Noting that the best public policies for children and families cannot be effective without sufficient funding to back them up, this budget guide seeks to help advocates learn the key elements to examine in state budgets. Focusing on the 2002-2003 budget cycle in Arizona, the report considers basic principles as they apply to policy related to young children and families. The report argues that budgetary issues should be of primary concern to human service advocates, and describes the sources of money in the state budget and delineates how the money is allocated. Principles are then presented that can help advocates clarify their options and inform budget debates: (1) provide sufficient funding to make policies work effectively, noting that funding falls short of the policy in child protective services staff, behavioral health services, and child care surveyors; (2) budget for long-term results, identifying important goals in this area as preschool now for later success and tax cuts with proof and purpose; (3) adjust funding each year to account for caseload growth and inflation unless an explicit policy decision has been made to reduce a specific service, noting that areas in which such "back-door cuts" are possible are child care subsidies, homeless youth intervention, and the "Success by Six" program; (4) create a clear and easily understood budget, identifying tax expenditures and the TANF spending as areas needing to be reported more clearly; and (5) respond to changing circumstances with changes in state funding policies, recommending that the Social Service Block Grant be replaced, after-school options expanded, and the creation of a new funding responsibility for the state general fund by examined. In addition, the report describes key funding sources for children's and families' programs and details the budget development process. The report concludes with a glossary of budget-related terms. (KB)