CHILD CARE

nancial stress and unable to pay their staff much — which in turn limits how many children they can serve.

The San Francisco tax, narrowly approved by voters in 2018, is that rare example in California of a dedicated, permanent funding source intended to solve those problems.

In the first year of its rollout, the measure has paid for 1,000 more children to enroll in subsidized care, increased wages for 2,500 early education teachers and made 10,000 more children eligible for subsidized care on top of the 15,000 who were before.

“I’m hoping that if people see San Francisco can do it, then why not somewhere else?” said retired San Francisco Board of Supervisors President Norman Yee, the main architect of the tax measure.

In 2018, after months of organizing from local officials, parents and child care workers, San Francisco voters passed the commercial tax with a measure dubbed “Baby Prop C” by a margin of less than one percentage point. A failed legal challenge by taxpayer and business groups delayed its implementation, but last year, funds collected under it began reaching the child care field in July.

As a result, families making up to 110 percent of San Francisco’s area median income — or up to $152,400 a year for a family of four — can now qualify for subsidized child care for their kids under age 4.

Those income eligibility rules provide access to far more families than the state’s rules, which only allow subsidized care for families who make up to 85 percent of the state median income — or up to $95,289 annually for a similar family. Because it’s far more expensive to live in San Francisco than in California overall, some families who make even less than what it takes to get by there have not been able to qualify for state-subsidized care.

And unlike the state, which has required many families to chip in an income-based monthly fee toward their subsidized child care, San Francisco plans to charge no fees for city-funded care thanks to Proposition C funding, said Wei-min Wang, a director in the city’s early education department. That’s true even for moderate-income families who are newly eligible, he said.

“Now that we have Baby Prop C money, we don’t have to treat it like a scarce good we have to allocate and ration,” Wang said. “We don’t want high-quality early care and education to be so much a privilege as the right of every child, regardless of your background.”

Eventually, the city’s child care leaders expect to use Prop C to fund subsidized care for families making up to 200 percent of the area median income — as much as $277,100 for a family of four, according to current salary data. But the priority now is serving lower-income families, city officials said.

About half of Prop C revenue goes to expanding access to subsidized child care. But crucially, in an industry where low pay has often thwarted expansion of child care slots, the other half goes to pay raises for child care teachers, who in California are paid on average just $17 an hour. Many in San Francisco were making as little as $18 an hour — far shy of the $31 an hour it takes for a single person to get by there, according to the MIT Living Wage Calculator.

Prop C was designed not only to pay early educators a living wage, but to build a salary structure to put them on par with their counterparts in K-12 education, where starting pay is generally significantly higher and teachers are paid better the more higher education they have.

Prop C is working toward a new minimum wage of $28 an hour for early educators serving at least half low-income children by providing them semi-annual stipends or raising their hourly rates. Advocates expect that will not only improve current teachers’ quality of life but also help draw more quality applicants to the field and thus enable providers to serve more children.

It may be too early to judge Prop C’s success.

Still, San Francisco is further along than most of the state in advancing child care reforms. In 1991, San Francisco became what was believed to be the first city in the U.S. to establish a municipal fund exclusively for children’s services, including child care. Since 2004, it has worked toward establishing universal preschool, and since 2013 it has had a city office dedicated to early care and education.

And for more than a decade, the city has paid child care providers who serve low-income kids higher rates than what the state pays its subsidized care providers, knowing that the true cost of providing quality care has typically exceeded what the state pays.

“We now have this dedicated source of early childhood funding that is the first municipal source, where we can really draw from forever,” said Ingrid Mezquita, director of the city’s Department of Early Childhood, of Prop C. “It gives a level of stability that this sector hasn’t had in a very long time, or ever.”

The push for Prop C

Families shell out more for child care in San Francisco than in any other California county.

The vast majority of San Francisco families must pay as much as $2,700 a month — more than $32,000 a year — for full-time infant care, according to a 2021 statewide survey. That’s compared to a statewide average of about $1,600 a month.

Yet California’s income eligibility levels for subsidized care are set so low that many families can’t qualify for help paying for child care, and many families who make enough to get by in California are automatically disqualified from subsidized care because they make too much. In San Francisco, a family of four with two working parents needs to make $167,920 to get by, according to MIT’S Living Wage Calculator, which is more than $72,000 above the state’s income limit for subsidized child care.

Meanwhile, there has not been enough public funding or child care providers in California to accommodate all the children who already do qualify for subsidized care. In San Francisco, more than 2,400 children were on the city’s waiting list for subsidized child care at the time Prop C was being proposed to voters.

There were other reasons to go after a child care tax measure, advocates said. For one thing, child care teachers in city-funded programs were seeing staff turnover rates of 75 percent, according to the early education department, which didn’t bode well for the quality of children’s education.

Prop C was meant to be San Francisco’s answer to those problems.

The measure is largely the brainchild of Yee, the former Board of Supervisors president and a longtime child care and education advocate who had led one of San Francisco’s two child care referral agencies for 18 years before entering politics. He and fellow Supervisor Jane Kim led the effort to collect more than 9,400 voter signatures to put the initiative on the 2018 ballot.

Before, Yee and other advocates had to keep asking city leaders every year for one or two million or so dollars in the budget for child care. But those incremental, one-time amounts weren’t going to build a better child care system, which would require several reforms, he said.

Those reforms would need to address four areas, he said: giving more families access to subsidized care, expanding facilities to accommodate them, raising teachers’ pay and investing in their professional development to improve quality.

“Prop C is really a gamechanger, because it provides the resources to do so many of the things that we wanted to do for our early education system,” Yee said in 2021, after Prop C survived the court challenge. “It gets us to close to universal child care access for everybody, including middle-income families, and it provides living wages for our early care educators.”

Before Prop C, commercial landlords in San Francisco generally paid a commercial rent tax rate of 0.3 percent.

Prop C now collects 3.5 percent from the rents of most commercial spaces and 1 percent from rents of warehouse spaces in San Francisco. Landlords who are paid less than $1 million annually in rental income and rents paid by government, nonprofit, arts and other tenants are exempt. Fifteen percent of the funds collected by Prop C goes to the city’s general fund, and the rest goes to child care.

It makes sense for large businesses to pay a tax for child care, advocates said, considering they possess some of the city’s greatest wealth and benefit from the availability of such care, since their employees need it to do their jobs. “Business is going to invest and support children in San Francisco so workers can go to work,” said Gina Fromer, CEO of the Children’s Council of San Francisco.

That was a key point supporters made during the 2018 campaign, volunteers said. Parents and providers held rallies, distributed flyers and did phone banking daily, targeting the people who would benefit most, said Maria Luz Torre, a Parent Voices organizer: women and low-income families.

“We even rallied at 555 California (Street). Trump is a co-owner of that building,” she said. “We rallied there to show these are the people who are paying for this, and not you.”

Two months after Prop C passed, a coalition of landlord, business and taxpayer groups that had opposed the measure sued in an attempt to invalidate it. Those groups — the Howard Jarvis Taxpayers Association, Building Owners and Managers Association of California, California Business Properties Association and California Business Roundtable — argued that Prop C actually needed a two-thirds majority to pass because a government official, Yee, had been heavily involved.

“Our issue had nothing to do with where the money was going, but rather that it was an illegal tax,” said Brooke Armour, vice president of the California Business Roundtable, in an email.

But in 2021, a state appeals judge sided with the city, saying that because the measure had been placed on the ballot as a voter initiative — and because Yee’s involvement did not change that — it needed only a simple majority to pass. Later that year, the state supreme court denied the plaintiffs’ request to review their appeal.

San Francisco is lucky, Luz Torre said, in that it has a wealthy tax base to draw from to fund child care. Other counties may have to get more creative, she said.

At least one other California county has also passed a tax to fund child care. In 2020, just across the San Francisco Bay, voters approved a half-percent sales tax in Alameda County to raise child care workers’ wages and offer more subsidized care slots, as well as fund pediatric health care.

That measure, Measure C, has been held up for more