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Millions of Children Are Eligible for Subsidized Child Care

Yet Only a Fraction of Children Received Services in 2017

January 2019 | By Kristin Schumacher

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Child care keeps parents working and families afloat, yet the high cost of care across California often forces parents to make difficult choices about who cares for their child while they go to work. This can be detrimental for families with low incomes, who often struggle to simply afford the basics. California’s subsidized child care and development system is designed to serve families with low and moderate incomes, but there are far more children eligible for subsidized child care than what is funded by the state and federal governments.[1] This means that families with few resources are often unable to secure affordable care for their children.

In 2017, just 1 in 9 children eligible for subsidized child care and development programs in California were enrolled in a program that could accommodate families for more than a couple hours per day and throughout the entire year.[2] According to a Budget Center analysis of federal survey data, an estimated 2 million children from birth through age 12 were eligible for care, but only 228,100 were able to participate in a subsidized full-day, full-year program.[3] This mismatch between eligibility for care and available spaces largely reflects inadequate state and federal funding. Moreover, decades of wage stagnation has dampened families’ incomes, making it difficult to afford the high cost of child care.[4] In fact, in 2017, roughly 1 out of 3 California workers with children earned low wages. [5]

State and federal policymakers have begun to increase funding for subsidized child care and development programs in recent years.[6] In California, policymakers have incrementally increased the number of spaces for children and boosted provider payment rates. State policymakers also took an important step forward by updating the decade-old income eligibility limits and implementing a 12-month eligibility period. These positive changes were long overdue and allow families to retain subsidized care for their children while they build a secure economic foundation for their families. However, these changes also mean that the small share of families receiving care remain eligible for longer periods of time, while substantially more families have become eligible. Without additional investments in new spaces for children, these changes could further limit access for low-income families.

Governor Newsom’s proposed 2019-20 budget includes a large investment in young children. However, while the proposal expands full-day, full-year preschool and sets aside hundreds of millions of dollars in one-time funding for subsidized child care facilities and teacher training, it does not immediately expand access to subsidized child care programs for children from low- and moderate-income families, instead signaling that the Administration intends to significantly expand the number of children served in the years ahead. Since some parents have been waiting for child care for years, substantial investment in California’s subsidized child care and development system must include increased access to child care programs for children and families.

This analysis is the first part of a multiphase effort to analyze subsidized child care and development programs in California. Future phases of this work will examine the unmet need for subsidized child care across different age groups and by race and ethnicity.

[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 (CSPP), 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 CSPP 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 CSPP, families generally must meet the same guidelines regarding eligibility status that are applicable to subsidized child care.

[2] Budget Center analysis of US Census Bureau, American Community Survey data. Data limitations likely result in a conservative estimate of the number of children in California who are eligible for subsidized child care. For more information about the methodology used to calculate this estimate, see the Technical Appendix.

[3] The 228,100 figure reflects children enrolled in the full-day CSPP or in one of the following subsidized child care programs: Alternative Payment Program; CalWORKs Stages One, Two, or Three; Family Child Care Home Network; General Child Care; and the Migrant Child Care and Development Program. Enrollment is for October 2017, except for California Community College CalWORKs Stage Two, which reflects a Department of Finance estimate for the 2017-18 fiscal year. This analysis also includes the full-day CSPP, which consists of part-day preschool and “wraparound” child care, because it accommodates many — although not all — families’ work schedules throughout the year, and thus approximates the experience that a child would have in a subsidized child care program. In contrast, this analysis excludes roughly 97,000 children who were enrolled in the part-day CSPP, without access to wraparound child care, in October 2017. This is because most families with low and moderate incomes likely need wraparound care in order to supplement the CSPP’s part-day, part-year schedule. This analysis reports enrollment data for a single month — as opposed to a monthly average for 2017 — because the California Department of Education (CDE) does not typically separate part-day and full-day CSPP enrollment when reporting monthly averages for a single fiscal year. The CDE also states, “Caution should be used when interpreting monthly averages as some programs do not operate at full capacity throughout the entire year (e.g., State Preschool) while other programs have seasonal fluctuations in enrollment (e.g., Migrant Child Care).” Finally, the data are for October 2017 because the CDE’s point-in-time reports are only available for the month of October.

[4] See Amy Rose, Modest Gains for California’s Low- and Midwage Workers (California Budget & Policy Center: January 2018).

[5] Estimate based on data from the University of California Berkeley Labor Center, Low-Wage Work in California (August 2018). “Low wage” is defined as earning less than $14.35 per hour.

[6] Kristin Schumacher, Dollars for Child Care and Preschool in 2018-19 Near Pre-Recession Levels With Boost From One-Time Funding (California Budget & Policy Center: September 2018).

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Child Care & Preschool

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For the fifth year in a row, funding for California’s subsidized child care and development system has increased. This system provides critical child care and early learning opportunities for a limited number of children from low- and moderate-income families, but state funding was cut dramatically during and after the Great Recession, while federal funding for subsidized child care remained relatively flat.[1] This meant that fewer children and families received subsidized care than prior to the onset of the Great Recession. However, state policymakers have incrementally reinvested in these programs and services beginning with the 2014-15 state fiscal year, and bipartisan support for subsidized child care at the federal level has resulted in newly available federal funds, as well. Due to these investments, after adjusting for inflation, overall funding for California’s subsidized child care and development system in the 2018-19 fiscal year is $3.887 billion, 15% greater than in 2017-18 ($3.375 billion), and nearly even with funding levels in 2007-08, prior to the onset of the Great Recession (see chart).

The 2018-19 budget includes state funds to add 2,100 Alternative Payment Program (AP) child care slots, as well as 2,959 full-day state preschool slots, as agreed upon in the 2016-17 budget agreement. This year’s budget also adds 11,307 time-limited AP child care slots with newly available federal funds.[2] The 2018-19 budget also increases payment rates for providers that contract directly with the state, including an additional increase specifically for the care of infants, toddlers, and children with special needs. Still, despite the increase in state and federal resources, overall funding for subsidized child care and preschool slots in 2018-19 ($3.522 billion) is still nearly $250 million lower than in 2007-08 ($3.771 billion), prior to the onset of the Great Recession, after adjusting for inflation.

In contrast, total funding for programs and activities designed to boost the quality or support the administration of subsidized child care and preschool programs has increased dramatically.[3] These “quality and support programs” include a range of items such as the Quality Rating and Improvement System (QRIS) and funding for the Resource and Referral Network. Total funding for quality and support programs in 2018-19 is $365 million — an increase of 143% compared to 2017-18, after adjusting for inflation. This dramatic increase is primarily due to the new Inclusive Early Care and Education Expansion Program, which was funded with $167 million in one-time Proposition 98 funds that are to be administered through the 2022-23 fiscal year.

While funding for certain quality-boosting activities has increased, funding for other activities that fall within the quality and support category has decreased or been eliminated. For example, the state funded Centralized Eligibility Lists (CELs) with about $8 million for the maintenance of county-level waiting lists for subsidized slots, but funding for CELs was redirected to child care programs in 2011-12 to mitigate the effects of deep budget cuts. Policymakers have not restored funding for this service. In addition, even though funding for the Resource and Referral Network has remained relatively stable at roughly $19 million annually since 2007-08, funding has actually decreased by nearly one-fifth (19%) after adjusting for inflation.

California’s subsidized child care and development system keeps families working while providing kids with an environment that helps them learn and thrive. Yet, we know that the number of children eligible for subsidized care far outstrips the number of available slots.[4] As the new Governor crafts a policy agenda for the next four years, it is critical that early care and education is at the top of the list. Investing in our state’s subsidized child care and development system sets children and families up for success.

[1] The federal American Recovery and Reinvestment Act (ARRA) of 2009 included a $2 billion boost in funding for the Child Care and Development Block Grant (CCDBG), a major source of federal funding for subsidized child care. Due to this, California received $221 million in additional federal funds, which the state used in 2009-10 and 2010-11 to offset a portion of the state budget cuts to the child care and development system, which in turn maintained child care assistance for some families who otherwise would have lost it.

[2] Absent ongoing funding from the federal government, these slots will only be available through June 30, 2020.

[3] The 2014 reauthorization of the CCDBG, a major source of federal funding for subsidized child care, required states to increase the share of funds set aside for improving the quality of subsidized child care. See Hannah Matthews, et al., Implementing the Child Care and Development Block Grant Reauthorization: A Guide for States (The Center for Law and Social Policy and The National Women’s Law Center: June 2017).

[4] Kristin Schumacher, Over 1 Million Kids Eligible for Subsidized Child Care Didn’t Get Services (California Budget & Policy Center: December 2016).

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Child Care & Preschool

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Cal Grants are the foundation of California’s financial aid program for low- and middle-income students pursuing higher education in the state. Cal Grants provide aid for tuition and living expenses that does not have to be paid back. There are two main types of Cal Grants: Entitlement grants and Competitive grants.

Entitlement grants are guaranteed to all California students who meet certain income and GPA requirements and apply to college no later than one year after high school graduation and to community college students who are transferring to a four-year college. Nontraditional students who meet the income and GPA requirements and apply for the award by the deadline more than a year after high school graduation are eligible for Competitive Cal Grants. Competitive grant amounts are equivalent to the Entitlement grants, providing tuition assistance up to $12,630 at University of California, $5,742 at California State University, and $9,084 at most private colleges.[1] The main difference between Competitive grants and Entitlement grants is that Entitlement grants are guaranteed to all eligible students, whereas Competitive grants are currently limited to 25,750 students.

The number of qualified student applicants for Competitive Cal Grants far exceeds available awards. In 2017-18, more than 340,000 students qualified for an award, but only 25,750 grants were available — meaning 92% of eligible students were not served. In the past decade, the number of students who are eligible for Competitive Cal Grants has more than doubled (103%), while the number of awards available has increased by less than 15%.[2] In 2008-09, an eligible student had a 13% chance of receiving a Competitive Cal Grant; in 2017-18, it was 8%. California students have a better chance of getting into the University of California, Berkeley than of receiving a Competitive Cal Grant.[3]

Nontraditional students, such as those who spend significant time in the workforce before enrolling in college, face significant barriers in their academic pursuits. Many of these students rely on financial aid to be able to afford the rising costs associated with a college degree, yet the probability that they will receive the aid they need to succeed is low — and declining over time. Competitive Cal Grants are one of the most effective financial aid investments the state can make to promote access and affordability because they support the lowest-income and least represented students. Increasing the number of Competitive Cal Grant awards available would help ensure college is affordable for a larger share of nontraditional students.

Endnotes

[1] Figures reflect award amounts for the 2018-19 academic year.

[2] The increase in eligible students is likely due to improvements in the California Student Aid Commission’s application system and process, an increase in the number of older students seeking to upgrade their skills to improve their job prospects and meet changing labor market demands, and greater financial aid awareness.

[3] University of California, Berkeley’s incoming freshman acceptance rate for 2017-18 was 18.3%.

Education

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In the fall of 2006, with California’s prisons bulging at the seams and the state facing lawsuits targeting prison overcrowding, Governor Arnold Schwarzenegger used his executive authority to “temporarily house” California prisoners in private correctional facilities in other states. (The Legislature endorsed this policy soon after it was implemented.) Initially, the numbers were small: Within a couple of months of the Governor’s emergency proclamation, just 80 Californians had been sent to prison beyond the state line (to Tennessee). However, California’s use of out-of-state “contract beds” expanded rapidly. By late 2010, more than 10,000 people were serving their California prison sentences outside of the state, including in Mississippi and Oklahoma.

Advocates for incarcerated adults criticized the state’s policy, arguing that “transferring prisoners out of state further disrupts ties to family and community.” Concerns were also raised about the conditions in private, for-profit facilities. Nonetheless, state policymakers saw the use of out-of-state facilities as a key strategy for addressing severe overcrowding in California’s prisons, at least temporarily. The apparent need for this strategy became all the more urgent when, in August 2009, a panel of federal judges ordered the state to cap its prison population at 137.5% of the prison system’s “design capacity.” At the time of this order — which was upheld by the US Supreme Court — California’s prison population far exceeded the cap. More than 150,000 adults were housed in state prisons that were designed to hold a total of about 80,000 people, putting the prison population at 188% of capacity.

Yet, thanks to a series of criminal justice reforms adopted by state policymakers and the voters — reforms that have significantly reduced incarceration — California has been able to comply with the court-ordered prison population cap while simultaneously scaling back its reliance on out-of-state facilities. Since peaking at over 10,000 in the early 2010s, the number of California prisoners housed outside of the state has declined to less than 3,000, as Governor Brown’s administration has pursued a policy (articulated in 2012 and again in 2016) that aims to end the use of contract beds in other states. Now, the culmination of this policy is just around the corner: California is expected to sever its ties with all out-of-state contract facilities by the end of January 2019, ending an era that began a dozen years ago during the depths of California’s prison overcrowding crisis.

Does ending the use of out-of-state facilities mean that California’s work is done when it comes to criminal justice reform? Not by a longshot. Although the state continues to comply with the court-ordered prison population cap, the prison system — which is overseen by the California Department of Corrections and Rehabilitation (CDCR) — remains severely overcrowded. Currently, approximately 115,700 adults are incarcerated in 34 state prisons designed to hold about 85,000 people — 136% of capacity. In addition, more than 11,000 adults are housed in other in-state facilities under the CDCR’s jurisdiction, including public and private contract facilities.

With incarceration projected to continue declining modestly over the next few years, California should soon be able to scale back the use of private in-state contract facilities — a goal explicitly spelled out in the 2018-19 state budget package — and could be in a position to close at least one state prison. However, downsizing California’s costly prison infrastructure in a bigger way would require additional criminal justice reforms, such as addressing the state’s harsh, one-size-fits-all sentencing laws. By more rapidly reducing incarceration, California could plan for the closure of multiple prisons and reinvest the savings in a range of public services and systems that can help to promote rehabilitation, reduce poverty, and strengthen families and communities. Watch for more Budget Center analysis and commentary on this topic in the coming months.

Justice System

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In 2017, Governor Brown signed AB 19 (Santiago), establishing the California College Promise, which provides state funding to community colleges to improve college readiness, increase completion rates, and close achievement gaps. The 2018-19 state budget funded the Promise, allocating $46 million to the program.

Promise programs are place-based programs that seek to increase college graduation rates by incentivizing college attainment and rewarding students who satisfy specified criteria. These programs vary in eligibility requirements, funding, and overall structure. Some Promise programs offer guaranteed admission to a university, while others provide financial support based on need or merit.

The California College Promise is a voluntary program administered by the California Community Colleges Chancellor’s Office. The program provides funding to community colleges that advance the program’s goals and implement the following program strategies:

  • Partner with one or more K-12 schools to establish an Early Commitment to College Program.
  • Partner with one or more K-12 schools to support and improve high school student preparation for college and reduce postsecondary remediation.
  • Utilize evidence-based practices to improve outcomes for underprepared students.
  • Participate in the Guided Pathways Grant Program, which helps students stay on track from entry to graduation.
  • Maximize student access to need-based financial aid programs, including by participating in the Federal Direct Student Loan Program as well as ensuring students complete the Free Application for Federal Student Aid (FAFSA) or Dream Act application.

The Promise program allocates funding to districts using a formula based on factors such as number of units taken in the past by first-time, full-time students, and number of Pell grant recipients. The $46 million allocated in the state budget reflects the estimated cost for districts to cover the fees of first-time, full-time students based off 2016-17 data; however, colleges have discretion in how to use the funding they receive. While some colleges may elect to waive tuition for all or some first-time, full-time students (including undocumented students), others may choose to provide child care resources, or help financially needy students cover their non-tuition costs of college (such as textbooks and transportation).

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In May 2017, the US House of Representatives narrowly approved — by a 217-to-213 vote — the American Health Care Act of 2017 (AHCA). This bill, which did not advance beyond the House, would have reversed California’s progress in extending health coverage to millions of people under the framework of the federal Affordable Care Act (ACA), which President Obama signed into law in 2010. California’s House delegation split along partisan lines: All 14 Republicans voted for the AHCA, while all 39 Democrats voted against it. Key provisions of the bill targeted Medicaid, which is known as Medi-Cal in California and covers over 13 million Californians with low and moderate incomes. The AHCA would have 1) phased out the expansion of Medicaid eligibility to certain low-income adults ages 19 to 64, including adults without dependent children, and 2) capped annual federal funding for the entire Medicaid program. Overall, the House bill would have shifted nearly $6 billion in costs for Medi-Cal from the federal government to California in 2020, rising to an annual shift of $24 billion by 2027, according to state projections. Such a massive cost-shift would have forced deep state spending cuts and put at risk the health and economic security of millions of Californians. Proposals to cut federal Medicaid funding and roll back other key provisions of the ACA could re-emerge in 2019 depending on the outcome of the upcoming midterm elections.

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In recent years, California has made significant progress in reducing incarceration. The number of adults incarcerated at the state level, which peaked at more than 173,000 in 2007, declined to 131,260 by June 2017 — a reduction of nearly one-quarter. This substantial drop resulted largely from criminal justice reforms adopted by state policymakers and the voters following a 2009 federal court order that required California to reduce overcrowding in state prisons.[1] The most recent of these reforms was Proposition 57, a 2016 ballot measure that provided state officials with new tools to reduce the amount of time that people spend in prison.[2]

State-level incarceration is expected to continue falling over the next several years, “driven by the expected impacts” of Prop. 57, according to the California Department of Corrections and Rehabilitation (CDCR).[3] The CDCR projects that the number of incarcerated adults will decline to about 124,400 by June 2022 — a modest 5% drop (see chart) from the June 2017 level (131,260). The Brown Administration anticipates that by freeing up a relatively small amount of space in state prisons, Prop. 57 — along with other recent criminal justice reforms — will allow the state to end the use of out-of-state “contract facilities” by fall 2019.[4] However, the Administration does not anticipate closing any state prisons, which account for the vast majority of corrections-related spending at the state level.

Despite the ongoing decline in incarceration, spending on state corrections remains high. Under the Governor’s proposed budget, combined funding for the CDCR and the Board of State and Community Corrections would be $12.1 billion in 2018-19 (the fiscal year that begins this coming July 1) — $2 billion higher than the 2012-13 level, after adjusting for inflation.[5] This growth generally reflects spending increases that have outpaced inflation, including for prison health care (up by 37.8%, or $857 million); for CDCR statewide administration (up by 23.4%, or $96 million); and for prison security and operations (up by 18.7%, or $1.1 billion), which includes the cost of salaries and benefits for correctional officers and support services for incarcerated adults, such as meals and clothing (see chart).[6]

Significantly reducing corrections spending will require California to go beyond recent reforms. This should include simplifying the state’s complex Penal Code with an eye toward shortening prison sentences. Such reforms would further reduce incarceration, allowing the state to close costly prisons. This, in turn, would free up substantial revenues that could be reallocated to a range of services and supports that can promote rehabilitation, reduce poverty, and strengthen families and communities.

[1] For a discussion of these reforms and the 2009 federal court order, see Scott Graves, Corrections Spending Through the State Budget Since 2007-08: Still High Despite Recent Reforms (California Budget & Policy Center: November 2015), pp. 1 and 3 and endnote 4.

[2] Scott Graves, Proposition 57: Should Voters Provide State Officials With New Flexibility to Reduce the Prison Population? (California Budget & Policy Center: October 2016).

[3] California Department of Corrections and Rehabilitation, Fall 2017 Population Projections (January 2018), p. v.

[4] Department of Finance, Governor’s Budget Summary 2018-19 (January 2018), p. 71. About 3,500 Californians are housed in facilities in Arizona and Mississippi. The court-imposed prison population cap (137.5% of prisons’ “design capacity”) precludes the state from housing all of these individuals in state prisons at this time.

[5] These expenditures generally reflect the operational costs of the state correctional system. This spending excludes capital outlay as well as state funding that counties receive each year to carry out certain correctional responsibilities that they assumed as part of the state-to-county “realignment” enacted in 2011.

[6] Budget Center analysis of Department of Finance data. The increase in prison health care spending is partly attributable to a shift of roughly $270 million from the Department of State Hospitals’ budget to the CDCR’s budget, which took effect on July 1, 2017. Excluding this shift, prison health care spending is up by 25.9% since 2012-13, after adjusting for inflation.

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As legal subdivisions of the state, California’s 58 counties play a key role in delivering public services at the local level. Counties operate an array of health and human services programs on behalf of the state, including foster care, public health and mental health services, and Medi-Cal (California’s Medicaid program). Counties also carry out a broad range of countywide functions, such as overseeing elections and operating, along with the courts and cities, the criminal justice system. Finally, counties provide some municipal-type services in unincorporated areas, including policing and fire protection.

Each year, counties develop their budgets for the upcoming fiscal year through a months-long process that reflects both unique local practices and the requirements of state law. (The fiscal year runs from July 1 to the following June 30.) A key task in crafting the annual spending plan is estimating how much revenue the county will receive, since this number helps to determine whether the county can expand and/or improve service levels, as opposed to maintaining or (during economic downturns) reducing services. Statewide, counties received $69.2 billion in revenue in 2015-16.[1] Nearly half (47.1%) of this revenue came from the state and federal governments, and local property taxes made up almost one-fifth (19.5%) of the total.

Because state and federal dollars comprise a large share of county revenues — and typically come with strings attached — county budgets, to a large degree, reflect funding and policy choices made by the Governor and state legislators as well as by federal policymakers. However, county budgets also reflect local choices, as counties allocate their limited “discretionary” dollars, particularly property tax revenue, to locally determined priorities.

Statewide, counties spent $66.9 billion in 2015-16, with more than half (54.6%) of these dollars going to public protection or public assistance. Public protection includes spending on the district attorney, adult and juvenile detention, policing provided by sheriff’s departments, and probation. Public assistance includes spending on cash grants for Californians with low incomes, including for families with children in the CalWORKs welfare-to-work program. Large shares of county spending in 2015-16 also supported business-type “enterprise” activities (15.5%) — such as airports, hospitals, and golf courses — and health-related services (15.2%).

[1] The county revenue and spending data reported in this Fact Sheet — for which 2015-16 is the most recent year available — come from the Local Government Financial Data website of the California State Controller’s Office. The figures exclude the City and County of San Francisco, which reports revenues and expenditures as a city rather than as a county.

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