2024-25 Child Care Budget Analysis
Date: September 15th, 2024
Introduction
Child care should be a civil right, not a privilege that is dictated by social injustices and limitations. California lawmakers make child care funding decisions that affect all of us – from families who depend on it, to providers who nurture the next generation, to the children who rely on care to learn and grow.
Due to the fierce advocacy of Child Care Providers United (CCPU), Parent Voices, and our joint efforts with other child care advocates across the state, this year’s state budget includes $6,051.6 billion for child care.[i]
Fiscal Year (FY) 2024-25 State Budget for Child Care Overview:
- Protects existing child care subsidy payment rates,[ii]
- Adds reporting requirements for implementing the alternative methodology (paying providers based on the cost of providing care) – a significant step in “rate reform,”[iii]
- Sets a date for implementing new child care subsidy payment rates,[iv]
- Maintains funding for existing spaces in previous budget years and this budget year,[v] and
- Codifies the child care spaces expansion commitment into law.[vi]
While policy makers maintain funding for core programs and commit to expanding child care spaces and vouchers, cutting and delaying life-giving services that impact families’ daily lives cannot be the solution for future budget shortfalls. Additional public funding to pay child care providers fairly and for affordable child care programs is vital for California families, women, and children.
Child Care Payment Rates
Many child care providers are Black, Latine, or immigrant women who nurture a child’s home language and culture and honor our vibrant communities. Child care providers are dedicated professionals who should be paid fairly and supported for their knowledge, experience, and talent.
The FY 2024-25 State Budget for Child Care makes the following commitments to move forward with “rate reform” – to pay child care providers fairly:
- The California Department of Social Services (CDSS) must report to the Assembly and Senate Budget Committees and the Legislative Analyst’s Office regarding how the alternative methodology will be implemented with the following information:
- CDSS’s plan to set new payment rates using the alternative methodology beginning July 1, 2025.
- The estimated costs and timelines for implementation “including, but not limited to, state operations resources, technology and infrastructure changes, and any regulatory or statutory changes necessary to implement the approved single rate structure.”[vii]
- CDSS must report quarterly to the Assembly and Senate Budget Committees and the Legislative Analyst’s Office on progress made to conduct an alternative methodology and cost estimate model, from October 1, 2024 through January 1, 2026.[viii]
- CDSS must share a timeline with the Legislature if new payment rates do not start on January 1, 2025. The timeline must detail the transition from the temporary payment rates to the alternative methodology. The temporary payment rates must be, at minimum, equivalent to current payment rates including the “cost of care plus rates.”[ix]
- Prohibits child care subsidy payment rates to be lower than the payment rates in force on June 30, 2024, inclusive of the cost of care plus rates from the 2023-2024 Budget Act.[x]
Child Care Provider Benefits
- Within 90 days of CCPU submitting its annual report and DOF approval:
California State Budget Child Care Items
Child Care Spaces
Child care is essential for nurturing strong, thriving families, and ensuring justice in our communities.
In the May Revision to the 2024-25 January State Budget Proposal, the Governor proposed to indefinitely pause the expansion of child care spaces, which would have harmed 81,000 families and left them without child care. The Legislature rejected this proposal and with the support of advocates, came to an agreement with the Governor to continue the promised child care spaces expansion.
The FY 2024-25 State Budget for Child Care includes:
- Continued funding for spaces (including vouchers) from the 2021 Budget Agreement during FY 2020-21.[xiv] As of May 15, 2024, an estimated 118,800 new child care spaces were added in California since 2021:
- Estimated 22,000 General Child Care and Development Programs spaces (General Child Care)[xv]Estimated 95,000 Alternative Payment child care vouchers (AP vouchers)[xvi]Estimated 1,300 Migrant Alternative Child Care vouchers[xvii]
- An estimated 500 Emergency Child Care Bridge Program for Foster Children (Bridge Program) vouchers[xviii]
- Statutory language that reflects the 2021 Budget Agreement to add approximately 206,800 new child care spaces by FY 2027-2028 (88,000 remaining):[xix]
- New child care spaces will be added as follows[xx]:
- FY 2024-25: 11,000 General Child Care spaces, beginning October 1, 2024[xxi]
- FY 2025-26: No new child care spaces
- FY 2026-27: 12,000 General Child Care spaces and 32,000 AP vouchers[xxii]
- FY 2027-28: 17,000 General Child Care spaces and 16,000 AP vouchers
- FY 2028-29 & After: Any of the 206,800 unawarded General Child Care spaces from prior years and additional child care spaces needed to maintain total child care spaces levels must be issued
- New child care spaces will be added as follows[xx]:
- Any spaces appropriated for in the budget that are not awarded during the designated year must be distributed the following fiscal year to the same program until all the promised spaces and vouchers are awarded[xxiii]
- About 6,183 Emergency Child Care Bridge Program (“Bridge Program”) vouchers:[xxiv]
CDSS and Related State Agency Policy Changes
- Until January 1, 2027, the Office of the State Fire Marshal (OSFM) and local fire enforcing agencies must apply the December 2022 version of California Building Code Title 24 Chapter 3 to child care centers.[xxvii]
- The OSFM must consult with CDSS to update fire regulations for child care centers by January 1, 2027.[xxviii]
- CDSS is required to report to the Joint Legislative Budget Committee and the Senate and Assembly Budget Committees with a proposed list of quality improvement activities, including funding totals by activity, funded by the Child Care and Development Fund.[xxix]
- CDSS must collaborate with the California Department of Education (CDE) to create a streamlined request for application process for current child care contractors.[xxx]
Other Funding Impacting Families and Children
California Work Opportunity and Responsibility to Kids (CalWORKs)
People should be able to support their families without having to sacrifice their child’s well-being. The CalWORKs program is a public benefits program that provides modest cash assistance and supportive services, like child care and employment services, to families with the lowest incomes to help meet their basic needs.[xxxi] Many of the families who participate in the CalWORKs program have CalWORKs Child Care or are eligible for other publicly funded child care.
Highlighted Vital CalWORKs Programs in the 2024-25 State Budget:
- Protected Programs
- Family Stabilization Program (provides assistance to families experiencing crisis, such as drug treatment and emergency housing): Funding maintained at $71.2 million[xxxii]
- CalWORKs Maximum Aid Payment (grant paid to families participating in CalWORKs based on family size[xxxiii]): Increased funding by 0.3%[xxxiv]
- Reduced Funding[xxxv]
- Eliminated Funding
- Safety Net Reserve (“established to offset the impact of a revenue downturn or economic impact on health and safety programs.” [xxxix] Funding must be “utilized…for the purpose of maintaining existing program benefits and services for Medi-Cal and CalWORKs programs during economic downturns.” [xl]): Complete elimination of the $900 million.
Policymakers’ choice to reduce CalWORKs program funding and completely drain the Safety Net Reserve puts families who use these programs at risk of having even fewer resources and services.
Department of Education (CDE) Early Education Programs
California State Preschool Program (CSPP)
The State Budget includes lowering the age of children eligible for CSPP from three-years-old to two-years-old until July 1, 2027.[xli] CSPPs may operate in various locations, such as K-12 school campuses and community-based settings. All CSPP programs serving children under four-years-old must follow Title 22 licensing requirements.[xlii] The State Budget requires CDE to consult with CDSS and develop guidance for enrolling two-year-olds including safe, age-appropriate diapering and toilet training, in alignment with Title 22 Child Care Center regulations.[xliii]
This year’s State Budget adds two-year-old children to be fourth priority on CSPP waiting lists.[xliv]
The requirement to reserve 10% of enrollment for children with “exceptional needs” starting July 1, 2026 was removed.[xlv] CSPPs are required to reserve only 5% of enrollment for children with exceptional needs.
Proposition 98 Funding Maneuver
California policymakers cannot institute unfair policies at a time when we anticipate future revenue shortfalls, an increased need for services, and federal pandemic relief funds are no longer available.
The California Constitution requires the annual state budget to dedicate funding for K-14 education, which is known as the “Proposition 98 Minimum Funding Guarantee” (Prop. 98 Guarantee). The state uses a set of formulas to determine the amount of the Prop. 98 Guarantee each year and the funding comes from a combination of state General Fund dollars and local property tax revenues.[xlvi]
During the COVID-19 pandemic, policy makers overestimated the Prop. 98 Guarantee in the 2022-23 Budget as a result of the extension of the tax filing deadline.[xlvii] However, the actual 2022-23 revenues were lower than the estimation when the 2022-23 State Budget was adopted, which resulted in schools receiving $8 billion over the Prop. 98 Guarantee.
The 2024-25 Budget suspends the Prop. 98 Guarantee for 2023-24 down to $98.5 billion.[xlviii] As a result of the Prop. 98 Guarantee suspension, the 2024-25 Budget also creates a maintenance factor of $8.3 billion for FY 2023-24.[xlix] The 2024-25 Budget will pay $4.1 billion in a maintenance factor payment in addition to the ongoing Prop. 98 Guarantee funding requirements for FY 2024-25.[l]
To address the $8 billion overestimation, the 2024-25 Budget applies a “funding maneuver” of $6.2 billion that moves K-14 education costs from FY 2022-23 to future fiscal years, with payments starting in FY 2026-27.[li]
The maneuver of over $6.2 billion state General Fund dollars and maintenance factor “address” the shortfall in funding. While education programs have Prop. 98 guaranteed funding, the majority of other public programs, including child care, CalWORKs, and housing programs, rely on the General Fund. Dedicating future General Fund money to Prop. 98 will take away funding from these other vital non-Prop 98 programs, primarily hurting families of color.