What it does
Proposition 1D would authorize a diversion of $268 million in annual tobacco tax revenue currently earmarked for First 5 programs to the state’s General Fund. That revenue, plus $340 million in unspent First 5 tobacco tax money now held in a reserve fund, would instead be used to pay for other state government health and human services programs that serve children, including Medicaid, foster care, child care subsidies, preschool programs. Money for these programs currently comes from the state general fund.
Prop. 1D is required because the voters in Prop. 10 required that the new tobacco tax monies be spent on new activities, not merely replace funds for ongoing activities. Voter approval is therefore required to spend the funds on already existing state programs.
Prop. 1D also reduces the scope of Prop. 10, but ambiguously. Currently, First 5 funding promotes, supports and improves early childhood development, giving county commissions some latitude in determining what is appropriate for the county. Prop. 1D narrows this to allow the remaining First 5 funds only to be spent on direct health care, early education, and human services. The term “direct” services is not clearly defined.
Prop. 1D would allow a county controller to borrow county First 5 funds to add to the county General Fund, to be repaid with interest. Prop. 1D would also transfer 6 percent of First 5 funds which are designated for mass media communications to First 5 general purpose programs. Finally, it would guarantee each county at least $400,000 in First 5 funds annually.
Why it is on the ballot
Prop. 1D is part of the package to reduce the state budget deficit. In 2009-10, Prop. 1D would reduce the state budget deficit by approximately $608 million due to the one-time sweep of a portion of the unspent reserves. Thereafter, Prop. 1D would give the state’s General Fund approximately $268 million annually from 2010-11 through 2013-14. The total transfer, and permanent loss to First 5 programs, would be approximately $1.68 billion.
- Prop. 10 became part of the state Constitution by adding another sin tax to tobacco products and designating it for early childhood programs. These are worthy means and ends, but Prop. 10 grossly miscalculated the need, and the ability of providers to come up with worthy programs. The result is that billions of dollars are sitting unspent while the state critically needs to fund other worthy early childhood programs.
- First 5’s current mandate is so broad that counties can shift virtually any program, beneficial or not, to First 5 funding as long as it is associated with very young children. That should be tightened up.
- The First 5 money will continue to be spent on early childhood programs that the state already funds. Many of those programs will be in danger of being cut if Prop. 1D and the other budget deficit reduction measures fail to pass on May 19.
- The diversion of funds is designed to last for only five years, presumably the worst years of the recession. After five years, the diversion of tobacco tax funding will end.
- Prop. 1D thwarts the will of the people, who put Prop. 10 into the state Constitution to ensure that every child in California got a head start for good education and health care. These types of early intervention programs are the wrong things to cut if we want to give every Californian an equal start in life.
- Fewer people are smoking, so tax revenues already are shrinking, further reducing First 5 funding. Moreover, a recent additional federal tobacco tax will produce even less revenue to First 5 commissions.
- At the county level, many of these programs are multi-year commitments. These diversions will certainly result in cuts to needed programs to the very children and families most affected by the severe economic recession. Put another way, why should the state budget be balanced on the backs of little kids who are in the hardest hit families?
In analyzing Props. 1D and 1E, SPUR is concerned that money is being taken away from programs that serve some of California’s most vulnerable citizens. Much of this money flows to counties, where service delivery is everything, and where innovative programs can demonstrate success. However, we also acknowledged that the First 5 programs have received more money than they have been able to spend, and that the temporary transfer would be to programs serving the same population, which would face other cuts as the budget is rebalanced.
SPUR recommends a “Yes” vote on Proposition 1D.