BILL ANALYSIS �
Senate Appropriations Committee Fiscal Summary
Senator Kevin de Le�n, Chair
AB 2125 (Ridley-Thomas) - Child Care: Reimbursement Rates
Amended: May 23, 2014 Policy Vote: Education 5-1
Urgency: No Mandate: No
Hearing Date: August 4, 2014
Consultant: Jacqueline Wong-Hernandez
This bill meets the criteria for referral to the Suspense File.
Bill Summary: AB 2125 requires the Superintendent of Public
Instruction (SPI) to review the plan that establishes standards
and assigns reimbursement rates for child care and development
programs, and to submit recommendations for a single
reimbursement system that reflects the actual current cost of
child care based on the most recent regional market rate survey.
Fiscal Impact:
Review and recommendations: $150,000 - $200,000 (General
Fund) in costs to the California Department of Education
(CDE), to review the existing standards and reimbursement
rates plan, and submit recommendations for a single
reimbursement system.
Implementation: Substantial cost pressure, likely in the
hundreds of millions and up to $1 billion (General Fund), to
implement the recommended "single reimbursement system that
reflects the actual cost of child care based on the the most
recent regional market survey."
Background: Existing law establishes eligibility for child care
and development services administered by the CDE and requires
the SPI to adopt rules and regulations on eligibility,
enrollment and priority for services. (Education Code � 8263).
The CDE administers child care and development services through
two systems:
1) Direct contract with the CDE. Providers must meet health
and safety standards of Title 22 and Title 5 requirements
including higher staff qualifications and provide an
educational component; providers are reimbursed at the
Standard Reimbursement Rate (SRR).
AB 2125 (Ridley-Thomas)
Page 1
2) Voucher program administered through Alternative Payment
Programs (reimbursements to private sector child care
providers chosen by the parent). Providers must meet the
health and safety standards of Title 22, and are reimbursed
using the Regional Market Rate (RMR).
With regard to Title 5 programs, existing law 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. Existing law further
requires the SRR to be $9024.75 per unit of average daily
enrollment for a 250-day year, increased commencing with the
2015-16 fiscal year by a cost-of-living adjustment granted by
the Legislature.
(EC � 8265)
With regard to Title 22 programs, existing law requires the cost
of child care services provided for CalWORKs recipients to be
governed by the RMR, and defines "RMR" as care costing no more
than 1.5 market standard deviations above the mean cost of care
for that region. RMR ceilings are at the 85th percentile of the
2005 RMR survey for that region. Existing law requires the CDE
to contract to conduct and complete a RMR survey no more than
once every two years, consistent with the federal regulations,
with the a goal of completion by March 1. (EC � 8357 and �
8447)
Proposed Law: This bill requires the SPI to review the plan that
establishes standards and assigns reimbursement rates for child
care and development programs, and to submit recommendations to
the Legislature and Governor for a single reimbursement system
that reflects the actual current cost of child care based on the
most recent regional market rate survey.
Staff Comments: The CDE has opined that it would take one
dedicated position 18 months to complete the work required to
thoroughly review the existing standards and reimbursement rates
plan, research reimbursement system options, develop possible
funding system options, have the SPI decide on recommendations,
and then write the report and submit recommendations for a
single reimbursement system to the Legislature and the Governor.
If the CDE had to complete the work in 12 months, as required by
this bill, the review and report would be more general.
AB 2125 (Ridley-Thomas)
Page 2
This bill's requirement to recommend a "single reimbursement
system that reflects the actual cost of child care based on the
the most recent regional market survey" implies in its framing
that the the recommendation be for increasing child care
reimbursement rates based on market rates, and that the SPI
propose that increase to the Legislature and Governor. This
creates cost pressure to increase reimbursement rates and
provide more funding for child care. If the reimbursement rate
were set at the 85th percentile of the most recent RMR survey,
it would cost roughly $500 million above the total child care
appropriation; setting it at the 100% percentile would cost
roughly $1 billion (General Fund).