"Children Learning, Parents Earning, Communities Growing"
February 28, 2022 | Issue #9
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The Gann Limit Threatens State Investments in Child Care

 
California child care advocates were likely elated by recent headlines announcing that state revenues continue to come in billions of dollars ahead of projections.
 
Surging revenues typically give policymakers an opportunity to boost investments in critical public services such as child care, which is a key component of California’s economic infrastructure.
 
Unfortunately, this year is different.
 
State policymakers’ hands are tied by an archaic rule that links spending today to the budget priorities of the 1970s — a disco-era spending cap known as the Gann Limit.
 
The Gann Limit was approved by voters in 1979 and applies to both state and local spending. If the state exceeds its limit over a two-year period, the Legislature must spend the revenue over that limit in specific ways — providing half to taxpayers and the other half to K-12 schools and community colleges.
 
The Gann Limit challenges California’s ability to adequately support current services. The cost of many public services — from health care to support for seniors and people with disabilities — can easily increase faster than the spending cap is allowed to rise each year. If we don’t allow growing revenues to meet the cost of basic services, policymakers could be forced to make major cuts to child care and other spending outside of K-14 education.
 
The spending cap also constrains state leaders’ ability to advance bold policy solutions, such as expanding affordable child care to all working families. Funding significant new investments to help all Californians thrive can best be achieved by removing the straitjacket of an outdated spending limit.
 
Policymakers have limited options to avoid hitting the spending cap. For example, they can spend money on purposes excluded from the limit, such as responding to an emergency and investing in infrastructure. Policymakers also can stay under the limit by reducing tax revenues, such as by expanding state tax credits like the CalEITC and California’s Young Child Tax Credit, which provide financial assistance to families with low incomes.
 
Of course, not every policy idea can be implemented as a tax credit. Moreover, many types of expenditures — including ongoing investments in California’s underfunded child care system — can’t be excluded from the Gann Limit.
 
Since the spending cap is in the California Constitution, state leaders would need to ask voters to approve any changes to it. Substantially reforming or — better yet — repealing the Gann Limit would allow the state to plan for and make the bold investments needed for all Californians to share in the state’s wealth.
 
Californians want to address growing income and wealth inequality, and we have the resources to support those who have been left behind, both before and during the pandemic. And Californians agree — children grow and learn best when parents have access to safe, affordable, and quality child care and preschool, and when the providers responsible for caring for and teaching babies and kids are paid at least a living wage. 
 
It’s time to reconsider rules made by a previous generation of Californians — rules that deny policymakers the tools to create communities that support the growth and well-being of all Californians.