BILL ANALYSIS �
AB 2125
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Date of Hearing: April 23, 2014
ASSEMBLY COMMITTEE ON EDUCATION
Joan Buchanan, Chair
AB 2125 (Ridley-Thomas) - As Amended: April 10, 2014
SUBJECT : Child care: standard reimbursement rates
SUMMARY : Replaces the standard reimbursement rate (SRR) with a
reimbursement rate for child development programs to reflect the
actual current cost of care in each region per unit of average
daily enrollment for a 250-day year. Specifically, this bill :
1)Requires the Superintendent of Public Instruction (SPI) to
implement a plan that establishes reasonable standards and
assigned reimbursement rates through a single reimbursement
system which vary with the length of the program year and the
hours of service.
2)Eliminates the SRR at $3,523 per unit of average daily
enrollment for a 250-day year, increased by the cost-of-living
adjustment granted by the Legislature beginning July 1, 1980,
or as adjusted to provide adequate compensation for education
and training, and instead establishes a reimbursement rate
that reflects the actual current cost of care in each region
per unit of average daily enrollment for a 250-day year.
3)Strikes provisions that specify the following:
a) The plan shall require agencies having an assigned
reimbursement rate above the current year SRR to reduce
costs on an incremental basis to achieve the SRR.
b) The plan shall provide for adjusting reimbursement on a
case-by-case basis, in order to maintain service levels for
agencies currently at a rate less than the SRR. Assigned
reimbursement rates shall be increased only on the basis of
one or more of the following:
i) Loss of program resources from other sources.
ii) Need of an agency to pay the same child care rates
as those prevailing in the local community.
iii) Increased costs directly attributable to new or
different regulations.
iv) Documented increased costs necessary to maintain the
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prior year's level of service and ensure the continuation
of threatened programs.
v) Child care agencies funded at the lowest rates shall
be given first priority for increases.
4)Specifies that the adjustment factors for infants; toddlers;
children with exceptional needs; severely disabled children; a
child at risk of neglect, abuse, or exploitation; and
limited-English-speaking and non-English-speaking children
shall apply without regard to whether the programs are at or
below the SRR and without regard to whether the reimbursement
rate exceeds the adjusted SRR.
5)Strikes the provision specifying that programs above the SRR
may be considered on a case-by-case basis for rate adjustments
due to documented increases in insurance costs.
6)Strikes the provision specifying that in no event shall the
assigned reimbursement rate exceed the SRR.
7)Strikes the provision excluding the schoolage community child
care services programs from being adjusted by specified
reimbursement factors.
8)Adjusts the regional market rate (RMR) ceiling established at
the 85th percentile of the 2005 RMR survey for that region to
the 85th percentile of the current RMR survey for that region.
EXISTING LAW :
1)Establishes eligibility for child care services and child
development programs administered by the California Department
of Education (CDE) and requires the SPI to adopt rules and
regulations on eligibility, enrollment and priority of
services needed for implementation (Education Code (EC)
Section 8263).
2)Requires the SPI to implement a plan that establishes
reasonable standards and assigned reimbursement rates, which
vary with the length of the program year and the hours of
service. Requires the SRR to be $3,523 per unit of average
daily enrollment for a 250-day year, increased by a
cost-of-living adjustment granted by the Legislature beginning
July 1, 1980. (EC Section 8265)
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3)Requires the cost of child care services provided for CalWORKs
recipients to be governed by the RMR. Specifies that
recipients of child care services shall be allowed to choose
the child care services of licensed child care providers or
child care providers who are, by law, not required to be
licensed, and the cost of that child care shall be reimbursed
by counties or agencies that contract with the CDE if the cost
is within the RMR. (EC Section 8357)
4)Defines "RMR" as care costing no more than 1.5 market standard
deviations above the mean cost of care for that region.
Establishes the RMR ceilings at the 85th percentile of the
2005 RMR survey for that region. Requires the CDE to contract
to conduct and complete a RMR Survey no more frequently than
once every two years, consistent with the federal regulations,
with the a goal of completion by March 1. (EC Sections 8357
and 8447)
FISCAL EFFECT : Unknown
COMMENTS : According to supporters, this bill is intended to
establish a single reimbursement rate system for child care and
development programs and increase payments to providers.
Background on child care and development programs . The CDE
administers a child care and development system, maintaining
1,401 service contracts with approximately 758 public and
private agencies supporting and providing services to children
from birth through 12 years of age. Contractors include school
districts, county offices of education, cities, colleges, other
public entities, community-based organizations, and private
agencies. In fiscal year (FY) 2013-14, $2.1 billion was
provided for child care and development programs from state and
federal funds, enrolling an estimated 340,000 children. This is
down from $2.669 billion initially provided in the FY 2010-11
budget (prior to midyear trigger cuts) with almost 416,000
slots. According to the Legislative Analyst's Office, overall
funding for the child care and development program has decreased
by almost $1 billion since 2008-09, with the elimination of
110,000 slots. The Governor's proposed FY 2014-15 budget
provides an increase of $66 million over FY 2013-14 funds for a
total of $2.2 billion for child care and development programs to
provide an estimated 343,000 child care and preschool slots.
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Eligibility . State and federal subsidized child care is
provided through two ways: 1) eligibility for CalWORKs, or 2)
based on income and need for child care services. CalWORKs is a
temporary cash aid program for families with children. The
child care program is administered in three stages to help a
family transition from immediate, short-term child care needs to
stable, long-term child care as a family becomes stable and is
no longer reliant on CalWORKs aid. Subsidized child care
services are intended to assist recipients in engaging in work
or education/training required for receiving aid.
Non-CalWORKs families and former CalWORKs recipients can receive
subsidized child care if they meet income eligibility of 70% of
state median income ($46,896 for a family of four) or if they
are recipients of child protective services and if they can show
need for child care services.
Payment system . The state uses two different methodologies for
determining the rates for child care and development program
payments.
1)RMR . The CDE administers a voucher program that enables
eligible families to choose their providers, which may be a
licensed center, licensed family child care homes, or
license-exempt care (e.g., care by a relative). The voucher
program is administered by Alternative Payment Programs (APPs)
selected by the CDE. Child care licensed providers must
comply with Title 22 regulations (health and safety standards)
developed by the California Department of Social Services and
receive reimbursements of up to the 85th percentile of child
care rates charged by private providers in the area.
The rates are determined by the RMR survey and vary depending
on the geographical location of the provider. The RMR is
based on a survey of licensed centers and family child care
homes measuring child care rates of similar socioeconomic
conditions, rather than geographic proximity, creating ''price
profiles" of similar zip codes. Ceilings are established for
each county according to estimates of the 85th percentile of
child care rates for groups of centers and family child care
homes. These county market rate ceilings are differentiated
by the age of the child (infant/preschool/school age),
full-time or part-time care, and frequency of care. The rate
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is intended to enable access to 85 percent of all licensed
providers in a county and represents the maximum amount the
state will pay for services. Providers that charge at or
below the RMR will receive the actual costs. If a family
chooses a provider that charges above the RMR, the family pays
the additional amount. State and federal law requires the
survey to be updated every two years. However, due to
budgetary reasons, the current RMR is based on the 2005
survey.
2)SRR . In addition to Title 22 regulations, child development
programs and preschools that contract directly with CDE
through the General Child Care, Migrant and Handicapped child
care, and California State Preschool Programs must comply with
higher standards (teacher qualifications, child development)
under Title 5 regulations developed by the CDE and receive the
SRR. The SRR is a specified rate established in statute and
adjusted through the budget act. The current SRR, which was
last adjusted in 2007-08, is at $34.38 per day for full-day
care (or $8,595 annually) and $21.22 per day per child for
part-day (or $3,714 annually). The monthly rate for full day
care for a four-year-old is $716.
Annual Rates for Subsidized Early Education and Support Services
in California
--------------------------------------------------
|Counties |Standard |Regional |Regional |
| |Reimburseme|Market Rate |Market Rate |
| |nt Rate<1> |Ceiling |Ceiling |
---------------------------
<1> The standard reimbursement rate (SRR) is $34.38 per child
day of enrollment (CDE) or $8,595 per annum based on 250 days of
operation (Education Code Section 8265 (B) and State Budget Act
of 2012, item 6110-194-0001, provision 7).
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| | |2005<2> |2012<3> |
| | |CURRENT | |
|------------+-----------+------------+------------|
|Alameda | $8,595| $10,308 | $14,540|
|------------+-----------+------------+------------|
|Humboldt | $8,595| $8,176 | $10,887|
|------------+-----------+------------+------------|
|Kern | $8,595| $8,088| $8,229|
|------------+-----------+------------+------------|
|Los Angeles | $8,595| $8,925| $13,542|
|------------+-----------+------------+------------|
|Mendocino | $8,595| $7,908| $11,001|
|------------+-----------+------------+------------|
|Orange | $8,595| $9,984| $15,071|
|------------+-----------+------------+------------|
|Riverside | $8,595| $8,204| $13,131|
|------------+-----------+------------+------------|
|Sacramento | $8,595| $8,231| $11,563|
|------------+-----------+------------+------------|
|San Diego | $8,595| $9,058| $14,577|
|------------+-----------+------------+------------|
|San | $8,595| $11,809| $14,590|
|Francisco | | | |
|------------+-----------+------------+------------|
|Sonoma | $8,595| $9,094| $14,485|
|------------+-----------+------------+------------|
|Ventura | $8,595| $9,064|$15,060 |
--------------------------------------------------
Source: California Department of Education
The Governor has attempted to reduce RMR and the SRR rates. The
Governor's FY 2012-13 budget proposed to reduce the RMR to the
---------------------------
<2> Assembly Bill 1497, which was signed into law on June 27,
2012, maintains the Regional Market Rate ceilings at the 85th
percentile of the 2005 Regional Market Rate Survey and the
licensed-exempted child care providers ceilings at 60 percent of
the Family Child Care Home ceilings effective July 1, 2012.
Number shown represents the maximum reimbursement full-time
monthly rate for children aged 2-5 years in child care centers,
multiplied by 12 to obtain the annual rate.
<3> 2012 Regional Market Rate (RMR) Survey of California Child
Care Providers. Number shown represents the maximum
reimbursement at 85% for full-time monthly rate for children
aged 2-5 years in child care centers, multiplied by 12 to obtain
the annual rate.
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50th percentile using the 2009 survey. The Legislative
Analyst's Office (LAO) estimated the proposal to reduce rates by
12 to 14 percent, on average. The FY 2012-13 budget also
proposed to reduce the SRR by 10 percent, dropping the per-child
rate for full-day services to $30.94 and the preschool rate to
$19.10. The LAO recommended rejection of the reduction. The
budget that was ultimately adopted did not include the
reductions.
This bill adjusts both the SRR and the RMR. The RMR is adjusted
by updating the survey used to determine rates. The current
rate based on the 85th percentile of the 2005 RMR survey is
updated to the current survey. For now, the most current is the
2012 survey. The contractor retained by CDE to conduct the 2014
survey is in the process of collecting information.
The change to the SRR is significant. The bill proposes to
eliminate the rate specified in statute and instead establish a
reimbursement rate based on the actual current cost of care in
each region. It is unclear how the current cost of care is
calculated. According to the author's office, the intent of the
bill is to base the reimbursement rate on the RMR at the 100th
percentile. Staff recommends an amendment to replace "actual
current cost of care" with the RMR at the 100th percentile.
Need for adjustment . The SRR has been the same since FY
2007-08, while the state Legislature has placed greater emphasis
on increasing the quality of early childhood and development
programs. The low SRR reimbursement has caused contractors to
cease the provision of services to low-income families.
According to the LAO, in a report titled, "Restructuring
California's Child Care and Development System," the RMR is
higher than the SRR in 19 counties. Consequently, 224 providers
have terminated contracts with the CDE over the last few years,
typically due to insufficient funding. The availability and
access to quality subsidized early education services are
reduced in a community if the CDE is unable to locate another
provider to take the slots. Wages of child care providers are
low. Based on information provided by the CDE, the Employment
Development Department reports that during the first quarter of
2011, the average wage of those employed by child care centers
was $11.64 per hour and $15.23 per hour for preschool teachers.
How much would the SRR increase ? If the SRR were raised to the
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RMR at the 85th percentile using the 2012 RMR survey, with the
exception of one county, which experiences a minor decrease, the
other counties identified in the chart above would receive
between a 25 percent to a 75 percent increase. The increases
are higher at 100th percentile. The RMR survey does not
currently measure costs at the 100 percentile. If this bill is
enacted, the RMR survey would have to be updated in order to get
the payment levels specified by this bill.
Should there be a hold harmless provision ? The SRR is higher
than the RMR in some areas. Using the RMR in those areas may
cause hardship on those providers. Staff recommends adding an
amendment to continue the current rate for contractors whose
rate would be reduced under the new reimbursement system until
the new reimbursement rate reaches the most current RMR level
for that region.
Infant/toddler adjustments . Current law authorizes an
adjustment increase in the SRR, recognizing that there are
higher costs to serve certain populations, including
infants/toddlers; children with exceptional needs (0 to 21
years); severely disabled children (0 - 21 years); children at
risk of neglect, abuse, or exploitation (0 - 14); and
limited-English-speaking (2 - kindergarten). The RMR survey
already takes into consideration higher costs for serving
infant/toddlers. As such, it is not necessary to continue an
adjustment factor for infants/toddlers. Staff recommends
striking the adjustment factors for infants and toddlers.
LAO proposal . The LAO recently issued a report recommending a
restructure of the child care and development system. Among
other recommendations, the LAO proposes the following:
Limit CalWORKs eligibility for child care to 6-8 years,
which will increase access to 35,000 more families. There
is no data on how long families get child care currently.
Provide benefits (except for the State Preschool
Programs) through vouchers. State Preschool will continue
as direct contract, but providers would be restricted to
only local educational agencies.
Require higher developmental standards for 0-3
providers. CDE would be required to develop the standards
and monitor the providers to ensure compliance.
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Change the fee structure so that they are more uniform
by high, medium or low-cost counties based on the 70th
percentile of the 2012 RMR survey. Establish rates for
infants, preschool, and school-age for each type of cost
counties.
-----------------------------------------
|Rate Structure Proposed by the | |
| LAO | |
|-------------------------------+---------|
| 2014-15 |Annually |
| Ratea | |
| |$16,104 |
|High-Cost Counties | 10,824 |
|Infants $1,342 | |
|Preschool 902 |7,212 |
|School-age 601 | |
|-------------------------------+---------|
|Medium-Cost Counties | |
|Infants $1,077 |$12,924 |
|Preschool 719 | |
|School-age 479 |8,628 |
| | |
| |5,748 |
|-------------------------------+---------|
|Low-Cost Counties | |
|Infants $ 836 |$10,032 |
|Preschool 594 | |
|School-age 396 |7,128 |
| | |
|a Reflects reimbursement per |4,752 |
|month for full-time child care | |
|(based on the 70th percentile | |
|of the 2012 RMR survey) | |
-----------------------------------------
Source: Legislative Analyst's Office
The author may wish to consider whether the rate structure
proposed by the LAO may be easier for implementation purposes.
Under this bill, the CDE would have to broadly structure 58
different contracts for the cost differences in each region.
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Each contract in each region will also vary according to the age
of the children and the amount of time served. This could
increase the CDE's administration duties substantially. The
author may wish to consider the benefits of the LAO's regional
rate structure, using the 100th percentile of the most recent
survey.
Technical amendment . This bill updates the 2005 RMR to the
"current" RMR survey. Staff recommends changing "current" to
"most recent". "Current" is used to describe the survey in
effect, but the survey currently being used is not the most
recent survey.
Arguments in support . The author states, "This legislation
proposes that the base reimbursement level be set to correspond
to the latest regional market survey, so that it increases to
match the current cost of living in every region of the state.
Aligning and increasing these rates, will allow ECE [early
childhood education] providers to improve the pay of the ECE
workforce, which responded to 8 years of increasing quality
standards by attaining higher levels of workforce training and
education."
Prior related legislation . AB 2286 (Bonilla), held in the
Assembly Appropriations Committee suspense file in 2012,
increases the rates for subsidized child care services for
infant and toddler care as follows: 1) Increases the adjustment
factor for infants 0 to 18 months of age served in a child day
care center from 1.7 to 2.3; and 2) Increases the adjustment
factor for toddlers who are 18 to 36 months of age served in a
child day care center from 1.4 to 1.8.
REGISTERED SUPPORT / OPPOSITION :
Support
California Child Development Administrators Association
California Child Care Resource and Referral Network
Child Care Alliance of Los Angeles
Northern Director's Group
Opposition
None on file
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Analysis Prepared by : Sophia Kwong Kim / ED. / (916) 319-2087