Children's Hospitals: CheckUp

In November 2004, 58.1 percent of voters authorized the state to issue $750 million in new general obligation (GO) bonds, a type of long-term loan that the state repays with money from California’s General Fund. These bonds were used to create the Children’s Hospital Fund.

From this fund, the state can award a total of $742 million in grants to build, expand, renovate, remodel, furnish, and equip children’s hospitals. The remaining $8 million in authorized bonds are reserved to cover the expected administrative costs of the program.

Thirteen California children’s hospitals are eligible for Prop. 61 funds. The five eligible University of California children’s hospitals can request up to $30 million each, and the eight eligible private nonprofit hospitals can request up to $74 million each. Bonds are issued as the funds are disbursed.

The California Health Facilities Financing Authority (CHFFA) is responsible for administering grants from Prop. 61 bond funds. Once Prop. 61 passed, CHFFA had 60 days to create applications and regulations for Prop. 61 funding. To date, seven of the eight eligible private children’s hospitals and two of the five eligible UC children’s hospitals have submitted the extensive applications.

As of May 25, CHFFA has awarded $306 million and disbursed $159 million to eight of those hospitals.

Prop. 61 provides eligible nonprofit children’s hospitals with a significant new source of funds. Unlike University of California and other public hospitals, private children’s hospitals do not receive funding from revenue bonds, which are approved by the state legislature and repaid with revenues produced by the projects they finance. Rather, private children’s hospitals usually borrow money or generate their own funds to finance capital projects.

Each application for Prop. 61 funding has been evaluated against a list of criteria outlined in the CHFFA’s Children’s Hospital Program Overview and Instructions. Grants have then been allocated and implemented according to specific guidelines also provided by CHFFA. CHFFA officials have conducted site visits to ensure each construction or renovation project’s grant eligibility.

There have been no legal challenges or other court cases related to Prop. 61.

Before the 2004 election, the Legislative Analyst’s Office estimated that Prop. 61 would cost the state General Fund about $1.5 billion over 30 years to pay off both the principal ($750 million) and interest ($756 million) costs of the bonds, to be paid in amounts of about $50 million per year.

This cost estimate is likely to be accurate, since Prop. 61 bonds are limited to $750 million. In the two and a half years since Prop. 61 passed, CHFFA has awarded $306 million and disbursed $159 million. The California Children’s Hospital Association expects that approximately 68 percent of all Prop. 61 funds will be awarded by spring of 2008.

CHFFA will continue to accept grant applications from eligible children’s hospitals until Prop. 61 funding is exhausted, or until June 30, 2014, whichever comes first. If all $750 million has not been granted by 2014—an unlikely prospect—then CHFFA will conduct a second round of funding with specifics to be determined.

Proponents said: Proponents’ principal argument for Prop. 61 was that it would help increase capacity in children’s hospitals, as well as to purchase medical technology and equipment. These benefits have materialized for the children’s hospitals that have received Prop. 61 grants. Grants have been used for expansion of existing children’s hospital facilities, construction of new facilities, and the purchase of medical equipment.

However, Prop. 61’s impact is limited to the 13 hospitals that meet certain requirements outlined in the initiative, as hospitals were required to have already met certain requirements between the years 2001 and 2003 to be eligible for grants. (See below for a list of hospitals that have received or are eligible to receive grants.)

Proponents also said that Prop. 61 would not raise taxes. It is true that the language of Prop. 61 did not authorize any taxes. Yet the $750 million in bonds, in addition to the $756 million in interest, has and will continue to be repaid from the state General Fund, which is made up of taxpayer dollars.

Opponents said: Opponents held that Prop. 61 does not expand or improve health coverage. It is true that Prop. 61 contains no health coverage provisions, although expanded capacity in existing children’s hospitals allows hospitals to provide care for more children.

Prop. 61 opponents also argued California voters have already “mortgaged the future” by approving billions of dollars in bond sales, and that Prop. 61 will only add to this problem. Since 1972, California voters have approved $129.1 billion in GO (general obligation) bonds like those authorized by Prop. 61—$42.7 billion of which resulted from the November 2006 election, when voters passed a four infrastructure ballot measures (Propositions 1B through 1E). The LAO reports that the state had about $45 billion in outstanding infrastructure-related GO bond debt as of November 2006. This number will increase in the next few years as the bonds from Prop. 61 and other recently-approved bond measures are sold. In FY 2005-2006, this debt cost the General Fund $3.2 million in debt service, which made up 3.5% of total General Fund spending. Learn more about bonds and the state budget from the California Budget Project.

Total authorized: $750,000,000
Total awarded: $306,109,274
Total disbursed: $159,256,600

1. Children’s Hospital Central California (nonprofit)
   Authorized: $74,000,000
   Awarded: $9,079,215
   Disbursed: $8,821,232*
   Project status: Projects are complete (grant award reimbursed expenditures for medical equipment and to expand the neonatal intensive care unit by 12 beds).


2. Children’s Hospital Los Angeles (nonprofit)
   Authorized: $74,000,000
   Awarded: $74,000,000
   Disbursed: $53,000,000
   Project status: In progress. Grant award was for partial funding of a new $280 million, 280 bed seismically compliant hospital.


3. Children’s Hospital & Research Center Oakland (nonprofit)
   Authorized: $74,000,000
   Awarded: $1,696,546
   Disbursed: $1,695,274*
   Project status: Project is complete (grant award reimbursed medical equipment expenditures).


4. Children’s Hospital of Orange County (nonprofit)
   Authorized: $74,000,000
   Awarded: $22,909,844
   Disbursed: $12,700,516
   Project status: Project is complete (award was granted to help the hospital expand and remodel its Ambulatory Care Center and reimbursement for medical equipment).  


5. Long Beach Memorial Medical Center (Miller Children’s Hospital; nonprofit)
   Authorized: $74,000,000
   Awarded: $74,000,000
   Disbursed: $21,495,693
   Project status: In progress. Grant was awarded to help the hospital build, equip, and furnish a new four-story inpatient pediatric tower adjacent to its existing 281-bed facility.  


6. Rady Children’s Hospital (formerly Children’s Hospital and Health Center, San Diego; nonprofit)
   Authorized: $74,000,000
   Awarded: $11,266,631
   Disbursed: $11,258,181*
   Project status: Grants were awarded to expand and remodel the Hematology/Oncology clinic, Emergency Department, and Ortho Clinic, upgrade helipad and reimbursement for medical equipment. The first project is complete, and the other two are still in progress. 


7. Lucile Salter Packard Children’s Hospital at Stanford (nonprofit)
   Authorized: $74,000,000
   Awarded: $74,000,000
   Disbursed: $20,458,204
   Project status: In May 2006, CHFFA approved a grant to partially fund an expanded and consolidated Oncology Unit, construct a new 6-room surgical suite, and expand NICU by 20 beds and reimbursement for medical equipment.  


8. University of California, Davis Children's Hospital
   Authorized: $30,000,000
   Awarded: $9,157,038
   Disbursed: $0
   Project status: In May 2006, CHFFA approved a grant to partially fund an expanded NICU by 13 beds in its new patient tower and reimbursement for medical equipment.  


9. Mattel Children’s Hospital at University of California, Los Angeles
   Authorized: $30,000,000
   Awarded: $30,000,000
   Disbursed: $29,827,500*
   Project status: In progress. Grant was awarded for partial funding of a new $600 million, 520-bed seismically compliant hospital.

* Bond issuance costs, which vary based on the market rate when the bond was issued, are subtracted from the total amount awarded. Thus, disbursed amounts will always be slightly lower than the amount awarded.

1. Loma Linda Children’s Hospital (nonprofit; authorized to receive $74 million)
2. University Children’s Hospital at University of California, Irvine (authorized to receive $30 million)
3. University of California, San Francisco Children’s Hospital (authorized to receive $30 million)
4. University of California, San Diego Children’s Hospital (authorized to receive $30 million)