BILL ANALYSIS Ó ----------------------------------------------------------------- |SENATE RULES COMMITTEE | AB 812| |Office of Senate Floor Analyses | | |1020 N Street, Suite 524 | | |(916) 651-1520 Fax: (916) | | |327-4478 | | ----------------------------------------------------------------- CONSENT Bill No: AB 812 Author: Mitchell (D) Amended: 6/26/13 in Senate Vote: 21 SENATE EDUCATION COMMITTEE : 9-0, 7/3/13 AYES: Liu, Wyland, Block, Correa, Hancock, Hueso, Huff, Monning, Torres SENATE APPROPRIATIONS COMMITTEE : Senate Rule 28.8 ASSEMBLY FLOOR : 77-0, 5/29/13 (Consent) - See last page for vote SUBJECT : Child care: contracts SOURCE : Author DIGEST : This bill eliminates the required 90-day notice prior to the immediate termination of a child care contract, prohibits a contractor from continuing to provide care to children while appealing an immediate termination, expands the reasons for which a contract may be immediately terminated, and makes other changes relative to contracts with the California Department of Education (CDE) for child care and development services. ANALYSIS : Existing law: CONTINUED AB 812 Page 2 1.Authorizes local government agencies or non-profit organizations to contract with CDE to operate Alternative Payment Programs and provide alternative payments and support services to parents and child development providers. Alternative Payment Programs help parents arrange child care services and makes payments directly to the provider, which may be in-home care, family child care or center-based care, and either licensed or license-exempt. Contract classification. 2.Requires the Superintendent of Public Instruction to establish a contract classification system to identify, monitor and provide technical assistance to contracted child care and development providers and Alternative Payment Programs. 3.Defines a "clear contract" as a designation of a contracted agency that is in full compliance withal applicable statutory provisions, funding terms and conditions, and applicable program quality guidelines. 4.Defines a "provisional contract" as designation of a newly awarded contract to an agency, under which the timeframe of this status is at the discretion of CDE. 5.Defines a "conditional contract" as a designation of a high risk contracted child care agency that is out of fiscal or programmatic compliance. 6.Prohibits a child care agency under a "conditional contract" from applying for additional state child development program funds. Contract termination 7.Authorizes CDE to suspend or immediately terminate a contract for chronic fiscal or program violations of a felony nature, which include the following violations: A. Fraud or conspiracy to defraud. B. Misuse of state funds in violation with the California Accounting Manual. CONTINUED AB 812 Page 3 C. Embezzlement. D. Threats of bodily or other harm to state officials. E. Bribery or attempted bribery of a state official. F. Unsafe or unhealthy physical environment or facility. G. Substantiated abuse or molestation of children. H. Failure to report suspected child abuse or molestation. I. Theft of supplies, equipment or food. J. Places a person in position of fiscal responsibility or control who has been convicted of specified crimes, including financial crimes. 1.Requires CDE to provide to a contractor a 90-day notice of suspension or termination except if there is imminent danger to the health and safety of children. 2.Provides due process rights to a child care agency, which include the right to an independent appeals process administered by the Office of Administrative Hearings. 3.Authorizes CDE to suspend or terminate a contract of an agency that places a person in a position of fiscal responsibility or control who has been convicted of burglary, forgery, counterfeiting, larceny, embezzlement, or extortion. 4.Current regulations establish an internal dispute review process within CDE. This bill eliminates the required 90-day notice prior to the immediate termination of a child care contract, prohibits a contractor from continuing to provide care to children while appealing an immediate termination, expands the reasons for which a contract may be immediately terminated, and makes other changes relative to contracts with CDE for child care and development services. Specifically, this bill: Immediate termination of a contract CONTINUED AB 812 Page 4 1.Eliminates the requirement that fiscal or program violations be chronic. 2.Expands the reasons for which the CDE may immediately terminate a contract to include: A. Cessation of operations without the permission of CDE or abandoning the contracts. B. Failure of a program to fully reimburse a significant number of approved child care providers within 15 calendar days after the date set in the plan for timely payments adopted by the contracting agency, unless the failure is due to a delay in receiving apportionments from the state. C. Failure to pay salaries owed to employees, pay federal payroll tax, or fully reimburse a significant number of child care providers for more than 15 days after the employee salaries, federal payroll taxes, or reimbursement payments were due, unless failure is due to a delay in receiving apportionments from the state. 1.Eliminates the requirement that CDE provide written notification 90-days prior to the immediate termination of a contract, and deletes the condition that an immediate termination be based on imminent danger to the health and welfare of children. 2.Prohibits a contractor from continuing to operate during the period of appeal of an immediate termination of the contract, and deletes the condition that a contractor ceases operation only if the termination is based on imminent danger to the health or welfare of children. 3.Requires a notice of immediate termination to be served on the contracting agency by personal service or at the last address on file with CDE, by overnight mail or certified mail. Provides that service may be proved in the manner authorized in a civil action, and that service by mail is complete at the time of deposit. (Notice of immediate termination is still required, but does not give contractor 90-days prior to termination.) 4.Deletes from the list of offenses for which, if committed by a CONTINUED AB 812 Page 5 person in a position of fiscal responsibility, a contract may be immediately terminated, burglary, forgery, counterfeiting, larceny, embezzlement, or extortion. 5.Replaces on the list of offenses for which, if committed by a person in a position of fiscal responsibility, a contract may be immediately terminated, a crime involving misuse or misappropriation of state or federal funds, or a state or federal crime involving moral turpitude. 6.Eliminates obsolete references to the suspension of contracts. Conditional contract status 7.Deems a contracting agency (all contracts with that agency) to be on conditional status if that agency has at least one contract on conditional status. 8.Removes the prohibition on a contractor with conditional status from applying for additional child care and development funds. 9.Clarifies that a conditional contract status may be imposed for both fiscal and programmatic non-compliance (not just one or the other). Internal appeal 10.Requires CDE to provide an internal appeal procedure to resolve a dispute between CDE and a contracting agency regarding a dispute regarding the interpretation or application of a term or condition of a contract, or to dispute a finding made by CDE resulting from a fiscal or programmatic review, including an error rate notification. 11.Requires a contracting agency to have the right to appeal the finding of a fiscal or programmatic review, including an error rate finding, by submitting a request for appeal in accordance with the internal appeal procedure developed by CDE. FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes Local: No SUPPORT : (Verified 8/13/13) CONTINUED AB 812 Page 6 Superintendent of Public Instruction American Academy of Pediatrics American Federation of State, County and Municipal Employees California Policy Immigrant Center Children's Advocacy Institute Coalition of Humane Immigrant Rights of Los Angeles Community Clinic Association of LA County Mexican American Defense and Education Fund ARGUMENTS IN SUPPORT : According to the author, "In the last two years, there have been incidents where child care contractors involved in financial malfeasance ceased operating or ceased reimbursing providers, but would not relinquish their contracts. In these circumstances, CDE had no authority to immediately remove those contracts and re-direct funding to contractors who would continue services to eligible children and families. CDE could only withhold funding, which did nothing to protect children." ASSEMBLY FLOOR : 77-0, 5/29/13 AYES: Achadjian, Alejo, Allen, Ammiano, Atkins, Bigelow, Bloom, Blumenfield, Bocanegra, Bonilla, Bonta, Bradford, Brown, Buchanan, Ian Calderon, Campos, Chau, Chávez, Chesbro, Conway, Cooley, Dahle, Daly, Dickinson, Donnelly, Eggman, Fong, Fox, Frazier, Beth Gaines, Garcia, Gatto, Gomez, Gonzalez, Gordon, Gorell, Gray, Grove, Hagman, Hall, Harkey, Roger Hernández, Jones, Jones-Sawyer, Levine, Logue, Lowenthal, Maienschein, Mansoor, Medina, Melendez, Mitchell, Morrell, Mullin, Muratsuchi, Nazarian, Nestande, Olsen, Pan, Patterson, Perea, V. Manuel Pérez, Quirk, Quirk-Silva, Rendon, Salas, Skinner, Stone, Ting, Wagner, Waldron, Weber, Wieckowski, Wilk, Williams, Yamada, John A. Pérez NO VOTE RECORDED: Holden, Linder, Vacancy PQ:ej 8/13/13 Senate Floor Analyses SUPPORT/OPPOSITION: SEE ABOVE **** END **** CONTINUED AB 812 Page 7 CONTINUED