New state budget aims to tackle child poverty

Dr. Fernando Lozano | Inland Empire Economic Partnership

According to the Public Policy Institute of California, 1 in 4 children in California live in poverty. In the Inland Empire, this number is even larger, where according to the PPIC, more than 1 in 3 children live in poverty.

In a state that has long been divided by income and wealth inequality, reducing child poverty is not trivial and must be a policy priority. With the benefit of a projected budget surplus of $31 billion to allocate in 2022-2023, the question is how can we combat child poverty to assure a better future for all Californians.

The 2022-23 Governor’s Budget for California ambitiously tackles child poverty. The need to address child poverty is not surprising, the problem is acute and reflects some of our state’s (sometimes contradictory) inherent characteristics: for example, lack of housing affordability or welcoming immigrants who begin the American dream. In fact, more than 70% of all children living in poverty belong to households where at least one adult works. Latino, and immigrant children are more likely to be poor: statewide, 40% of immigrant children, 42% of children whose parents do not speak English, and 34% of Latino children are poor.

A recent report by the National Academy of Sciences shows the persistence of poverty within the life-cycle. According to this report, a child who grows in poverty is more likely to receive food stamps as an adult, report poor health, have a child out of wedlock, or have lower income. In turn, several studies report that increasing family income (for example, through the Earned Income Tax Credit or other programs in the safety net) results in better grades, math and reading test scores, and graduating from high school and attending college. In general, when reducing child poverty, the social safety-net works and improves future outcomes.

Research in social sciences shows the efficiency of a more progressive social policy. While President Biden’s Build Back Better infrastructure plan has stalled in the Senate, here in California, Governor Gavin Newsom has unveiled an ambitious budget to protect California’s children from the negative consequences of poverty. The Governor’s Budget includes investments in early childhood education, the expansion of the California Earned Income Tax Credit, childcare services that allow parents to work, and a Child Tax Credit. These elements are both in the President’s Build Back Better and the Governor’s Budget, but California cannot wait for the dysfunctionality of Washington to pass BBB, investing in our future is essential, and the Governor’s budget moves us in the right direction.

The budget proposed by Newsom includes over $1 billion dollars for transitional kindergarten. The goal is to increase access to transitional kindergarten for at least 56,000 children. A recent paper of the National Bureau of Economic Research shows that early childhood education is associated with better academic achievement, a higher probability that a child will take the SAT, and higher probability of college attendance. Importantly, this report also shows that early childhood education is also associated with decreases in several disciplinary measures, including juvenile incarceration.

But the biggest difference is helping parents provide for their children. A recent commission to study child poverty by the National Academy of Sciences was tasked with finding which social safety program could reduce child poverty by half. While they make clear that no particular program has the impact to halve child poverty, the commission shows the programs which achieve the largest reductions are those who target to low-income households and increase their disposable income.

At the federal level, the most significant contributors to the reduction of child poverty are the Earned Income Tax Credit or the Children Tax Credit. At the state level, these programs are the CalEITC and the California Young Child Tax Credit.

There are three differences between the federal and the state’s tax credit programs: the first one is that while immigrants do not have access to the federal EITC, immigrants and importantly those who file taxes using a TIN, have access to the CalEITC. The second difference between state and federal programs is an expansion of the CalEITC for households who are not currently at work. The third is a $1,000 credit for adults who grew up in the foster care system, up to age 25. In addition to the CalEITC, the California Young Children Tax Credit gives low-income households $1,000 for each child under age 5, low-income California families will welcome this credit after the federal Tax Credit Expansion recently ended.

In a period where the need to create a more inclusive economy is more important than ever, California cannot wait for the Senate in Washington D.C. to create the progressive policy our future demands.

This budget is a first step forward.