How Did Child Care and Preschool Really Fare in the State Budget?

The 2014-15 budget agreement (read our initial analysis here) made changes to California’s subsidized child care and state preschool program that one legislator described as “the largest investment in those two areas in a decade.” This reinvestment is a positive step forward in restoring funding for the state’s child care and development system, but it is only the first step of many necessary to fully reinvest in these critical programs. A closer look at the numbers illustrates how much further California still has to go.

The budget agreement restores funding for 13,000 child care and preschool slots in 2014-15. Of these, 7,500 full-day, full-year preschool slots, 500 Alternative Payment Program slots, and 1,000 General Child Care slots were added on July 1, and an additional 4,000 full-day, full-year preschool slots will be added on June 15, 2015. However, even with the new slots the total number is still more than 20 percent below the number funded in 2007-08, and total state funding is still 31 percent lower than in 2007-08, after adjusting for inflation. The spending plan also does not restore funding for the Centralized Eligibility List (CEL), thus making it impossible to determine just how many children are waiting for a child care or preschool slot. Before funding for the CEL was cut in 2011, close to 200,000 children were waiting for a slot, and this number has likely grown since then.

The 2014-15 spending plan updates provider payment rates, but in many cases these rates still lag behind the rates paid in 2007-08. For example, providers that contract directly with the state will see a 5 percent increase in their payment rates, but will still be reimbursed at a value that is nearly 7 percent lower than the 2007-08 rate, after adjusting for inflation. Likewise, payments for providers that are reimbursed with vouchers will now be based on a 2009 market rate survey — an update from the 2005 survey used previously — but only after the 2009 regional market rates are reduced by 13 percent in making them the basis for payment. As a result, many providers won’t see an increase at all. In fact, in 46 out of 58 counties, providers categorized as licensed child care homes will not see an increase in their payment rate for infant care.

Further, providers that contract with the state have to meet more stringent licensing requirements that include a developmental component. This is in addition to meeting the health and safety standards that voucher-based providers are held to. Due to the more stringent licensing requirements, contract-based providers should be paid at a greater rate for the higher-quality standards that they are required to meet. However, in 17 counties — representing a third of all counties — voucher-based centers caring for preschool-age children will be paid at a rate that actually exceeds that for contracted providers, even though the quality standards may not be as high. In addition, in eight counties voucher-based licensed child care centers will be paid at a rate for infant care that exceeds contract-based providers.

Lastly, state policymakers did not update the income eligibility limit, which is the highest income at which a family qualifies for subsidized child care and preschool. Yet, as we noted in a recent report, state policymakers have not adjusted the income eligibility limit in years, and it is currently set at just 70 percent of the 2005 state median income (SMI). This means that families lose eligibility at a lower income than they would if the income limit were updated to reflect the most recent SMI for which data are available. In fact, the income limit would increase by more than 10 percent if based on the most recent SMI — a difference of over $400 a month for a family of three.

The 2014-15 budget agreement represents a missed opportunity to more significantly invest in one of California’s most vulnerable populations: children living in poverty. Access to subsidized child care and high-quality preschool programs helps to mitigate the effects of poverty and helps families achieve economic security. This boosts local economies and reduces future state costs for remedial education, corrections, and safety net programs, to name a few. Increasing support for California’s child care and development system doesn’t just boost support for low- income families, it is an effective way to invest in California’s economic future as well.

— Kristin Schumacher