BILL ANALYSIS                                                                                                                                                                                                    Ó




                   Senate Appropriations Committee Fiscal Summary
                            Senator Kevin de León, Chair


          AB 260 (Gordon) - Individualized County Child Care Subsidy Plans
          
          Amended: June 25, 2013          Policy Vote: Education 9-0
          Urgency: No                     Mandate: No
          Hearing Date: August 30, 2013                                
          Consultant: Jacqueline Wong-Hernandez                       
          
          SUSPENSE FILE.

          
          Bill Summary: This bill makes permanent the San Mateo County  
          individualized child care subsidy plan and extends by 2 years  
          the San Francisco County individualized child care subsidy plan.

          Fiscal Impact: 
              San Mateo subsidy plan: Potentially substantial loss of  
              state savings beginning in 2014-15; likely in excess of $1  
              million dollars annually.
              San Francisco subsidy: Substantial loss of state savings in  
              2015-16; likely in the low millions of dollars.
              Oversight: Minor workload savings to the California  
              Department of Education (CDE); the department would no  
              longer have administrative workload associated with the  
              requirements of the pilot itself.

          Background: The state subsidizes child care and development for  
          certain low income families. Certain child care providers have  
          direct service contracts with the CDE, and are commonly referred  
          to as licensed Title 5 programs. These child care providers must  
          meet education and training standards that exceed those of Title  
          22 child care providers (licensed and license-exempt), as well  
          as provide care that includes an educational component. Title 5  
          providers are reimbursed at the Standard Reimbursement Rate,  
          which is currently $34.38 per child per day.

          Current law authorizes pilot projects in San Mateo County (since  
          2004) and San Francisco City and County (since 2006) that allow  
          the counties to develop and implement an individualized county  
          child care subsidy plan in recognition of the high-cost of  










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          living in those counties. The plans allow Title 5 child care  
          providers in the county to supersede state requirements in the  
          following factors: 1) Eligibility criteria including age, family  
          size, time limits, income level, inclusion of former and current  
          CalWORKs participants, and special needs considerations; 2)  
          fees, including family fees, sliding scale fees, and co-payments  
          for those families that are not income eligible; 
          3) reimbursement rates; and, 4) methods of maximizing the  
          efficient use of subsidy funds including multi-year contracting  
          with the CDE for center-based child care, and interagency  
          agreements that allow for flexible transfer of funds among  
          agencies.  
          (Education Code 8335.1 and 8341) 

          Individualized child care subsidy plans must be implemented  
          within allocated funds. No additional state funding is provided  
          to either San Francisco or San Mateo counties for individualized  
          child care subsidy plans.

          Both counties have been required to submit period reports to the  
          Legislature, and are required to terminate and phase out the  
          individualized county child care subsidy plans as follows:

          1)   San Mateo is to terminate the plan on January 1, 2014, and  
               phase out until January 1, 2016, at which time the county  
               is to implement the state's requirements for child care  
               subsidies.

          2)   San Francisco is to terminate the plan on July 1, 2014, and  
               phase out until July 1, 2016, at which time the city and  
               county is to implement the state's requirements for child  
               care subsidies.

          The individualized child care subsidy plan is phased out by not  
          enrolling additional children under the alternative criteria  
          once the plan is terminated. As children age-out or disenroll  
          for other reasons, fewer and fewer children meet the criteria of  
          the individualized plan.

          Proposed Law: AB 260 makes permanent the San Mateo County  
          individualized child care subsidy plan and extends by two years  
          the San Francisco County individualized child care subsidy plan.  
           With regard to San Mateo County, this bill:









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           1)   Extends by 6 months the individualized child care subsidy  
               plan, from January 1, 2014, to July 1, 2014.

          2)   Authorizes the individualized child care subsidy plan to  
               continue to be implemented permanently.

          3)   Sunsets the existing provisions and recasts nearly  
               identical language for the continuance of the  
               individualized child care subsidy plan with the existing  
               requirement for showing increases in enrollment and the  
               role of the Department of Social Services (DSS) in  
               reviewing outcome measures.

          4)   Requires the county to prepare and submit to the  
               Legislature, the DSS, and the CDE, an annual report, until  
               January 1, 2018, as specified.

          With regard to San Francisco County, this bill:

          1)   Extends the sunset on the individualized child care subsidy  
               plan for 2 years, from July 1, 2014, to July 1, 2016, and  
               phase out period (to 2016-2018).  

          2)   Extends by 6 months the due date of the final report to the  
               Legislature, and requires that the report include an  
               evaluation of the pilot project's operation between the  
               2011-12 and 2013-14 fiscal years, and provide a  
               recommendation as to whether the pilot project should  
               continue as a permanent program.  
          Related Legislation: AB 86 (Committee on Budget), approved by  
          the Legislature on June 14, 2013, extends both the San Francisco  
          and San Mateo individualized child care subsidy plans for an  
          additional year. The prior two extensions were implemented  
          through the Budget Act. This bill exceeds the authority granted  
          by the Budget Act and would chapter out those provisions if  
          enacted.

          Staff Comments: The individualized child care subsidy pilot  
          program in San Mateo and San Francisco counties was established  
          to increase subsidized child care access and options in two  
          counties with a high cost of living. Under the pilot program,  
          both counties were allowed to provide subsidized child care to  









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          families whose income levels would have made them ineligible in  
          other parts of the state, to pay increased reimbursement rates  
          to child care providers, and to temporarily reallocate funds  
          among providers when one provider was not going to be able to  
          fully expend the funding in its contract. The pilot program did  
          not provide the counties additional funding for subsidized child  
          care; it simply made it easier for the two counties to spend the  
          funding they were allocated annually. As intended, the pilot  
          resulted in more subsidized child care money being spent on  
          subsidized child care in those counties, and less reverting back  
          to the state General Fund.

          In 2002-03, the year before the pilot began, San Mateo County  
          was unable to spend 15% of its allocation, and returned that  
          money to the General Fund. By contrast, in 2011-12, it was  
          unable to spend only 3.6% of its allocation, and returned  
          $652,580 to the state. San Francisco County returned $1,134,639  
          - 2.3% of its allocation, in 2011-12. The flexibility afforded  
          by the pilot program is the primary reason that the county has  
          been able to offer more subsidized child care and spend its  
          allocation. Another reason is that state budget reductions to  
          subsidized child care have substantially reduced the available  
          funds for each county to spend.

          Absent the special rules (whether in pilot or permanent form)  
          governing subsidized child care in San Mateo and San Francisco  
          counties, there would be a reduction in child care services.  
          Providers would no longer find it as attractive to offer  
          subsidized child care services (which reimburse less than the  
          market rate for child care) and fewer families would qualify for  
          the services in those counties, to begin with. The amount of  
          unspent funds that would revert from those counties back to the  
          General Fund would increase, but it is not clear how much it  
          would increase. Since 2002-03, a number of mitigating factors  
          have been introduced, including child care allocation  
          reductions, contract changes, and the flexibility for all  
          counties to temporarily reallocate funds among child care  
          providers in the county when a provider is not going to spend  
          its full contract amount (which was previously only allowable  
          for San Mateo and San Francisco counties under this pilot).












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