Legislative Analyst's Office

Analysis of the 2000-01 Budget Bill
California Children and Families Commission (4250)

Proposition 10 was enacted by the voters of California in the November 1998 election. It funds early childhood development programs from revenues generated by increases in the state excise tax on cigarettes and other tobacco products. These programs are provided either by the state California Children and Families Commission or the local county commissions.

The Governor's proposal estimates that Proposition 10 revenues will be $733 million in 1999-00 and $719 million in 2000-01, a decrease of 2 percent due to a projected decrease in tobacco consumption. According to statute, these funds are deposited into the California Children and Families Trust Fund, and a small amount is used to (1) offset reductions in certain Proposition 99 programs and Breast Cancer Fund programs due to decreased tobacco consumption and (2) reimburse the State Board of Equalization for its administrative costs. Of the remainder, 80 percent of the funds are allocated to Proposition 10 county commissions and the other 20 percent to the state commission.

The California Children and Families Commission must spend their funds on (1) a mass media campaign, (2) educational activities, (3) support for child care providers, (4) research, and (5) administration. In early 2000, the state commission intends to fund initiatives in children's health care, child care and development, and family literacy.

The budget estimates that spending will amount to $1.1 billion in the current year and $729 million in the budget year. Current-year expenditures exceed the annual revenues because of a large carry-over from 1998-99, due to the time required for program implementation.

We note that these funds are continuously appropriated, and not subject to appropriation by the Legislature. We also note that passage of Proposition 28, included on the March 2000 ballot, would repeal the tax provisions of Proposition 10. This would eliminate new funds for programs administered by the state and local commissions.

Matching Grant Program Would Encourage Cost-Effective Use of Proposition 10 Funds

We recommend enactment of legislation to establish a state-funded voluntary matching grant program for the Proposition 10 county commissions, which would fund (1) early childhood programs that have been shown to be cost-effective and/or (2) demonstration programs that are potentially cost-effective, based on existing research.

Background. Proposition 10 results in a significant increase in funding for programs related to early childhood development. A key issue, therefore, is ensuring that these funds will be spent effectively. Most of the Proposition 10 revenues go to the county commissions. This local control is likely to facilitate responsiveness to local needs, but with up to 58 commissions and the broad discretion that they have in allocating their revenues, it will be a challenge to ensure that the funds will be spent effectively. County strategic plans must describe how program outcomes will be measured and must be consistent with guidelines adopted by the state commission, but specific spending plans do not have to be reviewed or approved at the state level.

The Legislature has no direct control over the expenditure of Proposition 10 funds, and as such its role is a limited one. Nevertheless, the Legislature does have an opportunity to influence decisions taken by the state and, more importantly, the county commissions.

Research on Early Childhood Programs. A variety of early childhood programs typically small-scale demonstration programs have been evaluated as being effective according to outcome measures such as school achievement and health status. In a few cases (a home-visiting program in Elmira, New York, for example), the cost-effectiveness of programs has been documented as well. (For further discussion of research on such cost-effective programs, please see our report, Proposition 10: How Does it Work? What Role Should the Legislature Play in Its Implementation?, January 1999.)

It also makes sense to evaluate the potential of other early childhood interventions. While relatively few programs have been analyzed on the narrowly defined basis of cost-effectiveness, a large number have been shown to result in positive outcomes. The Office of Juvenile Justice and Delinquency Prevention in the U.S. Department of Justice, for example, has published the results of a review of "family strengthening" programs, which identified 34 noteworthy programs, including nine that focus on families with children under six years of age. Such programs could serve as the basis for initiating pilot projects in California.

Matching Grant Program. We recommend enactment of legislation to establish a state-funded voluntary matching grant program for the Proposition 10 county commissions, which would fund (1) early childhood programs that have been shown to be cost-effective and/or (2) demonstration programs that are potentially cost-effective, based on existing research. (As implied above, demonstration programs are small-scale projects designed to test the effectiveness or cost-effectiveness of the program or specific aspects of the program.)

The primary purpose of this matching grant program would be to create a fiscal incentive to encourage the county commissions to use their funds productively. We believe that a 1:3 state/local match would provide a sufficient incentive. Thus, a state appropriation of $15 million, for example, would match up to $45 million in local funds.

We also suggest that if such a program is adopted, it be administered either by the Department of Social Services (DSS) or by the California Children and Families Commission, with the assistance of an advisory group that includes representatives from other departments. We note that the DSS has some expertise in this area and currently oversees a home-visiting pilot project. This expertise is important because the administrative agency will have to make judgments on the potential effectiveness and cost-effectiveness of the local proposals. The Children and Families Commission on the other hand, also has acquired staffing expertise and has responsibility for state oversight of the program.

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