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Other Budget Issues

Last Updated: 1/28/2011
Budget Issue: Redirection of Proposition 10 funds
Program: California Children and Families First Commission
Finding or Recommendation: Adopt the Governor’s January 2011-12 budget proposal to place a measure before voters in a June 2011 special election to allow the use of Proposition 10 funds for children on Medi-Cal, reducing state General Fund costs by $1 billion in the budget year and $215 million in 2012-13. The Legislature could go beyond the Governor’s proposal by increasing the amount to be redirected from Proposition 10.
Further Detail


Proposition 10 was enacted by the voters of California in the November 1998 election. The initiative measure created the California Children and Families Commissions, now commonly known as the state and local First 5 Commissions, which rely upon revenues generated by state excise taxes on cigarettes and other tobacco products to fund early childhood development programs for children up to age five. Local commissions receive 80 percent of Proposition 10 revenues while the state commission receives the remaining 20 percent.

Governor's Proposal

The Governor’s proposed ballot measure would (1) sweep $1 billion on a one-time basis from state and local commissions’ fund reserves to pay for Medi-Cal services for children up to age five and (2) redirect on an ongoing basis 50 percent of state and local commission’s future revenues to fund various state children’s programs. This proposal would result in General Fund savings of $1 billion in 2011-12 and approximately $215 million in 2012-13. This amount would decline gradually in the out-years in accordance with an ongoing trend of declining tobacco product consumption.

LAO Comments

Proposition 10, which generally funds early childhood development, health, and education programs that were designed to be enhancements to previously existing core programs, was approved by voters during a period when state finances were healthier. Given the state’s fiscal condition now, we believe it is reasonable for the Legislature to consider a reduction to programs for enhanced services, such as Proposition 10, rather than cut more deeply into core programs.