First Things First flush with cash — for now

At a time when nearly every budget projection has fallen short of expectations, Arizona policymakers may get a rare unexpected windfall from Proposition 302.

When lawmakers voted in March to put the referendum on the ballot — a measure that would sweep and dismantle the Early Childhood Development and Health Board Fund — they expected it to put about $325 million into the state’s cash-starved coffers.

But as of Sept. 1, the agency had about $100 million more than that on hand.

First Things First, as the agency is commonly known, said it doesn’t know how much of that money will be spent by Nov. 30, when its funds would be swept into the state’s general fund if voters approve Prop. 302.

But the state could get tens of millions more than it expected if voters agree to scrap the program, a boon that would help alleviate a budget deficit, which could reach $300 million even if Prop. 302 and another similar ballot measure pass in November. If voters reject Prop. 302, the state’s precariously balanced budget will plunge further into the red.

According to internal budget documents, First Things First, approved by voters in 2006, had nearly $430 million on hand at the beginning of September. And the fund’s balance at the end of the 2010 fiscal year was about $22 million more than the program’s administrators originally estimated, according to the Joint Legislative Budget Committee.

“It’s a bit of a surprise,” said House Majority Leader John McComish, a Republican from Phoenix.

Rhian Allvin, executive director of First Things First, said determining the amount of money that will be left in the fund on Nov. 30 is nearly impossible. She said First Things First does not know exactly how much billable work service providers will have done by then.

And though the program’s board budgeted for about $195 million in grants for the 2011 fiscal year, it has only approved about $118 million so far, meaning the agency could still approve up to $77 million in grants before the Nov. 2 election. The First Things First board meets next on Sept. 27- 28, and Allvin said the board will likely approve more contracts for service providers.

The extra money could be welcome news for Gov. Jan Brewer and Republican lawmakers who view the program as a bloated bureaucratic entity that Arizona can’t afford during its ongoing fiscal catastrophe. Critics believe many of the programs First Things First supports are inefficient or reduntant, and that the agency’s 139 full-time employees are simply a waste of money.

And any additional budget cuts forced by the failure of Prop. 302 would likely hit agencies such as the Department of Economic Security and Department of Health Services, said Senate President Bob Burns. Prop. 302 would continue the 80-cent-per-pack cigarette tax that funds First Things First, but the money would go to the state’s general fund in future years.

“The Legislature has used up the options as far as how we’re going to pay for things. So the actual programs that are going to be exposed to budget cuts are some of the same programs these folks claim that they want to help,” the Peoria Republican said.

There are myriad unknown factors surrounding the exact monetary value of Prop. 302. Allvin said any new grants approved at the board’s late September meeting will go into effect immediately, but she doesn’t know exactly how much will have been spent by Nov. 30. She said it is equally difficult to gauge how much of the $118 million in grants that have already been approved will be owed to service providers by then.

“I am not sure at what point in time that the Legislature decided that the magic number was $350 million,” Allvin said.

The nature of the program makes such estimates difficult, Allvin said. First Things First, which was approved by voters in 2006, established 31 regional councils that determine the greatest developmental needs of children 5 years old and under in their areas. The councils then submit grant proposals for organizations to provide those services.

To critics of the program, First Things First’s cash surplus is indicative of the program’s frustratingly slow start. The program did not approve a single grant until its third year of operation, and its spending did not become substantial until the 2010 fiscal year.

“Were they writing contracts now … I would consider that a slap in the face to voters. So I hope they’re not doing that,” said Rep. John Kavanagh, a Fountain Hills Republican. “Everything should be on hold to see what the will of the people is.”

First Things First did not award any grants in 2007 and 2008. In 2009, it approved about $17 million in grants, followed by $70 million in 2010. The agency’s total budget jumped from $31.5 million in 2009 to an estimated $210 million two years later.

Some accuse First Things First of ramping up spending so it can get as much money out the door as possible before voters possibly sweep the fund. Allvin said the program has no intention of halting the services it provides while it awaits the results of the election. The services the program provides are still needed, and First Things First will continue to do its job unless and until voters say otherwise.

“The bottom line for us is we’re going about our normal course of business and not being interrupted by the Legislature putting us on the ballot for elimination,” Allvin said. “The normal course of business includes spending money on children, birth to five.”

Not all Prop. 302 supporters believe First Things First should put the brakes on its services.

“That’s their business. It’s certainly their right to continue their business … until they’re told not to,” McComish said.

Allvin and other supporters of the program say First Things First needed time to set up the councils and evaluate the needs of young children in their regions before it could start approving grants. And the program needed time to build up a deep bank account to ensure it would have sufficient programs once things got off the ground.

Of course, any projected windfall from Prop. 302 is dependent on the ballot measure actually passing, and the campaign committee urging voters to OK the proposition faces a tough road. An anti-302 committee called Save First Things First has already raised about $488,000, more than half of which was contributed by Native American tribes, while the ‘yes’ campaign’s Sept. 23 campaign finance report showed that it hadn’t raised a dime.

Pam Pickard, who chairs the “Kid’s First — Yes on 302” committee, said the campaign has gotten financial commitments from contributors, but hasn’t received any checks yet.

First Things First has spent about $2 million in the past year on promotional advertisements, including billboards and a well-produced television commercial, the first in the history of the agency. The spending isn’t legally considered a campaign expenditure because the ads never mention Prop. 302. But critics accuse the agency of electioneering at the taxpayers’ expense with the ads.

Allvin said the ads weren’t meant to influence voters. She said the public relations campaign was timed to coincide with the ramp-up in First Things First spending, not the election. Agency spokesman Liz Barker Alvarez said First Things First also budgeted for nearly $1.5 million for ads and other public awareness activities in early 2011, well after the election.