Budget Issues

In a multitude of ways, government funding has a profound impact on programs and services critical to young children and families. Even the best-conceived public policies that aim to promote access, affordability, and quality in child care and early childhood education can be undermined by inadequate allocations of resources. Funding streams at the federal, state, and local levels all have a role to play.

Throughout its history, MCC has focused on budget issues affecting children. This history demonstrates that securing public funds for programs serving young children and families can pose immense challenges, even in favorable economic climates. In periods of economic decline, these challenges are amplified significantly.

Since late 2002, State leaders have grappled with the gravest fiscal crisis to confront Maryland in more than a decade. Turbulent economic conditions (arguably dating back to the terrorist attacks of September 2001) have afflicted states throughout the nation. In Maryland, this has been further complicated by a mounting structural deficit and the legislative crossfire between two intensely controversial issues -- gambling and taxes.

Fears about cuts to a range of vital child care programs were realized in the FY 2004 budget, released in January 2003. The struggle to preserve these programs dominated the Session of the General Assembly. The cuts included $25 million to the Child Care Subsidy Program, $5 million for after-school programs, more than $4 million to various quality initiatives (including the Credential), and a $4 million cut to the Maryland Child Care Resource Network (MCCRN). This last cut represented 70 percent of MCCRN's budget, and would have reduced funding to a level at which the statewide network of resource centers would have been unsustainable.

Together with MCC Board members, Public Policy Committee volunteers, other MCC staff, and allies in other nonprofit organizations, the Public Policy Department undertook an intensive, highly targeted campaign to influence legislative leaders as well as Governor Ehrlich's Administration. A luncheon briefing for legislators in January and MCC's Legislative Day in February 2004 (dedicated to the memory of Terry Lansburgh) provided superb opportunities for outreach. Additionally, key budget hearings brought hundreds of MCC supporters to Annapolis.

These efforts achieved a notable success when the Governor included a partial restoration of funding for MCCRN in his supplemental budget, but the allocation was immediately challenged by legislative analysts. This was the first of several advances and setbacks that marked the final weeks of the 2004 Session. MCC redoubled its lobbying efforts and ultimately convinced budget leaders in both houses to preserve the $2 million supplemental appropriation for MCCRN.

Nevertheless, MCCRN still faced a painful budget shortfall. No funds for child care subsidies, after-school programs, or quality initiatives were restored. And other vital programs and policies championed by allies with MCC's support--including the network of Family Support Centers and the Maryland Children's Health Insurance Program--suffered deep losses of funding.

In keeping with the tortuous nature of the 2003 Session, even adjournment on Sine Die brought scant closure to the process. A combination of a tax legislation veto, continuing departmental deficits, and downwardly adjusted revenue predictions led the Ehrlich Administration to an unprecedented, across-the-board impoundment of FY 2004 budgeted funds in early summer. This was followed in mid-July by an extraordinary round of cuts presented to and approved by the Board of Public Works. Included were additional reductions to programs already slashed during the Session, such as the Maryland After School Opportunity Fund (an additional $1 million cut) and Family Support Centers (cut by an additional $290,000).

The 2004 Session of the General Assembly arrived with new fiscal anxieties and debate over the budget. Advocates were initially relieved to find that the Governor's FY 2005 budget proposal did not exacerbate the damage inflicted in FY 2004. While the programs of greatest concern to MCC did not see their allocations restored to pre-FY 2004 levels, they did not suffer further funding cuts.

Challenges arose, however, during budget deliberations in the General Assembly. The Department of Legislative Services (DLS), which advises the General Assembly on fiscal matters, recommended cuts to the Governor's proposed funding for the Child Care Credentialing Program and the Extended Elementary Education Program (EEEP)--a $20-million state pre-K program. In both cases, MCC intensively lobbied the Legislature's budget committees to reject the recommendations. The recommended cut to the Credentialing Program would have been particularly disastrous, and would likely have led to its demise. Ultimately, MCC was able to convince legislators to reject that cut. While the cut to EEEP was not completely abated, legislators chose to cut only $2.4 million, rather than the recommended $4.8 million.

As anticipated, budget issues during the 2005 Session of the Maryland General Assembly again proved tumultuous. The Governor’s proposed budget, released in early January, reflected Department of Human Resources (DHR) recommendations to reduce expenditures on child care subsidies. Even more alarming, the budget proposal slashed $2 million in funding for MCCRN, allocating only $1.8 million for a contract that stood at $5.8 million just three years ago.

Subsequent meetings with State House staff carried assurances that the Governor would attempt to rectify the cut in a Supplemental Budget. In late February, the Governor issued a press release announcing his intention to restore funds for the Network—and to transfer the program to the Maryland State Department of Education (MSDE), a relocation that MCC had strongly advocated. The Supplemental Budget was finally released in late March, with $1 million in restored funds for the Network and a shift of the entire contract from DHR to MSDE. But legislators, apparently confused by the mechanics of the restoration and funding shift, initially rejected the appropriation. After vigorous lobbying, the $1 million supplemental appropriation was ultimately restored by Conference Committee on the last weekend of the Session. MCC and the Network worked with MSDE to address the remaining funding gap.

In addition to the struggle to preserve funding for the Network, MCC and its allies urged the General Assembly to enact emergency legislation preventing DHR from once again child care subsidy funds to cover shortfalls in other areas of the department. Although the bills themselves failed in committee, the crowded hearings, passionate testimony, and press coverage that they generated produced two major results: the House and Senate agreed to budgetary language restricting the amount of child care subsidy funds that DHR was permitted to transfer in FY 2005; and they prohibited any diversion of child care subsidy funds whatsoever in FY 2006.

Beginning in the summer of 2005, Maryland's economy and State revenues enjoyed a modest upswing. In the 2006 Session, the Governor and the General Assembly approved, among other allocations, $750,000 to partially restore Network funding, $1.9 million to expand early childhood mental health initiatives, and an increase of $3.9 million for child care subsidies. The General Assembly also added budget language expressing its intent that in FY 2008, the Governor fully restore funding for the Network and the state’s Family Support Centers to no less than their FY 2003 levels ($5.8 million and $6.9 million, respectively).

Nevertheless, Maryland is still grappling with a structural deficit. In 2007, despite ominous projections from the incoming O’Malley Administration about the State’s finances, the FY 2008 budget proposal included a $4 million increase—up to $111 million—for the Child Care Subsidy Program. This good news was undercut when DLS recommended that the General Assembly slash the allocation by $5 million in order to contain costs.

MCC, with support from MSDE, quickly and forcefully mobilized the child care community to resist the recommended cut. In a system still recovering from repeated funding raids and the nearly three-year imposition of a wait list, MCC argued, even the full allocation was insufficient to meet the true need for child care subsidy. Furthermore, it was entirely inadequate to redress pent-up deficiencies in the program, particularly in regard to parent co-payments and provider reimbursement rates.

Ultimately, MCC and its allies persuaded both the House and Senate budget committees to reject the recommended cut. In the process, DLS seemed to undergo a change of heart—language drafted by the Department to mandate that at least $3 million be spent to increase reimbursement rates was added to the final budget.

Unfortunately, budget success did not extend to other key programs. Despite the strong endorsement of MSDE and the State Board of Education, the Governor’s budget did not fully restore funding for the Maryland Child Care Resource Network or for Family Support Centers to their 2003 levels. (These programs were level-funded, however, reflecting the partial restorations of previous fiscal years.) A State Board-recommended increase for the Maryland Infants and Toddlers Program was also rejected.

A handful of tax-related legislative proposals championed by MCC and its allies similarly failed, victims of growing apprehension over the impending budget crisis. Chief among these was a bill to expand the State’s refundable Earned Income Tax Credit (EITC), which offers tremendous economic benefits to low-income families with children. Its high cost made the bill arguably impossible to enact this year. Still, the compelling hearings orchestrated by MCC may help the EITC become an important component of the comprehensive tax reform package that legislative leaders are expected to hammer out during the coming year.

Position

MCC must vigorously defend programs and services for young children and their families in the face of deficits, spending cuts, and other budget challenges.

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