BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                  AB 274
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          Date of Hearing:    April 16, 2013

                        ASSEMBLY COMMITTEE ON HUMAN SERVICES
                                  Mark Stone, Chair
                    AB 274 (Bonilla) - As Amended:  April 10, 2013
           
          SUBJECT  :  Child care and development services

           SUMMARY  :  Makes several changes to the Child Care and  
          Development Services Act (CCDSA).  Specifically,  this bill  :   

          1)Authorizes child care providers to submit attendance records  
            that serve to demonstrate that the child is receiving services  
            for which s/he has been certified electronically on a monthly  
            basis to the Alternative Payment Program (APP).

          2)Requires the monthly attendance record to be signed by the  
            parent or guardian, under penalty of perjury, one per month to  
            confirm that the child's attendance was recorded accurately.

          3)Allows the monthly attendance record to be maintained in  
            original format or electronically.

          4)Allows APPs to maintain records electronically, as permitted  
            by state and federal auditing requirements, as specified.

          5)Requires the California Department of Education (CDE) upon  
            request of a child care contractor on or after January 1,  
            2015, to request the State Controller to process the payment  
            to the contractor through direct deposit.

           EXISTING LAW  :

          1)Establishes the CCDSA to provide a comprehensive,  
            community-based, coordinated, and cost-effective system of  
            child care and development services for children from birth to  
            age 13 with the purpose of enhancing the social, emotional,  
            physical, and intellectual development of children.

          2)States the intent of the Legislature that all families have  
            access to child care and development services, regardless of  
            their demographic background, in order to help them attain  
            financial stability through employment, while maximizing  
            growth and development of their children, and enhancing their  
            parenting skills through participation in child care and  








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            development programs.

          3)Defines child care and development services as care and  
            services designed to meet a wide variety of needs of children  
            and their families, while their parents or guardians are  
            working, in training, seeking employment, incapacitated, or in  
            need of respite. 

          4)Authorizes local government agencies or non-profit  
            organizations to contract with the CDE to operate APPs and  
            provide alternative payments and support services to parents  
            and child development providers. 

          5)Establishes requirements and procedures APPs and child  
            development providers must follow as contracted agencies with  
            the CDE, including but not limited to tracking and reporting  
            of attendance, accounting and auditing requirements, and  
            reimbursement and payment procedures.

           FISCAL EFFECT  :  Unknown

           BACKGROUND  

           Title 22 and Title 5 of the California Code of Regulations
           There are generally two types of child development providers in  
          the state; commonly referred to as either Title 22 or Title 5  
          programs.  Title 22 refers to Division 2 of Title 22 of the  
          California Code of Regulations (CCR), which is governed by DSS,  
          and Title 5 refers to Divisions 19 and 19.5 of the CCR, which is  
          governed by the CDE. 

          Title 22 establishes general health and safety requirements,  
          staff to child ratios, and basic provider training  
          qualifications.  In order for any person to operate a child  
          development program, the program must first become a licensed  
          provider under Title 22.  Title 22 providers set their own rates  
          and may voluntarily accept child development subsidy vouchers,  
          along with statutorily established family fees, provided through  
          the California Work Opportunity and Responsibility to Kids  
          (CalWORKs) program or other state-funded child care subsidy  
          programs.  Voucher rates are set by the Regional Market Rate  
          (RMR), which is generally intended to reflect the true regional  
          cost of care in the private child care market.  As established  
          in AB 1497 of 2012, the education budget trailer bill (Chapter  
          29, Statutes of 2012), the RMR is currently set at the 85th  








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          percentile of the 2005 RMR Survey, and the license-exempt child  
          care providers ceiling at 60% of the Family Child Care Home  
          ceilings, effective July 1, 2012. 

          According to DSS, as of February 6, 2013, there were  
          approximately 47,477 child care agencies with a licensed  
          capacity to serve up to 1,095,672 children in California. 

          Title 5 governs the state's subsidized child development  
          programs, which are overseen by the CDE.  These programs must be  
          licensed by DSS under Title 22 regulations and must meet higher  
          quality standards established under Title 5 regulations.  These  
          requirements include:

                 A developmentally- and age-appropriate educational  
               program for enrolled children;

                 Staff development opportunities to improve program  
               quality;

                 Parental involvement and education, including a parent  
               survey;

                 Nutritional standards that comply with federal child  
               nutrition program requirements, such as the National School  
               Lunch Program;

                 A health and social services component to identify and  
               refer eligible children and their families to community or  
               public health and social services, such as CalFresh;

                 A self-evaluation process to continually improve and  
               enhance their program; and

                 An environment rating scale that measures education  
               quality, parental involvement, and staff development and  
               education.

          It is important to note that Title 5 programs, as a condition of  
          being contracted with the CDE, must accept and serve needy and  
          eligible subsidized children.  Title 5 programs are funded  
          through the receipt of the Standard Reimbursement Rate (SRR)  
          based upon the number of children enrolled and the number of  
          hours of care, as well as statutorily established family fees.   
          Whereas a Title 22 program accepting a voucher would be  








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          reimbursed by the RMR, which is generally higher than the SRR  
          because of its association with the regional private provider  
          market, a Title 5 program is reimbursed using the SRR. 

          The SRR is statutorily set and is supposed to be increased  
          annually with a cost of living adjustment (COLA), however, a  
          COLA has not been provided since the 2007-08 fiscal year.  The  
          SRR currently stands at $34.38 for one full-day of enrolled  
          care, which is defined by regulation as six and one half hours  
          of care.  There are "adjustment factors" that are applied to the  
          SRR to reflect the increased cost of care for the varying ages  
          and needs of children, i.e. infants and toddlers, special needs,  
          etc.  However, the adjustment factors have also not changed  
          since they were established in AB 2311 (Chu,) Chapter 435,  
          Statutes of 2002.

          Title 5 programs earn their SRR reimbursement based upon child  
          days of enrollment, meaning they are reimbursed at the rate of  
          $34.38 per day for each day the needy or eligible child receives  
          care.  This creates challenges for Title 5 programs, as they  
          budget based upon the total number of days and children they  
          anticipate having to serve in a fiscal year.  Add into this the  
          uncertainty of a child's regular and continuous enrollment, a  
          family being deemed as no longer eligible or in need of care,  
          and fluctuating statewide budgets, it becomes a formidable  
          challenge for a Title 5 program to fully earn their contract's  
          maximum reimbursable amount (MRA).  The goal set by CDE for  
          Title 5 programs is to annually earn no less than 98% of their  
          MRA.
           
          According to CDE, as of the 2009-10 fiscal year, there were  
          approximately 1,420 service contracts with nearly 770 public and  
          private agencies supporting and providing services to 489,200  
          children.  Title 5 providers contract with the CDE and include  
          school districts, county offices of education, cities, local  
          park and recreation districts, county welfare departments, other  
          public entities, community-based organizations, and private  
          agencies.

           Alternative Payment Programs
           There are currently 81 APPs contracted with the CDE, funding  
          through state and federal funds, to provide an array of support  
          and payment services to enable low-income and eligible families  
          to access subsidized child care.  APPs do not provide direct  
          child development services or programs, rather they provide  








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          families who are participating in welfare-to-work activities  
          under the California Work Opportunities and Responsibility to  
          Kids(CalWORKs) program, or who are low-income but do not qualify  
          for CalWORKs, with subsidized child care vouchers. 

          Child care vouchers can then be used to access child care at  
          either a Title 5 or Title 22 child development center or with a  
          license-exempt child care provider, as specified.  However, as  
          noted above, the voucher can only be used at a Title 22 program  
          that accepts them, whereas all vouchers must be accepted at a  
          Title 5 program.

          Typically, a family who receives a voucher from an APP will then  
          be referred to a local child care resource and referral (R&R)  
          network.  The R&R network, also funded through state and federal  
          dollars, will assist the family in helping identify and access  
          the appropriate and desired child development program for the  
          child or children.  However, due to lack of state resources and  
          ongoing cuts to the CCDSA, access to programs able to accept  
          vouchers is limited.  Should the family be unable to find  
          appropriate care, they will be placed on a waiting list, if one  
          is available.

           Supply and demand  
          In 1997, the state developed a nine county pilot program to  
          consolidate waiting lists for subsidized child care programs to  
          better organize and prioritize enrollment of eligible and needy  
          children.  This nine-county pilot was expanded statewide and  
          made permanent in 2005.  Referred to as the Centralized  
          Eligibility List (CEL), it not only became a valuable tool to  
          help prioritize enrollment based upon eligibility and need, it  
          also helped to demonstrate the need for subsidized child care  
          and funding county-by-county and statewide. 

          The state annually appropriated $7.9 million to operate all 58  
          county CELs and the statewide CEL.  Unfortunately, due to the  
          ongoing budget deficit at the time, funding for CEL was  
          eliminated in the Budget Act of 2011 (Senate Bill 87, Chapter  
          33).  At the time of its elimination, there were approximately  
          240,000 eligible and needy children waiting for a subsidized  
          child care slot to open up.  Since then, some counties have  
          pursued maintaining their own CEL with existing local funds, but  
          it remains difficult to accurately estimate the total number of  
          needy and eligible families and children waiting for subsidized  
          child care. 








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          However, using the number of eligible and needy children who  
          were on the statewide CEL in 2011, and taking into account the  
          nearly $700 million, or 42% of subsidized child care funding  
          that has been cut from the budget over the past five years, it  
          is not unreasonable to estimate that the number of eligible and  
          needy children waiting for subsidized child care surpasses  
          300,000 children in need of care statewide.

           COMMENTS  :

           Monitoring and Reporting of Attendance  
          The CCDSA authorizes the State Superintendent of Public  
          Instruction (SSPI) to adopt all rules, regulations and  
          guidelines necessary to facilitate the funding and reimbursement  
          of procedures.  Under this authority, current regulations  
          require contractors to submit periodic reports that must  
          include:

          1)Days and hours of enrollment and attendance;

          2)Total days of operation; and

          3)Services, revenues and expenditures relating to care provided  
            for subsidized and unsubsidized children.

          Under Section 18065 of Title 5 of the CCR, parents must  
          physically sign-in and sign-out their child when they drop off  
          and pick up their child from the program each day. 

          Over the years, there have been disputes about how attendance  
          must be recorded, whether it is through the parents or program  
          staff, whether it is noted in pencil, pen, or different or  
          similar colored ink, and how exact the time-in and time-out is  
          recorded.  This has created, at times, ambiguity, concerns over  
          incorrect attendance reporting, and resulted in confusion and  
          increased administrative burdens for program, APP and CDE staff.

          In an effort to help resolve this ambiguity, the CDE's Child  
          Development Division (CDD) issued Management Bulletin (MB) 12-17  
          in September, 2012.  Although this MB was issued with the intent  
          to clarify some of these issues, there remains concerns about  
          how providers continue to be held accountable for how parents  
          sign-in and sign-out their child. 









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          This measure seeks to build upon the progress made with MB 12-17  
          by placing attendance reporting requirements in statute, which  
          would supersede Section 18065 of the CCR.  Rather than submit a  
          daily sign-in/sign-out sheet, AB 274 would allow providers to  
          submit a monthly attendance record, signed by the parent, under  
          penalty of perjury, and by the provider, and submitted to the  
          APP as an invoice for reimbursement.  It would also allow the  
          monthly attendance record to be maintained in its original  
          format or electronically.  Daily attendance recording would not  
          be eliminated under AB 274, rather the bill would change how it  
          is reported to the APP for purposes of reimbursement.

          It is unclear, however, why the parent is required to sign the  
          monthly attendance sheet under penalty of perjury and not the  
          provider staff.  Since monthly attendance sheets are proposed to  
          be used to affirm that that the child received care by virtue of  
          the parent's signature and for purposes of reimbursement to the  
          provider, should the provider also be required to sign under  
          penalty of perjury? It is also unclear what "or other  
          ascertainable means" signifies for purposes of verifying the  
          monthly attendance sheet. 

          Additionally, although AB 274 allows attendance to be reported  
          monthly, it does not require the APP to accept it.  AB 274  
          should be amended to ensure that monthly attendance sheets are  
          accepted by the APP for purposes of reimbursement.

           Electronic Records  
          State statute is unspecific as it relates to how and in what  
          form child development providers and APPs must maintain records,  
          whether in original format, electronically, or in another  
          format.  However, Section 8261 of the Education Code provides  
          the SSPI the authority to adopt regulations to specify adequate  
          standards of performance for contractors and APPS and establish  
          reporting requirements for purposes of compliance with the  
          CCDSA.  Pursuant to that authority, Section 18067 of Title 5 of  
          the CCR, APPs and child care providers are required to maintain  
          records for up to five years. 

          AB 274 would simply state that APPs and child care provides may  
          maintain records electronically, except as required by state or  
          federal law.  However, should other state law, or more  
          specifically, federal law, require records to be maintained in  
          hard copy or original format, it is unclear whether this  
          proposed provision would achieve its intended outcome.








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          According to the Northern Director's Group, an association of  
          northern California APPs and R&R agencies, which is a co-sponsor  
          of this measure, this will help to reduce the administrative  
          burden of maintaining hard copy files of documents.  Maintaining  
          and storing hundreds, if not thousands, of filing boxes of  
          original documents can be significant in light of the  
          substantial budget reductions made to the CCDSA.  Allowing them  
          to be maintained electronically rather than in hard copy would  
          help to reduce costs and save funds that could otherwise be used  
          for meeting other current state requirements and supporting  
          child care providers and the families and children they serve.

           Direct Deposit  
          Currently, APPs and child care providers are paid through hard  
          copy checks by the CDE.  Although the CDE administer and  
          determines how and when child development providers shall be  
          paid, it is the State Controller that issues payments from the  
          state treasury.  However, CDE's current financial management  
          system, the Provider Accounting and Reporting Information System  
          (PARIS) is unable to process payments through direct deposit.   
          According to CDE, PARIS is a system designed to calculate  
          payment amounts to child development programs and APPs.  Once  
          the payment amounts are calculated through PARIS, the amounts  
          are transmitted via hard copy documents to the State Controller  
          for issuance of payment.  PARIS is not designed to operate as a  
          payment system, which would require the collection, maintenance,  
          and transmittal of financial information necessary to facilitate  
          payment to APPs and child development providers through direct  
          deposit. 

          The state is currently in the process of implementing the  
          Financial Information System for California (FI$Cal) Project.   
          The purpose of the FI$Cal Project is to provide the state with a  
          singular budgeting, accounting, procurement, and cash management  
          system.  A collaborative effort between the State Controller,  
          the State Treasurer, and the Directors of the Departments of  
          Finance and General Services, it is intended to provide an  
          integrated financial management system better optimize and make  
          more efficient the business management of the state. 

          FI$Cal will begin integration of state agencies in phases July  
          1, 2013.  According to the CDE, when they are integrated into  
          FI$Cal they will be able to process direct deposit payments for  
          all providers and APPs.  However, CDE will not be included until  








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          the fourth and final phase of the project's roll out on July 1,  
          2016. 

          This measure would require the CDE to request the State  
          Controller to pay specified providers and APPs via direct  
          deposit at their request, beginning July 1, 2015. AB 274's  
          direct deposit requirement should be aligned with the July 1,  
          2016 roll out of FI$Cal for CDE, since CDE's current system is  
          unable to process direct deposit payments.  

           RECOMMENDED AMENDMENTS

          Staff recommends the following amendments:

          Amendment #1
          On page two, delete lines nine and ten inclusive and replace  
          with "  signed by the parent or guardian of child receiving  
          services and the child care provider once per" 

           Amendment #2
          On page two, line 13 delete "or other ascertainable means" and  
          be replaced with "  and signed as the end of each month of care  
          and under penalty of perjury by both the parent and the child  
          care provider.





























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           Amendment #3
          On page three, line three insert new subdivision (d) to read:  
           (d) The alternative payment provider shall accept the monthly  
          attendance record or invoice as documentation of the certified  
          need and hours of care provided.
           
          Amendment #4
          On page three, line 21 delete "2015" and replace with "  2016  "

           REGISTERED SUPPORT / OPPOSITION  :   

           Support 
           
          BANANAS, Child Care Resource & Referral, Northern Alameda County
          Contra Costa Child Care Council
          Family Resource and Referral Center, San Joaquin County
          Solano Family & Children's Services
          Valley Oak Children's Services

           Opposition 
           
          None on file
           
          Analysis Prepared by  :    Chris Reefe / HUM. S. / (916) 319-2089