Its a combo of both. The background was a simple wash that I scanned separately from the figures. And none of it is watercolor, its all gouache, but it should be the same since I treated it like water color.
The text and flowers were made via lasso tool super quickly and transposed onto a new layer, as well as the figures. I simply lasso'd from the background image to give it that texture.
Everything else was fiddled with hue/saturation adjustment options.
Edit: @ ike ike
The stencil look is nice, perhaps try playing with off-register looks a bit more? Kind of what you have goin on in the hat, where the black outline is slightly off, it will jive with the style you got goin on in there already.
I always enjoyed your foray into super-saturated colors and lighting, I'm way to timid for that kind of thing and I can see it pays off well. Also those teeth are super bombin' rad.
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