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All California students pursuing higher education and career pathways should have access to an affordable education and the ability to achieve economic security. And California offers many postsecondary institutions for students to pursue their goals, including colleges, universities, community colleges, and trade schools. Yet, high costs of higher education and career training programs, along with economic hardship exacerbated by the COVID-19 pandemic has caused many students to cancel their education and career training plans. This is hitting students from households with low incomes the hardest. 1“Households with low incomes” are defined as households with annual income of less than $50,000. State policymakers can support students in building their education and careers by making education affordable and addressing costs of basic needs so California’s communities are home to thriving students, families, and workforces. 

The high costs of postsecondary education are a major barrier for students with low incomes to stay enrolled and complete their coursework.

Since the beginning of the 2021-22 academic year, more than 1 in 5 households with low incomes included at least one prospective student who canceled all plans to take classes from a postsecondary institution due to impacts of the pandemic (23%).2The US Census Bureau, Household Pulse Survey defines postsecondary institutions as colleges, universities, community colleges, trade schools, or other occupational schools. Students living in households with low incomes were more likely to cancel their education plans than California households overall (18%) and compared to households with higher incomes (14%). Students in Black and Latinx households also canceled education plans at higher proportions than all households (24% and 19%, respectively).

Bar chart: More Than 1 in 5 Households with Low Incomes Included a Student Who Canceled Postsecondary Education Plans. California Households with at Least One Adult Who Canceled All Plans to Take Classes in 2021-22.

There are various reasons why students canceled their postsecondary education plans, but financial stress is a key factor. Of those California households where at least one member canceled all plans for postsecondary education, 41% did so because they were unable to pay for educational expenses due to pandemic-related changes to income and 45% of households with low incomes canceled for the same reason.3Survey respondents were able to select various reasons why plans to take classes were canceled, including being unable to pay for educational expenses, having COVID-19 or having concerns about the virus, uncertainty about how classes or programs would change, among others. Respondents could choose more than one reason for canceling plans.

The high costs of postsecondary education are a major barrier for students with low incomes to stay enrolled and complete their coursework. At a time when California households with low incomes are much more likely to be struggling to meet basic needs, policymakers should ensure that Californians with low incomes seeking postsecondary degrees and certificates have the financial support necessary to complete their programs, provide for themselves and their households, and build their lives across the state’s diverse communities.


Support for this report was provided by the Conrad N. Hilton Foundation.

  • 1
    “Households with low incomes” are defined as households with annual income of less than $50,000.
  • 2
    The US Census Bureau, Household Pulse Survey defines postsecondary institutions as colleges, universities, community colleges, trade schools, or other occupational schools.
  • 3
    Survey respondents were able to select various reasons why plans to take classes were canceled, including being unable to pay for educational expenses, having COVID-19 or having concerns about the virus, uncertainty about how classes or programs would change, among others. Respondents could choose more than one reason for canceling plans.

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Introduction

All Californians deserve a safe and stable place to call home – a home that is affordable, located near their work and communities. Even before the COVID-19 pandemic, California’s serious housing affordability challenges threatened the well-being of families and communities and the future growth of the state. Throughout the pandemic, job losses have hit low-wage workers hardest, and hundreds of thousands of renters with low incomes have sought assistance as they are strained to pay rent.1Alissa Anderson, California Low-Paid Workers & Their Families Struggle as Jobs Decline Again (California Budget & Policy Center, February 2021), https://calbudgetcenter.org/resources/california-low-paid-workers-their-families-struggle-as-jobs-decline-again/. Enrique Lopezlira, et al., California’s Labor Market in the Time of COVID-19: 2021 Chartbook, February 2022 (UC Berkeley Labor Center, February 1, 2022), https://laborcenter.berkeley.edu/californias-labor-market-in-the-time-of-covid-19-2021-chartbook/.  “California COVID-19 Rent Relief Program Dashboard,” State of California Business, Consumer Services, and Housing Agency, Housing Is Key Rental Assistance (webpage), accessed April 19, 2022, https://housing.ca.gov/covid_rr/dashboard.html. As the pandemic moves into a new stage and many emergency protections are lifted, millions of Californians continue to live in a state of emergency, struggling to keep a roof over their heads.

About 2.1 million California households were facing housing hardship in the first months of 2022, meaning people were already late on rent or mortgage payments and/or had low confidence in their ability to make their next payment.2Except where otherwise noted, results cited are from Budget Center analysis of US Census Bureau, Household Pulse Survey public-use microdata, representing multiweek averages for Week 41 (data collected December 29, 2021 to January 10, 2022), Week 42 (January 26 to February 7, 2022), Week 43 (March 2 to March 14, 2022), and Week 44 (March 30 to April 11, 2022). Without support, these households risk housing instability, evictions, and in the worst case, homelessness.

Who are the Californians currently struggling to afford their housing? Understanding who is experiencing housing hardship can help state leaders target policies and funding to ensure families and individuals receive the support they need to remain in stable housing and thrive.

1. Renters Are Much More Likely to Face Housing Hardship Than Homeowners

Access to an affordable home is the foundation for a healthy life, especially for the more than 40% of Californians who live in rented homes. Californians with low incomes, and Black, Pacific Islander, and Latinx Californians are especially likely to rent – reflecting racist and discriminatory policies and practices in housing, employment, and education that have blocked millions of Californians from homeownership.3Monica Davalos, Sara Kimberlin, and Aureo Mesquita, California’s 17 Million Renters Face Housing Instability and Inequity Before and After COVID-19  (California Budget & Policy Center, February 2021), https://calbudgetcenter.org/resources/renters-face-housing-instability-and-inequity-before-and-after-covid-19/.

Renters are especially likely to be struggling to afford their housing. From January to April 2022, California renters were twice as likely as homeowners with mortgages to report housing hardship. About 33% of renter households reported being late on housing payments or having low confidence in their ability to meet the next month’s payments, compared to 15% of homeowners with mortgages.

Even before the pandemic, 1 in 2 renter households paid more than 30% of income toward housing and 1 in 4 spent more than half their income on housing.4Davalos, Kimberlin, and Mesquita, California’s 17 Million Renters. Hundreds of thousands of applications for rental assistance during the pandemic show that renters continue to struggle with housing costs.5California COVID-19 Rent Relief Program Dashboard.”

2. About Half of Renters with Low Incomes Are Struggling to Afford Housing Costs

All Californians, regardless of income, deserve a safe and stable place to live. Yet many Californians particularly struggle to pay for housing when their incomes are low because their work is undervalued, they do not receive fair wages, they have lost jobs, or they depend on retirement or disability benefits that are set below the cost of living. All of these conditions reflect the effects of racist, sexist, xenophobic, and ableist policies and practices in workplaces and housing.

Californians with low incomes are especially likely to rent, and renters with low incomes report the most difficulty paying for housing. About half of renter households with incomes below $50,000 reported housing hardship from January to April 2022.

Californians with low incomes have been hit hardest by pandemic job losses.6Alissa Anderson, California Low-Paid Workers. Enrique Lopezlira, et al., California’s Labor Market. They have also suffered the most as inflation has pushed up prices for food, energy, and other necessities, as well as rent.7Michael Weber, Yuriy Gorodnichenko, and Olivier Coibion, “The Expected, Perceived, and Realized Inflation of US Households Before and During the COVID-19 Pandemic, NBER Working Paper 29640, (January 2022), https://www.nber.org/papers/w29640.

3. Racial Disparities in Rent Hardship Are Severe

Race or ethnicity should not affect one’s access to stable and affordable housing. Yet racial inequities are severe in Californians’ housing experiences. Californians of color are most likely to live in renter households and were most likely to have unaffordable housing costs even before the COVID-19 pandemic.8Davalos, Kimberlin, and Mesquita, California’s 17 Million Renters. Black Californians disproportionately experience homelessness, as do American Indian or Alaska Native and Pacific Islander Californians.9Monica Davalos and Sara Kimberlin, Who is Experiencing Homelessness in California? Tailored Housing Interventions are Needed for California’s Diverse Unhoused Population (California Budget & Policy Center, February 2022), https://calbudgetcenter.org/resources/who-is-experiencing-homelessness-in-california/. These patterns reflect effects of racist housing, education, and employment policies and practices that have blocked Californians of color from opportunities to achieve housing security.

While housing hardship is being felt across renters of all races and ethnicities in California, Black and Latinx renters are especially likely to report being late or lacking confidence in their ability to make rent payments. About 4 in 10 Black or Latinx renter households reported housing hardship from January to April of 2022. About 3 in 10 Asian renters and about 2 in 10 white renters reported hardship.

These inequitable housing experiences reflect and add to racial inequities in other pandemic hardships. Black and Latinx workers have been most likely to lose employment and slowest to recover from high unemployment rates.10Alissa Anderson, Inequitable Job Gains: Unemployment Is Twice as High for Black Californians as for White Californians (California Budget & Policy Center, August 2021), https://calbudgetcenter.org/resources/inequitable-job-gains-covid19/. Pacific Islander, Latinx, and Black Californians have also experienced the highest age-adjusted rates of COVID-19 death.11Adriana Ramos-Yamamoto and Monica Davalos, Confronting Racism, Overcoming COVID-19, and Advancing Health Equity (California Budget & Policy Center, February 2021), https://calbudgetcenter.org/resources/confronting-racism-overcoming-covid19-advancing-health-equity/.

more in this series

Read our 5Facts: Who is Experiencing Homelessness in California? to learn more about California’s diverse unhoused population.

4. Housing Hardship Affects California Low-Income Renters in All Types of Families

Across all stages of life, families of all types need affordable and stable housing in order to thrive. Housing security is vital for children because housing instability and homelessness can severely negatively impact children’s health and development. For adults, a stable home is the basic foundation required to maintain health, work, and dignified living conditions throughout all ages of life.

Struggling California renters include both families with children and adult-only households. From January to April 2022, about half of renter households with incomes under $50,000 reporting housing hardship were families with children (51%). About half included only adults (49%), including senior households.

5. Even Before COVID-19, Undocumented and Mixed-Status Renters Had Unaffordable Rents

All Californians, regardless of where they are born, should be able to count on having safe and stable housing. Even before the pandemic, Californians who were undocumented immigrants or in mixed-status families faced higher rates of poverty due to discriminatory barriers to meeting basic needs, including worker exploitation and inequitable access to safety net supports.12Sara Kimberlin, Aureo Mesquita, and Kristin Schumachher, Undocumented & Mixed-Status Families Are Blocked From Food Support (California Budget & Policy Center, May 2022), https://calbudgetcenter.org/resources/undocumented-mixed-status-families-are-blocked-from-food-support/.

Among renter households that include undocumented Californians, an estimated 58% were paying unaffordable rents before the pandemic, and about an estimated one-third were severely housing cost-burdened, paying more than half of their income toward rent.13Budget Center analysis of US Census Bureau, American Community Survey public-use microdata for 2019, using undocumented status imputation developed for the California Poverty Measure. See Figure 5. These high rates of unaffordable housing put these households at risk of housing instability and eviction.

Estimates of current housing hardship among undocumented and mixed-status renters are not available, but the pandemic has likely increased hardship for these Californians. While millions of California workers who lost jobs during the pandemic turned to unemployment benefits for support, workers who are undocumented were blocked from accessing this aid. Undocumented and mixed-status households have also been excluded from other COVID-19 relief and from many ongoing supports that help families meet basic needs like housing.

Conclusion

Every California family and individual deserves a place to live, to thrive, to share moments with their loved ones – a place to call home. Despite much wealth in our state, driving strong growth in state revenues even during the pandemic, millions of Californians continue to live in a state of emergency, struggling to keep up with housing payments and at risk of losing their homes. 

Yet policymakers can act on proven policies and invest in support especially for California’s renters, who are most likely to be facing housing hardship – particularly renters with low incomes and those who are Black and Latinx, as well as undocumented and mixed-status households. Strategies can include:

  • Direct resources to emergency rental assistance, legal aid, and eviction protections that have helped keep Californians housed during the pandemic. State leaders can build on these protections and supports to ensure California’s renters can stay in their homes.
  • Increase the supply of affordable rental housing to ensure that all Californians have access to an affordable home – and make sure the housing is designed to meet the needs of diverse types of households, including older adults, single workers, households that include people with disabilities, and working families with children.
  • Expand and target additional financial support to Californians with low incomes through taxpayer rebates, refundable tax credits, and safety net supports like CalWORKs, Supplemental Security Income/State Supplementary Payment and General Assistance.
  • Design, implement, and evaluate housing policies with a racial equity lens, ensuring fair access and outcomes for communities historically excluded from housing security and opportunities.
  • Ensure emergency housing supports and affordable housing are accessible to all Californians in need regardless of immigration status so that undocumented individuals and mixed-status families have the security of a stable home.

As the COVID-19 pandemic moves onto a new stage, leaving many emergency measures behind, policymakers must ensure no Californian is left without a safe and stable home. Strong state revenues present opportunities to keep Californians housed now and to invest in the state’s long-term housing affordability challenges. California’s state of emergency only truly ends when all Californians have a safe, stable, and affordable place to call home.


Support for this report was provided by the Conrad N. Hilton Foundation.

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Introduction

California children need a safe space to learn and grow while parents are at work, and the COVID-19 pandemic underscored just how essential child care is for the livelihood of workers and communities. California’s subsidized child care and development system has long been critical to the state’s economic infrastructure, helping families struggling to make ends meet cover the high cost of early care and education for their children.1Families are eligible for subsidized child care if the child who would receive care is under the age of 13; the family establishes an appropriate eligibility status, such as by having an income below the limit set by the state; and the family demonstrates a need for care, such as parental employment. Families generally must meet the same income guidelines applicable to child care to qualify for the California State Preschool Program, which is funded solely with state dollars. State law, however, allows up to 10% of families in the state preschool program to have incomes up to 15% above the income eligibility limit, but only after all other eligible children have been enrolled. The California State Preschool Program is a part-day program offered for roughly nine months of the year. Some children receive “wraparound” services that provide subsidized child care for the remainder of the day and throughout the entire year. To be eligible for the full-day California State Preschool Program, families generally must meet the same eligibility guidelines that are applicable to subsidized child care. But policymakers have never provided enough funding to offer care for all eligible families or to ensure providers and early educators are paid fair and just wages.2Kristin Schumacher, Exploring the Unmet Need for Subsidized Child Care and Development Programs in California (California Budget & Policy Center, February 2019), https://calbudgetcenter.org/resources/exploring-the-unmet-need-for-subsidized-child-care-and-development-programs-in-california/; and Kristin Schumacher and Erik Saucedo, California’s Subsidized Child Care Providers Are Overdue for a Pay Raise (California Budget & Policy Center, April 2022), https://calbudgetcenter.org/resources/californias-subsidized-child-care-providers-are-overdue-for-pay-raise/

State and federal dollars fund the state’s subsidized child care and development system that includes both child care programs and the California State Preschool Program. Due to chronic underfunding at the state and federal level, cash-strapped families and under-paid providers engaged in the state’s subsidized child care and development system did not have the resources to withstand the economic shock of the pandemic. This 5 Facts provides key details on how state and federal funding mitigated some of the impacts of the pandemic on California’s subsidized child care and development system and explains why policymakers should continue to invest ongoing resources in California’s families and providers.

1. Federal Policymakers Provided Significant One-Time Support for Child Care Providers and Families During the Pandemic

California has received more than $5 billion in federal relief funds during the pandemic to support under-paid child care providers and cash-strapped families who were not in a position to weather a health and economic crisis.3Federal policymakers also provided pandemic relief funding for Head Start, a federal early care and education program. These relief dollars flowed directly to Head Start providers across California and were not appropriated in the state budget. See US Department of Health and Human Services, Office of Head Start, Program Instruction ACF-PI-HS-21-03 (May 4, 2021), https://eclkc.ohs.acf.hhs.gov/policy/pi/acf-pi-hs-21-03. These one-time relief dollars were on top of the state’s annual appropriation from the Child Care and Development Fund (CCDF) — the primary source of federal funding for subsidized child care.

The first round of federal pandemic relief for child care came from the Coronavirus, Aid, Relief, and Economic Security (CARES) Act, enacted in March 2020.4California Budget & Policy Center, Federal Fiscal Relief and COVID-19: Implications for Californians (April 2020), https://calbudgetcenter.org/resources/covid19-federal-fiscal-relief-california/. California received $350 million, increasing federal funding for child care in California by 51% in the 2020 federal fiscal year over pre-pandemic levels.5State policymakers supplemented the CARES Act funding for child care with an additional $110 million in flexible CARES Act dollars allocated to states from the Coronavirus Relief Fund. See Department of Finance, Notification letter Section 11.90 – Child Care and Food Bank Support (October 19, 2020), https://dof.ca.gov/wp-content/uploads/budget/covid-19/covid-19-allocations/10-19-20_section_11-90-federal_coronavirus_relief_funds-child_care_and_food_bank_support-cc.pdf.

Federal policymakers provided additional child care relief in the Coronavirus Response and Relief Supplemental Appropriations Act (CRRSA) in December 2020, of which California received an additional $964 million. Finally, the American Rescue Plan Act (ARPA) became law in March 2021, providing a total of $3.7 billion for child care relief efforts in California — 62% for provider stabilization and 38% to supplement CCDF funding.6California Budget & Policy Center, American Rescue Plan Provides Assistance to Millions of Californians (March 2021), https://calbudgetcenter.org/resources/american-rescue-plan-provides-assistance-to-millions-of-californians/. Combined, CRRSA and ARPA provided a total of $4.7 billion in child care relief funds to California in the 2021 federal fiscal year. This was a six-fold increase in federal child care dollars over pre-pandemic funding from the Child Care and Development Fund. 

2. State Policymakers Have Utilized Roughly Half of Federal COVID-19 Child Care Relief Funds

Federal child care relief funding has been significant and essential to support child care providers and working parents. To date, state leaders have appropriated 48% — roughly $2.5 billion — of the federal funds to keep the underfunded subsidized child care and development system afloat.

More than one-third of the appropriated relief funds, or $891 million, has been used to support California families. Policymakers have utilized relief funding to provide emergency child care for essential workers and to expand subsidized child care spaces for families with low incomes. Policymakers also have waived family fees for subsidized care for a limited time to ease families’ financial burdens.7See Kristin Schumacher, Erik Saucedo, and Marcela Salvador, California Families Pay High Price for Subsidized Child Care (California Budget & Policy Center, March 2021), https://calbudgetcenter.org/resources/california-families-pay-high-price-for-subsidized-child-care/.

Nearly two-thirds of the appropriated federal relief funds — $1.6 billion — has been allocated to support child care and preschool providers. Relief measures have included provider stipends for both subsidized and non-subsidized providers, rate increases and rate supplements to compensate for chronically low payment rates, pandemic supports to ease the cost of keeping doors open during the pandemic, and other investments in quality and support programs.

The administration has struggled to distribute the large amount of federal relief funds in a timely fashion, and some measures, such as waiving family fees for working parents and provider pandemic supports, will end on June 30, 2022, increasing economic hardship. More than half of the federal relief dollars remain unallocated.

3. Remaining One-Time Federal Relief Funds to Boost Provider Payment Rates and Provide Care for More Children

Roughly half of the $5.2 billion in one-time federal COVID-19 child care relief dollars remain unspent. The $2.7 billion in unspent funds includes both CRRSA and ARPA dollars — both of which can be used for a variety of purposes to supplement existing child care funding in California.8US Department of Health and Human Services, Office of Child Care, Information Memorandum CCDF-ACF-IM-2021-1 (April 14, 2021), https://www.acf.hhs.gov/occ/policy-guidance/ccdf-discretionary-funds-appropriated-crrsa-act-public-law-116-260-signed-law; US Department of Health and Human Services, Office of Child Care, Information Memorandum CCDF-ACF-IM-2021-2 (May 10, 2021), https://www.acf.hhs.gov/occ/policy-guidance/ccdf-acf-im-2021-02; and US Department of Health and Human Services, Office of Child Care, Information Memorandum CCDF-ACF-IM-2021-3 (June 10, 2021), https://www.acf.hhs.gov/occ/policy-guidance/ccdf-acf-im-2021-03.

The majority of unspent federal relief funding is ARPA dollars — both the stabilization funds and supplemental CCDF funds. Policymakers have signaled the intent to use these one-time ARPA dollars for provider payment rates through the 2023-24 state fiscal year and for subsidized child care spaces through the 2024-25 state fiscal year.9Assembly Bill 131 (Committee on Budget, Chapter 116, Statutes of 2021), https://leginfo.legislature.ca.gov/faces/billNavClient.xhtml?bill_id=202120220AB131; and Senate Bill 129 (Skinner, Chapter 69, Statutes of 2021), https://leginfo.legislature.ca.gov/faces/billNavClient.xhtml?bill_id=202120220SB129. State leaders have also indicated that the remaining $326 million in CRRSA will fund additional subsidized child care spaces in 2022-23 state fiscal year.10Assembly Bill 131 (Committee on Budget). The use of these federal child care relief funds in 2022-23 and beyond is not final until the governor signs the budget agreement for the fiscal year.

The federal administration signaled urgency in utilizing child care relief funds for temporary measures to support cash-strapped families and under-paid subsidized providers who have faced enormous challenges during the pandemic. The CRRSA dollars and ARPA Stabilization funds must be spent by September 30, 2023.11US Department of Health and Human Services, Office of Child Care, Information Memorandum CCDF-ACF-IM-2021-1 and Information Memorandum CCDF-ACF-IM-2021-2. ARPA supplemental CCDF funds must be spent by September 30, 2024.12US Department of Health and Human Services, Office of Child Care, Information Memorandum CCDF-ACF-IM-2021-3.

More in this series

See our Report: California’s Subsidized Child Care Providers Are Overdue for Pay Raise to learn how California providers and families suffer when subsidized child care is limited in their communities because of policymakers’ lack of investment.

4. Policymakers Have Expanded the Subsidized Child Care and Development System With One-Time Funds

Funding for the state’s subsidized child care and development system increased dramatically in the 2021-22 state fiscal year due in large part to one-time federal relief funds. In 2021-22, total funding for subsidized child care programs and the California State Preschool Program was $6.9 billion, but $2 billion of this total was one-time funding — 29% of overall support.

These one-time dollars are both federal relief funds and state funds, and have been used to support children, families, and providers in a number of ways, including payment rate increases and additional child care and preschool spaces for children. Policymakers plan to use remaining one-time federal relief funds to maintain these program expansions in coming years.13Assembly Bill 131 (Committee on Budget). Eventually, the state will have to commit significant, ongoing state dollars to avoid cuts to these vital supports for families and providers, but this will be difficult if policymakers face budget challenges.

Using one-time dollars to boost funding for the subsidized child care and development system is not unique to the pandemic. Since Governor Newsom took office, the state has increasingly relied on one-time dollars to support child care and preschool program expansions. Using one-time funding for ongoing programs and services undermines the fiscal foundation of the state’s subsidized child care and development system.

5. The 2021-22 Budget Builds on Investments from Prior Years but Still Falls Short of Equitable Funding Levels

Policymakers have incrementally invested in the state’s subsidized child care and development system to restore the devastating cuts made to child care programs and the California State Preschool Program as a result of the Great Recession — the state’s last economic crisis.14Kristin Schumacher, One-time Funding Boosts Dollars for Child Care and Preschool (California Budget & Policy Center, September 2018), https://calbudgetcenter.org/resources/one-time-funding-boosts-dollars-for-child-care-and-preschool/. State leaders continued this investment trend in the 2021-22 budget by utilizing one-time federal relief dollars and one-time and ongoing state funds to dramatically increase support for the state’s subsidized child care and development system.

Total funding for subsidized child care and the California State Preschool Program increased by more than one-third in 2021-22 (after adjusting for inflation), bringing overall funding to $6.9 billion. This boost in funding was driven by roughly $1.7 billion in one-time federal relief dollars included in the 2021-22 state budget. State policymakers also increased General Fund support for the subsidized child care and development system by 31% and special fund support by 59%. However, even with increased funding, resources still fall far short of the billions in additional support necessary to provide fair and just wages to providers and to increase access to early learning and care for families with low and moderate incomes in California.15California Health & Human Services Agency, Master Plan for Early Learning and Care: Making California for All Kids (December 2020), 95-107, https://www.chhs.ca.gov/home/master-plan-for-early-learning-and-care/.

Conclusion

The COVID-19 pandemic has underscored just how vital child care is to children, families, communities, and the economy. In response to the crisis, California policymakers have invested state and federal dollars into the state’s chronically underfunded subsidized child care and development system to mitigate some of the devastating impacts of the pandemic. While total funding for subsidized child care and the California State Preschool Program increased dramatically, the use of one-time funds to expand these programs threatens the fiscal foundation of the system and California families’ and providers’ ability to sustain child care.

As the state and nation emerges from the pandemic, policymakers have the opportunity to use one-time federal pandemic relief funds as a down payment for a fiscally sound subsidized child care and development system. To do so, both the state and federal government must provide significant, ongoing resources. This will ensure that children have a safe place to learn and grow, working parents have access to affordable child care, and providers and early educators are paid fair and just rates.

  • 1
    Families are eligible for subsidized child care if the child who would receive care is under the age of 13; the family establishes an appropriate eligibility status, such as by having an income below the limit set by the state; and the family demonstrates a need for care, such as parental employment. Families generally must meet the same income guidelines applicable to child care to qualify for the California State Preschool Program, which is funded solely with state dollars. State law, however, allows up to 10% of families in the state preschool program to have incomes up to 15% above the income eligibility limit, but only after all other eligible children have been enrolled. The California State Preschool Program is a part-day program offered for roughly nine months of the year. Some children receive “wraparound” services that provide subsidized child care for the remainder of the day and throughout the entire year. To be eligible for the full-day California State Preschool Program, families generally must meet the same eligibility guidelines that are applicable to subsidized child care.
  • 2
    Kristin Schumacher, Exploring the Unmet Need for Subsidized Child Care and Development Programs in California (California Budget & Policy Center, February 2019), https://calbudgetcenter.org/resources/exploring-the-unmet-need-for-subsidized-child-care-and-development-programs-in-california/; and Kristin Schumacher and Erik Saucedo, California’s Subsidized Child Care Providers Are Overdue for a Pay Raise (California Budget & Policy Center, April 2022), https://calbudgetcenter.org/resources/californias-subsidized-child-care-providers-are-overdue-for-pay-raise/
  • 3
    Federal policymakers also provided pandemic relief funding for Head Start, a federal early care and education program. These relief dollars flowed directly to Head Start providers across California and were not appropriated in the state budget. See US Department of Health and Human Services, Office of Head Start, Program Instruction ACF-PI-HS-21-03 (May 4, 2021), https://eclkc.ohs.acf.hhs.gov/policy/pi/acf-pi-hs-21-03.
  • 4
    California Budget & Policy Center, Federal Fiscal Relief and COVID-19: Implications for Californians (April 2020), https://calbudgetcenter.org/resources/covid19-federal-fiscal-relief-california/.
  • 5
    State policymakers supplemented the CARES Act funding for child care with an additional $110 million in flexible CARES Act dollars allocated to states from the Coronavirus Relief Fund. See Department of Finance, Notification letter Section 11.90 – Child Care and Food Bank Support (October 19, 2020), https://dof.ca.gov/wp-content/uploads/budget/covid-19/covid-19-allocations/10-19-20_section_11-90-federal_coronavirus_relief_funds-child_care_and_food_bank_support-cc.pdf.
  • 6
    California Budget & Policy Center, American Rescue Plan Provides Assistance to Millions of Californians (March 2021), https://calbudgetcenter.org/resources/american-rescue-plan-provides-assistance-to-millions-of-californians/.
  • 7
    See Kristin Schumacher, Erik Saucedo, and Marcela Salvador, California Families Pay High Price for Subsidized Child Care (California Budget & Policy Center, March 2021), https://calbudgetcenter.org/resources/california-families-pay-high-price-for-subsidized-child-care/.
  • 8
    US Department of Health and Human Services, Office of Child Care, Information Memorandum CCDF-ACF-IM-2021-1 (April 14, 2021), https://www.acf.hhs.gov/occ/policy-guidance/ccdf-discretionary-funds-appropriated-crrsa-act-public-law-116-260-signed-law; US Department of Health and Human Services, Office of Child Care, Information Memorandum CCDF-ACF-IM-2021-2 (May 10, 2021), https://www.acf.hhs.gov/occ/policy-guidance/ccdf-acf-im-2021-02; and US Department of Health and Human Services, Office of Child Care, Information Memorandum CCDF-ACF-IM-2021-3 (June 10, 2021), https://www.acf.hhs.gov/occ/policy-guidance/ccdf-acf-im-2021-03.
  • 9
    Assembly Bill 131 (Committee on Budget, Chapter 116, Statutes of 2021), https://leginfo.legislature.ca.gov/faces/billNavClient.xhtml?bill_id=202120220AB131; and Senate Bill 129 (Skinner, Chapter 69, Statutes of 2021), https://leginfo.legislature.ca.gov/faces/billNavClient.xhtml?bill_id=202120220SB129.
  • 10
    Assembly Bill 131 (Committee on Budget).
  • 11
    US Department of Health and Human Services, Office of Child Care, Information Memorandum CCDF-ACF-IM-2021-1 and Information Memorandum CCDF-ACF-IM-2021-2.
  • 12
    US Department of Health and Human Services, Office of Child Care, Information Memorandum CCDF-ACF-IM-2021-3.
  • 13
    Assembly Bill 131 (Committee on Budget).
  • 14
    Kristin Schumacher, One-time Funding Boosts Dollars for Child Care and Preschool (California Budget & Policy Center, September 2018), https://calbudgetcenter.org/resources/one-time-funding-boosts-dollars-for-child-care-and-preschool/.
  • 15
    California Health & Human Services Agency, Master Plan for Early Learning and Care: Making California for All Kids (December 2020), 95-107, https://www.chhs.ca.gov/home/master-plan-for-early-learning-and-care/.

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California’s subsidized child care providers offer vital early learning and care for families struggling to make ends meet. Even as the COVID-19 pandemic continues, many providers and their staff have risked their health and safety to offer care for children of working parents. These early educators — primarily women and disproportionately women of color — deserve to be paid professional wages for essential work that helps children learn and grow while parents are working to support their families. 

Despite providers’ critical role in nurturing children and assisting families, state leaders have failed to consistently and adequately increase provider payment rates in recent years. Child care providers are unable to offer early educators adequate professional wages, struggle to keep pace with the rising statewide minimum wage, and can’t afford the increasing price of food and supplies if policymakers don’t provide routine and sufficient updates to payment rates. Ultimately, California providers and families suffer when subsidized child care is limited in their communities because of policymakers’ lack of investment.

Providers and families suffer when subsidized child care is limited in their communities because of policymakers’ lack of investment.

How Are Subsidized Child Care Providers Paid in California?

Subsidized child care providers are paid in one of two ways in California: 1) by accepting vouchers from families or 2) by contracting directly with the state. Providers who accept vouchers are reimbursed by the state based on the Regional Market Rate (RMR) Survey. The RMR survey — administered every two to three years — provides “rate ceilings” based on provider setting and the age of the child for all 58 California counties. The rate ceiling is the highest payment a provider can receive from the state for the care of a child. Providers that contract directly with the state are paid with a statewide rate called the Standard Reimbursement Rate, which has typically been adjusted for various factors such as the age of the child or disability status.

Payment Rates for Voucher-Based Child Care Providers Are Not Keeping Pace Across 58 Counties

California experienced strong revenue growth over the past five years, yet state leaders updated voucher-based payment rates for child care providers just twice since the 2016-17 state fiscal year. During this same period, the state law requiring annual increases to the statewide minimum wage went into effect, raising the wage by 40% from 2017 to 2022.1Calculations are based on the minimum wage for employers with 25 employees or less. Senate Bill 3 (Leno, Chapter 4, Statutes of 2016), https://leginfo.legislature.ca.gov/faces/billNavClient.xhtml?bill_id=201520160SB3

The rate ceilings for child care providers across all 58 counties generally have not kept pace with the rising minimum wage even after the most recent increase to payment rates included in the 2021-22 state budget agreement. In the state’s two most populous counties — Los Angeles and San Diego — payment rates for licensed centers caring for preschool-age children increased by half as much as the statewide minimum wage. Providers in some counties, such as Santa Barbara County, saw miniscule rate increases of less than 1%. And in 27 counties, due to weaknesses in the rate-setting methodology, licensed centers have not received a single rate increase for care for preschool-age children since the 2016-17 state fiscal year.2Market rate surveys collect data on the tuition and fees that families can afford to pay for child care in a geographic area. These rates typically do not cover the true cost of care, as many providers supplement tuition and fees with other sources of revenue, such as grants or donations. See Bipartisan Policy Center, The Limitations of Using Market Rates for Setting Child Care Subsidy Rates (May 2020), 4-6, https://bipartisanpolicy.org/report/the-limitations-of-using-market-rates-for-setting-child-care-subsidy-rates/.

State Rate for Contract Providers Doesn’t Match Rising Child Care Business Costs

Similar to voucher-based payment rates, policymakers also have not consistently updated the Standard Reimbursement Rate each year so that contract providers keep pace with rising staff costs and the increasing price of food and supplies. From 2016-17 to 2021-22, the Standard Reimbursement Rate has increased by just 28.2%, falling short of the 40% increase in the state minimum wage.3During this period, policymakers also increased the Standard Reimbursement Rate adjustment
factors for a number of higher-cost groups of children, such as infants or children with disabilities.
Many of these adjustment factors were eliminated in the 2021-22 budget agreement as part of the
transition to a single reimbursement rate system for subsidized child care providers. See Assembly
Bill 1808 (Committee on Budget, Chapter 32, Statutes of 2018),
https://leginfo.legislature.ca.gov/faces/billTextClient.xhtml?bill_id=201720180AB1808; and Assembly
Bill 131 (Committee on Budget, Chapter 116, Statutes of 2021),
https://leginfo.legislature.ca.gov/faces/billNavClient.xhtml?bill_id=202120220AB131.

Even though contract-based providers are required to meet more program standards than voucher-based providers do, the payment rate is lower than the Regional Market Rate ceiling in many counties, illustrating a key problem with the state’s bifurcated rate system. To correct for this, policymakers included a provision in the 2021-22 budget agreement to reimburse contract-based providers with either the Standard Reimbursement Rate or the rate for voucher-based providers, whichever is higher.4Assembly Bill 131 (Committee on Budget).

Subsidized Child Care Providers Urgently Need a Pay Raise

Already operating on thin financial margins, child care providers have struggled during the pandemic with a loss of income and increased costs due to reduced enrollment, temporary closures, and enhanced health and safety requirements.5Kristin Schumacher, California’s Economic Recovery Starts with Child Care (California Budget & Policy Center, February 2021), https://calbudgetcenter.org/resources/california-economic-recovery-starts-with-child-care/. Policymakers’ recent efforts to boost subsidized child care providers’ payment rates and to provide other one-time rate supplements are just the first step to fair and just payment rates. In addition to increasing payment rates, the 2021-22 budget agreement also required the governor’s administration and providers, parents, and other early childhood experts to begin work on a plan to replace the state’s bifurcated rate system with a unified, equitable system.6AB 131 (Committee on Budget).

But subsidized child care providers and the families they serve can’t wait. While a permanent solution is in the works, state leaders should provide another payment rate increase in the 2022-23 budget agreement to ensure child care providers can keep up with rising costs while continuing to offer invaluable care to children and families.

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