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Information Bulletin from the Child Development Policy Institute

March 13, 2003

Realignment Hearing: Ad Hoc Group Presents Unified Testimony
A joint hearing on the issue of Realignment was held yesterday in the State Capitol by the Assembly Human Services Committee, the Senate Health & Human Services Committee, and the Assembly Budget Subcommittee on Health and Human Services. It was the first of two days of testimony to inform legislators about the effects of the Governor's proposal to restructure $8.1 billion of human services to the local level, including most of child care and development.

In introductory remarks, the Assembly policy committee Chair, Assemblymember Lois Wolk said, "We need to keep our eye on the prize: Is it better for the consumer?"

The Assembly's Budget Subcommittee Chair, Assemblymember Judy Chu, said that there are many questions to be answered about Realignment. She noted that the Legislative Analyst is already projecting there would be more required expenditures for counties than revenues, and that the Legislative Counsel has issued an opinion that the Governor's local income plan could not circumvent the Constitutional requirement to give half of any new dollars to schools.

Assemblymember Ray Haynes, representing the Minority view, said that Realignment could be a good thing with the lower administrative costs and efficiencies possible at the local level. On the other hand, he said, the Governor is proposing the largest tax increase in the State's history, hiding it behind Realignment. "This is a charade, a funding illusion, not a shift. There are no funding reductions, just program responsibility shifts." "You need to give counties incentives to do the right thing," he said.

Speaking for the Administration
Steve Larson, Deputy Director of the Department of Finance, said that the Administration, in addition to providing funds for local flexibility, is trying to "preserve critical programs." "Realignment is an integral part of the solution," he emphasized. If Realignment fails, Larson said, severe program budget cuts will happen. Finally, he said that the Administration was interested in the Senate Republican budget proposal, but "we need to solve the problem THIS YEAR."

Bruce Wagstaff, Deputy Director of CDSS' Welfare-To-Work Division, said that the Administration "recognizes the magnitude of the child care issue." "We view the proposal as a means to preserve programs, place program responsibility where the services are delivered, improve service delivery, foster innovation, and create fiscal incentives for cost-effectiveness." He reiterated the Governor's concern about the current system that there are access and seams problems; that there are inequities in the service to former recipients and the working poor; that there is uneven distribution of centers, especially in poorer neighborhoods; and that there is little coordination of existing dollars and in the flexibility of their use.

Realignment Working Groups Planned
Wagstaff said that the Administration "looks forward to resolving the issues in the (upcoming) work groups. (Apparently, there will be working groups to resolve problems in multiple areas associated with the decentralization.) "We did this successfully in Realignment I," he said. Relative to child care, Wagstaff said, "Last year, in response to the Administrative Review, there were stakeholders meetings on all these issues. Now that we have had more time for input, the Work Groups should be able to hit the road running!"

LAO Supports Realignment but Projects Revenues Will Lag
Marianne O'Malley, speaking for the Legislative Analyst, said that the Realignment of child care "merits consideration." She gave the legislators some principles to use to determine which kinds of programs to devolve. Programs, not taxes, should be the focus of realignment, she said. Counties will need control over the shifted programs.

Revenues must roughly match expenditures. By the way, she said the LOA projects program growth in the out-years to increase at a 7-8% rate annually, while revenues in the out-years will grow at a 5.5-6% annual rate. (Editorial comment: This seems like a bad bargain for counties to me!)

Anthony Symbol, also speaking for the LAO, said that the Realignment of child care "merits consideration." Like the Administration, he ticked off a list of (alleged) problems with the current system. "We need an integrated strategy and to reduce complexity," he said. Symbol said that to "re-bench" child care back into Proposition 98, the minimum guarantee must be raised - by some $1.165 billion - meaning less money available for K-14 needs.

Finally, he pointed out that the Governor's proposal assumes "constant" federal dollars. This may not be the case, he said. First, the House has voted (1) a cut to social service programs, including the Child Care and Development Fund, and (2) increased work hour requirement for TANF recipients with no increase in child care funding. Negotiations with the Senate are pending on both actions.

Counties Voice Concerns
Pat Leary, for the CA State Association of Counties, and Frank Mecca, for the California Welfare Directors Association, voiced concern about the Governor's devolution plan. Leary said that Realignment I has been a success and met its objectives, although revenues in the coming year may be $184 million short. The lessons learned from R-I were (1) make sure that revenues equal (shifted) responsibilities, (2) don't mix entitlements programs (like child protective services and foster care) with non-entitled programs ("Caseload always has the first draw.") ("IHSS is going to bust the bank."), and (3) these can be no changes by the Legislature that effects local costs without an additional appropriation.

Mecca said that CWDA supports the Governor's efforts to raise revenues. He said that they are frustrated with the administrative complexities of the current child care system and its bifurcation. They reiterated the unfairness and inequity between equally needy families (former recipients and the working poor). "We're talking about the same people," he said. "We are forced into the Hobson's choice of choosing which families to serve."

Child Development Makes Its Case
CDD Director Michael Jett made important points about the differences between child care and child development. The emphasis is on the development of the child - meaning Early Childhood Education - not the parent getting off government assistance. He spoke about the State's educational standards which help prepare children for school success and cited a LA Unified School District study of second graders who performed better when they had preschool experiences.

Jett rebutted arguments about complexities and access. He said that 85-90% of the "seams" have been eliminated. He argued that the Realignment will result in a widely varying system with 58 different fees, reimbursement rates, and eligibility standards. Will the counties continue the tradition of high quality care? Where is the local expertise? he asked.

Grace Cainoy made the presentation for the Partnership for Early Care and Education - the new alliance of eighteen statewide organizations in the field. She spoke about the potential negative impact of Realignment on children, families, and the 60-year old, nationally-respected child development system. The Governor's plan would (1) compromise quality child care and development and threaten school readiness efforts, (2) undermine accountability, (3) create unstable resources/funding for child care, and (4) increase, not decrease, administrative complexities. Finally, Cainoy warned the legislators about the consequences of CDE having to notify 850 contractors that their contracts may not be renewed. Programs will start closing, beginning in April, whether or not Realignment happens, she said.

This was the first time the Child Development Community has demonstrated unity before a legislative committee. It was both impressive and successful.

Ad Hoc Realignment Group Becomes the Partnership for Early Care and Education
The Ad Hoc Realignment Group decided that it needed a name to be effective. After rejecting some not-so-serious suggestions, such as the "Cut Corrections Now Coalition" and the "Don't Mess with Kids Coalition," they settled on the Partnership for Early Care and Education. The name is significant in that it emphasizes that the purpose is child-focused and school readiness-oriented.

Assembly Passed Mid-Year Reductions Bill
Following similar action by the Senate last week, the Assembly yesterday approved a revised current year reduction package. The three bill package is nearly identical to the one passed earlier but held because of a threatened veto. The previous reduction legislation was contingent upon the signing of AB 4X which would have triggered the reinstatement of (increase in) the Vehicle License Fee.

The Senate- and Assembly-passed measures retain funding for CalWORKs Stage 3 child care through the use of one-time federal funds ($98.8 million).

Speaking of Pulling the VLF Trigger …
One of the Hot Potato issues among Democrats is who should pull the VLF trigger, reinstating the higher car tax. The Governor does not want the political repercussions; neither does newly-elected State Controller Steve Westley. The former worries that the "tax increase" would fuel a potential recall effort; the latter, that it would politically blemish a potential gubernatorial bid in four years.

Not surprisingly, lawyers for both parties recently issued a joint legal opinion that a shortage of State cash can trigger an automatic increase in the fees. The triggering probably won't happen until new revenue figures are available in the May Revise, said DOF Director Steve Peace. Republican lawmakers called the legal interpretation "a tortured and contorted opinion designed to reach a predetermined outcome. The increase would likely be legally challenged; an initiative override is also being considered.

GOP Protests Senate's "Informational" Budget Hearings
Senator Dick Ackerman (R-Irvine) has written to Senator Wes Chesbro, Chair of the Senate Budget and Fiscal Review Committee, to express concern about the "informational hearings" now being held on the FY 2003-04 Budget. "In my view, rather than slowing the pace of budget deliberations, the current crisis calls for accelerating it." "I urge you to … direct our chairs to reach as many decisions as possible before the May Revision," he said. "There will be precious little time left to make our Constitutional deadline of June 15…"

Democrats Reject Minority's Budget Proposal
In the last CDPI Bulletin, we described the Senate Republican's Budget proposal for 7% across-the-board cuts, held for two subsequent years. The Democratic leadership has said that across-the-board cuts will not be the approach this year.

Wall Street Lowers State's Bond Rating
In 2003-04, the Department of Finance estimates, the State will spend about $2.4 billion in debt payments, which is slightly less than 4 percent of the State's total general fund spending. Three major credit agencies recently downgraded the State's bond rating, meaning the State ultimately will spend more in interest to repay its debts.

Cuts in Community Care Licensing Staff Protested; Fee Increases, Too
Tim Fitzharris, Legislative Advocate, and Donita Stromgren for the R&R Network, were the child development voices who protested additional cuts to Licensing staff in recent Senate Budget hearings. The CCL has already taken cuts of 71.7 positions. When combined with the proposed Mid-Year reduction, there would be a loss of 133 positions, or a 12% reduction year-over-year. "In our view," Fitzharris said, "less State oversight means fewer safe environments for children."

The two also expressed concern about increased fees for child care licensees. They asked why the fee increases for child care facilities were increased by 100% while those for other programs (e.g., residential homes for the elderly or foster care group homes) were proposed to increase by 25%. They suggested that fee increases be sunsetted, so they diminish when the State's fiscal deficit recedes. Fitzharris also expressed concern about the elimination of the "aggregate rate" for facilities with multiple sites.

It's Alice in the Looking Glass: double the fees and decrease Licensing staff by 12%!!!
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