law has already taken effect. The Department of Finance worked with First 5 California’s (F5CA) Fiscal Services Office to determine an estimated loss of up to $9.8 million to the First 5 fund in FY 2016–17. The Board of Equalization (BOE) has produced an alternative estimate of $23.6 million loss in the imminent fiscal year. Neither of these estimates were included in this year’s revenue update that you received from Sierra Losh on June 29, 2016; we will continue to work with both agencies to gain better clarity on the bill’s implementation timeline, and both short- and long-term projected impacts.

ABX2 11 (Nazarian) also will have immediate fiscal year impacts on the First 5 fund, as the law has already taken effect. We have received a forecast from the BOE that its administrative draw from the First 5 fund in FY 2016–17 will be reduced by $2.6 million. This estimated savings was already incorporated in the revenue projections you received June 29. However, this $2.6 million is far below the estimated total annual savings projected by the new and increased fee program in future years. We will be working with the BOE to get updated out-year estimates. It also is important to note AB 2770 (Nazarian) is still active in the regular legislative session and may have an additional impact in the fiscal year, as well as out-years, in conjunction with ABx2 11.

The F5CA Fiscal Services team will continue to closely monitor the monthly revenues in FY 2016–17, and will analyze the long-term impact of these bills. If this analysis shows substantial changes in the projected revenues, or if further analyses from the Department of Finance and BOE yield more concrete projections, F5CA will provide a revised revenue projection at that time, and not wait until June 2017 to update the figures. The impact of ABX2 11 was included in the revenue projections, as it resulted in a small but welcome increase to revenues transferred to F5CA.”

CalWORKS Diaper Funding Left Out of Budget

Purchasing diapers presents a significant hardship to low-income families, costing an average of $100 per month, causing one in 3 US moms to have to choose between food and diapers, according to Baby2Baby. Instead of funding the program, the budget analysis states that the Department of Social Services, Department of Public Health, and legislative staff will work with interested stakeholders to “consider and inform the Legislature” of options to sustainably address the concern.

Read more at the SacBee.

BOE Excess Funds Proposed to be Reallocated

From the First 5 Association:
Proposal to Reallocate BOE Reserves to Special Funds
On May 4th the Assembly Budget Sub 4 on State Administration approved a staff recommendation to return $4.8M reserve funds held in the Cigarette and Tax Tobacco Compliance Fund to the special funds, including $2.995M to Prop 10. The State Auditor’s report had found the balance in the Compliance Fund (funded by special funds including Prop 10) to be excessive. The Governor’s proposed budget would leave a $7.9M balance.
Status: The Assembly Subcommittee approved the reallocation based on the special funds’ share and the issue will now be part of ongoing State Budget negotiations. Pending approval by the Senate and Governor, the reallocation would be included in the 2016-17 State Budget. The Association will track developments and provide updates accordingly.

Potential First 5 Impact: The action would result in nearly $3M additional Prop 10 dollars allocated to the State ($599K) and county commission ($2.4M).

LAO Analysis of Governor’s Child Care Restructuring Proposal

The Legislative Analyst has released the analysis of the Governor’s Budget proposal to completely restructure state-funded preschool, child care, QRIS and T-K. In sum, “We recommend the Legislature create a single, coherent preschool program designed to provide access to all low–income and at–risk children (as defined by the Legislature) and offer a full–day option for working families. We also recommend the Legislature provide a uniform per–child funding rate and distribute funds based on the number of eligible children participating in the program. Additionally, we recommend providing substantial local flexibility on program implementation but requiring all programs to include developmentally appropriate activities, meet minimum state staffing requirements, and report some key information to the state.”

The LAO was more favorable of voucher-izing the whole system: “We recommend the Legislature pursue the Governor’s proposal to unify the existing child care system into one voucher–based program. In doing so, we recommend the Legislature require all child care programs accepting vouchers to include developmentally appropriate activities for children birth through age three. We also recommend the Legislature take steps to equalize service levels across counties, replace the current funding model for vouchers with a simplified and market–driven model, and establish regional monitoring systems to oversee certain components of local programs.”

Read the whole report.