BILL ANALYSIS Ó AB 274 Page 1 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 AB 274 Page 2 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 AB 274 Page 3 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 AB 274 Page 4 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 AB 274 Page 5 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. AB 274 Page 6 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. AB 274 Page 7 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. AB 274 Page 8 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$Cal they will be able to process direct deposit payments for all providers and APPs. However, CDE will not be included until AB 274 Page 9 the fourth and final phase of the project's roll out on July 1, 2016. This measure would require the CDE to request the State Controller to pay specified providers and APPs via direct deposit at their request, beginning July 1, 2015. AB 274's direct deposit requirement should be aligned with the July 1, 2016 roll out of FI$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. AB 274 Page 10 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