The 2023-2024 State Budget Must Address Under-Investment in Kids

On January 10, 2023, Governor Gavin Newsom released his $296.9 billion 2023-2024 state budget proposal.

Children Now released this statement in response to the Administration’s proposal:

While we recognize the tighter budget situation this year, it’s critical that the Governor and Legislature be bold in addressing the decades old underinvestment in kids in California and our state’s low ranking in terms of child well-being. We applaud the Administration’s proposal for the new investment in addressing the youth opioid crises and its commitment to TK expansion. We’re also pleased that the Governor highlighted rate reform for child care, and we look forward to working with him and the Legislature to address the systemic inequities that exist in the current system. Given the disproportionate impact the pandemic has had on children, especially Black and brown kids, kids in poverty and youth in foster care, much more needs to be done across the early childhood, physical and mental health, TK-higher ed and child welfare domains.

An overview of proposed child-related investments, broken down by issue area, can be found below. Children Now will continue to advocate with the Administration and the Legislature to make improvements to this proposal before the final state budget is approved in June.

EARLY CHILDHOOD

Children Now is pleased that the Governor acknowledged the need to address rate reform for child care during his press conference and looks forward to working with him and the Legislature to address the systemic inequities that exist in the current system, including making a down payment on rates this budget year. While details are still emerging, it does not appear that the Governor has addressed key details impacting the quality and implementation of Transitional Kindergarten (TK). These issues, along with ensuring the state’s teacher preparation programs have adequate funding to develop and offer a PK-3 credential remain a priority for Children Now that we will pursue aggressively as the budget negotiations and legislative year progress.

Early childhood highlights from the Governor’s budget include:

Child Care: The Budget maintains over $2 billion annually to expand subsidized child care slot availability.

Rate Reform: The Governor’s summary includes mention of Rate Reform, within the context of CCPU negotiations (current contract expires June 30, 2023).

Cost-of-Living Adjustment (COLA): The Budget includes $301.7 million General Fund for Child Care and Development Programs and $1.5 million for the Child and Adult Care Food Program to reflect an estimated statutory COLA of 8.13 percent.

California State Preschool Program (CSPP): Consistent with the 2022 Budget Act, the 23/24 proposed budget includes $64.5 million Proposition 98 General Fund and $51.8 million General Fund for CSPP programs to continue a three-year plan (which began in 2022) to ramp up the inclusivity adjustments for the State Preschool Program. Students with disabilities must make up at least 7.5 percent of State Preschool Program providers’ enrollment this year, and next year up to 10 percent. To support reimbursement rate increases previously supported by available one-time federal stimulus funding, the Budget includes $152.7 million General Fund. These resources are in addition to the approximately $63.3 million General Fund and $112 million Proposition 98 General Fund to support an 8.13 percent statutory cost-of-living adjustment.

The Budget also includes an increase of $763,000 Proposition 98 General Fund to support the preschool Classroom Assessment Scoring System.

Transitional Kindergarten (TK): The January budget proposal stays the course with the on-going implementation and expansion of TK. As additional numbers of four-year-old children become eligible for enrollment (those that turn five by April 2, 2024, for the 2023/2024 school year), the commitment to “re-bench” Proposition 98 and provide supplemental funding to support a 12:1 student to adult ratio continues.

Key numbers in the January budget proposal for TK include:

13% COLA
Reduction of $10 million in per pupil TK funding from the 22/23 budget
Reduction of $46 million for additional staffing in TK classrooms from the 22/23 budget
Commitment of $690 million in per pupil TK funding for 23/24
Commitment of $165 million for additional TK staffing for 23/34

Literacy Grant Program: The proposed 23/24 budget builds on the prior four years of investment targeting improving literacy for California students. The budget provides an additional $250 million in one-time Proposition 98 funding, the same amount of funds allocated in 22/23, for Literacy Coaches and Reading Specialist Grant Program and additional $1 million in one-time general funds to create a Literacy Roadmap.

K-12 & HIGHER EDUCATION

Many of the commitments we were hoping to see honored in education have been held. We will continue to track the development of the state budget and changes in state revenues to ensure education priorities are considered and protected.

Surprisingly, public education is facing minimal reductions while we move forward with the implementation of universal transitional kindergarten (TK), universal school meals, and universal expanded learning TK-6, all while providing one of the highest cost-of-living adjustments (COLA) of 8.13% in our state’s history. A combination of declining enrollment, a sizable education rainy day fund, and a large amount of ongoing funds being spent for one-time purposes in prior years allow the Governor to meet most of his education budget priorities without making cuts.

The overall proposed 2023-24 Proposition 98 funding (Pre-K-12 and community colleges) is $108.8 billion, a decrease of $1.6 billion from the 2022- 23 Budget Act spending level.

Specifically, the budget provides:

$4.2 billion increase in Local Control Funding Formula (LCFF) funding through a large 8.13% COLA
$669 million to cover COLAs including Special Education, Child Nutrition, State Preschool, Youth in Foster Care, and the Mandates Block Grant
$300 million for a newly proposed LCFF Equity Multiplier, which would be required to be used at the eligible school sites generating the funding (elementary/ middle schools with 90% of students eligible for free/reduced meals and high schools with 85% eligible for free/reduced meals) to focus on meeting the needs of the lowest-performing students to accelerate gains and close opportunity gaps serving students
$116.2 million to continue a multi-year plan to increase inclusivity adjustments for students with disabilities, dual language learners, and childhood mental health.
$165 million for additional supplemental funding for lower TK staffing ratios for the new TK cohort
$153 million to backfill one-time federal stimulus funding for state preschool
$690 million to fund the next TK expansion cohort (students born between Feb 2 and April 2)
$941 million for the new Arts and Music in Schools Funding Guarantee (Proposition 28). That amount will grow annually at the same rate as the Pre-K-12 Proposition 98 funding. The additional funding comes on top of the otherwise required Proposition 98 guarantee, and thus augments total Pre-K-12 education spending.
$100 million in one-time funding for the Arts and Museums Visiting Funds, for high school students to visit cultural activities.
Package to close equity gaps through changes in Pre-K – 12 accountability and continuous improvement system. Details are scarce, but the proposal would make changes to the Local Control Accountability Plan (LCAP) process and Differentiated Assistance for lower-performing local education agencies (LEAs) to close achievement gaps.

The budget also included the following reductions and delays:

$1.4 billion reduction to the Prop 98 Rainy Day Fund contribution, resulting in school districts facing caps on the general budget reserves for the first time. This cap will come at the worst time with districts facing future fiscal uncertainty while trying to utilize around $50 billion in one-time state and federal funds received over the last two budgets.
$1.2 billion reduction in Arts, Music, and Instructional Materials Discretionary Block Grant. Despite the name, the expectation was that many LEAs planned to use these funds to cover increased State Teacher Retirement System (STRS) and Public Employee Retirement System (PERS) costs. As a result, those districts will need to cover a larger share of the increased STRS and PERS costs within their existing resources.
The budget proposal delays by one year $550 million in planned funding for the Full Day Kindergarten Facilities Grant Program General Fund (spending in 2024-25 instead of 2023-24).
The budget proposes to delay funding for the Preschool Inclusion Grants by two years, from 2022-23 to 2024-25 which saves the state $10 million in General Fund costs.

Special Education – COLA and New Programmatic Requirements: The budget proposal does not include any specific fiscal increases or reductions to the special education budget beyond a COLA. However, the proposal does provide several programmatic changes which:

Restrict the amount of money Special Education Local Plan Areas (SELPAs) are allowed to retain for non-direct student services before allocating special education base funding to their member local educational agencies
Extend the moratorium on the creation of new single-district SELPAs by two years to June 30, 2026
Increase fiscal transparency by requiring the CDE to post each SELPA’s annual local plan, including their governance, budget, and services plans, on its website.

Higher Education – Proposal Honors Compact: The Governor’s 2023-24 Budget Proposal continues for the second straight year the state’s investment in the multi-year compacts with the University of California (UC) and the California State University (CSU), and the multi-year roadmap with the California Community Colleges (CCC). In total, the budget proposes:

$23.7 billion in General Fund and local property tax support for the three higher education segments, which equates to $4.73 billion for UC, $5.35 billion for CSU, and $13.66 billion for the CCC.
Delaying payment of $250 million from the 2023-24 fiscal year to the 2024-25 fiscal year for affordable student housing projects under the Higher Education Student Housing Grant Program. A total of $1.15 billion for the student housing revolving loan program would be delayed over three fiscal years.

HEALTH

Medi-Cal Access for Children – The proposed Medi-Cal budget maintains previous investments in health care access and transformation, including $10.7 billion for CalAIM implementation, such as the new Enhanced Care Management (ECM) benefit, which goes live for children and youth on July 1, 2023. Significant new proposed funding to support Medi-Cal and children’s access to care include:

$6.1 billion over five years for the Department of Health Care Services and the Department of Social Services to implement the Behavioral Health Community-Based Continuum Demonstration, effective January 1, 2024. These funds are intended to support Medi-Cal beneficiaries living with serious mental illness and serious emotional disturbance with a focus on children and youth experiencing or at risk of homelessness and justice-involved individuals.
The Budget proposes the renewal of the Managed Care Organization (MCO) Tax effective January 1, 2024, through December 31, 2026, to help maintain the Medi-Cal program. The Budget includes $1.3 billion ($317 million in reduced General Fund spending) in 2023-24 and the MCO Tax is estimated to offset $6.5 billion in General Fund spending over the three years.
$22.7 million ($8.6 million General Fund) in 2023-24 and $57.1 million ($21.7 million General Fund) ongoing for primary care and obstetric care provider increases.

Opioid Crisis Among Youth – The budget maintains previous investments in children and youth behavioral health, and includes the following new investments to address the ongoing opioid crisis:

An additional $93 million in Opioid Settlement Fund over four years beginning in 2023-24 to support youth- and fentanyl-focused investments for the Department of Health Care Services and for the Department of Public Health.
An increase of $3.5 million ongoing in Proposition 98 General Fund spending for all middle and high school sites to maintain at least two doses of naloxone hydrochloride or another medication to reverse an opioid overdose on campus for emergency aid.

Residential Program for Co-Occurring Developmental Disabilities and Mental Health Diagnoses: The Budget includes $28.7 million ($22.1 million General Fund) to expand safety net services to further support individuals with complex needs. The plan includes the development of a residential program in the community for adolescents and adults with high-intensity co-occurring developmental disabilities and mental health diagnoses, conversion of two Stabilization Training Assistance Reintegration homes to Intermediate-Care-Facility-licensed homes, adjustments to Crisis Assessment Stabilization Teams staffing, expansion of supports for foster youth who are eligible for regional center services, and establishment of an Autism Services Branch to support a statewide focus on addressing the needs of the growing population of individuals with autism spectrum disorder.

Healthcare Workforce Grants: The Budget maintains over $1 billion General Fund to the Department of Health Care Access and Information (HCAI) to strengthen and expand the state’s health and human services workforce. These investments include funding for increasing nurses, community health workers and social workers, and supporting new individuals coming into the workforce in behavioral health, primary care and reproductive health. The Budget defers $68 million in 2022-23 and $329.4 million in 2023-24 for certain HCAI healthcare workforce programs. These programs remain fully funded, but these funds will be appropriated later than initially anticipated—$198.7 million in both 2024-25 and 2025-26.

Partial Public Health Workforce Reductions —The Budget reduces funding for various public health workforce training and development programs by $49.8 million General Fund over four years to help address the budgetary problem. The Budget maintains $47.7 million General Fund over four years for community-based clinical education rotations for dental students and public health incumbent workforce upskilling and training.

Health and Human Services Innovation Accelerator Initiative: This Initiative will seed a new entity and provide an initial investment so that researchers and developers can create solutions to the greatest health challenges facing Californians, such as targeting diabetes-related morbidity and mortality, addressing disparities in maternal and infant mortality faced by women and their babies, and preventing and mitigating infectious disease. This program will also create a State Innovation Transition Team within government to enhance innovation within safety-net programs. Funding for this initiative will be refined over the next few months and included in the May Revision.

CHILD WELFARE

The Governor’s budget largely avoids dramatic reductions and preserves funding for supports and services that impact children and youth in the child welfare system.

Program Expenditures for System Involved Youth

Detailed above, the $6.1 billion Behavioral Health Community-Based Continuum Demonstration includes several proposed reforms specific to children and youth in the child welfare system.
The updated $28.7 million Safety Net Plan includes several items to further support the continuum of safety net services, including the expansion of supports for foster youth who are eligible for regional center services.
The proposed budget includes funding through 2029 for the California Youth Empowerment Commission established in statute in 2021. The Commission is advisory in nature, for the main purpose of providing meaningful opportunities for civic engagement to youth to help inform how to improve the quality of life for California’s diversity of youth, especially disconnected and disadvantaged youth. It will launch by the end of this year.
The proposal includes $78.1 million ongoing General Fund to make the CaliforniansForAll Youth Jobs Corps program permanent while providing pathways for undocumented Californians with work authorization.

Programs Facing Delayed Implementation

The Governor’s Budget proposes to maintain $20 million in 2022-23 to expand the Court Appointed Special Advocate program and remove $20 million General Fund for the program in both 2023-24 and 2024-25.
The 2022 Budget Act committed $20 million General Fund each year for three years through 2025 to the California Workforce Development Board to invest in career pathway programs at community colleges. The Governor’s Budget proposes to withdraw $10 million in 2023-24 and 2024-25 from the California Youth Leadership Program, reducing the total three-year investment to $40 million. However, if there is sufficient General Fund in January 2024, this reduction will be restored.