California’s First 5 programs evolve as smoking declines and tobacco taxes go away

An otherwise welcome advance in public health — the widespread reduction in smoking —  is having the perverse effect of driving down tobacco tax revenue that, for a generation, has supported some California programs aimed at early childhood education and health.

Still, proponents of the programs financed by tobacco taxes are finding new ways to support California’s youngest residents.

Proposition 10, which took effect Jan. 1, 1999, placed a 50 cent tax on tobacco products and created state and county commissions, known as First 5 commissions, to determine where those funds should be invested. Since then, First 5 has invested billions of dollars toward preschool and oral health programs, improved access to healthcare, and support for pregnant women.

In recent years, however, the funds that support First 5 commissions have fallen by half, a reflection of the decline in smoking. That’s made it necessary for First 5 commissions to form partnerships with other agencies, or stretching their existing funding as far as possible. Commissions have also turned to other revenue sources and are advocating for policy changes at the state and local level.

“After 20 years, we’ve done some really great things,” said Karen Scott, executive director for First 5 San Bernardino.

“But we see there is strength in partnering and in leveraging not only resources, but knowledge.”

A declining revenue source

When voters approved Prop 10, in 1998, it was known then that the funding would continue to decline as Californians kicked their smoking habit. That’s the point of any so-called sin tax.

“From the very onset, Prop 10 recognized in its language that we were to be coming from a declining revenue source. So, therefore, we were intended to be a catalytic investment, not a silver bullet,” said Erin Gabel, deputy director of external and governmental affairs at First 5 California.

Beyond providing a funding source for programs aimed at children younger than 5 years, the goal of the First 5 program was create a coordinated system of support for young children and their families. The thinking was that because 90 percent of brain development happens before a child’s fifth birthday, programs that help that population need to remain operational and effective even if tax support for those programs dries up.

“If children have access to timely and appropriate child healthcare, and early development services, and have access to quality early learning, the research tells us kids are going to be ready for success in life,” said Kim Belshé, executive director of First 5 LA.

“That’s really what Prop 10 is about.”

First 5 commissions were tasked with investing revenue and proving the best practices at the local level, and then sharing those findings with leaders in Sacramento and Washington D.C. After that, Gabel said, the goal was to find additional funding sources and “… spread that innovation statewide, for children and their families.”

Under Prop 10, First 5 California distributes 80 percent of the annual revenues to the state’s 58 individual counties. How much a county gets is based on the number of live births.

The remaining 20 percent goes to the state’s overall programming and administrative costs.

But in a state where smoking declined by more than 50 percent from the late 1980s through 2014, the amount of money going into the First 5 program has been in free fall.

In its first full fiscal year, from 1999-2000, Prop 10 generated 675.2 million in revenue. By the 2017-18 fiscal year, the revenue was down to $351 million. And by 2020, First 5 expects to get $135 per child, down from $261 per child when the program launched.

But, that’s not all. First 5 projects losing an additional $122 million over the next five years due to Proposition 56, which placed an additional $2 tax on tobacco products.

“We’re trying to get our arms around that right now,” Gabel said.

There are some bright spots, however.

First 5 has received more support from the state, through the allocation of additional funding to provide home visits to expecting mothers, newborns and children up to five years old. Also, over the past five years the state has increased its investment in preschool, Gabel said, in part due to First 5’s advocacy.

There is also hope among First 5 leadership that Governor-elect Gavin Newsom will act on his campaign promise to expand early childhood education programs, and boost prenatal and child care.

Additionally, some First 5 leaders are eyeing revenue from legal marijuana sales as a potential new revenue source. Prop 64, approved by voters in 2016, allows funding for drug prevention and treatment, Gabel said, noting that some of what First 5 does falls into that camp.

“We are excited to see how Prop 64 dollars can be leveraged to build more access for home visiting,” Gabel said. “And, hopefully we can also leverage medical funding that is allowable for these purposes.”

Partnering in the Inland Empire

While each First 5 commission shares a mission to serve children and their families, there are some differences in their strategies.

First 5 in Riverside and San Bernardino counties are taking a collaborative approach. For example, the agencies partnered to secure $12 million for dental services in both counties. And they are working together to launch a health screening program for children, called Help Me Grow, on a regional scale.

By partnering, the agencies can cut administrative costs even as they serve more children and make themselves more attractive to state and federal funding.

“We’ve been working really closely with First 5 San Bernardino, mostly because our kids and our families go back and forth between our counties,” said Tammi Graham, executive director of First 5 Riverside. “We share two major health plans with the Inland Empire Health Plan and Molina, so it makes sense in some of these initiatives to reduce the administrative costs by working together instead of doing it separately.”

That’s the new vision — networking, relationship building and leveraging their resources, said Scott, of San Bernardino’s First 5.

“I feel we’re doing more with less because we have learned how to build those relationships and leverage additional funding,” Scott said. “We’re bringing in funding. That’s something we never did before.”

In Riverside, the focus of funding has shifted, not reduced, services, said Tammi Graham, executive director of First 5 Riverside.

Gov.-elect Newsom’s stated support of early childhood development services and proposed universal pre-kindergarten legislation gives Graham hope. She believes, for example, that her organization might be able to invest more in children up to 3 years old, while the state focuses on kids 4 and 5 years old.

“That’s really what we do is watch for the shift in the landscape and where we want to target our limited funds,” Graham said. “If we were to receive an additional funding stream that would allow us to expand, then we would do that as well.”

Fiscally conservative in Orange County

Orange County has been budgeting for less revenue from the beginning. By assuming a 3.5 percent decrease annually, the county’s youth programs have held steady through the peaks and valleys, said Kim Goll, executive director of First 5 Orange County, Children and Families Commission.

Through early partnerships with hospitals and school districts, First 5 has screened expecting mothers for birthing risks and collected data on kindergarten readiness.

The data convinced schools, which traditionally got involved only after children started kindergarten, to take on some of pre-K services themselves.

While the expect-less strategy has buffered the agency from funding decline, about $26 million in other services currently remain at risk, Goll said. The county has also seen a drop in live births as younger adults move to more affordable regions.

“We’ve been able to find a lot of sustainable revenue sources for a lot of our services, but there are a lot of services (for which) we are the only, or primary (funding source),” Goll said. Some of those services, she added, “are absolutely critical to the health and well being of young children and their families.”

A shift in focus in Los Angeles

In recent years, First 5 LA shifted its focus, making less direct investment in services while stepping up on policy, and advocacy, Belshé said.

When more resources were available, L.A. County’s First 5 — which is the state’s largest — was funding more preschool slots, developmental screenings and oral health services directly to children, Belshé said.

“Looking (into the future) was very sobering, and our board and staff were clear that we needed to live within our means,” Belshé said. “That meant we needed to change our financial strategy. It also meant we needed to change our funding and our strategic approach.”

For example, Belshé said, First 5 LA phased gradually stopped helping to pay for insurance for children who were not eligible for Medi-Cal or other forms of insurance, and instead started advocating for policy change in Sacramento to expand coverage.

“That was accomplished a couple years ago,” Belshé said. “So now every child in all of our counties should be eligible for low cost or no cost health insurance coverage.”

First 5 LA continues investing in home visiting programs, which is a direct investment purposely structured to inform and direct policy change, Belshé said.

“If we want to get kids on… the best trajectory possible, that means starting early and starting with parents,” Belshé said. “That’s what home visiting is about. It’s a parent support initiative.”

Impact

While First 5’s across the state have an eye on revenues, they also spent much of 2018 sharing the success stories about their 20-year history.

Since inception, $2.2 billion has been invested in Los Angeles County; $437 million in Riverside County, $400 million in San Bernardino County and $750 million in Orange County.

Lina Lumme is one of the benefactors of that spending. In 2003, she was pregnant and homeless.

Lumme flew to Los Angeles after leaving an unhealthy relationship in her hometown in Russia. After calling several numbers from the Yellow Pages, she found Precious Life Shelter in Los Alamitos, a residential shelter for homeless pregnant women that receives funding through First 5 Orange County.

She stayed there for nearly three years, working her way up through the program until she was able to move out on her own. Today, Lumme is executive director of The Youth Center in Los Alamitos and is married with two children.

“I would not trade my experience,” Lumme said. “I would do it all over again if I had to. I was miserable, but I’m better today. I’m completely happy. I love giving back to the community. I love helping the families.”