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Legislature looks to take $1B from First 5, bypass voters


By: Joanna Lin, California Watch

March 10, 2011 - State lawmakers are expected to vote soon on a budget that includes a $1 billion shift from Proposition 10 to Medi-Cal. The move will likely result in deep cuts to services and programs for early childhood development, with the state's most populous counties taking the hit.

Proposition 10, approved by voters in 1998, created the California Children & Families Commission, also known as First 5 for its focus on the first five years of childhood development.

Through a 50 cent tax on each pack of cigarettes, the initiative has generated more than $6.7 billion in revenue to date, according to the state Board of Equalization. Eighty percent is distributed among 58 county commissions, and 20 percent goes to a state commission. The commissions decide locally how to use the money, and unspent funds are carried over each year.

In January, Gov. Jerry Brown said the commissions had amassed $2 billion in reserves and called for redirecting $1 billion to Medi-Cal services for children under age 5. Last week, the Budget Conference Committee agreed.

California has looked to First 5 to help balance the budget before. A 2009 ballot initiative to temporarily redirect funds from Proposition 10, a constitutional amendment, failed.

This time, by rejecting Brown's proposal to also divert 50 percent of future First 5 revenues to general fund-supported early childhood services, lawmakers believe they can carry out the one-time funding sweep with a two-thirds vote of the Legislature and without voter approval.

It's money that First 5 commissions have maintained they do not have. So where would $1 billion come from?

The budget calls for $50 million from the state commission and $950 million from county commissions.

"Nine hundred fifty million dollars is basically more than two years' worth of revenue," said Sherry Novick, executive director of the First 5 Association, a nonprofit that represents the county commissions. "We didn't ever anticipate that we would be having to give up more than two years' worth of revenue."

The association last month offered Brown $500 million, which would have been volunteered by some of the largest county commissions, to help plug the state's $26.6 billion budget hole. But the offer was rejected as not enough, Novick said.

Under the proposed budget, those counties stand to lose much more than they were willing to give up.

First 5 LA, for example, is looking at a $424 million loss. That's almost the entire cost of one of its most ambitious programs, Best Start. The commission has allocated about $430 million over the next five years to the program, which focuses on building better communities for children in 14 of the neediest areas in Los Angeles.

The program would not be possible with only a year's revenue, said Francisco Oaxaca, the commission's director of public affairs.

"This really did require a number of years, basically banking this money in order to be prepared to initiate a program that would have the impact we think it needs," he said. "To do that with some credibility you really need to have that war chest of funds available."

The 20 smallest county commissions – those that received less than $600,000 in Proposition 10 revenue last year – are excluded from the funding shift. The remaining 38 county commissions will have until the end of the next fiscal year – June 30, 2012 – to transfer 50 percent of their fund balances as of June 30, 2010.

Records show that county commissions' fund balances stood at more than $1.9 billion last year. Of that, reserves, or entirely undesignated funds, accounted for 18.4 percent – about $355 million.

By the time the budget is approved, those figures will be more than eight months old. Many of those reserves could be spent or designated, Novick said. And among commissions affected by the budget proposal, 16 had nothing in reserve at the end of the last fiscal year.

First 5 San Mateo is one such commission. Every dollar of its $31.1 million fund balance is contracted or designated.

"Our commission is committed to spending that fund balance and putting money in the community," said Michelle Blakely, program and planning director of First 5 San Mateo. To lose 50 percent of the fund balance, she said, "that's 50 percent less that's going to the community."

Since 2003, the commission has contributed $2.3 million annually to the county's Children's Health Initiative, which aims to provide health coverage for all children. The initiative helps eligible children access state health programs, and for the ineligible with family income up to 400 percent of the federal poverty line, it provides insurance.

The money First 5 loses would go to Medi-Cal services for children under age 5 – one of the programs the Children's Health Initiative helps families access.

"We know the benefit of Medi-Cal. In our county, we're covering those kids and we're covering the working poor as well," Blakely said. "It's just worrisome to me that the State of California cannot pay for young kids. To me that's the bigger issue. Find it elsewhere, not from other children."

But Blakely is not hopeful that will happen. "We're functioning on the worst case scenario," she said.

Website: www.CaliforniaWatch.org


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