What We’re Watching For in the May Revision and Beyond

May 13, 2013

Governor Brown is set to release the May Revision of his proposed 2013-14 budget tomorrow, kicking off the sprint to a final budget agreement in June. The CBP will provide a series of analyses of the revision, including a same-day statement, a brief analysis of major changes and important new proposals — and the issues they raise — and a more in-depth scan in the days that follow. You can find all the latest updates and analyses here at California Budget Bites.

The following are five issues that we’ll be watching for in the Governor’s May Revision and the budget deliberations that follow in the coming weeks:

1.   Education Finance Reform

The issue: The Governor’s proposed Local Control Funding Formula (LCFF) seeks to make the state’s system of school finance more equitable by providing additional revenue to school districts with disadvantaged students, a topic the CBP recently examined in its chartbook on the LCFF. Under the Governor’s proposal, each school district would receive a base grant per student and — in addition — a supplemental grant based on the unduplicated number of English learners or students from low-income families as well as a concentration grant for the share of these students above 50 percent of district enrollment.

We’re watching for: potential changes to the mix of LCFF grants as well as any new accountability provisions. Will the May Revision preserve the additional dollars allocated for disadvantaged students? If the LCFF concentration grants are reduced or eliminated, will the freed-up dollars be used to provide larger supplemental grants? The May Revision may also include stronger accountability provisions in terms of addressing district spending of LCFF dollars. Our view is that policymakers should preserve additional dollars the LCFF would allocate for disadvantaged students, including concentration grants, and that school districts should be required to use these dollars to directly benefit the students for whom they are intended.

2.    Medi-Cal Expansion

The issue: As part of federal health care reform, the Governor’s proposed 2013-14 budget calls for expanding Medi-Cal — the state’s Medicaid program — to cover low-income adults who currently are not eligible. Our recent Medi-Cal chartbook provides an in-depth look at the program and the issues raised by the expansion. In January, the Governor presented two approaches to expansion — a county-based approach and a state-based approach — while also linking the expansion to his proposal to “capture” some funding that counties now use to provide health care to low-income, uninsured Californians. The Governor’s proposal also assumes a 10 percent cut in payments for Medi-Cal providers that was approved by state policymakers in 2011 and is currently pending in the U.S. 9th Circuit Court of Appeals.

We’re watching for: a call for a state-led expansion that leaves existing funding with counties, for now, and that reconsiders the cuts to provider payments. Counties and health care advocates are nearly unanimous in their push for a state-led expansion. Also, any savings that counties do realize, at least in the near term, should be prioritized for local health services given that millions of Californians will remain uninsured even after health care reform is fully implemented and will turn to the counties for care. Lastly, amid concerns that payment cuts on the eve of the Medi-Cal expansion could drive providers from the program at the very time when provider participation needs to increase, we’ll be watching for a call to repeal those cuts.

3.    State Revenue Projections

The issue: Ten months through the current fiscal year, the State Controller’s Office reports that total revenue is running ahead of the Governor’s January projections by $4.6 billion. The state’s revenue collections are prompting speculation about increased revenue forecasts for the upcoming 2013-14 fiscal year.

We’re watching for: updated economic and revenue forecasts. If there is a projected increase in General Fund revenues compared to January projections, what will the revised level of the Proposition 98 minimum school funding guarantee be, and how will the May Revision propose to use additional Proposition 98 funding? Options would include using the dollars to pay back money borrowed from K-12 schools, providing additional funding to implement the Local Control Funding Formula, and/or providing resources for other one-time or ongoing education priorities. How much of this higher-than-anticipated revenue is left over beyond the Proposition 98 minimum funding level? And how is that revenue allocated? Calls for paying down budgetary debt and/or building up the state’s reserves are likely to be among the options considered. But, with many Californians still hurting in the wake of the Great Recession, a balanced approach would prioritize providing additional resources for critical programs such as child care and state preschool, CalWORKs, and adult dental coverage.

4.    Pay-Down of California’s Budgetary Debt

The issue: The Governor’s proposed 2013-14 budget calls for paying down $4.2 billion in budgetary debt as part of a plan to reduce this debt from $27.8 billion in 2012-13 to $4.3 billion by 2016-17. “Budgetary debt” includes money borrowed from K-12 schools, unpaid costs to local governments, and loans from state special funds.

We’re watching for: any changes to the Governor’s proposed pay-down. If the May Revision does project higher revenue collections, increasing the pay-down in 2013-14 could be part of proposals for allocating these additional revenues. The Governor and the Legislature may also choose to adopt a more gradual repayment schedule in order to free up funds to support other budget priorities.

5.    Enterprise Zone Reform

The issue: The Governor’s proposed 2013-14 budget includes a set of regulatory changes to the state’s Enterprise Zone (EZ) Program, which provides a variety of tax credits intended to encourage businesses to locate in economically distressed geographic areas. While the intent of the program is to promote business development and job creation in targeted areas, research shows that the program fails to achieve its goals and places an increasing strain on the state budget — $720 million in 2010, projected to rise to $1 billion by 2015-16.

We’re watching for: any changes to proposals to restructure the EZ Program. Proposals that are currently under consideration include the Governor’s proposed regulatory reforms as well as a number of legislative proposals that seek to restructure the program. Given that lawmakers are very unlikely to eliminate the program, we think that it should be restructured to better target the jobs and business development intended, boost accountability and evaluation of program effectiveness, and reduce the strain on the state budget.

— Chris Hoene

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Affordable Child Care and Preschool Are Critical Supports for a Changing US Workforce

March 26, 2013

Last week, the CBP and the Women’s Foundation of California jointly released a report showing that women are not sharing equally in the state’s emerging economic recovery and that recent cuts to key public services and systems threaten pathways to economic opportunity for women — especially low-income women. One of the report’s major points is the deep reduction made to state funding for child care and preschool programs in the past several years. State policymakers have cut annual funding for subsidized child care and preschool programs by more than $900 million since 2007-08, resulting in the elimination of more than 110,000 child care and preschool slots. At a joint hearing of the Assembly Budget Subcommittees on Health and Human Services and Education Finance last Wednesday, we highlighted these cuts while discussing the importance of child care and preschool programs for low-income families.

Prioritizing support for child care and preschool programs is especially critical in light of the changing nature of the US workforce — in particular, the large number of mothers of young children entering the labor force in recent decades. As discussed in our testimony at last week’s joint hearing, the share of women working or looking for work that have children age 5 or under has risen substantially since 1975, from 39.0 percent to 64.2 percent — an increase of nearly two-thirds. Additionally, in 2010, more than 30 percent of women in the workforce with young children were single mothers, meaning that the stakes of creating economic opportunity for women are as large as ever.

Subsidized child care and preschool programs are especially important for low-income women, given that child care is one of the most expensive items in a household budget. In 2011, in Los Angeles County, full-time care for an infant in a child care center was, on average, $11,499 annually. When women struggle to afford child care, it presents one additional barrier to securing employment.

Low-income women who do have access to child care assistance have a greater chance of maintaining employment, increasing earning potential, and becoming financially independent. Boosting state support for child care and preschool is a prime example of the kind of strategic public investments that can support women’s economic advancement and security. Policy choices made today will determine whether we work toward widely shared prosperity and healthy families over the long-term.

— Kristin Schumacher

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New CBP Report: Investing in Women’s Career Advancement and Economic Security

March 20, 2013

The CBP yesterday released a new report showing that almost four years since the official end of the Great Recession, the impact of the downturn is still acutely felt among women — especially low-income women — in California. Released in partnership with the Women’s Foundation of California, A Fair Chance: Why California Should Invest in Economic Opportunity for Women and Their Families shows that California’s women have not shared equally in the state’s emerging recovery. In addition, the report highlights how budget cuts made in recent years continue to cloud the economic outlook for women and have weakened services and supports that foster their economic security.

The report finds that:

  • Men’s and women’s employment rates have gone in opposite directions during the past two years. Between December 2010 and December 2012, the employment rate for California men increased by 1.7 percentage points (from 79.4 percent to 81.1 percent), while decreasing by eight-tenths (0.8) of a percentage point for women (from 65.3 percent to 64.5 percent).
  • Local government employment — long a jobs mainstay for California’s women — has declined over the past four years and continued to trend lower throughout 2012, showing the lasting effect on women’s employment of the deep budget cuts made in recent years. Local government employment includes jobs with K-12 public schools, community colleges, and cities and counties.
  • Women account for more than two-thirds of a huge drop in California community college enrollment, which declined by more than 300,000 students between 2007-08 and 2011-12. This means women have less access to education and training that lead to immediate employment or to a four-year degree program. In addition, women’s enrollment at the University of California and California State University has lagged that for men since 2007.

  • Amid a weak job market and growing poverty, state policymakers have made significant cuts across a range of programs and services that help women find and keep work and provide for their families.  These included steep reductions to child care and preschool funding — causing the elimination of more than 100,000 slots — as well as to welfare-to-work services and cash assistance provided through the California Work Opportunity and Responsibility to Kids (CalWORKs) Program.

The report was featured yesterday at a Capitol briefing for legislators and their staffs and received coverage from the Los Angeles Times, Sacramento Business Journal, Inland News Today, and other outlets across the state. You can read the full report here and an executive summary of the report here.

— Steven Bliss

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State Poverty Rate Remains at One in Six

September 12, 2012

Census Bureau data released today show that 6.4 million Californians – about one in six state residents – were living in poverty in 2011. That means there were more Californians living in poverty last year than there were residents of the cities of Los Angeles, San Diego, and San Francisco combined. The state’s poverty rate increased by a statistically significant 4.7 percentage points from 12.2 percent in 2006, the year before the Great Recession began, to 16.9 percent in 2011 – the highest poverty rate in 15 years. The change in the poverty rate between 2010 and 2011 was not statistically significant.

Children represent a disproportionate share of Californians living in poverty. While individuals under age 18 accounted for only one-quarter (24.7 percent) of the state’s residents in 2011, they accounted for more than one-third (35.6 percent) of Californians living in poverty that year. The child poverty rate also far exceeds that for adults. Approximately one out of four children (24.3 percent) lived in poverty last year, compared to 15.6 percent of Californians ages 18 to 64.

California’s child poverty rate is particularly troubling given research documenting lasting consequences for children raised in poverty, from lower levels of educational attainment to lower earnings as adults. Childhood poverty not only can mean a life of hardship for individual children – a reason for concern in its own right – but also can impose significant costs to society as a whole through these children’s lost potential.

The Census data released today highlight the importance of fostering a faster recovery in California’s job market by avoiding deeper state spending cuts that cost jobs. Poverty tends to rise and fall in tandem with unemployment, and the state’s jobless rate has remained stubbornly high – in recession-like double digits – due to limited job growth since the national recession ended more than three years ago. As we documented in a recent report, continued job losses due to budget cuts are partly to blame for holding back California’s job market recovery. K-12 public schools and community colleges, for example, have lost tens of thousands of jobs since the downturn ended, and these job losses have offset a portion of the state’s private sector job gains.

This November, voters will have the opportunity to approve new revenues that not only would prevent significant midyear cuts to public schools, colleges, and universities – the building blocks of a strong economy – but also could help avoid deeper cuts to the state’s social safety net at a time when millions of Californians remain in poverty in the aftermath of the Great Recession. By raising significant new revenues – predominantly from the wealthiest 1 percent of Californians – Proposition 30 would begin to reverse years of disinvestment in our state and create a solid foundation on which to rebuild, as we discuss in our analysis of the measure published yesterday.

– Alissa Anderson

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New CBP Report: Congress Should Maintain States’ Flexibility To Expand SNAP Food Assistance

August 13, 2012

A new CBP analysis examines deep cuts that Congress is considering making to the federal Supplemental Nutrition Assistance Program (SNAP, formerly food stamps). Known as CalFresh in California, this program provides food assistance to nearly 4 million low-income individuals across the state, over three-fifths of them children. The need for food assistance has increased due to the Great Recession and its aftermath. Since mid-2007, when the economic downturn started in California, CalFresh enrollment has risen steadily and nearly doubled.

As part of the reauthorization of the federal Farm Bill, the US House of Representatives is considering slashing SNAP funding by more than $16 billion over the next 10 years, largely by eliminating the flexibility that states have to broaden SNAP eligibility to more low-income working families. This change would end SNAP food assistance for roughly 2 million to 3 million low-income individuals in 40 states, including California.

The cuts under consideration in the House would jeopardize improvements that California has made – or is considering making – to CalFresh. For instance: as we’ve blogged before, a bill now in the Legislature – AB 1560 – would bring more low-income individuals into CalFresh by both simplifying eligibility rules and creating a direct link between CalFresh and the Medi-Cal Program. The proposed House cuts to SNAP would prohibit this effort to expand access to CalFresh and would reduce nutrition assistance at the worst possible time: with many families still struggling in the wake of the worst economic downturn since the Great Depression.

– Steven Bliss

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