Budget Agreement Makes Significant Investment in Early Care and Education, but Funding Is Still Down From 2007-08
California’s child care and development system helps prepare children for school and provides affordable care so parents can find jobs and remain employed. Funding for these programs was cut dramatically during and after the Great Recession. Despite modest spending increases in recent years, funding for child care and preschool slots in the fiscal year about to end (2014-15) is still more than $1 billion lower than in 2007-08, after adjusting for inflation. The 2015-16 budget package makes a significant investment in the child care and development system, due largely to the Legislature’s efforts to boost funding for these critical programs. Specifically, the spending plan:
- Restores more than 16,000 child care and preschool “slots” cut in recent years. The budget agreement restores funding for 6,800 Alternative Payment slots starting July, 1 2015. The estimated General Fund cost for this restoration is $52.6 million in 2015-16. The budget agreement also restores funding for 7,030 full-day preschool slots effective January 1, 2016, of which 5,830 are for local education agencies (LEAs) and 1,200 are for non-LEA providers. The estimated cost for these slots is $34.3 million ($30.9 million Proposition 98). Finally, the budget agreement includes $12.1 million in Proposition 98 funds for 2,500 additional part-day preschool slots. Priority for these slots is to be given to children with exceptional needs. Even with the addition of these more than 16,000 slots in 2015-16 – along with the roughly 13,000 slots added in 2014-15 – the total number of slots remains well below the pre-recession level.
- Moves funding for preschool “wraparound” slots from the General Fund into Proposition 98. Wraparound slots provide full-day care for some children who are enrolled in the state’s part-day preschool program. In prior years, these wraparound slots were funded with General Fund dollars. As part of the 2015-16 budget agreement, wraparound slots provided by LEAs will be funded with Proposition 98 dollars. This creates General Fund savings of $145 million in 2015-16. Wraparound slots provided by non-LEA providers will continue to be funded through the General Fund.
- Increases the Standard Reimbursement Rate (SRR) for child care and preschool providers. Providers that contract with the state are reimbursed based on the SRR, which is a daily rate adjusted for factors such as a child’s age or special needs. The spending plan increases the SRR by the following percentages, beginning on July 1, 2015:
- 5 percent for preschool and child care providers at an estimated cost of $61.0 million in 2015-16 ($38.3 Proposition 98) as part of the negotiated budget plan; and
- 1 percent for part-day preschool providers to better serve children with exceptional needs at an estimated cost of $6.0 million in Proposition 98 funding in 2015-16, as included in the Governor’s May Revision.
- Boosts the Regional Market Rate (RMR) by 4.5 percent. As part of the 2014-15 budget agreement, policymakers updated the value of subsidized child care vouchers to reflect the 85th percentile of the 2009 RMR Survey – rather than the 2005 RMR Survey previously in use – but with the rate ceilings reduced by 10 percent. The 2015-16 budget agreement increases the rate ceilings currently in use by 4.5 percent, effective October 1, 2015. The estimated cost for this increase in the rate ceilings is $29.6 million in 2015-16.
- Increases the payment rate for license-exempt providers. License-exempt providers – typically family and friends – often provide care to families with variable work schedules and/or nontraditional work hours. License-exempt providers are paid a rate that is a percentage of the rate paid to licensed family child care homes (FCCHs). In 2012, policymakers reduced the license-exempt provider payment rates by one-third, from 90 percent of the rate paid to FCCHs to 60 percent. The budget agreement increases the payment rate to 65 percent of the rate paid to FCCHs beginning October 1, 2015, at a General Fund cost of $10.7 million in 2015-16.
- Provides a COLA for child care and preschool programs. Policymakers suspended the statutory COLA from 2008-09 through 2014-15. The 2015-16 COLA of 1.02 percent will increase spending by $14.3 million ($6.1 million Proposition 98). For child care and preschool providers that contract directly with the state, the COLA will result in an increase in provider payment rates. For providers reimbursed with vouchers – such as those in the Alternative Payment Program – the COLA will increase the number of slots.
- Funds quality improvement projects for infant and toddler care. The budget includes onetime General Fund spending of $24.2 million for Quality Rating Improvement System (QRIS) block grants to be used and/or distributed by local or regional consortia for professional development, technical assistance, and other resources meant to improve the quality of care for infants and toddlers.
- Reflects the increase in funding for young children with special needs that was part of the Governor’s May Revision. The spending agreement increases funding by $30 million, for a total of $119 million, in Proposition 98 funds for the Early Education Program for Infants and Toddlers with Exceptional Needs. This program, implemented by LEAs, provides early identification and interventions for children from birth through age two who have special needs.
The 2015-16 budget reflects a significant investment in California’s child care and development system. However, the spending plan does not include many legislative proposals that would have further improved access and enhanced program quality, such as boosting slots, updating income eligibility limits, and further increasing provider payment rates.