April 7, 2016
The Honorable Marty Block, Chair
Senate Budget & Fiscal Review Sub.1 on Education
State Capitol Building, Room 4072
Sacramento, CA 95814
The Honorable Holly Mitchell, Chair
Senate Budget Sub. 3 on Health & Human Services
State Capitol Building, Room 5080
Sacramento, CA 95814
BY E-MAIL & FIRST CLASS MAIL
The Honorable Kevin McCarty, Chair
Assembly Budget Sub. 2 on Education Finance
State Capitol Building, Room 2160
Sacramento, CA 95814
The Honorable Tony Thurmond, Chair
Assembly Budget Sub 1 on Health & Human Services
State Capitol Building, Room 5150
Sacramento, CA 95814
Re:
Recommendations for 2016-17 Budget Priorities Concerning Child Care
Dear Chairs Block, Mitchell, McCarty, and Thurmond:
The Child Care Law Center (CCLC) is a statewide legal organization solely dedicated to
ensuring that good quality child care and early education is available to every child, family and
community. CCLC pays particular attention to the needs of children who are low-income, have
disabilities, or face other barriers to safe, stable child care. We submit these budget proposals on
behalf of all California children and families who will benefit from a continued, strong
legislative commitment to child care.
Notwithstanding last year’s improved funding, California’s child care system remains in
a precarious state and still has not returned to pre-recession funding levels. Cuts during the Great
Recession have negatively impacted capacity, quality, and administrative functioning. An
estimated 250,000 eligible, low-income children languish on wait lists for child care. In 54 out of
58 counties, less than one of five eligible children receive a subsidy. Restructuring California’s
Child Care and Development System, LAO Report of April 2014, at p. 18.
Income eligibility ceilings as well as payment rates rest on woefully outdated data.
Thousands of licensed child care providers in low-income communities have shut their doors due
to the inadequacy of payment rates. Lost child care investment subjects families to stress as they
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struggle to pay for child care. Children experience anxiety as they witness their parents trying to
make ends meet while juggling between unstable child care arrangements. Finally, parents
endure the frustration of not being able to participate fully in, and contribute to, California’s
economic prosperity. Only by making significant investments in the inter-related areas of
access, quality, stable child care, and reimbursement rates, can we build a child care
infrastructure for today’s children and for the future.
The Child Care Law Center has already signed onto the Early Childhood Education
California Budget Request of April 4, 2016, joined by more than 100 organizations statewide.
We strongly support funding the full $800 Million in child care and early education requested by
the Legislative Women’s Caucus. If adopted in full, these targeted investments in a year of
budget surplus will go a long way toward improving access for low income families to stable,
secure, good quality child care.
Our specific analysis of these proposals is below.
1. Improve Child Care Access and Stability for Low-Income Working Families
a. Adopt a 12-month eligibility period.
The Child Care Law Center strongly urges adoption of a minimum 12-month eligibility
period for families receiving subsidized child care that includes protection from onerous
reporting, and accounts for fluctuating income and moderate income growth. Toward this end,
we have co-sponsored legislation, AB 2150 (Santiago and Weber). The proposed legislation
would protect families from repeated reporting or termination within the 12-month period, use
the current SMI income threshold for entering families, and create an exit income ceiling to
protect families whose income increases but remain under the federal income limit of 85% of
SMI. The Budget Act of 2016, SB 825, would be an equally appropriate vehicle to effect these
changes to current law, and we urge the Committee to consider them.
Current law states that families may receive child care assistance for no more than 12 months
without redetermination of eligibility, but offers no protection from frequent, interim reporting
obligations during that 12 months.1 Families must report, within 5 days, any changes in income,
family size, or activities requiring child care, even if the changes have no effect on eligibility.
Cal. Code Regs. tit. 5 § 18102. Whenever such changes occur, contractors must update a
family's application within 30 days, documenting continued need and eligibility and determining
any change in the fee. Cal. Code Regs. tit. 5 § 18083(e). Families who have a "variable
schedule," are required to submit pay stubs (from all jobs) indicating the days and hours of
employment, written statements from each of their employers, or other records of their time
every four months. Cal. Code Regs. Tit. 5 § 18086(b)(2). As a result, many substantively
eligible families have their child care terminated before the 12 months has run, either for failure
to timely report, or for purported lack of eligibility based on new information.
Cal. Educ. Code § 8263 (a); Cal. Code Regs. tit. 5, §18103(a) (3) (“[F]amilies shall be recertified at least
once each contract period and at intervals not to exceed twelve (12) months.”).
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Burdensome reporting rules cause eligible families to churn in and out of child care programs
and onto long waiting lists. Churning disrupts children’s development; makes it impossible for
child care providers to balance ledgers or plan for quality investments; and burdens employers
and education providers who need to sign off on endless paperwork. The proposed changes to the
state’s minimum eligibility period, reporting, and income eligibility rules will ensure continuity
of care, which supports the developmental needs of children and fosters school readiness. These
program changes will strengthen parents’ ability to work, improve their prospects in the job
market, and increase their earning potential. Further, a minimum 12-month eligibility period and
trigger for income reporting will reduce administrative burdens, and bring our program rules into
compliance with federal requirements under the Child Care Development Block Grant (CCDBG)
Program.
Adoption of a 12-month eligibility period will have the added benefit of bringing
California’s child care program into alignment with other benefit programs, improving crossprogram consistency. Particularly for programs serving children, recent attention has focused on
implementing policies that reduce recipient churn. Studies of various benefit programs have
found that increasing eligibility periods and establishing a threshold of income that triggers midperiod reporting reduces churn, ensuring continuity of care for eligible families—and it does so
while reducing administrative burdens and without compromising program integrity. Lessons
Churned: Measuring the Impact of Churn in Health and Human Services Programs on
Participants and State and Local Agencies (2015); Understanding the Rates, Causes and Costs
of Churning in the SNAP Program (2014); Churning Under the ACA and State Policy Options
for Mitigation (2012). As a result, many programs are adopting longer time periods between
eligibility redeterminations and the use of “trigger thresholds” to report changes in income. This
has been most prevalent in programs that target benefits toward children in need, such as MediCal, WIC, and HeadStart. In those programs, as in the proposed bill to establish 12 months of
assistance and a graduated phase-out of subsidized child care, the focus is on the well-being of
the child and the negative consequences of premature termination or interruption of benefits to
children.
b. Update eligibility guidelines to reflect the current SMI and increase the
exit ceiling to 85% of SMI.
California currently allows families in state child care programs to earn no more than
70% of a severely outdated State Median Income (SMI), based on income data from a decade
ago.2 Updating the income threshold to 70% of current SMI will more accurately reflect current
wage patterns of Californians, and protect low-income working families who receive a small
wage increase from becoming ineligible while they remain unable to afford the cost of
unsubsidized child care. This both reflects sound policy, and will bring the income standard into
compliance with federal requirements, which mandate the use of the current SMI.
Cal. Educ. Code §§ 8263.1(a)-(c), setting income limits based on SMI in use for the 2007-08 fiscal year, which
was based on data collected in 2005. A family of four loses eligibility for child care services if its income exceeds
$46,896.23. CDE Management Bulletin 11-06, Updated Child Development Income Ceilings, available at
http://www.cde.ca.gov/sp/cd/ci/mb1106.asp. The average California Self-Sufficiency Standard for two adults with
one preschooler and one school-age child was $63,979 in 2014. See, The Insight Center for Community and
Economic Development, California Family Economic Self-Sufficiency Standard, available at
http://www.insightcced.org/toolsmetrics/self-sufficiency-standard-tool-for-california/.
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Similarly, increasing the point at which families exit the program to 85% of current SMI
will remove the very harmful cliff of eligibility where a parent who earns a small raise is
suddenly ineligible for any subsidy. Establishing a higher exit income allows for a graduated
phase-out for those parents whose income is at or below 85% of SMI. Those parents may pay a
higher family fee, and thus receive a lower net reimbursement for child care, while still
qualifying for a partial subsidy.
c. Increase available slots, particularly voucher slots, to promote increased access.
Building from last year’s initial restoration of 6,800 slots, we recommend expanding slots for
infants and toddlers by at least an additional 25,000. That increased capacity is sorely needed to
help the many families that are languishing on waiting lists for child care. Investment in voucher
slots is needed as many working poor families are unable to use state-contracted child care
facilities, because low wage work disproportionately involves variable or non-traditional work
hours that contracted facilities find it difficult to accommodate. These families rely on child care
vouchers to secure a wider array of family child care homes and license-exempt child care.
Focus on voucher-based care will help some of California’s most vulnerable families obtain safe,
nurturing care that meets their needs.
2. Increase all reimbursement rates using current regional market surveys; start
the transition toward a regionalized, single rate structure.
The failure of the Regional Market Rates (RMR) and Standard Reimbursement Rates (RMR)
to keep pace with the cost of child care on the open market has made it more difficult for
families to find child care providers who are willing to accept the subsidized payment rate.
Child care providers regularly inform us that reimbursement rates are so low that it is impossible
to retain staff and make ends meet, let alone invest in quality improvements. Simultaneously,
parents with subsidized child care vouchers report that they cannot find child care providers who
will accept their children because the subsidies pay so little. As the rates charged by providers
have continued to increase above the maximum reimbursement rates, parents are paying higher
co-payments. Some CalWORKs families who are struggling to make ends meet on their meager
income while they work to get off cash aid must make co-payments to cover the difference
between child care provider fees and the voucher reimbursement rates. Without an adequate
increase in reimbursement rates, there is a risk that slots will not be utilized fully, or use of them
will cause unnecessary hardship for already struggling families.
The RMR is currently based upon the 85th percentile from a 2009 survey of market rates,
which in most cases is then reduced by 10.11%, followed by a modest, 4.5% increase. See, Cal.
Ed. Code § 8447(a)(2). California’s overall licensed child care capacity for both subsidized and
private pay families declined dramatically during the recession, particularly in family child care
homes, which lost over 70,000 licensed slots between 2008 and 2014 as providers closed and
exited the field. (Source: Kidsdata.org.) We have heard from the field that the decline in State
investment in child care played a large role in this loss.
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A rate increase is one of the most effective ways to build child care capacity, particularly for
infant and toddler care, which continues overwhelmingly to be available in family child care
homes. It will also help satisfy federal requirements, which require states to base rates upon the
most recent biennial market survey, to set payment at no less than the 75th percentile as the
indicator that a state has met its equal access obligation; and to do so without reducing the
number of families receiving assistance. Section 5 of the Child Development Block Grant Act of
2014, Pub. Law 113-186. As one example of how far behind this federal target we have fallen,
for center care in Los Angeles County in 2014, the percentage difference between the 75th
percentile of the then most recent market rate survey (2012) and the actual state rate was -20%
for a 4 year old, and -27% for a 1 year old. National Women’s Law Center, 2014 State Child
Care Assistance Report at p. 37-39, available at:
http://www.nwlc.org/sites/default/files/pdfs/nwlc_2014statechildcareassistancereport-final.pdf.
The Child Care Law Center recommends that in increasing the RMR, the SRR be increased
similarly, with recognition of the need for regional variation in the SRR, and a long-term goal to
simplify and align the rate structure for voucher and contract-based programs.
a. Increase license exempt rates to 80% of current FCCH rates; use the same
methodology to determine hourly rates for FCCH and license-exempt care.
The state sets reimbursement for license-exempt child care providers at rates far below the
minimum wage. As noted last year by the Assembly Budget Committees on Education Finance,
and Health and Human Services, “rates for licensed-exempt providers continue to remain at
amazingly low levels. For example in Los Angeles, the current part-time hourly rate for licensed
exempt care for a school-aged child is $2.02 per hour. Other than prison inmates, these providers
may be the lowest paid workers in California.” (Overview provided for the Joint Hearing of the
Assembly Budget Committees on Education Finance, and Health and Human Services, April 14,
2015 at p.7). The reauthorized Child Care and Development Block Grant requires non-relative
license exempt providers to meet the same health and safety training and monitoring
requirements that it imposes on licensed providers. The Child Care Law Center recommends
that license-exempt rates be increased to 80% of updated family child care home (FCCH) rates,
for hourly as well as full-time reimbursement rates.
Early care and education is the essential foundation upon which we can build a future of
economic success and prosperity for all Californians. Access to stable, high quality child care
and early learning experiences improves the odds of success for two generations – parents and
children – who rely on child care. We respectfully ask you to prioritize the needs of our
youngest, vulnerable children and their families in this year’s budget. We appreciate your work
on this critical issue and look forward to partnering with you as we move forward.
Sincerely,
/pap/
Patti Prunhuber
Senior Policy Attorney
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cc: Members, Senate Budget and Fiscal Review Sub 1 on Education
Members, Assembly Budget Sub. 2 on Education Finance
Members, Senate Budget Sub. 3 on Health and Human Services
Members, Assembly Budget Sub. 1 on Health and Human Services
Hannah Beth Jackson, Chair, Legislative Women’s Caucus
Cristina Garcia, Vice-Chair, Legislative Women’s Caucus
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