Children and Families Agency Cries Foul Over State’s Fee Hikes

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Health and education programs for California’s young children are taking a financial hit because the state has been unfairly hiking its cut of tobacco tax money, said officials with the Orange County agency in charge of such programs locally.

The Children and Families Commission of Orange County and similar commissions across the state are funded through tobacco tax revenues authorized by 1998’s Proposition 10.

The “administrative fees” charged to collect that tax by the state Board of Equalization have jumped from about $2 million in 2003 to more than $17 million this fiscal year, according to Orange County’s commission.

Children and Families Commission of Orange County

“That cost has really grown astronomically,” said Christina Altmayer, executive director of the local commission during its regular meeting last week.

And they keep on rising, Altmayer said, affecting Orange County to the tune of $1 million per year.

Commissioners aren’t happy about it.

“It’s just ridiculous what we get charged,” said new commission Chairwoman Sandra Barry.

The commissions are tasked with spending Proposition 10 money on health and education programs such as developmental disability screenings and dental care for children up to age 5. Orange County’s commission has a budget of $24.5 million this year.

The commission voted unanimously Wednesday to join other large commissions in pursuing a new state law that would cap the fees. The cost would be limited to 1 percent of the tax revenue, down from the current level of more than 3 percent, commission officials said.

And in another sign of their frustration, commissioners are talking openly about taking their case to court.

“I do think there’s something fundamentally wrong here,” said Commissioner Hugh Hewitt, who is also a nationally-known radio talk show host.

“The last time we sued the state we won,” he added, referring to a lawsuit that challenged the state’s efforts to use about $1 billion in children’s commission funding to plug its budget hole.

Hewitt directed commission staff to investigate whether there’s an equity-based argument for a lawsuit.

It’s unclear why the Board of Equalization has been raising its fees. Its spokesman Brian Miller declined to comment, referring questions to the state Department of Finance.

The finance department’s chief spokesman, H.D. Palmer, also declined to comment, saying staff is still looking into the issue.

Meanwhile, the commission’s lobbyist, Curt Pringle, said the children’s commissions are paying the state “far beyond” what they’re getting. Another difficulty, he told commissioners, lies with the state’s ever-changing fee formula.

“Every year they will take this formula requirement and come up with [a new] one,” Pringle said.

Pringle added that he believes all five equalization board members are “sympathetic” to the county commission’s position. He described it as a “staff-driven issue.”

A representative of board Vice Chairwoman Michelle Steel reiterated that position.

“Our office is on standby to work with you to resolve this matter,” said Tyler Diep, a senior advisor to Steel, who is also running for a seat on the Orange County Board of Supervisors.

“Whether we ultimately seek a legislative or administrative remedy, we will work with you,” Diep added.

Pringle doubted that the Board of Equalization will back down on its own. “It needs to be imposed on them, if the Legislature feels this is a reasonable request,” Pringle said.

As less tobacco products are sold statewide, the Proposition 10 funding also falls — from more than $600 million to $481 million over the last decade. And last week’s announcement that CVS pharmacies will stop selling cigarettes is expected to bring a further drop in funds.

Aside from the fees issue, commission officials said the declining Proposition 10 revenue, which accounts for 96 percent of its budget, has been expected all along.

“We were created to eventually go out of business,” said Kelly Pijl, spokeswoman for Orange County’s commission.

She added that the commission has focused on funding sustainable efforts that will continue after their funding is reduced or eliminated.

The commission’s programs include funding early learning specialists at every school district in Orange County, who help introduce young children to reading and other programs that prepare them for kindergarten, Pijl said.

The commission also funds 29 school nurses, who screen children for developmental challenges, Pijl said.

Detecting vision and reading issues in younger children helps remove educational stumbling blocks early, she added. Other programs center on children’s health and wellness, such as dental services and developing shelters for homeless families, Pijl said.

Meanwhile, advocates for new cigarette taxes in California have learned from the Proposition 10 experience and are putting caps on the state’s administrative fees, Altmayer said.

One example is a proposed ballot initiative that adds a new $2.50-per-pack tax to raise money for cancer research.

But the flip side of that, according to Altmayer, is that the state would effectively charge their extra costs – to collect a different tax – to the children’s commissions.

“I was under the false impression … that if we got a new tax increase it would actually be a benefit” in spreading costs, Altmayer told commissioners. “In effect it’s actually the reverse.”

Please contact Nick Gerda directly at ngerda@gmail.com and follow him on Twitter: @nicholasgerda.

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