AB 1981: Subsidized childcare: reimbursement rates: reporting.
- Session Year: 2025-2026
- House: Assembly
- Latest Version Date: 2026-09-27
Current Status:
Passed
(2026-09-27: Chaptered by Secretary of State - Chapter 567, Statutes of 2026.)
Introduced
In Committee
Awaiting First Chamber Vote
Passed First Chamber
In Committee
Awaiting Second Chamber Vote
Passed Second Chamber
Enacted
What does this bill do?
The bill requires California to adopt a single, cost‑based reimbursement rate for subsidized childcare that varies by region, provider type, time category, and child age, and adds higher pay for nonstandard hours plus enhanced payments for children with special needs. It also extends quarterly implementation reports through July 1, 2028 and requires the department to give the Joint Legislative Budget Committee chair a timeline if new rates are not in effect by July 1, 2025; the department may use all‑county letters or bulletins until formal regulations are adopted.
The summary is provided by generative AI which can make mistakes. For original language, please view the details in the table below.
Existing law requires the State Department of Social Services, in collaboration with the State Department of Education, to implement a reimbursement system plan that establishes reasonable standards and assigned reimbursement rates for subsidized childcare and development services, and to develop and conduct an alternative methodology for ratesetting, as specified.
Existing law requires the Governor and the Legislature to, by no later than July 1, 2025, establish reimbursement rates based on the alternative methodology, as specified. Existing law requires the department to provide quarterly updates from October 1, 2024, to July 1, 2027, inclusive, on the implementation of the new reimbursement rates set under the alternative methodology. If the new reimbursement rates do not take effect on July 1, 2025, existing law also requires the department to provide the Legislature with a timeline for transitioning from the rates that are in effect on July 1, 2025, to the new established rates.
This bill would instead, under those circumstances, require the department to provide the Chairperson of the Joint Legislative Budget Committee with the departments anticipated timeline for the above-described rate transition. The bill would also require the quarterly reports described above to continue until July 1, 2028.
Existing law states the intent of the Legislature that the reimbursement rates established under the alternative methodology satisfy certain parameters, including, among others, that the rates vary based on geography, type of care setting, regulatory requirements applicable to each type of care setting, time categories, and child age.
This bill would impose various requirements on the department, in consultation with the State Department of Education, when establishing new reimbursement rates using a single-rate structure informed by the alternative methodology, to the extent those requirements are consistent with the approved Child Care and Development Fund state plan. Among other things, the bill would require the department to vary rates based on geographic regions and specific age groupings and to include in the rates an enhanced rate for nonstandard hours of care and enhanced inclusion rates for children with special needs. The bill would authorize the department to implement these provisions by means of all-county letters, childcare bulletins, or similar written instructions.
This bill would incorporate additional changes to Section 10227.6 of the Welfare and Institutions Code proposed by AB 190 or SB 190 to be operative only if this bill and AB 190 or SB 190 are enacted and this bill is enacted last.
This bill would declare that it is to take effect immediately as an urgency statute.
Existing law requires the State Department of Social Services, in collaboration with the State Department of Education, to implement a reimbursement system plan that establishes reasonable standards and assigned reimbursement rates for subsidized childcare and development services, and to develop and conduct an alternative methodology for ratesetting, as specified.
Existing law requires the Governor and the Legislature to, by no later than July 1, 2025, establish reimbursement rates based on the alternative methodology, as specified. Existing law requires the department to provide quarterly updates from October 1, 2024, to July 1, 2027, inclusive, on the implementation of the new reimbursement rates set under the alternative methodology. If the new reimbursement rates do not take effect on July 1, 2025, existing law also requires the department to provide the Legislature with a timeline for transitioning from the rates that are in effect on July 1, 2025, to the new established rates.
This bill would instead, under those circumstances, require the department to provide the Chairperson of the Joint Legislative Budget Committee with the departments anticipated timeline for the above-described rate transition. The bill would also require the quarterly reports described above to continue until July 1, 2028.
Existing law states the intent of the Legislature that the reimbursement rates established under the alternative methodology satisfy certain parameters, including, among others, that the rates vary based on geography, type of care setting, regulatory requirements applicable to each type of care setting, time categories, and child age.
This bill would impose various requirements on the department, in consultation with the State Department of Education, when establishing new reimbursement rates using a single-rate structure informed by the alternative methodology, to the extent those requirements are consistent with the approved Child Care and Development Fund state plan. Among other things, the bill would require the department to vary rates based on geographic regions and specific age groupings and to include in the rates an enhanced rate for nonstandard hours of care and enhanced inclusion rates for children with special needs. The bill would authorize the department to implement these provisions by means of all-county letters, childcare bulletins, or similar written instructions.
This bill would incorporate additional changes to Section 10227.6 of the Welfare and Institutions Code proposed by AB 190 or SB 190 to be operative only if this bill and AB 190 or SB 190 are enacted and this bill is enacted last.
This bill would declare that it is to take effect immediately as an urgency statute.
Existing law requires the State Department of Social Services, in collaboration with the State Department of Education, to implement a reimbursement system plan that establishes reasonable standards and assigned reimbursement rates for subsidized childcare and development services, and to develop and conduct an alternative methodology for ratesetting, as specified.
Existing law requires the Governor and the Legislature to, by no later than July 1, 2025, establish reimbursement rates based on the alternative methodology, as specified. Existing law requires the department to provide quarterly updates from October 1, 2024, to July 1, 2027, inclusive, on the implementation of the new reimbursement rates set under the alternative methodology. If the new reimbursement rates do not take effect on July 1, 2025, existing law also requires the department to provide the Legislature with a timeline for transitioning from the rates that are in effect on July 1, 2025, to the new established rates.
This bill would instead, under those circumstances, require the department to provide the Chairperson of the Joint Legislative Budget Committee with the departments anticipated timeline for the above-described rate transition. The bill would also require the quarterly reports described above to continue until July 1, 2028.
Existing law states the intent of the Legislature that the reimbursement rates established under the alternative methodology satisfy certain parameters, including, among others, that the rates vary based on geography, type of care setting, regulatory requirements applicable to each type of care setting, time categories, and child age.
This bill would impose various requirements on the department, in consultation with the State Department of Education, when establishing new reimbursement rates using a single-rate structure informed by the alternative methodology, to the extent those requirements are consistent with the approved Child Care and Development Fund state plan. Among other things, the bill would require the department to vary rates based on geographic regions and specific age groupings and to include in the rates an enhanced rate for nonstandard hours of care and enhanced inclusion rates for children with special needs. The bill would authorize the department to implement these provisions by means of all-county letters, childcare bulletins, or similar written instructions.
This bill would incorporate additional changes to Section 10227.6 of the Welfare and Institutions Code proposed by AB 190 or SB 190 to be operative only if this bill and AB 190 or SB 190 are enacted and this bill is enacted last.
This bill would declare that it is to take effect immediately as an urgency statute.
Existing law requires the State Department of Social Services, in collaboration with the State Department of Education, to implement a reimbursement system plan that establishes reasonable standards and assigned reimbursement rates for subsidized childcare and development services, and to develop and conduct an alternative methodology for ratesetting, as specified.
Existing law requires the Governor and the Legislature to, by no later than July 1, 2025, establish reimbursement rates based on the alternative methodology, as specified. Existing law requires the department to provide quarterly updates from October 1, 2024, to July 1, 2027, inclusive, on the implementation of the new reimbursement rates set under the alternative methodology. If the new reimbursement rates do not take effect on July 1, 2025, existing law also requires the department to provide the Legislature with a timeline for transitioning from the rates that are in effect on July 1, 2025, to the new established rates.
This bill would instead, under those circumstances, require the department to provide the Chairperson of the Joint Legislative Budget Committee with the departments anticipated timeline for the above-described rate transition. The bill would also require the quarterly reports described above to continue until the new reimbursement rates set under the alternative methodology are fully implemented. July 1, 2028.
Existing law states the intent of the Legislature that the reimbursement rates established under the alternative methodology satisfy certain parameters, including, among others, that the rates vary based on geography, type of care setting, regulatory requirements applicable to each type of care setting, time categories, and child age.
This bill would impose various requirements on the department department, in consultation with the State Department of Education, when establishing new reimbursement rates under using a single-rate structure informed by the alternative methodology, to the extent those requirements are consistent with the approved Child Care and Development Fund state plan. Among other things, the bill would require the department to vary rates based on specific geographic regions and specific age groupings and to include in the rates an extended hours care rate, an enhanced inclusion rate for children with special needs, and an enhanced transportation rate. The bill would require the new reimbursement rates to be implemented with regards to family childcare providers within 90 days of the state and the provider organization representing those providers reaching agreement on the rates and would prohibit reimbursement rates from being reduced below the amounts in effect on the effective date of the bill. enhanced rate for nonstandard hours of care and enhanced inclusion rates for children with special needs. The bill would authorize the department to implement these provisions by means of all-county letters, childcare bulletins, or similar written instructions.
This bill would incorporate additional changes to Section 10227.6 of the Welfare and Institutions Code proposed by AB 190 or SB 190 to be operative only if this bill and AB 190 or SB 190 are enacted and this bill is enacted last.
This bill would declare that it is to take effect immediately as an urgency statute.
Existing law requires the State Department of Social Services, in collaboration with the State Department of Education, to implement a reimbursement system plan that establishes reasonable standards and assigned reimbursement rates for subsidized childcare and development services, and to develop and conduct an alternative methodology for ratesetting, as specified.
Existing law requires the Governor and the Legislature to, by no later than July 1, 2025, establish reimbursement rates based on the alternative methodology, as specified. Existing law requires the department to provide quarterly updates from October 1, 2024, to July 1, 2027, inclusive, on the implementation of the new reimbursement rates set under the alternative methodology. If the new reimbursement rates do not take effect on July 1, 2025, existing law also requires the department to provide the Legislature with a timeline for transitioning from the rates that are in effect on July 1, 2025, to the new established rates.
This bill would instead, under those circumstances, require the department to provide the Chairperson of the Joint Legislative Budget Committee with the departments anticipated timeline for the above-described rate transition. The bill would also require the quarterly reports described above to continue until the new reimbursement rates set under the alternative methodology are fully implemented.
Existing law states the intent of the Legislature that the reimbursement rates established under the alternative methodology satisfy certain parameters, including, among others, that the rates vary based on geography, type of care setting, regulatory requirements applicable to each type of care setting, time categories, and child age.
This bill would impose various requirements on the department when establishing new reimbursement rates under the alternative methodology, to the extent those requirements are consistent with the Child Care and Development Fund state plan. Among other things, the bill would require the department to vary rates based on specific geographic regions and specific age groupings and to include in the rates an extended hours care rate, an enhanced inclusion rate for children with special needs, and an enhanced transportation rate. The bill would require the new reimbursement rates to be implemented with regards to family childcare providers within 90 days of the state and the provider organization representing those providers reaching agreement on the rates and would prohibit reimbursement rates from being reduced below the amounts in effect on the effective date of the bill.
This bill would declare that it is to take effect immediately as an urgency statute.
Existing law requires the State Department of Social Services, in collaboration with the State Department of Education, to implement a reimbursement system plan that establishes reasonable standards and assigned reimbursement rates for subsidized childcare and development services, and to develop and conduct an alternative methodology for ratesetting, as specified.
Existing law requires the Governor and the Legislature to, by no later than July 1, 2025, establish reimbursement rates based on the alternative methodology, as specified. Existing law requires the department to provide quarterly updates from October 1, 2024, to July 1, 2027, inclusive, on the implementation of the new reimbursement rates set under the alternative methodology. If the new reimbursement rates do not take effect on July 1, 2025, existing law also requires the department to provide the Legislature with a timeline for transitioning from the rates that are in effect on July 1, 2025, to the new established rates.
This bill would instead, under those circumstances, require the department to provide the Chairperson of the Joint Legislative Budget Committee with the departments anticipated timeline for the above-described rate transition. The bill would also require the quarterly reports described above to continue until the new reimbursement rates set under the alternative methodology are fully implemented.
This bill would declare that it is to take effect immediately as an urgency statute.
Existing law requires the State Department of Social Services, in collaboration with the State Department of Education, to implement a reimbursement system plan that establishes reasonable standards and assigned reimbursement rates for subsidized childcare and development services, and to develop and conduct an alternative methodology for ratesetting, as specified.
Existing law requires the Governor and the Legislature to, by no later than July 1, 2025, establish reimbursement rates based on the alternative methodology, as specified. Existing law requires the department to provide quarterly updates from October 1, 2024, to July 1, 2027, inclusive, on the implementation of the new reimbursement rates set under the alternative methodology. If the new reimbursement rates do not take effect on July 1, 2025, existing law also requires the department to provide the Legislature with a timeline for transitioning from the rates that are in effect on July 1, 2025, to the new established rates.
This bill would instead, under those circumstances, require the department to provide the Chairperson of the Joint Legislative Budget Committee with the departments anticipated timeline for the above-described rate transition. The bill would also require that the information be sent no later than January 31, 2027, and every subsequent year until the established rates are in effect. the quarterly reports described above to continue until the new reimbursement rates set under the alternative methodology are fully implemented.
Existing law requires the State Department of Social Services, in collaboration with the State Department of Education, to implement a reimbursement system plan that establishes reasonable standards and assigned reimbursement rates for subsidized childcare and development services, and to develop and conduct an alternative methodology for ratesetting, as specified.
Existing law requires the Governor and the Legislature to, by no later than July 1, 2025, establish reimbursement rates based on the alternative methodology, as specified. If the new reimbursement rates do not take effect on July 1, 2025, existing law requires the department to provide the Legislature with a timeline for transitioning from the rates that are in effect on July 1, 2025, to the new established rates.
This bill would instead, under those circumstances, require the department to provide the Chairperson of the Joint Legislative Budget Committee with the departments anticipated timeline for the above-described rate transition. The bill would require that the information be sent no later than January 31, 2027, and every subsequent year until the established rates are in effect.
This act shall be known, and may be cited, as the True Cost of Childcare Act.
SEC. 2.(a)The Legislature finds and declares all of the following:
(1)California is committed to advancing racial, economic, geographic, and gender equity across its publicly funded systems, including early learning and care.
(2)Federal regulations allow states to use a cost estimation model. This model can replace a market-rate survey to better reflect the true cost of high-quality childcare. It includes adequate compensation for the workforce, investments in health and safety, and compliance with licensing requirements.
(3)In a broken market where rates are set based on what families can pay as opposed to what it actually costs to provide quality, developmentally appropriate care reliance on regional market rates perpetuate historic inequities by embedding disparities in family income, neighborhood wealth, and access to private tuition into the states reimbursement structure.
(4)The early care and education workforce is almost exclusively female and predominantly people of color, including many immigrants, first-generation college students, and working mothers. Many early educators turn to public safety-net support to meet the basic needs of their family.
(5)Childcare deserts are most prevalent in low-income communities, rural areas, tribal communities, and communities of color, where the market fails to generate rates sufficient to sustain licensed and license-exempt providers serving subsidized families.
(6)As part of developing a single rate structure the State Department of Social Services consulted with early childhood educator stakeholders.
(7)Despite this statutory direction and extensive stakeholder engagement, a single rate structure is continuing to be developed.
(8)Adopting a single rate structure informed by the alternative methodology is needed to support the childcare workforce, help families in the states subsidized childcare system, and protect the states economy.
(b)Therefore, it is the intent of the Legislature to codify a single rate structure informed by the alternative methodology and to ensure its timely implementation.
SEC. 3.Section 10213.5 of the Welfare and Institutions Code is amended to read:10213.5.As used in this part:
(a)Alternative payments includes payments that are made by one childcare agency to another agency or childcare provider for the provision of childcare and development services, and payments that are made by an agency to a parent for the parents purchase of childcare and development services.
(b)Alternative payment program means a local government agency or nonprofit organization that has contracted with the department pursuant to Section 10225.5, or a migrant alternative payment program pursuant to Chapter 6 (commencing with Section 10235), to provide alternative payments and to provide support services to parents and providers.
(c)Applicant or contracting agency means a school district, community college district, college or university, county superintendent of schools, county, city, public agency, private nontax-exempt agency, private tax-exempt agency, or other entity that is authorized to establish, maintain, or operate services pursuant to this chapter. Private agencies and parent cooperatives, duly licensed by law, shall receive the same consideration as any other authorized entity with no loss of parental decisionmaking prerogatives as consistent with the provisions of this chapter.
(d)Assigned reimbursement rate is that rate established by the contract with the agency and is derived by dividing the total dollar amount of the contract by the minimum child day of average daily enrollment level of service required.
(e)Attendance means the number of children present at a childcare and development facility. Attendance, for purposes of reimbursement, includes excused absences by children because of illness, quarantine, illness or quarantine of their parent, family emergency, medical and educational appointments, or to spend time with a parent or other relative as required by a court of law or that is clearly in the best interest of the child. For purposes of reimbursement, a contractor may claim attendance for days that the contractor or provider is required to hold a space for a child during the period that a family is assumed to have abandoned care or is engaging in the appeal process based on disenrollment for abandoning care.
(f)Capital outlay means the amount paid for the renovation and repair of childcare and development and preschool facilities to comply with state and local health and safety standards, and the amount paid for the state purchase of relocatable childcare and development and preschool facilities for lease to qualifying contracting agencies.
(g)Caregiver means a person who provides direct care, supervision, and guidance to children in a childcare and development facility.
(h)Childcare and development facility means a residence or building or part thereof in which childcare and development services are provided.
(i)Childcare and development programs means those programs that offer a full range of services for children from infancy to 13 years of age, for any part of a day, by a public or private agency, in centers and family childcare homes. These programs include, but are not limited to, all of the following:
(1)General childcare and development.
(2)Migrant childcare and development.
(3)Childcare provided by the California School Age Families Education Program (Article 7.1 (commencing with Section 54740) of Chapter 9 of Part 29 of Division 4 of Title 2).
(4)Resource and referral.
(5)Childcare and development services for children with exceptional needs.
(6)Family childcare home education network.
(7)Alternative payment.
(8)Schoolage community childcare.
(j)Childcare and development services means those 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. These services may include direct care and supervision, instructional activities, resource and referral programs, and alternative payment arrangements.
(k)Children at risk of abuse, neglect, or exploitation means children who are so identified in a written referral from a legal, medical, or social service agency, or emergency shelter.
(l)Children with exceptional needs means either of the following:
(1)Infants and toddlers under three years of age who have been determined to be eligible for early intervention services pursuant to the California Early Intervention Services Act (Title 14 (commencing with Section 95000) of the Government Code) and its implementing regulations. These children include an infant or toddler with a developmental delay or established risk condition, or who is at high risk of having a substantial developmental disability, as defined in subdivision (a) of Section 95014 of the Government Code. These children shall have active individualized family service plans, shall be receiving early intervention services, and shall be children who require the special attention of adults in a childcare setting.
(2)Children 3 to 21 years of age, inclusive, who have been determined to be eligible for special education and related services by an individualized education program team according to the special education requirements contained in Part 30 (commencing with Section 56000) of Division 4 of Title 2 of the Education Code, and who meet eligibility criteria described in Section 56026 of the Education Code and, Article 2.5 (commencing with Section 56333) of Chapter 4 of Part 30 of Division 4 of Title 2 of the Education Code, and Sections 3030 and 3031 of Title 5 of the California Code of Regulations. These children shall have an active individualized education program, shall be receiving early intervention services or appropriate special education and related services, and shall be children who require the special attention of adults in a childcare setting. These children include children with intellectual disabilities, hearing impairments (including deafness), speech or language impairments, visual impairments (including blindness), serious emotional disturbance (also referred to as emotional disturbance), orthopedic impairments, autism, traumatic brain injury, other health impairments, or specific learning disabilities, who need special education and related services consistent with Section 1401(3)(A) of Title 20 of the United States Code.
(m)Closedown costs means reimbursements for all approved activities associated with the closing of operations at the end of each growing season for migrant child development programs only.
(n)Cost includes, but is not limited to, expenditures that are related to the operation of childcare and development programs. Cost may include a reasonable amount for state and local contributions to employee benefits, including approved retirement programs, agency administration, and any other reasonable program operational costs. Cost may also include amounts for licensable facilities in the community served by the program, including lease payments or depreciation, downpayments, and payments of principal and interest on loans incurred to acquire, rehabilitate, or construct licensable facilities, but these costs shall not exceed fair market rents existing in the community in which the facility is located. Reasonable and necessary costs are costs that, in nature and amount, do not exceed what an ordinary prudent person would incur in the conduct of a competitive business.
(o)Elementary school, as contained in former Section 425 of Title 20 of the United States Code (the National Defense Education Act of 1958, Public Law 85-864, as amended), includes early childhood education programs and all child development programs, for the purpose of the cancellation provisions of loans to students in institutions of higher learning.
(p)Family childcare home education network means an entity organized under law that contracts with the department pursuant to Section 10250 to make payments to licensed family childcare home providers and to provide educational and support services to those providers and to children and families eligible for state-subsidized childcare and development services. A family childcare home education network may also be referred to as a family childcare home system.
(q)Health services include, but are not limited to, all of the following:
(1)Referral, whenever possible, to appropriate health care providers able to provide continuity of medical care.
(2)Health screening and health treatment, including a full range of immunization recorded on the appropriate state immunization form to the extent provided by the Medi-Cal Act (Chapter 7 (commencing with Section 14000) of Part 3) and the Child Health and Disability Prevention Program (Article 6 (commencing with Section 124025) of Chapter 3 of Part 2 of Division 106 of the Health and Safety Code), but only to the extent that ongoing care cannot be obtained utilizing community resources.
(3)Health education and training for children, parents, staff, and providers.
(4)Followup treatment through referral to appropriate health care agencies or individual health care professionals.
(r)Higher educational institutions means the Regents of the University of California, the Trustees of the California State University, the Board of Governors of the California Community Colleges, and the governing bodies of any accredited private nonprofit institution of postsecondary education.
(s)Intergenerational staff means persons of various generations.
(t)Dual language learner means children whose first language is a language other than English or children who are developing two or more languages, one of which may be English.
(u)Parent means a biological parent, stepparent, adoptive parent, foster parent, caretaker relative, or any other adult living with a child who has responsibility for the care and welfare of the child.
(v)Program director means a person who, pursuant to Sections 10242 and 10380.5, is qualified to serve as a program director.
(w)Proprietary childcare agency means an organization or facility providing childcare, which is operated for profit.
(x)Resource and referral programs means programs that provide information to parents, including referrals and coordination of community resources for parents and public or private providers of care. Services frequently include, but are not limited to: technical assistance for providers, toy-lending libraries, equipment-lending libraries, toy- and equipment-lending libraries, staff development programs, health and nutrition education, and referrals to social services.
(y)Severely disabled children are children with exceptional needs from birth to 21 years of age, inclusive, who require intensive instruction and training in programs serving pupils with the following profound disabilities: autism, blindness, deafness, severe orthopedic impairments, serious emotional disturbances, or severe intellectual disabilities. Severely disabled children also include those individuals who would have been eligible for enrollment in a developmental center for handicapped pupils under Chapter 7 (commencing with Section 56800) of Part 30 of Division 4 of Title 2 of the Education Code as it read on January 1, 1980.
(z)Short-term respite childcare means childcare service to assist families whose children have been identified through written referral from a legal, medical, or social service agency, or emergency shelter as being neglected, abused, exploited, or homeless, or at risk of being neglected, abused, exploited, or homeless. Childcare is provided for less than 24 hours per day in childcare centers, treatment centers for abusive parents, family childcare homes, or in the childs own home.
(aa)Site supervisor means a person who, regardless of their title, has operational program responsibility for a childcare and development program at a single site. A site supervisor shall hold a permit issued by the Commission on Teacher Credentialing that authorizes supervision of a childcare and development program operating in a single site. The department may waive the requirements of this subdivision if the department determines that the existence of compelling need is appropriately documented.
(ab)Standard reimbursement rate means that rate established by the department pursuant to Section 10280.
(ac)Startup costs means those expenses an agency incurs in the process of opening a new or additional facility before the full enrollment of children.
(ad)California state preschool program means part-day and full-day educational programs for low-income or otherwise disadvantaged three- and four-year-old children.
(ae)Support services means those services that, when combined with childcare and development services, help promote the healthy physical, mental, social, and emotional growth of children. Support services include, but are not limited to: protective services, parent training, provider and staff training, transportation, parent and child counseling, child development resource and referral services, and child placement counseling.
(af)Teacher means a person with the appropriate permit issued by the Commission on Teacher Credentialing who provides program supervision and instruction that includes supervision of a number of aides, volunteers, and groups of children.
(ag)Underserved area means a county or subcounty area, including, but not limited to, school districts, census tracts, or ZIP Code areas, where the ratio of publicly subsidized childcare and development program services to the need for these services is low, as determined by the department.
(ah)Workday means the time that the parent requires temporary care for a child for any of the following reasons:
(1)To undertake training in preparation for a job.
(2)To undertake or retain a job.
(3)To undertake other activities that are essential to maintaining or improving the social and economic function of the family, are beneficial to the community, or are required because of health problems in the family.
(ai)Homeless children and youth has the same meaning as defined in Section 11434a(2) of the federal McKinney-Vento Homeless Assistance Act (42 U.S.C. Sec. 11301 et seq.).
(aj)Local educational agency means a school district, a county office of education, a community college district, or a school district acting on behalf of one or more schools within the school district.
(ak)Alternative methodology means a cost-based method, including a cost estimation model, that informs payment rates pursuant to the requirements set forth in Section 98.45 of Title 45 of the Code of Federal Regulations.
(al)(1)Effective no later than March 1, 2024, part-time care means care certified for a child for fewer than 25 hours per week.
(2)Effective no later than March 1, 2024, full-time care means care certified for a child for 25 or more hours per week.
(3)Notwithstanding the rulemaking provisions of the Administrative Procedure Act (Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code), the department may implement and administer this subdivision by all-county letters, bulletins, or similar written instructions until regulations are adopted.
(4)The department shall initiate a rulemaking action to adopt regulations to implement this subdivision no later than July 1, 2026.
(5)If the provisions of this subdivision are in conflict with the provisions of a memorandum of understanding reached pursuant to Section 10426, the memorandum of understanding shall be controlling without further legislative action, except that if such provisions of a memorandum of understanding require the expenditure of funds, the provisions shall not become effective unless approved by the Legislature in the annual Budget Act.
(am)Excessive unexplained absences means absences that are not considered excused as defined in subdivision (e) and exceed 30 days within a 12-month interval during the period of time between determinations and redeterminations. Excessive unexplained absences, for the purposes of reimbursement, include nonconsecutive and consecutive days of absence that are not considered excused as defined in subdivision (e).
(1)Notwithstanding the rulemaking provisions of the Administrative Procedure Act (Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code), the department may implement and administer this subdivision by all-county letters, bulletins, or similar written instructions until regulations are adopted.
(2)The department shall initiate a rulemaking action to adopt regulations to implement this subdivision no later than July 1, 2030.
(an)Nonstandard hours means certified need from 6:00 p.m. to 7:00 a.m. any day of the week and certified need from 7:00 a.m. to 6:00 p.m. on Saturday or Sunday.
(ao)Base payment rate means the standard, unadjusted subsidy rate authorized by the state to reimburse providers and contractors to meet health, safety, program, and staffing requirements as it pertains to the delivery of subsidized childcare services to eligible children.
(ap)Enhanced rate, or enhanced payment rate means a state-authorized reimbursement, disbursed as a fixed, flat amount, to reimburse providers and contractors for specialized services, as determined by the department, provided to eligible children by an individual provider.
SEC. 4.Section 10227.6 of the Welfare and Institutions Code is amended to read:10227.6.(a)It is the intent of the Legislature to use an alternative methodology, as defined in subdivision (ak) of Section 10213.5, to inform the setting of reimbursement rates for subsidized childcare.
(b)Reimbursement rates are subject to agreement and codification by the Legislature.
(c)The department, in collaboration with the State Department of Education, shall develop and conduct an alternative methodology. The department shall begin the process of data collection and analysis pursuant to developing an alternative methodology by July 1, 2023, and consult with the State Department of Education on data collection, analysis, and methodology for preschool programs. The alternative methodology shall build on the recommendations of the working group established pursuant to Section 10280.2 and shall be aligned with the recommendations of the Joint Labor Management Committee established pursuant to subdivision (a) of Section 10280.2.
(d)No later than February 15, 2024, the department, in collaboration with the State Department of Education and the Joint Labor Management Committee established pursuant to subdivision (a) of Section 10280.2, using information from the cost estimation model, shall define elements of the base rate and any enhanced rates to inform the states proposed single-rate structure and rates. These elements shall be subject to the mandated public engagement state plan process and legislative review. The department shall report to the Senate Health and Human Services budget subcommittees, Assembly and Senate Education budget subcommittees, and the Legislative Analysts Office on progress made to conduct an alternative methodology and cost-estimate model.
(e)No later than May 15, 2024, the department shall report on the status of the draft Child Care and Development Fund state plan to the Senate Health and Human Services budget subcommittees, Assembly and Senate Education budget subcommittees, and the Legislative Analysts Office on the states proposed single-rate structure to be submitted to the United States Department of Health and Human Services, Administration for Children and Families.
(f)No later than July 1, 2024, the department shall submit necessary information to support use of a single-rate structure using the alternative methodology to the United States Department of Health and Human Services, Administration for Children and Families in the Child Care and Development Fund state plan or an amendment to the state plan. The department shall provide a copy of the Child Care and Development Fund state plan or amendment to the state plan submitted to the United States Department of Health and Human Services, Administration for Children and Families to the Senate Health and Human Services budget subcommittees, Assembly and Senate Education budget subcommittees, and the Legislative Analysts Office no later than July 10, 2024.
(g)(1)Within 60 days of federal approval of the single-rate structure utilizing the alternative methodology in the state plan, the department, in collaboration with the State Department of Education, shall provide the Assembly Committee on Budget, the Senate Committee on Budget and Fiscal Review, and the Legislative Analysts Office with a report that outlines the implementation components for the approved single-rate structure. For a period of 30 days, the Legislature shall have the opportunity to review and provide feedback regarding draft guidance for implementation of policies. The report shall include all of the following:
(A)The departments plan to set new reimbursement rates under the alternative methodology by no later than July 1, 2025.
(B)The estimated costs and estimated timelines associated with the implementation components of the approved single-rate structure, including, but not limited to, state operations resources, technology and infrastructure changes, and any regulatory or statutory changes necessary to implement the approved single-rate structure.
(2)The department shall, from October 1, 2024, until July 1, 2028, inclusive, provide the Assembly Committee on Budget, the Senate Committee on Budget and Fiscal Review, and the Legislative Analysts Office with quarterly updates on the implementation of the new reimbursement rates set under the alternative methodology. The quarterly updates shall include any changes to the information provided in the report described in paragraph (1).
(h)Beginning October 1, 2025, and through July 1, 2027, inclusive, the department shall update the Legislature not more frequently than quarterly, to the extent information is available or reported to the department by contractors, regarding progress on implementation of prospective payment and paying based on enrollment, in keeping with the goals set for funds appropriated pursuant to Provision 19 of Item 5180-101-0001 of the Budget Act of 2025 and with subparagraph (i) of paragraph (2) of subdivision (m) of Section 98.45 of Subpart E of Part 98 of Subchapter A of Subtitle A of Title 45 of the Code of Federal Regulations.
(i)The Governor and the Legislature shall, by no later than July 1, 2025, establish reimbursement rates based on the alternative methodology. Provider reimbursement rates shall not be reduced from the reimbursement rates that were in effect on June 30, 2024, pursuant to Sections 10280 and 10374.5 of this code and Section 8242 of the Education Code, inclusive of the cost of care plus rates established pursuant to subdivision (b) of Section 10277.1 and subdivision (b) of Section 10277.2.
(j)(1)If the new reimbursement rates established pursuant to subdivision (i) do not take effect on July 1, 2025, the department shall provide the Chairperson of the Joint Legislative Budget Committee with the departments anticipated timeline for transitioning from the rates that are in effect on July 1, 2025, to the new rates established pursuant to subdivision (i).
(2)Any temporary reimbursement rates established as part of the transition timeline required by paragraph (1) shall be, at minimum, equivalent to the reimbursement rates established pursuant to Sections 10280 and 10374.5 of this code and Section 8242 of the Education Code, inclusive of the cost of care plus rates established pursuant to subdivision (b) of Section 10277.1 and subdivision (b) of Section 10277.2.
(k)The single-rate structure shall apply to all programs funded by the State Department of Social Services under Chapter 3 (commencing with Section 10225), Chapter 6 (commencing with Section 10235), Chapter 7 (commencing with Section 10240), Chapter 8 (commencing with Section 10250), Chapter 9 (commencing with Section 10260), Chapter 21 (commencing with Section 10370), and Chapter 2 (commencing with Section 11461.6) of Part 2, and the State Department of Education under Chapter 2 (commencing with Section 8200) of Part 6 of Division 1 of Title 1 of the Education Code.
(l)(1)Except as required by subdivision (n), it is the intent of the Legislature, beginning July 1, 2025, to cease using a regional market-rate survey pursuant to Section 10436, and instead use an alternative methodology, as defined in subdivision (ak) of Section 10213.5, for the purpose of informing the setting of future childcare rates.
(2)It is the intent of the Legislature that:
(A)Reimbursement rates are set pursuant to statute and informed by the alternative methodology, as defined in subdivision (ak) of Section 10213.5.
(B)Under the single-rate structure, all programs described in subdivision (k) shall be reimbursed under a unified structure that takes into account a common set of rate elements.
(C)Rate levels shall be informed by the costs associated with meeting health and safety requirements and program requirements.
(D)Base rates shall be administered as a per-child amount, and programs shall be able to claim reimbursement for services they deliver consistent with enhanced rates, if any.
(E)Rates shall vary based on all of the following:
(i)Geography.
(ii)Type of care setting.
(iii)Regulatory requirements applicable to each type of care setting.
(iv)Time categories.
(v)Child age.
(m)Commencing July 1, 2026, rates for all programs described in subdivision (k) shall receive the cost-of-living adjustment granted by the Legislature annually pursuant to Section 42238.15 of the Education Code as a minimum annual rate increase for all subsidized childcare providers.
(n)If the United States Department of Health and Human Services, Administration for Children and Families does not approve the alternative methodology developed pursuant to this section, the department shall develop and conduct a survey of the market rates for childcare services.
(o)If the provisions of this section are in conflict with the provisions of a memorandum of understanding reached pursuant to Section 10426, the memorandum of understanding shall be controlling without further legislative action, except that if such provisions of a memorandum of understanding require the expenditure of funds, the provisions shall not become effective unless approved by the Legislature in the annual Budget Act.
(p)When updating the alternative methodology, as required by the triennial federal Child Care Development fund plan, the department shall use values or selection points that reflect the actual, established costs of providing care.
SEC. 4.5.Section 10227.6 of the Welfare and Institutions Code is amended to read:10227.6.(a)It is the intent of the Legislature to use an alternative methodology, as defined in subdivision (ak) of Section 10213.5, to inform the setting of reimbursement rates for subsidized childcare.
(b)Reimbursement rates are subject to agreement and codification by the Legislature.
(c)The department, in collaboration with the State Department of Education, shall develop and conduct an alternative methodology. The department shall begin the process of data collection and analysis pursuant to developing an alternative methodology by July 1, 2023, and consult with the State Department of Education on data collection, analysis, and methodology for preschool programs. The alternative methodology shall build on the recommendations of the working group established pursuant to Section 10280.2 and shall be aligned with the recommendations of the Joint Labor Management Committee established pursuant to subdivision (a) of Section 10280.2.
(d)No later than February 15, 2024, the department, in collaboration with the State Department of Education and the Joint Labor Management Committee established pursuant to subdivision (a) of Section 10280.2, using information from the cost estimation model, shall define elements of the base rate and any enhanced rates to inform the states proposed single-rate structure and rates. These elements shall be subject to the mandated public engagement state plan process and legislative review. The department shall report to the Senate Health and Human Services budget subcommittees, Assembly and Senate Education budget subcommittees, and the Legislative Analysts Office on progress made to conduct an alternative methodology and cost-estimate model.
(e)No later than May 15, 2024, the department shall report on the status of the draft Child Care and Development Fund state plan to the Senate Health and Human Services budget subcommittees, Assembly and Senate Education budget subcommittees, and the Legislative Analysts Office on the states proposed single-rate structure to be submitted to the United States Department of Health and Human Services, Administration for Children and Families.
(f)No later than July 1, 2024, the department shall submit necessary information to support use of a single rate structure using the alternative methodology to the United States Department of Health and Human Services, Administration for Children and Families in the Child Care and Development Fund state plan or an amendment to the state plan. The department shall provide a copy of the Child Care and Development Fund state plan or amendment to the state plan submitted to the United States Department of Health and Human Services, Administration for Children and Families to the Senate Health and Human Services budget subcommittees, Assembly and Senate Education budget subcommittees, and the Legislative Analysts Office no later than July 10, 2024.
(g)(1)Within 60 days of federal approval of the single-rate structure utilizing the alternative methodology in the state plan, the department, in collaboration with the State Department of Education, shall provide the Assembly Committee on Budget, the Senate Committee on Budget and Fiscal Review, and the Legislative Analysts Office with a report that outlines the implementation components for the approved single-rate structure. For a period of 30 days, the Legislature shall have the opportunity to review and provide feedback regarding draft guidance for implementation of policies. The report shall include all of the following:
(A)The departments plan to set new reimbursement rates under the alternative methodology by no later than July 1, 2025.
(B)The estimated costs and estimated timelines associated with the implementation components of the approved single-rate structure, including, but not limited to, state operations resources, technology and infrastructure changes, and any regulatory or statutory changes necessary to implement the approved single-rate structure.
(2)(A)The department shall, from October 1, 2024, to July 1, 2028, inclusive, provide the Assembly Committee on Budget, the Senate Committee on Budget and Fiscal Review, and the Legislative Analysts Office with quarterly updates on the implementation of the new reimbursement rates set under the alternative methodology. The quarterly updates shall include any changes to the information provided in the report described in paragraph (1).
(B)(i)The quarterly report issued in July 2027, pursuant to subparagraph (A) shall consist of the considerations required to add monthly cost of care plus rates made pursuant to Sections 10277.1, 10277.2, and 10277.6 to existing reimbursement rates that are funded within existing childcare and development contracts for alternative payment programs, including, but not limited to, migrant alternative payment programs pursuant to Chapter 3 (commencing with Section 10225), migrant childcare and development programs pursuant to Chapter 6 (commencing with Section 10235), general childcare and development programs pursuant to Chapter 7 (commencing with Section 10240), family childcare home education networks pursuant to Chapter 8 (commencing with Section 10250), childcare and development services for children with special needs pursuant to Chapter 9 (commencing with Section 10260), childcare for recipients of the CalWORKs program pursuant to Chapter 21 (commencing with Section 10370), and the emergency childcare bridge program for foster children pursuant to Section 11461.6.
(ii)Considerations presented by the department pursuant to clause (i) shall include, but not be limited to, all of the following:
(I)Updates to data systems required to add monthly cost of care plus payments to existing contract rates.
(II)Necessary statutory and regulatory changes to add monthly cost of care plus payments to existing contract rates.
(III)Activities needed to be performed by the department and contractors to ensure contractors can pay childcare providers through a contract rate that includes the monthly cost of care plus payments.
(iii)The department shall present, where practicable, an estimated timeframe for each consideration described pursuant to clause (ii).
(h)Beginning October 1, 2025, and through July 1, 2027, inclusive, the department shall update the Legislature not more frequently than quarterly, to the extent information is available or reported to the department by contractors, regarding progress on implementation of paying based on enrollment.
(i)The Governor and the Legislature shall, by no later than July 1, 2025, establish reimbursement rates based on the alternative methodology. Provider reimbursement rates shall not be reduced from the reimbursement rates that were in effect on June 30, 2024, pursuant to Sections 10280 and 10374.5 of this code and Section 8242 of the Education Code, inclusive of the cost of care plus rates established pursuant to subdivision (b) of Section 10277.1 and subdivision (b) of Section 10277.2.
(j)(1)If the new reimbursement rates established pursuant to subdivision (i) do not take effect on July 1, 2025, the department shall provide the Chairperson of the Joint Legislative Budget Committee with the departments anticipated timeline for transitioning from the rates that are in effect on July 1, 2025, to the new rates established pursuant to subdivision (i).
(2)Any temporary reimbursement rates established as part of the transition timeline required by paragraph (1) shall be, at minimum, equivalent to the reimbursement rates established pursuant to Sections 10280 and 10374.5 of this code and Section 8242 of the Education Code, inclusive of the cost of care plus rates established pursuant to subdivision (b) of Section 10277.1 and subdivision (b) of Section 10277.2.
(k)The single rate structure shall apply to all programs funded by the State Department of Social Services under Chapter 3 (commencing with Section 10225), Chapter 6 (commencing with Section 10235), Chapter 7 (commencing with Section 10240), Chapter 8 (commencing with Section 10250), Chapter 9 (commencing with Section 10260), Chapter 21 (commencing with Section 10370), and Chapter 2 (commencing with Section 11461.6) of Part 2, and the State Department of Education under Chapter 2 (commencing with Section 8200) of Part 6 of Division 1 of Title 1 of the Education Code.
(l)The department, after collaborating with the State Department of Education, shall identify the remaining foundational policy frameworks of the single rate structure by January 10, 2028.
(m)(1)Except as required by subdivision (n), it is the intent of the Legislature, beginning July 1, 2025, to cease using a regional market-rate survey pursuant to Section 10436, and instead use an alternative methodology, as defined in subdivision (ak) of Section 10213.5, for the purpose of informing the setting of future childcare rates and California state preschool program rates.
(2)It is the intent of the Legislature that:
(A)Reimbursement rates are set pursuant to statute and informed by the alternative methodology, as defined in subdivision (ak) of Section 10213.5.
(B)Under the single-rate structure, all programs described in subdivision (k) shall be reimbursed under a unified structure that takes into account a common set of rate elements.
(C)Rate levels shall be informed by the costs associated with meeting health and safety requirements and program requirements.
(D)Base rates shall be administered as a per-child amount, and programs shall be able to claim reimbursement for services they deliver consistent with enhanced rates, if any.
(E)Rates shall vary based on all of the following:
(i)Geography.
(ii)Type of care setting.
(iii)Regulatory and statutory requirements applicable to each type of care setting.
(iv)Time categories.
(v)Child age groupings, consisting of all of the following:
(I)Children under two years of age, the care of whom will be reimbursed at the infant rate.
(II)Children who are two years of age, the care of whom will be reimbursed at the toddler rate.
(III)Children who are three years of age to six years of age, inclusive, who are not yet enrolled in first grade, the care of whom will be reimbursed at the preschool rate.
(IV)Children five years of age and older, who are enrolled in first grade or higher, the care of whom will be reimbursed at the schoolage rate.
(F)(i)Enhanced inclusion rates shall be administered as a per-child amount, and programs shall be able to claim reimbursement, consistent with the rules and regulations developed by the department and the State Department of Education, respectively. To receive an enhanced inclusion rate for a child, the family data file shall include documentation of at least one of the following:
(I)A current individualized family service plan.
(II)A current individualized education program.
(III)A current individual program plan.
(IV)An active plan pursuant to Section 504 of the federal Rehabilitation Act of 1973 (29 U.S.C. Sec. 794).
(V)An active incidental medical services plan, as described in Section 1596.802 of the Health and Safety Code.
(ii)The documentation described in clause (i) may be unsigned if the family did not consent to the services, despite the child being deemed eligible.
(3)It is further the intent of the Legislature that the alternative methodology shall be based on a cost study and cost estimation model conducted by the department for the measurement of the costs of care in California for all childcare and preschool programs described in subdivision (k), and shall include, but not be limited to, all of the following costs:
(A)Salaries and wages.
(B)Geography.
(C)Type of care setting.
(D)Regulatory and statutory requirements applicable to each type of care setting.
(E)Time categories, including, but not limited to, non-traditional hours.
(F)Child age.
(G)Cost for delivering inclusion supports.
(n)Commencing July 1, 2026, rates for all programs described in subdivision (k) shall receive the cost-of-living adjustment granted by the Legislature annually pursuant to Section 42238.15 of the Education Code as a minimum annual rate increase for all subsidized childcare providers.
(o)If the United States Department of Health and Human Services, Administration for Children and Families does not approve the alternative methodology developed pursuant to this section, the department shall develop and conduct a survey of the market rates for childcare services.
(p)If the provisions of this section are in conflict with the provisions of a memorandum of understanding reached pursuant to Section 10426, the memorandum of understanding shall be controlling without further legislative action, except that if such provisions of a memorandum of understanding require the expenditure of funds, the provisions shall not become effective unless approved by the Legislature in the annual Budget Act.
(q)When updating the alternative methodology, as required by the triennial federal Child Care Development fund plan, the department shall use values or selection points that reflect the actual, established costs of providing care.
SEC. 5.Section 10227.7 is added to the Welfare and Institutions Code, to read:10227.7.(a)When establishing new reimbursement rates using a single-rate structure informed by an alternative methodology, pursuant to subdivision (i) of Section 10227.6, to the extent it is consistent with the approved Child Care and Development Fund state plan, the department, in consultation with the State Department of Education, shall do all of the following:
(1)Vary rates based on geographic regions established by the department and determined by the cost of living.
(2)Vary rates, at a minimum, based on whether the childcare is being provided in a license-exempt childcare setting, a licensed family daycare home, or a licensed daycare center setting.
(3)Vary rates based on regulatory and statutory requirements applicable to each type of care setting.
(4)Vary rates, at a minimum, based on the following time category considerations:
(A)Part-time and full-time certified need.
(B)A week, for purposes of determining the hours of certified need in a week, begins at midnight on Sunday and ends at 11:59 p.m. on Saturday.
(5)Vary rates, at a minimum, based on the following child age considerations:
(A)All programs that serve the same age of children and have the same program requirements receive the same reimbursable base payment rate, regardless of the type of program contract.
(B)The establishment of rates based on the following child age groupings:
(i)Children who are younger than two years of age, the care of whom will be reimbursed at the infant rate.
(ii)Children who are two years of age, the care of whom will be reimbursed at the toddler rate.
(iii)Children who are three to six years of age, inclusive, who are not yet enrolled in first grade, the care of whom will be reimbursed at the preschool rate.
(iv)Children who are five years of age and older who are enrolled in first grade, the care of whom will be reimbursed at the schoolage rate.
(6)Include an enhanced rate for nonstandard hours of care.
(7)(A)Include an enhanced inclusion rate, which shall be administered as a per-child amount and for which programs shall be able to claim reimbursement, consistent with the rules and regulations developed by the department and the State Department of Education, as applicable. To receive an enhanced inclusion rate for a child, the family data file shall include documentation of at least one of the following:
(i)A current individualized family service plan.
(ii)A current individualized education program.
(iii)A current individual program plan.
(iv)An active plan pursuant to Section 504 of the federal Rehabilitation Act of 1973 (29 U.S.C. Sec. 794).
(v)An active incidental medical services plan, as described in Section 1596.802 of the Health and Safety Code.
(B)The documentation described in subparagraph (A) may be unsigned if the family did not consent to the childs receipt of services, despite the child being deemed eligible.
(8)May include other enhanced rates, as determined through the annual Budget process.
(9)Ensure that the reimbursement rates for a specific child, payable to an individual provider or contractor, includes all enhanced rates for which the child is eligible, and that are for services the child is receiving from the individual provider or contractor.
(10)Ensure that base payment rates are based on a childs maximum certified hours of care with an individual provider, regardless of attendance.
(b)Notwithstanding the rulemaking provisions of the Administrative Procedure Act (Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code), the department may implement and administer this section by all-county letters, childcare bulletins, or similar written instructions until regulations are adopted. These all-county letters or similar written instructions shall have the same force and effect as regulations.
SEC. 6.Section 4.5 of this bill incorporates amendments to Section 10227.6 of the Welfare and Institutions Code proposed by this bill and either Assembly Bill 190 or Senate Bill 190. That section of this bill shall only become operative if (1) both bills are enacted and become effective on or before January 1, 2027, (2) each bill amends Section 10227.6 of the Welfare and Institutions Code, and (3) this bill is enacted after either Assembly Bill 190 or Senate Bill 190, in which case Section 10227.6 of the Welfare and Institutions Code, as amended by either Assembly Bill 190 or Senate Bill 190, shall remain operative only until the operative date of this bill, at which time Section 4.5 of this bill shall become operative, and Section 4 of this bill shall not become operative.
SEC. 7.This act is an urgency statute necessary for the immediate preservation of the public peace, health, or safety within the meaning of Article IV of the California Constitution and shall go into immediate effect. The facts constituting the necessity are:
In order to prevent further delays transitioning to the new systems for setting reimbursement rates for subsidized childcare programs, it is necessary for this act to take effect immediately.
This act shall be known, and may be cited, as the True Cost of Childcare Act.
SEC. 2.(a)The Legislature finds and declares all of the following:
(1)California is committed to advancing racial, economic, geographic, and gender equity across its publicly funded systems, including early learning and care.
(2)Federal regulations allow states to use a cost estimation model. This model can replace a market-rate survey to better reflect the true cost of high-quality childcare. It includes adequate compensation for the workforce, investments in health and safety, and compliance with licensing requirements.
(3)In a broken market where rates are set based on what families can pay as opposed to what it actually costs to provide quality, developmentally appropriate care reliance on regional market rates perpetuate historic inequities by embedding disparities in family income, neighborhood wealth, and access to private tuition into the states reimbursement structure.
(4)The early care and education workforce is almost exclusively female and predominantly people of color, including many immigrants, first-generation college students, and working mothers. Many early educators turn to public safety-net support to meet the basic needs of their family.
(5)Childcare deserts are most prevalent in low-income communities, rural areas, tribal communities, and communities of color, where the market fails to generate rates sufficient to sustain licensed and license-exempt providers serving subsidized families.
(6)As part of developing a single rate structure the State Department of Social Services consulted with early childhood educator stakeholders.
(7)Despite this statutory direction and extensive stakeholder engagement, a single rate structure is continuing to be developed.
(8)Adopting a single rate structure informed by the alternative methodology is needed to support the childcare workforce, help families in the states subsidized childcare system, and protect the states economy.
(b)Therefore, it is the intent of the Legislature to codify a single rate structure informed by the alternative methodology and to ensure its timely implementation.
SEC. 3.Section 10213.5 of the Welfare and Institutions Code is amended to read:10213.5.As used in this part:
(a)Alternative payments includes payments that are made by one childcare agency to another agency or childcare provider for the provision of childcare and development services, and payments that are made by an agency to a parent for the parents purchase of childcare and development services.
(b)Alternative payment program means a local government agency or nonprofit organization that has contracted with the department pursuant to Section 10225.5, or a migrant alternative payment program pursuant to Chapter 6 (commencing with Section 10235), to provide alternative payments and to provide support services to parents and providers.
(c)Applicant or contracting agency means a school district, community college district, college or university, county superintendent of schools, county, city, public agency, private nontax-exempt agency, private tax-exempt agency, or other entity that is authorized to establish, maintain, or operate services pursuant to this chapter. Private agencies and parent cooperatives, duly licensed by law, shall receive the same consideration as any other authorized entity with no loss of parental decisionmaking prerogatives as consistent with the provisions of this chapter.
(d)Assigned reimbursement rate is that rate established by the contract with the agency and is derived by dividing the total dollar amount of the contract by the minimum child day of average daily enrollment level of service required.
(e)Attendance means the number of children present at a childcare and development facility. Attendance, for purposes of reimbursement, includes excused absences by children because of illness, quarantine, illness or quarantine of their parent, family emergency, medical and educational appointments, or to spend time with a parent or other relative as required by a court of law or that is clearly in the best interest of the child. For purposes of reimbursement, a contractor may claim attendance for days that the contractor or provider is required to hold a space for a child during the period that a family is assumed to have abandoned care or is engaging in the appeal process based on disenrollment for abandoning care.
(f)Capital outlay means the amount paid for the renovation and repair of childcare and development and preschool facilities to comply with state and local health and safety standards, and the amount paid for the state purchase of relocatable childcare and development and preschool facilities for lease to qualifying contracting agencies.
(g)Caregiver means a person who provides direct care, supervision, and guidance to children in a childcare and development facility.
(h)Childcare and development facility means a residence or building or part thereof in which childcare and development services are provided.
(i)Childcare and development programs means those programs that offer a full range of services for children from infancy to 13 years of age, for any part of a day, by a public or private agency, in centers and family childcare homes. These programs include, but are not limited to, all of the following:
(1)General childcare and development.
(2)Migrant childcare and development.
(3)Childcare provided by the California School Age Families Education Program (Article 7.1 (commencing with Section 54740) of Chapter 9 of Part 29 of Division 4 of Title 2).
(4)Resource and referral.
(5)Childcare and development services for children with exceptional needs.
(6)Family childcare home education network.
(7)Alternative payment.
(8)Schoolage community childcare.
(j)Childcare and development services means those 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. These services may include direct care and supervision, instructional activities, resource and referral programs, and alternative payment arrangements.
(k)Children at risk of abuse, neglect, or exploitation means children who are so identified in a written referral from a legal, medical, or social service agency, or emergency shelter.
(l)Children with exceptional needs means either of the following:
(1)Infants and toddlers under three years of age who have been determined to be eligible for early intervention services pursuant to the California Early Intervention Services Act (Title 14 (commencing with Section 95000) of the Government Code) and its implementing regulations. These children include an infant or toddler with a developmental delay or established risk condition, or who is at high risk of having a substantial developmental disability, as defined in subdivision (a) of Section 95014 of the Government Code. These children shall have active individualized family service plans, shall be receiving early intervention services, and shall be children who require the special attention of adults in a childcare setting.
(2)Children 3 to 21 years of age, inclusive, who have been determined to be eligible for special education and related services by an individualized education program team according to the special education requirements contained in Part 30 (commencing with Section 56000) of Division 4 of Title 2 of the Education Code, and who meet eligibility criteria described in Section 56026 of the Education Code and, Article 2.5 (commencing with Section 56333) of Chapter 4 of Part 30 of Division 4 of Title 2 of the Education Code, and Sections 3030 and 3031 of Title 5 of the California Code of Regulations. These children shall have an active individualized education program, shall be receiving early intervention services or appropriate special education and related services, and shall be children who require the special attention of adults in a childcare setting. These children include children with intellectual disabilities, hearing impairments (including deafness), speech or language impairments, visual impairments (including blindness), serious emotional disturbance (also referred to as emotional disturbance), orthopedic impairments, autism, traumatic brain injury, other health impairments, or specific learning disabilities, who need special education and related services consistent with Section 1401(3)(A) of Title 20 of the United States Code.
(m)Closedown costs means reimbursements for all approved activities associated with the closing of operations at the end of each growing season for migrant child development programs only.
(n)Cost includes, but is not limited to, expenditures that are related to the operation of childcare and development programs. Cost may include a reasonable amount for state and local contributions to employee benefits, including approved retirement programs, agency administration, and any other reasonable program operational costs. Cost may also include amounts for licensable facilities in the community served by the program, including lease payments or depreciation, downpayments, and payments of principal and interest on loans incurred to acquire, rehabilitate, or construct licensable facilities, but these costs shall not exceed fair market rents existing in the community in which the facility is located. Reasonable and necessary costs are costs that, in nature and amount, do not exceed what an ordinary prudent person would incur in the conduct of a competitive business.
(o)Elementary school, as contained in former Section 425 of Title 20 of the United States Code (the National Defense Education Act of 1958, Public Law 85-864, as amended), includes early childhood education programs and all child development programs, for the purpose of the cancellation provisions of loans to students in institutions of higher learning.
(p)Family childcare home education network means an entity organized under law that contracts with the department pursuant to Section 10250 to make payments to licensed family childcare home providers and to provide educational and support services to those providers and to children and families eligible for state-subsidized childcare and development services. A family childcare home education network may also be referred to as a family childcare home system.
(q)Health services include, but are not limited to, all of the following:
(1)Referral, whenever possible, to appropriate health care providers able to provide continuity of medical care.
(2)Health screening and health treatment, including a full range of immunization recorded on the appropriate state immunization form to the extent provided by the Medi-Cal Act (Chapter 7 (commencing with Section 14000) of Part 3) and the Child Health and Disability Prevention Program (Article 6 (commencing with Section 124025) of Chapter 3 of Part 2 of Division 106 of the Health and Safety Code), but only to the extent that ongoing care cannot be obtained utilizing community resources.
(3)Health education and training for children, parents, staff, and providers.
(4)Followup treatment through referral to appropriate health care agencies or individual health care professionals.
(r)Higher educational institutions means the Regents of the University of California, the Trustees of the California State University, the Board of Governors of the California Community Colleges, and the governing bodies of any accredited private nonprofit institution of postsecondary education.
(s)Intergenerational staff means persons of various generations.
(t)Dual language learner means children whose first language is a language other than English or children who are developing two or more languages, one of which may be English.
(u)Parent means a biological parent, stepparent, adoptive parent, foster parent, caretaker relative, or any other adult living with a child who has responsibility for the care and welfare of the child.
(v)Program director means a person who, pursuant to Sections 10242 and 10380.5, is qualified to serve as a program director.
(w)Proprietary childcare agency means an organization or facility providing childcare, which is operated for profit.
(x)Resource and referral programs means programs that provide information to parents, including referrals and coordination of community resources for parents and public or private providers of care. Services frequently include, but are not limited to: technical assistance for providers, toy-lending libraries, equipment-lending libraries, toy- and equipment-lending libraries, staff development programs, health and nutrition education, and referrals to social services.
(y)Severely disabled children are children with exceptional needs from birth to 21 years of age, inclusive, who require intensive instruction and training in programs serving pupils with the following profound disabilities: autism, blindness, deafness, severe orthopedic impairments, serious emotional disturbances, or severe intellectual disabilities. Severely disabled children also include those individuals who would have been eligible for enrollment in a developmental center for handicapped pupils under Chapter 7 (commencing with Section 56800) of Part 30 of Division 4 of Title 2 of the Education Code as it read on January 1, 1980.
(z)Short-term respite childcare means childcare service to assist families whose children have been identified through written referral from a legal, medical, or social service agency, or emergency shelter as being neglected, abused, exploited, or homeless, or at risk of being neglected, abused, exploited, or homeless. Childcare is provided for less than 24 hours per day in childcare centers, treatment centers for abusive parents, family childcare homes, or in the childs own home.
(aa)Site supervisor means a person who, regardless of their title, has operational program responsibility for a childcare and development program at a single site. A site supervisor shall hold a permit issued by the Commission on Teacher Credentialing that authorizes supervision of a childcare and development program operating in a single site. The department may waive the requirements of this subdivision if the department determines that the existence of compelling need is appropriately documented.
(ab)Standard reimbursement rate means that rate established by the department pursuant to Section 10280.
(ac)Startup costs means those expenses an agency incurs in the process of opening a new or additional facility before the full enrollment of children.
(ad)California state preschool program means part-day and full-day educational programs for low-income or otherwise disadvantaged three- and four-year-old children.
(ae)Support services means those services that, when combined with childcare and development services, help promote the healthy physical, mental, social, and emotional growth of children. Support services include, but are not limited to: protective services, parent training, provider and staff training, transportation, parent and child counseling, child development resource and referral services, and child placement counseling.
(af)Teacher means a person with the appropriate permit issued by the Commission on Teacher Credentialing who provides program supervision and instruction that includes supervision of a number of aides, volunteers, and groups of children.
(ag)Underserved area means a county or subcounty area, including, but not limited to, school districts, census tracts, or ZIP Code areas, where the ratio of publicly subsidized childcare and development program services to the need for these services is low, as determined by the department.
(ah)Workday means the time that the parent requires temporary care for a child for any of the following reasons:
(1)To undertake training in preparation for a job.
(2)To undertake or retain a job.
(3)To undertake other activities that are essential to maintaining or improving the social and economic function of the family, are beneficial to the community, or are required because of health problems in the family.
(ai)Homeless children and youth has the same meaning as defined in Section 11434a(2) of the federal McKinney-Vento Homeless Assistance Act (42 U.S.C. Sec. 11301 et seq.).
(aj)Local educational agency means a school district, a county office of education, a community college district, or a school district acting on behalf of one or more schools within the school district.
(ak)Alternative methodology means a cost-based method, including a cost estimation model, that informs payment rates pursuant to the requirements set forth in Section 98.45 of Title 45 of the Code of Federal Regulations.
(al)(1)Effective no later than March 1, 2024, part-time care means care certified for a child for fewer than 25 hours per week.
(2)Effective no later than March 1, 2024, full-time care means care certified for a child for 25 or more hours per week.
(3)Notwithstanding the rulemaking provisions of the Administrative Procedure Act (Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code), the department may implement and administer this subdivision by all-county letters, bulletins, or similar written instructions until regulations are adopted.
(4)The department shall initiate a rulemaking action to adopt regulations to implement this subdivision no later than July 1, 2026.
(5)If the provisions of this subdivision are in conflict with the provisions of a memorandum of understanding reached pursuant to Section 10426, the memorandum of understanding shall be controlling without further legislative action, except that if such provisions of a memorandum of understanding require the expenditure of funds, the provisions shall not become effective unless approved by the Legislature in the annual Budget Act.
(am)Excessive unexplained absences means absences that are not considered excused as defined in subdivision (e) and exceed 30 days within a 12-month interval during the period of time between determinations and redeterminations. Excessive unexplained absences, for the purposes of reimbursement, include nonconsecutive and consecutive days of absence that are not considered excused as defined in subdivision (e).
(1)Notwithstanding the rulemaking provisions of the Administrative Procedure Act (Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code), the department may implement and administer this subdivision by all-county letters, bulletins, or similar written instructions until regulations are adopted.
(2)The department shall initiate a rulemaking action to adopt regulations to implement this subdivision no later than July 1, 2030.
(an)Nonstandard hours means certified need from 6:00 p.m. to 7:00 a.m. any day of the week and certified need from 7:00 a.m. to 6:00 p.m. on Saturday or Sunday.
(ao)Base payment rate means the standard, unadjusted subsidy rate authorized by the state to reimburse providers and contractors to meet health, safety, program, and staffing requirements as it pertains to the delivery of subsidized childcare services to eligible children.
(ap)Enhanced rate, or enhanced payment rate means a state-authorized reimbursement, disbursed as a fixed, flat amount, to reimburse providers and contractors for specialized services, as determined by the department, provided to eligible children by an individual provider.
SEC. 4.Section 10227.6 of the Welfare and Institutions Code is amended to read:10227.6.(a)It is the intent of the Legislature to use an alternative methodology, as defined in subdivision (ak) of Section 10213.5, to inform the setting of reimbursement rates for subsidized childcare.
(b)Reimbursement rates are subject to agreement and codification by the Legislature.
(c)The department, in collaboration with the State Department of Education, shall develop and conduct an alternative methodology. The department shall begin the process of data collection and analysis pursuant to developing an alternative methodology by July 1, 2023, and consult with the State Department of Education on data collection, analysis, and methodology for preschool programs. The alternative methodology shall build on the recommendations of the working group established pursuant to Section 10280.2 and shall be aligned with the recommendations of the Joint Labor Management Committee established pursuant to subdivision (a) of Section 10280.2.
(d)No later than February 15, 2024, the department, in collaboration with the State Department of Education and the Joint Labor Management Committee established pursuant to subdivision (a) of Section 10280.2, using information from the cost estimation model, shall define elements of the base rate and any enhanced rates to inform the states proposed single-rate structure and rates. These elements shall be subject to the mandated public engagement state plan process and legislative review. The department shall report to the Senate Health and Human Services budget subcommittees, Assembly and Senate Education budget subcommittees, and the Legislative Analysts Office on progress made to conduct an alternative methodology and cost-estimate model.
(e)No later than May 15, 2024, the department shall report on the status of the draft Child Care and Development Fund state plan to the Senate Health and Human Services budget subcommittees, Assembly and Senate Education budget subcommittees, and the Legislative Analysts Office on the states proposed single-rate structure to be submitted to the United States Department of Health and Human Services, Administration for Children and Families.
(f)No later than July 1, 2024, the department shall submit necessary information to support use of a single-rate structure using the alternative methodology to the United States Department of Health and Human Services, Administration for Children and Families in the Child Care and Development Fund state plan or an amendment to the state plan. The department shall provide a copy of the Child Care and Development Fund state plan or amendment to the state plan submitted to the United States Department of Health and Human Services, Administration for Children and Families to the Senate Health and Human Services budget subcommittees, Assembly and Senate Education budget subcommittees, and the Legislative Analysts Office no later than July 10, 2024.
(g)(1)Within 60 days of federal approval of the single-rate structure utilizing the alternative methodology in the state plan, the department, in collaboration with the State Department of Education, shall provide the Assembly Committee on Budget, the Senate Committee on Budget and Fiscal Review, and the Legislative Analysts Office with a report that outlines the implementation components for the approved single-rate structure. For a period of 30 days, the Legislature shall have the opportunity to review and provide feedback regarding draft guidance for implementation of policies. The report shall include all of the following:
(A)The departments plan to set new reimbursement rates under the alternative methodology by no later than July 1, 2025.
(B)The estimated costs and estimated timelines associated with the implementation components of the approved single-rate structure, including, but not limited to, state operations resources, technology and infrastructure changes, and any regulatory or statutory changes necessary to implement the approved single-rate structure.
(2)The department shall, from October 1, 2024, until July 1, 2028, inclusive, provide the Assembly Committee on Budget, the Senate Committee on Budget and Fiscal Review, and the Legislative Analysts Office with quarterly updates on the implementation of the new reimbursement rates set under the alternative methodology. The quarterly updates shall include any changes to the information provided in the report described in paragraph (1).
(h)Beginning October 1, 2025, and through July 1, 2027, inclusive, the department shall update the Legislature not more frequently than quarterly, to the extent information is available or reported to the department by contractors, regarding progress on implementation of prospective payment and paying based on enrollment, in keeping with the goals set for funds appropriated pursuant to Provision 19 of Item 5180-101-0001 of the Budget Act of 2025 and with subparagraph (i) of paragraph (2) of subdivision (m) of Section 98.45 of Subpart E of Part 98 of Subchapter A of Subtitle A of Title 45 of the Code of Federal Regulations.
(i)The Governor and the Legislature shall, by no later than July 1, 2025, establish reimbursement rates based on the alternative methodology. Provider reimbursement rates shall not be reduced from the reimbursement rates that were in effect on June 30, 2024, pursuant to Sections 10280 and 10374.5 of this code and Section 8242 of the Education Code, inclusive of the cost of care plus rates established pursuant to subdivision (b) of Section 10277.1 and subdivision (b) of Section 10277.2.
(j)(1)If the new reimbursement rates established pursuant to subdivision (i) do not take effect on July 1, 2025, the department shall provide the Chairperson of the Joint Legislative Budget Committee with the departments anticipated timeline for transitioning from the rates that are in effect on July 1, 2025, to the new rates established pursuant to subdivision (i).
(2)Any temporary reimbursement rates established as part of the transition timeline required by paragraph (1) shall be, at minimum, equivalent to the reimbursement rates established pursuant to Sections 10280 and 10374.5 of this code and Section 8242 of the Education Code, inclusive of the cost of care plus rates established pursuant to subdivision (b) of Section 10277.1 and subdivision (b) of Section 10277.2.
(k)The single-rate structure shall apply to all programs funded by the State Department of Social Services under Chapter 3 (commencing with Section 10225), Chapter 6 (commencing with Section 10235), Chapter 7 (commencing with Section 10240), Chapter 8 (commencing with Section 10250), Chapter 9 (commencing with Section 10260), Chapter 21 (commencing with Section 10370), and Chapter 2 (commencing with Section 11461.6) of Part 2, and the State Department of Education under Chapter 2 (commencing with Section 8200) of Part 6 of Division 1 of Title 1 of the Education Code.
(l)(1)Except as required by subdivision (n), it is the intent of the Legislature, beginning July 1, 2025, to cease using a regional market-rate survey pursuant to Section 10436, and instead use an alternative methodology, as defined in subdivision (ak) of Section 10213.5, for the purpose of informing the setting of future childcare rates.
(2)It is the intent of the Legislature that:
(A)Reimbursement rates are set pursuant to statute and informed by the alternative methodology, as defined in subdivision (ak) of Section 10213.5.
(B)Under the single-rate structure, all programs described in subdivision (k) shall be reimbursed under a unified structure that takes into account a common set of rate elements.
(C)Rate levels shall be informed by the costs associated with meeting health and safety requirements and program requirements.
(D)Base rates shall be administered as a per-child amount, and programs shall be able to claim reimbursement for services they deliver consistent with enhanced rates, if any.
(E)Rates shall vary based on all of the following:
(i)Geography.
(ii)Type of care setting.
(iii)Regulatory requirements applicable to each type of care setting.
(iv)Time categories.
(v)Child age.
(m)Commencing July 1, 2026, rates for all programs described in subdivision (k) shall receive the cost-of-living adjustment granted by the Legislature annually pursuant to Section 42238.15 of the Education Code as a minimum annual rate increase for all subsidized childcare providers.
(n)If the United States Department of Health and Human Services, Administration for Children and Families does not approve the alternative methodology developed pursuant to this section, the department shall develop and conduct a survey of the market rates for childcare services.
(o)If the provisions of this section are in conflict with the provisions of a memorandum of understanding reached pursuant to Section 10426, the memorandum of understanding shall be controlling without further legislative action, except that if such provisions of a memorandum of understanding require the expenditure of funds, the provisions shall not become effective unless approved by the Legislature in the annual Budget Act.
(p)When updating the alternative methodology, as required by the triennial federal Child Care Development fund plan, the department shall use values or selection points that reflect the actual, established costs of providing care.
SEC. 4.5.Section 10227.6 of the Welfare and Institutions Code is amended to read:10227.6.(a)It is the intent of the Legislature to use an alternative methodology, as defined in subdivision (ak) of Section 10213.5, to inform the setting of reimbursement rates for subsidized childcare.
(b)Reimbursement rates are subject to agreement and codification by the Legislature.
(c)The department, in collaboration with the State Department of Education, shall develop and conduct an alternative methodology. The department shall begin the process of data collection and analysis pursuant to developing an alternative methodology by July 1, 2023, and consult with the State Department of Education on data collection, analysis, and methodology for preschool programs. The alternative methodology shall build on the recommendations of the working group established pursuant to Section 10280.2 and shall be aligned with the recommendations of the Joint Labor Management Committee established pursuant to subdivision (a) of Section 10280.2.
(d)No later than February 15, 2024, the department, in collaboration with the State Department of Education and the Joint Labor Management Committee established pursuant to subdivision (a) of Section 10280.2, using information from the cost estimation model, shall define elements of the base rate and any enhanced rates to inform the states proposed single-rate structure and rates. These elements shall be subject to the mandated public engagement state plan process and legislative review. The department shall report to the Senate Health and Human Services budget subcommittees, Assembly and Senate Education budget subcommittees, and the Legislative Analysts Office on progress made to conduct an alternative methodology and cost-estimate model.
(e)No later than May 15, 2024, the department shall report on the status of the draft Child Care and Development Fund state plan to the Senate Health and Human Services budget subcommittees, Assembly and Senate Education budget subcommittees, and the Legislative Analysts Office on the states proposed single-rate structure to be submitted to the United States Department of Health and Human Services, Administration for Children and Families.
(f)No later than July 1, 2024, the department shall submit necessary information to support use of a single rate structure using the alternative methodology to the United States Department of Health and Human Services, Administration for Children and Families in the Child Care and Development Fund state plan or an amendment to the state plan. The department shall provide a copy of the Child Care and Development Fund state plan or amendment to the state plan submitted to the United States Department of Health and Human Services, Administration for Children and Families to the Senate Health and Human Services budget subcommittees, Assembly and Senate Education budget subcommittees, and the Legislative Analysts Office no later than July 10, 2024.
(g)(1)Within 60 days of federal approval of the single-rate structure utilizing the alternative methodology in the state plan, the department, in collaboration with the State Department of Education, shall provide the Assembly Committee on Budget, the Senate Committee on Budget and Fiscal Review, and the Legislative Analysts Office with a report that outlines the implementation components for the approved single-rate structure. For a period of 30 days, the Legislature shall have the opportunity to review and provide feedback regarding draft guidance for implementation of policies. The report shall include all of the following:
(A)The departments plan to set new reimbursement rates under the alternative methodology by no later than July 1, 2025.
(B)The estimated costs and estimated timelines associated with the implementation components of the approved single-rate structure, including, but not limited to, state operations resources, technology and infrastructure changes, and any regulatory or statutory changes necessary to implement the approved single-rate structure.
(2)(A)The department shall, from October 1, 2024, to July 1, 2028, inclusive, provide the Assembly Committee on Budget, the Senate Committee on Budget and Fiscal Review, and the Legislative Analysts Office with quarterly updates on the implementation of the new reimbursement rates set under the alternative methodology. The quarterly updates shall include any changes to the information provided in the report described in paragraph (1).
(B)(i)The quarterly report issued in July 2027, pursuant to subparagraph (A) shall consist of the considerations required to add monthly cost of care plus rates made pursuant to Sections 10277.1, 10277.2, and 10277.6 to existing reimbursement rates that are funded within existing childcare and development contracts for alternative payment programs, including, but not limited to, migrant alternative payment programs pursuant to Chapter 3 (commencing with Section 10225), migrant childcare and development programs pursuant to Chapter 6 (commencing with Section 10235), general childcare and development programs pursuant to Chapter 7 (commencing with Section 10240), family childcare home education networks pursuant to Chapter 8 (commencing with Section 10250), childcare and development services for children with special needs pursuant to Chapter 9 (commencing with Section 10260), childcare for recipients of the CalWORKs program pursuant to Chapter 21 (commencing with Section 10370), and the emergency childcare bridge program for foster children pursuant to Section 11461.6.
(ii)Considerations presented by the department pursuant to clause (i) shall include, but not be limited to, all of the following:
(I)Updates to data systems required to add monthly cost of care plus payments to existing contract rates.
(II)Necessary statutory and regulatory changes to add monthly cost of care plus payments to existing contract rates.
(III)Activities needed to be performed by the department and contractors to ensure contractors can pay childcare providers through a contract rate that includes the monthly cost of care plus payments.
(iii)The department shall present, where practicable, an estimated timeframe for each consideration described pursuant to clause (ii).
(h)Beginning October 1, 2025, and through July 1, 2027, inclusive, the department shall update the Legislature not more frequently than quarterly, to the extent information is available or reported to the department by contractors, regarding progress on implementation of paying based on enrollment.
(i)The Governor and the Legislature shall, by no later than July 1, 2025, establish reimbursement rates based on the alternative methodology. Provider reimbursement rates shall not be reduced from the reimbursement rates that were in effect on June 30, 2024, pursuant to Sections 10280 and 10374.5 of this code and Section 8242 of the Education Code, inclusive of the cost of care plus rates established pursuant to subdivision (b) of Section 10277.1 and subdivision (b) of Section 10277.2.
(j)(1)If the new reimbursement rates established pursuant to subdivision (i) do not take effect on July 1, 2025, the department shall provide the Chairperson of the Joint Legislative Budget Committee with the departments anticipated timeline for transitioning from the rates that are in effect on July 1, 2025, to the new rates established pursuant to subdivision (i).
(2)Any temporary reimbursement rates established as part of the transition timeline required by paragraph (1) shall be, at minimum, equivalent to the reimbursement rates established pursuant to Sections 10280 and 10374.5 of this code and Section 8242 of the Education Code, inclusive of the cost of care plus rates established pursuant to subdivision (b) of Section 10277.1 and subdivision (b) of Section 10277.2.
(k)The single rate structure shall apply to all programs funded by the State Department of Social Services under Chapter 3 (commencing with Section 10225), Chapter 6 (commencing with Section 10235), Chapter 7 (commencing with Section 10240), Chapter 8 (commencing with Section 10250), Chapter 9 (commencing with Section 10260), Chapter 21 (commencing with Section 10370), and Chapter 2 (commencing with Section 11461.6) of Part 2, and the State Department of Education under Chapter 2 (commencing with Section 8200) of Part 6 of Division 1 of Title 1 of the Education Code.
(l)The department, after collaborating with the State Department of Education, shall identify the remaining foundational policy frameworks of the single rate structure by January 10, 2028.
(m)(1)Except as required by subdivision (n), it is the intent of the Legislature, beginning July 1, 2025, to cease using a regional market-rate survey pursuant to Section 10436, and instead use an alternative methodology, as defined in subdivision (ak) of Section 10213.5, for the purpose of informing the setting of future childcare rates and California state preschool program rates.
(2)It is the intent of the Legislature that:
(A)Reimbursement rates are set pursuant to statute and informed by the alternative methodology, as defined in subdivision (ak) of Section 10213.5.
(B)Under the single-rate structure, all programs described in subdivision (k) shall be reimbursed under a unified structure that takes into account a common set of rate elements.
(C)Rate levels shall be informed by the costs associated with meeting health and safety requirements and program requirements.
(D)Base rates shall be administered as a per-child amount, and programs shall be able to claim reimbursement for services they deliver consistent with enhanced rates, if any.
(E)Rates shall vary based on all of the following:
(i)Geography.
(ii)Type of care setting.
(iii)Regulatory and statutory requirements applicable to each type of care setting.
(iv)Time categories.
(v)Child age groupings, consisting of all of the following:
(I)Children under two years of age, the care of whom will be reimbursed at the infant rate.
(II)Children who are two years of age, the care of whom will be reimbursed at the toddler rate.
(III)Children who are three years of age to six years of age, inclusive, who are not yet enrolled in first grade, the care of whom will be reimbursed at the preschool rate.
(IV)Children five years of age and older, who are enrolled in first grade or higher, the care of whom will be reimbursed at the schoolage rate.
(F)(i)Enhanced inclusion rates shall be administered as a per-child amount, and programs shall be able to claim reimbursement, consistent with the rules and regulations developed by the department and the State Department of Education, respectively. To receive an enhanced inclusion rate for a child, the family data file shall include documentation of at least one of the following:
(I)A current individualized family service plan.
(II)A current individualized education program.
(III)A current individual program plan.
(IV)An active plan pursuant to Section 504 of the federal Rehabilitation Act of 1973 (29 U.S.C. Sec. 794).
(V)An active incidental medical services plan, as described in Section 1596.802 of the Health and Safety Code.
(ii)The documentation described in clause (i) may be unsigned if the family did not consent to the services, despite the child being deemed eligible.
(3)It is further the intent of the Legislature that the alternative methodology shall be based on a cost study and cost estimation model conducted by the department for the measurement of the costs of care in California for all childcare and preschool programs described in subdivision (k), and shall include, but not be limited to, all of the following costs:
(A)Salaries and wages.
(B)Geography.
(C)Type of care setting.
(D)Regulatory and statutory requirements applicable to each type of care setting.
(E)Time categories, including, but not limited to, non-traditional hours.
(F)Child age.
(G)Cost for delivering inclusion supports.
(n)Commencing July 1, 2026, rates for all programs described in subdivision (k) shall receive the cost-of-living adjustment granted by the Legislature annually pursuant to Section 42238.15 of the Education Code as a minimum annual rate increase for all subsidized childcare providers.
(o)If the United States Department of Health and Human Services, Administration for Children and Families does not approve the alternative methodology developed pursuant to this section, the department shall develop and conduct a survey of the market rates for childcare services.
(p)If the provisions of this section are in conflict with the provisions of a memorandum of understanding reached pursuant to Section 10426, the memorandum of understanding shall be controlling without further legislative action, except that if such provisions of a memorandum of understanding require the expenditure of funds, the provisions shall not become effective unless approved by the Legislature in the annual Budget Act.
(q)When updating the alternative methodology, as required by the triennial federal Child Care Development fund plan, the department shall use values or selection points that reflect the actual, established costs of providing care.
SEC. 5.Section 10227.7 is added to the Welfare and Institutions Code, to read:10227.7.(a)When establishing new reimbursement rates using a single-rate structure informed by an alternative methodology, pursuant to subdivision (i) of Section 10227.6, to the extent it is consistent with the approved Child Care and Development Fund state plan, the department, in consultation with the State Department of Education, shall do all of the following:
(1)Vary rates based on geographic regions established by the department and determined by the cost of living.
(2)Vary rates, at a minimum, based on whether the childcare is being provided in a license-exempt childcare setting, a licensed family daycare home, or a licensed daycare center setting.
(3)Vary rates based on regulatory and statutory requirements applicable to each type of care setting.
(4)Vary rates, at a minimum, based on the following time category considerations:
(A)Part-time and full-time certified need.
(B)A week, for purposes of determining the hours of certified need in a week, begins at midnight on Sunday and ends at 11:59 p.m. on Saturday.
(5)Vary rates, at a minimum, based on the following child age considerations:
(A)All programs that serve the same age of children and have the same program requirements receive the same reimbursable base payment rate, regardless of the type of program contract.
(B)The establishment of rates based on the following child age groupings:
(i)Children who are younger than two years of age, the care of whom will be reimbursed at the infant rate.
(ii)Children who are two years of age, the care of whom will be reimbursed at the toddler rate.
(iii)Children who are three to six years of age, inclusive, who are not yet enrolled in first grade, the care of whom will be reimbursed at the preschool rate.
(iv)Children who are five years of age and older who are enrolled in first grade, the care of whom will be reimbursed at the schoolage rate.
(6)Include an enhanced rate for nonstandard hours of care.
(7)(A)Include an enhanced inclusion rate, which shall be administered as a per-child amount and for which programs shall be able to claim reimbursement, consistent with the rules and regulations developed by the department and the State Department of Education, as applicable. To receive an enhanced inclusion rate for a child, the family data file shall include documentation of at least one of the following:
(i)A current individualized family service plan.
(ii)A current individualized education program.
(iii)A current individual program plan.
(iv)An active plan pursuant to Section 504 of the federal Rehabilitation Act of 1973 (29 U.S.C. Sec. 794).
(v)An active incidental medical services plan, as described in Section 1596.802 of the Health and Safety Code.
(B)The documentation described in subparagraph (A) may be unsigned if the family did not consent to the childs receipt of services, despite the child being deemed eligible.
(8)May include other enhanced rates, as determined through the annual Budget process.
(9)Ensure that the reimbursement rates for a specific child, payable to an individual provider or contractor, includes all enhanced rates for which the child is eligible, and that are for services the child is receiving from the individual provider or contractor.
(10)Ensure that base payment rates are based on a childs maximum certified hours of care with an individual provider, regardless of attendance.
(b)Notwithstanding the rulemaking provisions of the Administrative Procedure Act (Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code), the department may implement and administer this section by all-county letters, childcare bulletins, or similar written instructions until regulations are adopted. These all-county letters or similar written instructions shall have the same force and effect as regulations.
SEC. 6.Section 4.5 of this bill incorporates amendments to Section 10227.6 of the Welfare and Institutions Code proposed by this bill and either Assembly Bill 190 or Senate Bill 190. That section of this bill shall only become operative if (1) both bills are enacted and become effective on or before January 1, 2027, (2) each bill amends Section 10227.6 of the Welfare and Institutions Code, and (3) this bill is enacted after either Assembly Bill 190 or Senate Bill 190, in which case Section 10227.6 of the Welfare and Institutions Code, as amended by either Assembly Bill 190 or Senate Bill 190, shall remain operative only until the operative date of this bill, at which time Section 4.5 of this bill shall become operative, and Section 4 of this bill shall not become operative.
SEC. 7.This act is an urgency statute necessary for the immediate preservation of the public peace, health, or safety within the meaning of Article IV of the California Constitution and shall go into immediate effect. The facts constituting the necessity are:
In order to prevent further delays transitioning to the new systems for setting reimbursement rates for subsidized childcare programs, it is necessary for this act to take effect immediately.
This act shall be known, and may be cited, as the True Cost of Childcare Act.
SEC. 2.(a)The Legislature finds and declares all of the following:
(1)California is committed to advancing racial, economic, geographic, and gender equity across its publicly funded systems, including early learning and care.
(2)Federal regulations allow states to use a cost estimation model. This model can replace a market-rate survey to better reflect the true cost of high-quality childcare. It includes adequate compensation for the workforce, investments in health and safety, and compliance with licensing requirements.
(3)In a broken market where rates are set based on what families can pay as opposed to what it actually costs to provide quality, developmentally appropriate care reliance on regional market rates perpetuate historic inequities by embedding disparities in family income, neighborhood wealth, and access to private tuition into the states reimbursement structure.
(4)The early care and education workforce is almost exclusively female and predominantly people of color, including many immigrants, first-generation college students, and working mothers. Many early educators turn to public safety-net support to meet the basic needs of their family.
(5)Childcare deserts are most prevalent in low-income communities, rural areas, tribal communities, and communities of color, where the market fails to generate rates sufficient to sustain licensed and license-exempt providers serving subsidized families.
(6)As part of developing a single rate structure the State Department of Social Services consulted with early childhood educator stakeholders.
(7)Despite this statutory direction and extensive stakeholder engagement, a single rate structure is continuing to be developed.
(8)Adopting a single rate structure informed by the alternative methodology is needed to support the childcare workforce, help families in the states subsidized childcare system, and protect the states economy.
(b)Therefore, it is the intent of the Legislature to codify a single rate structure informed by the alternative methodology and to ensure its timely implementation.
SEC. 3.Section 10213.5 of the Welfare and Institutions Code is amended to read:10213.5.As used in this part:
(a)Alternative payments includes payments that are made by one childcare agency to another agency or childcare provider for the provision of childcare and development services, and payments that are made by an agency to a parent for the parents purchase of childcare and development services.
(b)Alternative payment program means a local government agency or nonprofit organization that has contracted with the department pursuant to Section 10225.5, or a migrant alternative payment program pursuant to Chapter 6 (commencing with Section 10235), to provide alternative payments and to provide support services to parents and providers.
(c)Applicant or contracting agency means a school district, community college district, college or university, county superintendent of schools, county, city, public agency, private nontax-exempt agency, private tax-exempt agency, or other entity that is authorized to establish, maintain, or operate services pursuant to this chapter. Private agencies and parent cooperatives, duly licensed by law, shall receive the same consideration as any other authorized entity with no loss of parental decisionmaking prerogatives as consistent with the provisions of this chapter.
(d)Assigned reimbursement rate is that rate established by the contract with the agency and is derived by dividing the total dollar amount of the contract by the minimum child day of average daily enrollment level of service required.
(e)Attendance means the number of children present at a childcare and development facility. Attendance, for purposes of reimbursement, includes excused absences by children because of illness, quarantine, illness or quarantine of their parent, family emergency, medical and educational appointments, or to spend time with a parent or other relative as required by a court of law or that is clearly in the best interest of the child. For purposes of reimbursement, a contractor may claim attendance for days that the contractor or provider is required to hold a space for a child during the period that a family is assumed to have abandoned care or is engaging in the appeal process based on disenrollment for abandoning care.
(f)Capital outlay means the amount paid for the renovation and repair of childcare and development and preschool facilities to comply with state and local health and safety standards, and the amount paid for the state purchase of relocatable childcare and development and preschool facilities for lease to qualifying contracting agencies.
(g)Caregiver means a person who provides direct care, supervision, and guidance to children in a childcare and development facility.
(h)Childcare and development facility means a residence or building or part thereof in which childcare and development services are provided.
(i)Childcare and development programs means those programs that offer a full range of services for children from infancy to 13 years of age, for any part of a day, by a public or private agency, in centers and family childcare homes. These programs include, but are not limited to, all of the following:
(1)General childcare and development.
(2)Migrant childcare and development.
(3)Childcare provided by the California School Age Families Education Program (Article 7.1 (commencing with Section 54740) of Chapter 9 of Part 29 of Division 4 of Title 2).
(4)Resource and referral.
(5)Childcare and development services for children with exceptional needs.
(6)Family childcare home education network.
(7)Alternative payment.
(8)Schoolage community childcare.
(j)Childcare and development services means those 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. These services may include direct care and supervision, instructional activities, resource and referral programs, and alternative payment arrangements.
(k)Children at risk of abuse, neglect, or exploitation means children who are so identified in a written referral from a legal, medical, or social service agency, or emergency shelter.
(l)Children with exceptional needs means either of the following:
(1)Infants and toddlers under three years of age who have been determined to be eligible for early intervention services pursuant to the California Early Intervention Services Act (Title 14 (commencing with Section 95000) of the Government Code) and its implementing regulations. These children include an infant or toddler with a developmental delay or established risk condition, or who is at high risk of having a substantial developmental disability, as defined in subdivision (a) of Section 95014 of the Government Code. These children shall have active individualized family service plans, shall be receiving early intervention services, and shall be children who require the special attention of adults in a childcare setting.
(2)Children 3 to 21 years of age, inclusive, who have been determined to be eligible for special education and related services by an individualized education program team according to the special education requirements contained in Part 30 (commencing with Section 56000) of Division 4 of Title 2 of the Education Code, and who meet eligibility criteria described in Section 56026 of the Education Code and, Article 2.5 (commencing with Section 56333) of Chapter 4 of Part 30 of Division 4 of Title 2 of the Education Code, and Sections 3030 and 3031 of Title 5 of the California Code of Regulations. These children shall have an active individualized education program, shall be receiving early intervention services or appropriate special education and related services, and shall be children who require the special attention of adults in a childcare setting. These children include children with intellectual disabilities, hearing impairments (including deafness), speech or language impairments, visual impairments (including blindness), serious emotional disturbance (also referred to as emotional disturbance), orthopedic impairments, autism, traumatic brain injury, other health impairments, or specific learning disabilities, who need special education and related services consistent with Section 1401(3)(A) of Title 20 of the United States Code.
(m)Closedown costs means reimbursements for all approved activities associated with the closing of operations at the end of each growing season for migrant child development programs only.
(n)Cost includes, but is not limited to, expenditures that are related to the operation of childcare and development programs. Cost may include a reasonable amount for state and local contributions to employee benefits, including approved retirement programs, agency administration, and any other reasonable program operational costs. Cost may also include amounts for licensable facilities in the community served by the program, including lease payments or depreciation, downpayments, and payments of principal and interest on loans incurred to acquire, rehabilitate, or construct licensable facilities, but these costs shall not exceed fair market rents existing in the community in which the facility is located. Reasonable and necessary costs are costs that, in nature and amount, do not exceed what an ordinary prudent person would incur in the conduct of a competitive business.
(o)Elementary school, as contained in former Section 425 of Title 20 of the United States Code (the National Defense Education Act of 1958, Public Law 85-864, as amended), includes early childhood education programs and all child development programs, for the purpose of the cancellation provisions of loans to students in institutions of higher learning.
(p)Family childcare home education network means an entity organized under law that contracts with the department pursuant to Section 10250 to make payments to licensed family childcare home providers and to provide educational and support services to those providers and to children and families eligible for state-subsidized childcare and development services. A family childcare home education network may also be referred to as a family childcare home system.
(q)Health services include, but are not limited to, all of the following:
(1)Referral, whenever possible, to appropriate health care providers able to provide continuity of medical care.
(2)Health screening and health treatment, including a full range of immunization recorded on the appropriate state immunization form to the extent provided by the Medi-Cal Act (Chapter 7 (commencing with Section 14000) of Part 3) and the Child Health and Disability Prevention Program (Article 6 (commencing with Section 124025) of Chapter 3 of Part 2 of Division 106 of the Health and Safety Code), but only to the extent that ongoing care cannot be obtained utilizing community resources.
(3)Health education and training for children, parents, staff, and providers.
(4)Followup treatment through referral to appropriate health care agencies or individual health care professionals.
(r)Higher educational institutions means the Regents of the University of California, the Trustees of the California State University, the Board of Governors of the California Community Colleges, and the governing bodies of any accredited private nonprofit institution of postsecondary education.
(s)Intergenerational staff means persons of various generations.
(t)Dual language learner means children whose first language is a language other than English or children who are developing two or more languages, one of which may be English.
(u)Parent means a biological parent, stepparent, adoptive parent, foster parent, caretaker relative, or any other adult living with a child who has responsibility for the care and welfare of the child.
(v)Program director means a person who, pursuant to Sections 10242 and 10380.5, is qualified to serve as a program director.
(w)Proprietary childcare agency means an organization or facility providing childcare, which is operated for profit.
(x)Resource and referral programs means programs that provide information to parents, including referrals and coordination of community resources for parents and public or private providers of care. Services frequently include, but are not limited to: technical assistance for providers, toy-lending libraries, equipment-lending libraries, toy- and equipment-lending libraries, staff development programs, health and nutrition education, and referrals to social services.
(y)Severely disabled children are children with exceptional needs from birth to 21 years of age, inclusive, who require intensive instruction and training in programs serving pupils with the following profound disabilities: autism, blindness, deafness, severe orthopedic impairments, serious emotional disturbances, or severe intellectual disabilities. Severely disabled children also include those individuals who would have been eligible for enrollment in a developmental center for handicapped pupils under Chapter 7 (commencing with Section 56800) of Part 30 of Division 4 of Title 2 of the Education Code as it read on January 1, 1980.
(z)Short-term respite childcare means childcare service to assist families whose children have been identified through written referral from a legal, medical, or social service agency, or emergency shelter as being neglected, abused, exploited, or homeless, or at risk of being neglected, abused, exploited, or homeless. Childcare is provided for less than 24 hours per day in childcare centers, treatment centers for abusive parents, family childcare homes, or in the childs own home.
(aa)Site supervisor means a person who, regardless of their title, has operational program responsibility for a childcare and development program at a single site. A site supervisor shall hold a permit issued by the Commission on Teacher Credentialing that authorizes supervision of a childcare and development program operating in a single site. The department may waive the requirements of this subdivision if the department determines that the existence of compelling need is appropriately documented.
(ab)Standard reimbursement rate means that rate established by the department pursuant to Section 10280.
(ac)Startup costs means those expenses an agency incurs in the process of opening a new or additional facility before the full enrollment of children.
(ad)California state preschool program means part-day and full-day educational programs for low-income or otherwise disadvantaged three- and four-year-old children.
(ae)Support services means those services that, when combined with childcare and development services, help promote the healthy physical, mental, social, and emotional growth of children. Support services include, but are not limited to: protective services, parent training, provider and staff training, transportation, parent and child counseling, child development resource and referral services, and child placement counseling.
(af)Teacher means a person with the appropriate permit issued by the Commission on Teacher Credentialing who provides program supervision and instruction that includes supervision of a number of aides, volunteers, and groups of children.
(ag)Underserved area means a county or subcounty area, including, but not limited to, school districts, census tracts, or ZIP Code areas, where the ratio of publicly subsidized childcare and development program services to the need for these services is low, as determined by the department.
(ah)Workday means the time that the parent requires temporary care for a child for any of the following reasons:
(1)To undertake training in preparation for a job.
(2)To undertake or retain a job.
(3)To undertake other activities that are essential to maintaining or improving the social and economic function of the family, are beneficial to the community, or are required because of health problems in the family.
(ai)Homeless children and youth has the same meaning as defined in Section 11434a(2) of the federal McKinney-Vento Homeless Assistance Act (42 U.S.C. Sec. 11301 et seq.).
(aj)Local educational agency means a school district, a county office of education, a community college district, or a school district acting on behalf of one or more schools within the school district.
(ak)Alternative methodology means a cost-based method, including a cost estimation model, that informs payment rates pursuant to the requirements set forth in Section 98.45 of Title 45 of the Code of Federal Regulations.
(al)(1)Effective no later than March 1, 2024, part-time care means care certified for a child for fewer than 25 hours per week.
(2)Effective no later than March 1, 2024, full-time care means care certified for a child for 25 or more hours per week.
(3)Notwithstanding the rulemaking provisions of the Administrative Procedure Act (Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code), the department may implement and administer this subdivision by all-county letters, bulletins, or similar written instructions until regulations are adopted.
(4)The department shall initiate a rulemaking action to adopt regulations to implement this subdivision no later than July 1, 2026.
(5)If the provisions of this subdivision are in conflict with the provisions of a memorandum of understanding reached pursuant to Section 10426, the memorandum of understanding shall be controlling without further legislative action, except that if such provisions of a memorandum of understanding require the expenditure of funds, the provisions shall not become effective unless approved by the Legislature in the annual Budget Act.
(am)Excessive unexplained absences means absences that are not considered excused as defined in subdivision (e) and exceed 30 days within a 12-month interval during the period of time between determinations and redeterminations. Excessive unexplained absences, for the purposes of reimbursement, include nonconsecutive and consecutive days of absence that are not considered excused as defined in subdivision (e).
(1)Notwithstanding the rulemaking provisions of the Administrative Procedure Act (Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code), the department may implement and administer this subdivision by all-county letters, bulletins, or similar written instructions until regulations are adopted.
(2)The department shall initiate a rulemaking action to adopt regulations to implement this subdivision no later than July 1, 2030.
(an)Nonstandard hours means certified need from 6:00 p.m. to 7:00 a.m. any day of the week and certified need from 7:00 a.m. to 6:00 p.m. on Saturday or Sunday.
(ao)Base payment rate means the standard, unadjusted subsidy rate authorized by the state to reimburse providers and contractors to meet health, safety, program, and staffing requirements as it pertains to the delivery of subsidized childcare services to eligible children.
(ap)Enhanced rate, or enhanced payment rate means a state-authorized reimbursement, disbursed as a fixed, flat amount, to reimburse providers and contractors for specialized services, as determined by the department, provided to eligible children by an individual provider.
SEC. 4.Section 10227.6 of the Welfare and Institutions Code is amended to read:10227.6.(a)It is the intent of the Legislature to use an alternative methodology, as defined in subdivision (ak) of Section 10213.5, to inform the setting of reimbursement rates for subsidized childcare.
(b)Reimbursement rates are subject to agreement and codification by the Legislature.
(c)The department, in collaboration with the State Department of Education, shall develop and conduct an alternative methodology. The department shall begin the process of data collection and analysis pursuant to developing an alternative methodology by July 1, 2023, and consult with the State Department of Education on data collection, analysis, and methodology for preschool programs. The alternative methodology shall build on the recommendations of the working group established pursuant to Section 10280.2 and shall be aligned with the recommendations of the Joint Labor Management Committee established pursuant to subdivision (a) of Section 10280.2.
(d)No later than February 15, 2024, the department, in collaboration with the State Department of Education and the Joint Labor Management Committee established pursuant to subdivision (a) of Section 10280.2, using information from the cost estimation model, shall define elements of the base rate and any enhanced rates to inform the states proposed single-rate structure and rates. These elements shall be subject to the mandated public engagement state plan process and legislative review. The department shall report to the Senate Health and Human Services budget subcommittees, Assembly and Senate Education budget subcommittees, and the Legislative Analysts Office on progress made to conduct an alternative methodology and cost-estimate model.
(e)No later than May 15, 2024, the department shall report on the status of the draft Child Care and Development Fund state plan to the Senate Health and Human Services budget subcommittees, Assembly and Senate Education budget subcommittees, and the Legislative Analysts Office on the states proposed single-rate structure to be submitted to the United States Department of Health and Human Services, Administration for Children and Families.
(f)No later than July 1, 2024, the department shall submit necessary information to support use of a single-rate structure using the alternative methodology to the United States Department of Health and Human Services, Administration for Children and Families in the Child Care and Development Fund state plan or an amendment to the state plan. The department shall provide a copy of the Child Care and Development Fund state plan or amendment to the state plan submitted to the United States Department of Health and Human Services, Administration for Children and Families to the Senate Health and Human Services budget subcommittees, Assembly and Senate Education budget subcommittees, and the Legislative Analysts Office no later than July 10, 2024.
(g)(1)Within 60 days of federal approval of the single-rate structure utilizing the alternative methodology in the state plan, the department, in collaboration with the State Department of Education, shall provide the Assembly Committee on Budget, the Senate Committee on Budget and Fiscal Review, and the Legislative Analysts Office with a report that outlines the implementation components for the approved single-rate structure. For a period of 30 days, the Legislature shall have the opportunity to review and provide feedback regarding draft guidance for implementation of policies. The report shall include all of the following:
(A)The departments plan to set new reimbursement rates under the alternative methodology by no later than July 1, 2025.
(B)The estimated costs and estimated timelines associated with the implementation components of the approved single-rate structure, including, but not limited to, state operations resources, technology and infrastructure changes, and any regulatory or statutory changes necessary to implement the approved single-rate structure.
(2)The department shall, from October 1, 2024, until July 1, 2028, inclusive, provide the Assembly Committee on Budget, the Senate Committee on Budget and Fiscal Review, and the Legislative Analysts Office with quarterly updates on the implementation of the new reimbursement rates set under the alternative methodology. The quarterly updates shall include any changes to the information provided in the report described in paragraph (1).
(h)Beginning October 1, 2025, and through July 1, 2027, inclusive, the department shall update the Legislature not more frequently than quarterly, to the extent information is available or reported to the department by contractors, regarding progress on implementation of prospective payment and paying based on enrollment, in keeping with the goals set for funds appropriated pursuant to Provision 19 of Item 5180-101-0001 of the Budget Act of 2025 and with subparagraph (i) of paragraph (2) of subdivision (m) of Section 98.45 of Subpart E of Part 98 of Subchapter A of Subtitle A of Title 45 of the Code of Federal Regulations.
(i)The Governor and the Legislature shall, by no later than July 1, 2025, establish reimbursement rates based on the alternative methodology. Provider reimbursement rates shall not be reduced from the reimbursement rates that were in effect on June 30, 2024, pursuant to Sections 10280 and 10374.5 of this code and Section 8242 of the Education Code, inclusive of the cost of care plus rates established pursuant to subdivision (b) of Section 10277.1 and subdivision (b) of Section 10277.2.
(j)(1)If the new reimbursement rates established pursuant to subdivision (i) do not take effect on July 1, 2025, the department shall provide the Chairperson of the Joint Legislative Budget Committee with the departments anticipated timeline for transitioning from the rates that are in effect on July 1, 2025, to the new rates established pursuant to subdivision (i).
(2)Any temporary reimbursement rates established as part of the transition timeline required by paragraph (1) shall be, at minimum, equivalent to the reimbursement rates established pursuant to Sections 10280 and 10374.5 of this code and Section 8242 of the Education Code, inclusive of the cost of care plus rates established pursuant to subdivision (b) of Section 10277.1 and subdivision (b) of Section 10277.2.
(k)The single-rate structure shall apply to all programs funded by the State Department of Social Services under Chapter 3 (commencing with Section 10225), Chapter 6 (commencing with Section 10235), Chapter 7 (commencing with Section 10240), Chapter 8 (commencing with Section 10250), Chapter 9 (commencing with Section 10260), Chapter 21 (commencing with Section 10370), and Chapter 2 (commencing with Section 11461.6) of Part 2, and the State Department of Education under Chapter 2 (commencing with Section 8200) of Part 6 of Division 1 of Title 1 of the Education Code.
(l)(1)Except as required by subdivision (n), it is the intent of the Legislature, beginning July 1, 2025, to cease using a regional market-rate survey pursuant to Section 10436, and instead use an alternative methodology, as defined in subdivision (ak) of Section 10213.5, for the purpose of informing the setting of future childcare rates.
(2)It is the intent of the Legislature that:
(A)Reimbursement rates are set pursuant to statute and informed by the alternative methodology, as defined in subdivision (ak) of Section 10213.5.
(B)Under the single-rate structure, all programs described in subdivision (k) shall be reimbursed under a unified structure that takes into account a common set of rate elements.
(C)Rate levels shall be informed by the costs associated with meeting health and safety requirements and program requirements.
(D)Base rates shall be administered as a per-child amount, and programs shall be able to claim reimbursement for services they deliver consistent with enhanced rates, if any.
(E)Rates shall vary based on all of the following:
(i)Geography.
(ii)Type of care setting.
(iii)Regulatory requirements applicable to each type of care setting.
(iv)Time categories.
(v)Child age.
(m)Commencing July 1, 2026, rates for all programs described in subdivision (k) shall receive the cost-of-living adjustment granted by the Legislature annually pursuant to Section 42238.15 of the Education Code as a minimum annual rate increase for all subsidized childcare providers.
(n)If the United States Department of Health and Human Services, Administration for Children and Families does not approve the alternative methodology developed pursuant to this section, the department shall develop and conduct a survey of the market rates for childcare services.
(o)If the provisions of this section are in conflict with the provisions of a memorandum of understanding reached pursuant to Section 10426, the memorandum of understanding shall be controlling without further legislative action, except that if such provisions of a memorandum of understanding require the expenditure of funds, the provisions shall not become effective unless approved by the Legislature in the annual Budget Act.
(p)When updating the alternative methodology, as required by the triennial federal Child Care Development fund plan, the department shall use values or selection points that reflect the actual, established costs of providing care.
SEC. 4.5.Section 10227.6 of the Welfare and Institutions Code is amended to read:10227.6.(a)It is the intent of the Legislature to use an alternative methodology, as defined in subdivision (ak) of Section 10213.5, to inform the setting of reimbursement rates for subsidized childcare.
(b)Reimbursement rates are subject to agreement and codification by the Legislature.
(c)The department, in collaboration with the State Department of Education, shall develop and conduct an alternative methodology. The department shall begin the process of data collection and analysis pursuant to developing an alternative methodology by July 1, 2023, and consult with the State Department of Education on data collection, analysis, and methodology for preschool programs. The alternative methodology shall build on the recommendations of the working group established pursuant to Section 10280.2 and shall be aligned with the recommendations of the Joint Labor Management Committee established pursuant to subdivision (a) of Section 10280.2.
(d)No later than February 15, 2024, the department, in collaboration with the State Department of Education and the Joint Labor Management Committee established pursuant to subdivision (a) of Section 10280.2, using information from the cost estimation model, shall define elements of the base rate and any enhanced rates to inform the states proposed single-rate structure and rates. These elements shall be subject to the mandated public engagement state plan process and legislative review. The department shall report to the Senate Health and Human Services budget subcommittees, Assembly and Senate Education budget subcommittees, and the Legislative Analysts Office on progress made to conduct an alternative methodology and cost-estimate model.
(e)No later than May 15, 2024, the department shall report on the status of the draft Child Care and Development Fund state plan to the Senate Health and Human Services budget subcommittees, Assembly and Senate Education budget subcommittees, and the Legislative Analysts Office on the states proposed single-rate structure to be submitted to the United States Department of Health and Human Services, Administration for Children and Families.
(f)No later than July 1, 2024, the department shall submit necessary information to support use of a single rate structure using the alternative methodology to the United States Department of Health and Human Services, Administration for Children and Families in the Child Care and Development Fund state plan or an amendment to the state plan. The department shall provide a copy of the Child Care and Development Fund state plan or amendment to the state plan submitted to the United States Department of Health and Human Services, Administration for Children and Families to the Senate Health and Human Services budget subcommittees, Assembly and Senate Education budget subcommittees, and the Legislative Analysts Office no later than July 10, 2024.
(g)(1)Within 60 days of federal approval of the single-rate structure utilizing the alternative methodology in the state plan, the department, in collaboration with the State Department of Education, shall provide the Assembly Committee on Budget, the Senate Committee on Budget and Fiscal Review, and the Legislative Analysts Office with a report that outlines the implementation components for the approved single-rate structure. For a period of 30 days, the Legislature shall have the opportunity to review and provide feedback regarding draft guidance for implementation of policies. The report shall include all of the following:
(A)The departments plan to set new reimbursement rates under the alternative methodology by no later than July 1, 2025.
(B)The estimated costs and estimated timelines associated with the implementation components of the approved single-rate structure, including, but not limited to, state operations resources, technology and infrastructure changes, and any regulatory or statutory changes necessary to implement the approved single-rate structure.
(2)(A)The department shall, from October 1, 2024, to July 1, 2028, inclusive, provide the Assembly Committee on Budget, the Senate Committee on Budget and Fiscal Review, and the Legislative Analysts Office with quarterly updates on the implementation of the new reimbursement rates set under the alternative methodology. The quarterly updates shall include any changes to the information provided in the report described in paragraph (1).
(B)(i)The quarterly report issued no later than May 14, in July 2027, pursuant to subparagraph (A) shall consist of the considerations required to add monthly cost of care plus rates made pursuant to Sections 10277.1 and 10277.2 10277.1, 10277.2, and 10277.6 to existing reimbursement rates that are funded within existing childcare and development contracts for alternative payment programs, including, but not limited to, migrant alternative payment programs pursuant to Chapter 3 (commencing with Section 10225), migrant childcare and development programs pursuant to Chapter 6 (commencing with Section 10235), general childcare and development programs pursuant to Chapter 7 (commencing with Section 10240), family childcare home education networks pursuant to Chapter 8 (commencing with Section 10250), childcare and development services for children with special needs pursuant to Chapter 9 (commencing with Section 10260), childcare for recipients of the CalWORKs program pursuant to Chapter 21 (commencing with Section 10370), and the emergency childcare bridge program for foster children pursuant to Section 11461.6.
(ii)Considerations presented by the department pursuant to clause (i) shall include, but not be limited to, all of the following:
(I)Updates to data systems required to add monthly cost of care plus payments to existing contract rates.
(II)Necessary statutory and regulatory changes to add monthly cost of care plus payments to existing contract rates.
(III)Activities needed to be performed by the department and contractors to ensure contractors can pay childcare providers through an a contract rate that includes the monthly cost of care plus payments.
(iii)The department shall present, where practicable, an estimated timeframe for each consideration described pursuant to clause (ii).
(h)Beginning October 1, 2025, and through July 1, 2027, inclusive, the department shall update the Legislature not more frequently than quarterly, to the extent information is available or reported to the department by contractors, regarding progress on implementation of paying based on enrollment.
(i)The Governor and the Legislature shall, by no later than July 1, 2025, establish reimbursement rates based on the alternative methodology. Provider reimbursement rates shall not be reduced from the reimbursement rates that were in effect on June 30, 2024, pursuant to Sections 10280 and 10374.5 of this code and Section 8242 of the Education Code, inclusive of the cost of care plus rates established pursuant to subdivision (b) of Section 10277.1 and subdivision (b) of Section 10277.2.
(j)(1)If the new reimbursement rates established pursuant to subdivision (i) do not take effect on July 1, 2025, the department shall provide the Chairperson of the Joint Legislative Budget Committee with the departments anticipated timeline for transitioning from the rates that are in effect on July 1, 2025, to the new rates established pursuant to subdivision (i).
(2)Any temporary reimbursement rates established as part of the transition timeline required by paragraph (1) shall be, at minimum, equivalent to the reimbursement rates established pursuant to Sections 10280 and 10374.5 of this code and Section 8242 of the Education Code, inclusive of the cost of care plus rates established pursuant to subdivision (b) of Section 10277.1 and subdivision (b) of Section 10277.2.
(k)The single rate structure shall apply to all programs funded by the State Department of Social Services under Chapter 3 (commencing with Section 10225), Chapter 6 (commencing with Section 10235), Chapter 7 (commencing with Section 10240), Chapter 8 (commencing with Section 10250), Chapter 9 (commencing with Section 10260), Chapter 21 (commencing with Section 10370), and Chapter 2 (commencing with Section 11461.6) of Part 2, and the State Department of Education under Chapter 2 (commencing with Section 8200) of Part 6 of Division 1 of Title 1 of the Education Code.
(l)The department, after collaborating with the State Department of Education, shall identify the remaining foundational policy frameworks of the single rate structure by January 10, 2028.
(m)(1)Except as required by subdivision (n), it is the intent of the Legislature, beginning July 1, 2025, to cease using a regional market-rate survey pursuant to Section 10436, and instead use an alternative methodology, as defined in subdivision (ak) of Section 10213.5, for the purpose of informing the setting of future childcare rates and California state preschool program rates.
(2)It is the intent of the Legislature that:
(A)Reimbursement rates are set pursuant to statute and informed by the alternative methodology, as defined in subdivision (ak) of Section 10213.5.
(B)Under the single single-rate structure, all programs described in subdivision (k) shall be reimbursed under a unified structure that takes into account a common set of rate elements.
(C)Rate levels shall be informed by the costs associated with meeting health and safety requirements and program requirements.
(D)Base rates shall be administered as a per-child amount, and programs shall be able to claim reimbursement for services they deliver consistent with enhanced rates, if any.
(E)Rates shall vary based on all of the following:
(i)Geography.
(ii)Type of care setting.
(iii)Regulatory and statutory requirements applicable to each type of care setting.
(iv)Time categories.
(v)Child age groupings, consisting of all of the following:
(I)Children under two years of age, the care of whom will be reimbursed at the infant rate.
(II)Children who are two years of age, the care of whom will be reimbursed at the toddler rate.
(III)Children who are three years of age to six years of age, inclusive, who are not yet enrolled in first grade, the care of whom will be reimbursed at the preschool rate.
(IV)Children five years of age and older, who are enrolled in first grade or higher, the care of whom will be reimbursed at the schoolage rate.
(F)(i)Enhanced inclusion rates shall be administered as a per-child amount, and programs shall be able to claim reimbursement, consistent with the rules and regulations developed by the department and the State Department of Education, respectively. To receive an enhanced inclusion rate for a child, the family data file shall include documentation of at least one of the following:
(I)A current individualized family service plan.
(II)A current individualized education program.
(III)A current individual program plan.
(IV)An active plan pursuant to Section 504 of the federal Rehabilitation Act of 1973 (29 U.S.C. Sec. 794).
(V)An active incidental medical services plan, as described in Section 1596.802 of the Health and Safety Code.
(ii)The documentation described in clause (i) may be unsigned if the family did not consent to the services, despite the child being deemed eligible.
(3)It is further the intent of the Legislature that the alternative methodology shall be based on a cost study and cost estimation model conducted by the department for the measurement of the costs of care in California for all childcare and preschool programs described in subdivision (k), and shall include, but not be limited to, all of the following costs:
(A)Salaries and wages.
(B)Geography.
(C)Type of care setting.
(D)Regulatory and statutory requirements applicable to each type of care setting.
(E)Time categories, including, but not limited to, non-traditional hours.
(F)Child age.
(G)Cost for delivering inclusion supports.
(n)Commencing July 1, 2026, rates for all programs described in subdivision (k) shall receive the cost-of-living adjustment granted by the Legislature annually pursuant to Section 42238.15 of the Education Code as a minimum annual rate increase for all subsidized childcare providers.
(o)If the United States Department of Health and Human Services, Administration for Children and Families does not approve the alternative methodology developed pursuant to this section, the department shall develop and conduct a survey of the market rates for childcare services.
(p)If the provisions of this section are in conflict with the provisions of a memorandum of understanding reached pursuant to Section 10426, the memorandum of understanding shall be controlling without further legislative action, except that if such provisions of a memorandum of understanding require the expenditure of funds, the provisions shall not become effective unless approved by the Legislature in the annual Budget Act.
(q)When updating the alternative methodology, as required by the triennial federal Child Care Development fund plan, the department shall use values or selection points that reflect the actual, established costs of providing care.
SEC. 5.Section 10227.7 is added to the Welfare and Institutions Code, to read:10227.7.(a)When establishing new reimbursement rates using a single-rate structure informed by an alternative methodology, pursuant to subdivision (i) of Section 10227.6, to the extent it is consistent with the approved Child Care and Development Fund state plan, the department, in consultation with the State Department of Education, shall do all of the following:
(1)Vary rates based on geographic regions established by the department and determined by the cost of living.
(2)Vary rates, at a minimum, based on whether the childcare is being provided in a license-exempt childcare setting, a licensed family daycare home, or a licensed daycare center setting.
(3)Vary rates based on regulatory and statutory requirements applicable to each type of care setting.
(4)Vary rates, at a minimum, based on the following time category considerations:
(A)Part-time and full-time certified need.
(B)A week, for purposes of determining the hours of certified need in a week, begins at midnight on Sunday and ends at 11:59 p.m. on Saturday.
(5)Vary rates, at a minimum, based on the following child age considerations:
(A)All programs that serve the same age of children and have the same program requirements receive the same reimbursable base payment rate, regardless of the type of program contract.
(B)The establishment of rates based on the following child age groupings:
(i)Children who are younger than two years of age, the care of whom will be reimbursed at the infant rate.
(ii)Children who are two years of age, the care of whom will be reimbursed at the toddler rate.
(iii)Children who are three to six years of age, inclusive, who are not yet enrolled in first grade, the care of whom will be reimbursed at the preschool rate.
(iv)Children who are five years of age and older who are enrolled in first grade, the care of whom will be reimbursed at the schoolage rate.
(6)Include an enhanced rate for nonstandard hours of care.
(7)(A)Include an enhanced inclusion rate, which shall be administered as a per-child amount and for which programs shall be able to claim reimbursement, consistent with the rules and regulations developed by the department and the State Department of Education, as applicable. To receive an enhanced inclusion rate for a child, the family data file shall include documentation of at least one of the following:
(i)A current individualized family service plan.
(ii)A current individualized education program.
(iii)A current individual program plan.
(iv)An active plan pursuant to Section 504 of the federal Rehabilitation Act of 1973 (29 U.S.C. Sec. 794).
(v)An active incidental medical services plan, as described in Section 1596.802 of the Health and Safety Code.
(B)The documentation described in subparagraph (A) may be unsigned if the family did not consent to the childs receipt of services, despite the child being deemed eligible.
(8)May include other enhanced rates, as determined through the annual Budget process.
(9)Ensure that the reimbursement rates for a specific child, payable to an individual provider or contractor, includes all enhanced rates for which the child is eligible, and that are for services the child is receiving from the individual provider or contractor.
(10)Ensure that base payment rates are based on a childs maximum certified hours of care with an individual provider, regardless of attendance.
(b)Notwithstanding the rulemaking provisions of the Administrative Procedure Act (Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code), the department may implement and administer this section by all-county letters, childcare bulletins, or similar written instructions until regulations are adopted. These all-county letters or similar written instructions shall have the same force and effect as regulations.
SEC. 6.Section 4.5 of this bill incorporates amendments to Section 10227.6 of the Welfare and Institutions Code proposed by this bill and either Assembly Bill 190 or Senate Bill 190. That section of this bill shall only become operative if (1) both bills are enacted and become effective on or before January 1, 2027, (2) each bill amends Section 10227.6 of the Welfare and Institutions Code, and (3) this bill is enacted after either Assembly Bill 190 or Senate Bill 190, in which case Section 10227.6 of the Welfare and Institutions Code, as amended by either Assembly Bill 190 or Senate Bill 190, shall remain operative only until the operative date of this bill, at which time Section 4.5 of this bill shall become operative, and Section 4 of this bill shall not become operative.
SEC. 7.This act is an urgency statute necessary for the immediate preservation of the public peace, health, or safety within the meaning of Article IV of the California Constitution and shall go into immediate effect. The facts constituting the necessity are:
In order to prevent further delays transitioning to the new systems for setting reimbursement rates for subsidized childcare programs, it is necessary for this act to take effect immediately.
This act shall be known, and may be cited, as the True Cost of Child Care Childcare Act.
SEC. 2.(a)The Legislature finds and declares all of the following:
(1)The Legislature passed, and the Governor signed to enact, the Building a Better Early Care and Education System Act in 2019, codifying that family childcare providers have the right to form, join, and participate in a provider organization of their choosing to represent them and bargain on matters related to their employment terms and conditions.(2)Pursuant to the process established by the Building a Better Early Care and Education System Act, childcare providers organized and elected a statewide union, known as Child Care Providers United (CCPU), representing over 70,000 home-based childcare providers, which has successfully negotiated three contracts with the State of California.(3)The rate of pay for providers negotiated between the state and CCPU is informed by the rate methodology established in state law and funded in the state budget, and the current rate methodology is largely understood to leave providers significantly underpaid, leaving families without access to adequate, quality, reliable childcare in the locations, languages, and other necessities to meet families needs.(4)The Legislature has determined that the state should use a new alternative methodology. This methodology will apply the actual cost of care to calculate how subsidy payments are made to early childhood educators with one goal being to stabilize and improve childcare options for families.(5)(1)California is committed to advancing racial, economic, geographic, and gender equity across its publicly funded systems, including early learning and care.
(6)(2)Federal regulations allow states to use a cost estimation model. This model can replace a market rate market-rate survey to better reflect the true cost of high-quality childcare. It includes adequate compensation for the workforce, investments in health and safety, and compliance with licensing requirements.
(7)Californias existing market-rate methodology significantly underestimates the actual cost of care, with a recent study from the state showing that providers earned just 30 percent of the cost of care in 2024.(3)In a broken market where rates are set based on what families can pay as opposed to what it actually costs to provide quality, developmentally appropriate care reliance on regional market surveys rates perpetuate historic inequities by embedding disparities in family income, neighborhood wealth, and access to private tuition into the states reimbursement structure.
(8)(4)The early care and education workforce is almost exclusively female and predominantly people of color, including many recent immigrants, first-generation college students, and working mothers. An estimated 43 percent of Many early educators turn to public safety-net support to meet the basic needs of their family.
(9)Chronic underpayment has led to workforce instability, program closures, and less access to care for working families. These impacts are especially felt in low-income communities, rural areas, and communities of color.(10)(5)Childcare deserts are most prevalent in low-income communities, rural areas, tribal communities, and communities of color, where the market fails to generate rates sufficient to sustain licensed and license-exempt providers serving subsidized families.
(11)(6)As part of developing the alternative methodology, a single rate structure the State Department of Social Services was required to consult consulted with early childhood educator stakeholders. This includes Child Care Providers United, the bargaining representative for licensed and license-exempt family childcare providers receiving state subsidies. The goal was to inform the development of a cost-based rate model.
(12)(7)Despite this statutory direction and extensive stakeholder engagement, a single rate structure based on the actual cost of care is nowhere near completion. This delay prevents much-needed stabilization of the childcare sector. is continuing to be developed.
(13)(8)Adopting a true cost of care methodology single rate structure informed by the alternative methodology is needed to support the childcare workforce, help families in the states subsidized childcare system, and protect the states economy.
(b)Therefore, it is the intent of the Legislature to enact the statutory changes to implement a childcare reimbursement methodology based on the actual cost of care codify a single rate structure informed by the alternative methodology and to ensure its timely implementation.
SEC. 3.Section 10213.5 of the Welfare and Institutions Code is amended to read:10213.5.As used in this part:
(a)Alternative payments includes payments that are made by one childcare agency to another agency or childcare provider for the provision of childcare and development services, and payments that are made by an agency to a parent for the parents purchase of childcare and development services.
(b)Alternative payment program means a local government agency or nonprofit organization that has contracted with the department pursuant to Section 10225.5, or a migrant alternative payment program pursuant to Chapter 6 (commencing with Section 10235), to provide alternative payments and to provide support services to parents and providers.
(c)Applicant or contracting agency means a school district, community college district, college or university, county superintendent of schools, county, city, public agency, private nontax-exempt agency, private tax-exempt agency, or other entity that is authorized to establish, maintain, or operate services pursuant to this chapter. Private agencies and parent cooperatives, duly licensed by law, shall receive the same consideration as any other authorized entity with no loss of parental decisionmaking prerogatives as consistent with the provisions of this chapter.
(d)Assigned reimbursement rate is that rate established by the contract with the agency and is derived by dividing the total dollar amount of the contract by the minimum child day of average daily enrollment level of service required.
(e)Attendance means the number of children present at a childcare and development facility. Attendance, for purposes of reimbursement, includes excused absences by children because of illness, quarantine, illness or quarantine of their parent, family emergency, medical and educational appointments, or to spend time with a parent or other relative as required by a court of law or that is clearly in the best interest of the child. For purposes of reimbursement, a contractor may claim attendance for days that the contractor or provider is required to hold a space for a child during the period that a family is assumed to have abandoned care or is engaging in the appeal process based on disenrollment for abandoning care.
(f)Capital outlay means the amount paid for the renovation and repair of childcare and development and preschool facilities to comply with state and local health and safety standards, and the amount paid for the state purchase of relocatable childcare and development and preschool facilities for lease to qualifying contracting agencies.
(g)Caregiver means a person who provides direct care, supervision, and guidance to children in a childcare and development facility.
(h)Childcare and development facility means a residence or building or part thereof in which childcare and development services are provided.
(i)Childcare and development programs means those programs that offer a full range of services for children from infancy to 13 years of age, for any part of a day, by a public or private agency, in centers and family childcare homes. These programs include, but are not limited to, all of the following:
(1)General childcare and development.
(2)Migrant childcare and development.
(3)Childcare provided by the California School Age Families Education Program (Article 7.1 (commencing with Section 54740) of Chapter 9 of Part 29 of Division 4 of Title 2).
(4)Resource and referral.
(5)Childcare and development services for children with exceptional needs.
(6)Family childcare home education network.
(7)Alternative payment.
(8)Schoolage community childcare.
(j)Childcare and development services means those 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. These services may include direct care and supervision, instructional activities, resource and referral programs, and alternative payment arrangements.
(k)Children at risk of abuse, neglect, or exploitation means children who are so identified in a written referral from a legal, medical, or social service agency, or emergency shelter.
(l)Children with exceptional needs means either of the following:
(1)Infants and toddlers under three years of age who have been determined to be eligible for early intervention services pursuant to the California Early Intervention Services Act (Title 14 (commencing with Section 95000) of the Government Code) and its implementing regulations. These children include an infant or toddler with a developmental delay or established risk condition, or who is at high risk of having a substantial developmental disability, as defined in subdivision (a) of Section 95014 of the Government Code. These children shall have active individualized family service plans, shall be receiving early intervention services, and shall be children who require the special attention of adults in a childcare setting.
(2)Children 3 to 21 years of age, inclusive, who have been determined to be eligible for special education and related services by an individualized education program team according to the special education requirements contained in Part 30 (commencing with Section 56000) of Division 4 of Title 2 of the Education Code, and who meet eligibility criteria described in Section 56026 of the Education Code and, Article 2.5 (commencing with Section 56333) of Chapter 4 of Part 30 of Division 4 of Title 2 of the Education Code, and Sections 3030 and 3031 of Title 5 of the California Code of Regulations. These children shall have an active individualized education program, shall be receiving early intervention services or appropriate special education and related services, and shall be children who require the special attention of adults in a childcare setting. These children include children with intellectual disabilities, hearing impairments (including deafness), speech or language impairments, visual impairments (including blindness), serious emotional disturbance (also referred to as emotional disturbance), orthopedic impairments, autism, traumatic brain injury, other health impairments, or specific learning disabilities, who need special education and related services consistent with Section 1401(3)(A) of Title 20 of the United States Code.
(m)Closedown costs means reimbursements for all approved activities associated with the closing of operations at the end of each growing season for migrant child development programs only.
(n)Cost includes, but is not limited to, expenditures that are related to the operation of childcare and development programs. Cost may include a reasonable amount for state and local contributions to employee benefits, including approved retirement programs, agency administration, and any other reasonable program operational costs. Cost may also include amounts for licensable facilities in the community served by the program, including lease payments or depreciation, downpayments, and payments of principal and interest on loans incurred to acquire, rehabilitate, or construct licensable facilities, but these costs shall not exceed fair market rents existing in the community in which the facility is located. Reasonable and necessary costs are costs that, in nature and amount, do not exceed what an ordinary prudent person would incur in the conduct of a competitive business.
(o)Elementary school, as contained in former Section 425 of Title 20 of the United States Code (the National Defense Education Act of 1958, Public Law 85-864, as amended), includes early childhood education programs and all child development programs, for the purpose of the cancellation provisions of loans to students in institutions of higher learning.
(p)Family childcare home education network means an entity organized under law that contracts with the department pursuant to Section 10250 to make payments to licensed family childcare home providers and to provide educational and support services to those providers and to children and families eligible for state-subsidized childcare and development services. A family childcare home education network may also be referred to as a family childcare home system.
(q)Health services include, but are not limited to, all of the following:
(1)Referral, whenever possible, to appropriate health care providers able to provide continuity of medical care.
(2)Health screening and health treatment, including a full range of immunization recorded on the appropriate state immunization form to the extent provided by the Medi-Cal Act (Chapter 7 (commencing with Section 14000) of Part 3) and the Child Health and Disability Prevention Program (Article 6 (commencing with Section 124025) of Chapter 3 of Part 2 of Division 106 of the Health and Safety Code), but only to the extent that ongoing care cannot be obtained utilizing community resources.
(3)Health education and training for children, parents, staff, and providers.
(4)Followup treatment through referral to appropriate health care agencies or individual health care professionals.
(r)Higher educational institutions means the Regents of the University of California, the Trustees of the California State University, the Board of Governors of the California Community Colleges, and the governing bodies of any accredited private nonprofit institution of postsecondary education.
(s)Intergenerational staff means persons of various generations.
(t)Dual language learner means children whose first language is a language other than English or children who are developing two or more languages, one of which may be English.
(u)Parent means a biological parent, stepparent, adoptive parent, foster parent, caretaker relative, or any other adult living with a child who has responsibility for the care and welfare of the child.
(v)Program director means a person who, pursuant to Sections 10242 and 10380.5, is qualified to serve as a program director.
(w)Proprietary childcare agency means an organization or facility providing childcare, which is operated for profit.
(x)Resource and referral programs means programs that provide information to parents, including referrals and coordination of community resources for parents and public or private providers of care. Services frequently include, but are not limited to: technical assistance for providers, toy-lending libraries, equipment-lending libraries, toy- and equipment-lending libraries, staff development programs, health and nutrition education, and referrals to social services.
(y)Severely disabled children are children with exceptional needs from birth to 21 years of age, inclusive, who require intensive instruction and training in programs serving pupils with the following profound disabilities: autism, blindness, deafness, severe orthopedic impairments, serious emotional disturbances, or severe intellectual disabilities. Severely disabled children also include those individuals who would have been eligible for enrollment in a developmental center for handicapped pupils under Chapter 7 (commencing with Section 56800) of Part 30 of Division 4 of Title 2 of the Education Code as it read on January 1, 1980.
(z)Short-term respite childcare means childcare service to assist families whose children have been identified through written referral from a legal, medical, or social service agency, or emergency shelter as being neglected, abused, exploited, or homeless, or at risk of being neglected, abused, exploited, or homeless. Childcare is provided for less than 24 hours per day in childcare centers, treatment centers for abusive parents, family childcare homes, or in the childs own home.
(aa)Site supervisor means a person who, regardless of their title, has operational program responsibility for a childcare and development program at a single site. A site supervisor shall hold a permit issued by the Commission on Teacher Credentialing that authorizes supervision of a childcare and development program operating in a single site. The department may waive the requirements of this subdivision if the department determines that the existence of compelling need is appropriately documented.
(ab)Standard reimbursement rate means that rate established by the department pursuant to Section 10280.
(ac)Startup costs means those expenses an agency incurs in the process of opening a new or additional facility before the full enrollment of children.
(ad)California state preschool program means part-day and full-day educational programs for low-income or otherwise disadvantaged three- and four-year-old children.
(ae)Support services means those services that, when combined with childcare and development services, help promote the healthy physical, mental, social, and emotional growth of children. Support services include, but are not limited to: protective services, parent training, provider and staff training, transportation, parent and child counseling, child development resource and referral services, and child placement counseling.
(af)Teacher means a person with the appropriate permit issued by the Commission on Teacher Credentialing who provides program supervision and instruction that includes supervision of a number of aides, volunteers, and groups of children.
(ag)Underserved area means a county or subcounty area, including, but not limited to, school districts, census tracts, or ZIP Code areas, where the ratio of publicly subsidized childcare and development program services to the need for these services is low, as determined by the department.
(ah)Workday means the time that the parent requires temporary care for a child for any of the following reasons:
(1)To undertake training in preparation for a job.
(2)To undertake or retain a job.
(3)To undertake other activities that are essential to maintaining or improving the social and economic function of the family, are beneficial to the community, or are required because of health problems in the family.
(ai)Homeless children and youth has the same meaning as defined in Section 11434a(2) of the federal McKinney-Vento Homeless Assistance Act (42 U.S.C. Sec. 11301 et seq.).
(aj)Local educational agency means a school district, a county office of education, a community college district, or a school district acting on behalf of one or more schools within the school district.
(ak)Alternative methodology means a cost-based ratesetting method, including a cost estimation model, on which to base that informs payment rates pursuant to the requirements set forth in Section 98.45 of Title 45 of the Code of Federal Regulations.
(al)(1)Effective no later than March 1, 2024, part-time care means care certified for a child for fewer than 25 hours per week.
(2)Effective no later than March 1, 2024, full-time care means care certified for a child for 25 or more hours per week.
(3)Notwithstanding the rulemaking provisions of the Administrative Procedure Act (Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code), the department may implement and administer this subdivision by all-county letters, bulletins, or similar written instructions until regulations are adopted.
(4)The department shall initiate a rulemaking action to adopt regulations to implement this subdivision no later than July 1, 2026.
(5)If the provisions of this subdivision are in conflict with the provisions of a memorandum of understanding reached pursuant to Section 10426, the memorandum of understanding shall be controlling without further legislative action, except that if such provisions of a memorandum of understanding require the expenditure of funds, the provisions shall not become effective unless approved by the Legislature in the annual Budget Act.
(am)Excessive unexplained absences means absences that are not considered excused as defined in subdivision (e) and exceed 30 days within a 12-month interval during the period of time between determinations and redeterminations. Excessive unexplained absences, for the purposes of reimbursement, include nonconsecutive and consecutive days of absence that are not considered excused as defined in subdivision (e).
(1)Notwithstanding the rulemaking provisions of the Administrative Procedure Act (Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code), the department may implement and administer this subdivision by all-county letters, bulletins, or similar written instructions until regulations are adopted.
(2)The department shall initiate a rulemaking action to adopt regulations to implement this subdivision no later than July 1, 2030.
(an)Nonstandard hours means certified need from 6:00 p.m. to 7:00 a.m. any day of the week and certified need from 7:00 a.m. to 6:00 p.m. on Saturday or Sunday.
(ao)Base payment rate means the standard, unadjusted subsidy rate authorized by the state to reimburse providers and contractors to meet health, safety, program, and staffing requirements as it pertains to the delivery of subsidized childcare services to eligible children.
(ap)Enhanced rate, or enhanced payment rate means a state-authorized reimbursement, disbursed as a fixed, flat amount, to reimburse providers and contractors for specialized services, as determined by the department, provided to eligible children by an individual provider.
SEC. 3.SEC. 4.Section 10227.6 of the Welfare and Institutions Code is amended to read:10227.6.(a)It is the intent of the Legislature to use an alternative methodology, as defined in subdivision (ak) of Section 10213.5, to inform the setting of reimbursement rates for subsidized childcare.
(b)Reimbursement rates are subject to agreement and codification by the Legislature.
(c)The department, in collaboration with the State Department of Education, shall develop and conduct an alternative methodology. The department shall begin the process of data collection and analysis pursuant to developing an alternative methodology by July 1, 2023, and consult with the State Department of Education on data collection, analysis, and methodology for preschool programs. The alternative methodology shall build on the recommendations of the working group established pursuant to Section 10280.2 and shall be aligned with the recommendations of the Joint Labor Management Committee established pursuant to subdivision (a) of Section 10280.2.
(d)No later than February 15, 2024, the department, in collaboration with the State Department of Education and the Joint Labor Management Committee established pursuant to subdivision (a) of Section 10280.2, using information from the cost estimation model, shall define elements of the base rate and any enhanced rates to inform the states proposed single-rate structure and rates. These elements shall be subject to the mandated public engagement state plan process and legislative review. The department shall report to the Senate Health and Human Services budget subcommittees, Assembly and Senate Education budget subcommittees, and the Legislative Analysts Office on progress made to conduct an alternative methodology and cost-estimate model.
(e)No later than May 15, 2024, the department shall report on the status of the draft Child Care and Development Fund state plan to the Senate Health and Human Services budget subcommittees, Assembly and Senate Education budget subcommittees, and the Legislative Analysts Office on the states proposed single-rate structure to be submitted to the United States Department of Health and Human Services, Administration for Children and Families.
(f)No later than July 1, 2024, the department shall submit necessary information to support use of a single-rate structure using the alternative methodology to the United States Department of Health and Human Services, Administration for Children and Families in the Child Care and Development Fund state plan or an amendment to the state plan. The department shall provide a copy of the Child Care and Development Fund state plan or amendment to the state plan submitted to the United States Department of Health and Human Services, Administration for Children and Families to the Senate Health and Human Services budget subcommittees, Assembly and Senate Education budget subcommittees, and the Legislative Analysts Office no later than July 10, 2024.
(g)(1)Within 60 days of federal approval of the single-rate structure utilizing the alternative methodology in the state plan, the department, in collaboration with the State Department of Education, shall provide the Assembly Committee on Budget, the Senate Committee on Budget and Fiscal Review, and the Legislative Analysts Office with a report that outlines the implementation components for the approved single-rate structure. For a period of 30 days, the Legislature shall have the opportunity to review and provide feedback regarding draft guidance for implementation of policies. The report shall include all of the following:
(A)The departments plan to set new reimbursement rates under the alternative methodology by no later than July 1, 2025.
(B)The estimated costs and estimated timelines associated with the implementation components of the approved single-rate structure, including, but not limited to, state operations resources, technology and infrastructure changes, and any regulatory or statutory changes necessary to implement the approved single-rate structure.
(2)The department shall, from October 1, 2024, until the new reimbursement rates set under the alternative methodology are fully implemented, July 1, 2028, inclusive, provide the Assembly Committee on Budget, the Senate Committee on Budget and Fiscal Review, and the Legislative Analysts Office with quarterly updates on the implementation of the new reimbursement rates set under the alternative methodology. The quarterly updates shall include any changes to the information provided in the report described in paragraph (1).
(h)Beginning October 1, 2025, and through July 1, 2027, inclusive, the department shall update the Legislature not more frequently than quarterly, to the extent information is available or reported to the department by contractors, regarding progress on implementation of prospective payment and paying based on enrollment, in keeping with the goals set for funds appropriated pursuant to Provision 19 of Item 5180-101-0001 of the Budget Act of 2025 and with subparagraph (i) of paragraph (2) of subdivision (m) of Section 98.45 of Subpart E of Part 98 of Subchapter A of Subtitle A of Title 45 of the Code of Federal Regulations.
(i)The Governor and the Legislature shall, by no later than July 1, 2025, establish reimbursement rates based on the alternative methodology. Provider reimbursement rates shall not be reduced from the reimbursement rates that were in effect on June 30, 2024, pursuant to Sections 10280 and 10374.5 of this code and Section 8242 of the Education Code, inclusive of the cost of care plus rates established pursuant to subdivision (b) of Section 10277.1 and subdivision (b) of Section 10277.2.
(j)(1)If the new reimbursement rates established pursuant to subdivision (i) do not take effect on July 1, 2025, the department shall provide the Chairperson of the Joint Legislative Budget Committee with the departments anticipated timeline for transitioning from the rates that are in effect on July 1, 2025, to the new rates established pursuant to subdivision (i).
(2)Any temporary reimbursement rates established as part of the transition timeline required by paragraph (1) shall be, at minimum, equivalent to the reimbursement rates established pursuant to Sections 10280 and 10374.5 of this code and Section 8242 of the Education Code, inclusive of the cost of care plus rates established pursuant to subdivision (b) of Section 10277.1 and subdivision (b) of Section 10277.2.
(k)The single-rate structure shall apply to all programs funded by the State Department of Social Services under Chapter 3 (commencing with Section 10225), Chapter 6 (commencing with Section 10235), Chapter 7 (commencing with Section 10240), Chapter 8 (commencing with Section 10250), Chapter 9 (commencing with Section 10260), Chapter 21 (commencing with Section 10370), and Chapter 2 (commencing with Section 11461.6) of Part 2, and the State Department of Education under Chapter 2 (commencing with Section 8200) of Part 6 of Division 1 of Title 1 of the Education Code.
(l)(1)Except as required by subdivision (n), it is the intent of the Legislature, beginning July 1, 2025, to cease using a regional market rate market-rate survey pursuant to Section 10436, and instead use an alternative methodology, as defined in subdivision (ak) of Section 10213.5, for the purpose of informing the setting of future childcare rates.
(2)It is the intent of the Legislature that:
(A)Reimbursement rates are set pursuant to statute and informed by the alternative methodology, as defined in subdivision (ak) of Section 10213.5.
(B)Under the single-rate structure, all programs described in subdivision (k) shall be reimbursed under a unified structure that takes into account a common set of rate elements.
(C)Rate levels shall be informed by the costs associated with meeting health and safety requirements and program requirements.
(D)Base rates shall be administered as a per-child amount, and programs shall be able to claim reimbursement for services they deliver consistent with enhanced rates, if any.
(E)Rates shall vary based on all of the following:
(i)Geography.
(ii)Type of care setting.
(iii)Regulatory requirements applicable to each type of care setting.
(iv)Time categories.
(v)Child age.
(m)Commencing July 1, 2026, rates for all programs described in subdivision (k) shall receive the cost-of-living adjustment granted by the Legislature annually pursuant to Section 42238.15 of the Education Code as a minimum annual rate increase for all subsidized childcare providers.
(n)If the United States Department of Health and Human Services, Administration for Children and Families does not approve the alternative methodology developed pursuant to this section, the department shall develop and conduct a survey of the market rates for childcare services.
(o)If the provisions of this section are in conflict with the provisions of a memorandum of understanding reached pursuant to Section 10426, the memorandum of understanding shall be controlling without further legislative action, except that if such provisions of a memorandum of understanding require the expenditure of funds, the provisions shall not become effective unless approved by the Legislature in the annual Budget Act.
(p)When updating the alternative methodology, as required by the triennial federal Child Care Development fund plan, the department shall use values or selection points that reflect the actual, established costs of providing care.
SEC. 4.5.Section 10227.6 of the Welfare and Institutions Code is amended to read:10227.6.(a)It is the intent of the Legislature to use an alternative methodology, as defined in subdivision (ak) of Section 10213.5, to inform the setting of reimbursement rates for subsidized childcare.
(b)Reimbursement rates are subject to agreement and codification by the Legislature.
(c)The department, in collaboration with the State Department of Education, shall develop and conduct an alternative methodology. The department shall begin the process of data collection and analysis pursuant to developing an alternative methodology by July 1, 2023, and consult with the State Department of Education on data collection, analysis, and methodology for preschool programs. The alternative methodology shall build on the recommendations of the working group established pursuant to Section 10280.2 and shall be aligned with the recommendations of the Joint Labor Management Committee established pursuant to subdivision (a) of Section 10280.2.
(d)No later than February 15, 2024, the department, in collaboration with the State Department of Education and the Joint Labor Management Committee established pursuant to subdivision (a) of Section 10280.2, using information from the cost estimation model, shall define elements of the base rate and any enhanced rates to inform the states proposed single rate single-rate structure and rates. These elements shall be subject to the mandated public engagement state plan process and legislative review. The department shall report to the Senate Health and Human Services budget subcommittees, Assembly and Senate Education budget subcommittees, and the Legislative Analysts Office on progress made to conduct an alternative methodology and cost estimate cost-estimate model.
(e)No later than May 15, 2024, the department shall report on the status of the draft Child Care and Development Fund state plan to the Senate Health and Human Services budget subcommittees, Assembly and Senate Education budget subcommittees, and the Legislative Analysts Office on the states proposed single rate single-rate structure to be submitted to the United States Department of Health and Human Services, Administration for Children and Families.
(f)No later than July 1, 2024, the department shall submit necessary information to support use of a single rate structure using the alternative methodology to the United States Department of Health and Human Services, Administration for Children and Families in the Child Care and Development Fund state plan or an amendment to the state plan. The department shall provide a copy of the Child Care and Development Fund state plan or amendment to the state plan submitted to the United States Department of Health and Human Services, Administration for Children and Families to the Senate Health and Human Services budget subcommittees, Assembly and Senate Education budget subcommittees, and the Legislative Analysts Office no later than July 10, 2024.
(g)(1)Within 60 days of federal approval of the single rate single-rate structure utilizing the alternative methodology in the state plan, the department, in collaboration with the State Department of Education, shall provide the Assembly Committee on Budget, the Senate Committee on Budget and Fiscal Review, and the Legislative Analysts Office with a report that outlines the implementation components for the approved single rate single-rate structure. For a period of 30 days, the Legislature shall have the opportunity to review and provide feedback regarding draft guidance for implementation of policies. The report shall include all of the following:
(A)The departments plan to set new reimbursement rates under the alternative methodology by no later than July 1, 2025.
(B)The estimated costs and estimated timelines associated with the implementation components of the approved single rate single-rate structure, including, but not limited to, state operations resources, technology and infrastructure changes, and any regulatory or statutory changes necessary to implement the approved single rate single-rate structure.
(2)(A)The department shall, from October 1, 2024, to July 1, 2027, 2028, inclusive, provide the Assembly Committee on Budget, the Senate Committee on Budget and Fiscal Review, and the Legislative Analysts Office with quarterly updates on the implementation of the new reimbursement rates set under the alternative methodology. The quarterly updates shall include any changes to the information provided in the report described in paragraph (1).
(B)(i)The quarterly report issued no later than May 14, 2027, pursuant to subparagraph (A) shall consist of the considerations required to add monthly cost of care plus rates made pursuant to Sections 10277.1 and 10277.2 to existing reimbursement rates that are funded within existing childcare and development contracts for alternative payment programs, including, but not limited to, migrant alternative payment programs pursuant to Chapter 3 (commencing with Section 10225), migrant childcare and development programs pursuant to Chapter 6 (commencing with Section 10235), general childcare and development programs pursuant to Chapter 7 (commencing with Section 10240), family childcare home education networks pursuant to Chapter 8 (commencing with Section 10250), childcare and development services for children with special needs pursuant to Chapter 9 (commencing with Section 10260), childcare for recipients of the CalWORKs program pursuant to Chapter 21 (commencing with Section 10370), and the emergency childcare bridge program for foster children pursuant to Section 11461.6.
(ii)Considerations presented by the department pursuant to clause (i) shall include, but not be limited to, all of the following:
(I)Updates to data systems required to add monthly cost of care plus payments to existing contract rates.
(II)Necessary statutory and regulatory changes to add monthly cost of care plus payments to existing contract rates.
(III)Activities needed to be performed by the department and contractors to ensure contractors can pay childcare providers through an contract rate that includes the monthly cost of care plus payments.
(iii)The department shall present, where practicable, an estimated timeframe for each consideration described pursuant to clause (ii).
(h)Beginning October 1, 2025, and through July 1, 2027, inclusive, the department shall update the Legislature not more frequently than quarterly, to the extent information is available or reported to the department by contractors, regarding progress on implementation of prospective payment and paying based on enrollment, in keeping with the goals set for funds appropriated pursuant to Provision 19 of Item 5180-101-0001 of the Budget Act of 2025 and with subparagraph (i) of paragraph (2) of subdivision (m) of Section 98.45 of Subpart E of Part 98 of Subchapter A of Subtitle A of Title 45 of the Code of Federal Regulations. enrollment.
(i)The Governor and the Legislature shall, by no later than July 1, 2025, establish reimbursement rates based on the alternative methodology. Provider reimbursement rates shall not be reduced from the reimbursement rates that were in effect on June 30, 2024, pursuant to Sections 10280 and 10374.5 of this code and Section 8242 of the Education Code, inclusive of the cost of care plus rates established pursuant to subdivision (b) of Section 10277.1 and subdivision (b) of Section 10277.2.
(j)(1)If the new reimbursement rates established pursuant to subdivision(i) subdivision (i) do not take effect on July 1, 2025, the department shall provide the Legislature with a Chairperson of the Joint Legislative Budget Committee with the departments anticipated timeline for transitioning from the rates that are in effect on July 1, 2025, to the new rates established pursuant to subdivision (i).
(2)Any temporary reimbursement rates established as part of the transition timeline required by paragraph (1) shall be, at minimum, equivalent to the reimbursement rates established pursuant to Sections 10280 and 10374.5 of this code and Section 8242 of the Education Code, inclusive of the cost of care plus rates established pursuant to subdivision (b) of Section 10277.1 and subdivision (b) of Section 10277.2.
(k)The single rate structure shall apply to all programs funded by the State Department of Social Services under Chapter 3 (commencing with Section 10225), Chapter 6 (commencing with Section 10235), Chapter 7 (commencing with Section 10240), Chapter 8 (commencing with Section 10250), Chapter 9 (commencing with Section 10260), Chapter 21 (commencing with Section 10370), and Chapter 2 (commencing with Section 11461.6) of Part 2, and the State Department of Education under Chapter 2 (commencing with Section 8200) of Part 6 of Division 1 of Title 1 of the Education Code.
(l)The department, after collaborating with the State Department of Education, shall identify the remaining foundational policy frameworks of the single rate structure by January 10, 2028.
(l)(m)(1)Except as required by subdivision (n), it is the intent of the Legislature, beginning July 1, 2025, to cease using a regional market rate market-rate survey pursuant to Section 10436, and instead use an alternative methodology, as defined in subdivision (ak) of Section 10213.5, for the purpose of informing the setting of future childcare rates. rates and California state preschool program rates.
(2)It is the intent of the Legislature that:
(A)Reimbursement rates are set pursuant to statute and informed by the alternative methodology, as defined in subdivision (ak) of Section 10213.5.
(B)Under the single rate single structure, all programs described in subdivision (k) shall be reimbursed under a unified structure that takes into account a common set of rate elements.
(C)Rate levels shall be informed by the costs associated with meeting health and safety requirements and program requirements.
(D)Base rates shall be administered as a per-child amount, and programs shall be able to claim reimbursement for services they deliver consistent with enhanced rates, if any.
(E)Rates shall vary based on all of the following:
(i)Geography.
(ii)Type of care setting.
(iii)Regulatory and statutory requirements applicable to each type of care setting.
(iv)Time categories.
(v)Child age. age groupings, consisting of all of the following:
(I)Children under two years of age, the care of whom will be reimbursed at the infant rate.
(II)Children who are two years of age, the care of whom will be reimbursed at the toddler rate.
(III)Children who are three years of age to six years of age, inclusive, who are not yet enrolled in first grade, the care of whom will be reimbursed at the preschool rate.
(IV)Children five years of age and older, who are enrolled in first grade or higher, the care of whom will be reimbursed at the schoolage rate.
(F)(i)Enhanced inclusion rates shall be administered as a per-child amount, and programs shall be able to claim reimbursement, consistent with the rules and regulations developed by the department and the State Department of Education, respectively. To receive an enhanced inclusion rate for a child, the family data file shall include documentation of at least one of the following:
(I)A current individualized family service plan.
(II)A current individualized education program.
(III)A current individual program plan.
(IV)An active plan pursuant to Section 504 of the federal Rehabilitation Act of 1973 (29 U.S.C. Sec. 794).
(V)An active incidental medical services plan, as described in Section 1596.802 of the Health and Safety Code.
(ii)The documentation described in clause (i) may be unsigned if the family did not consent to the services, despite the child being deemed eligible.
(3)It is further the intent of the Legislature that the alternative methodology shall be based on a cost study and cost estimation model conducted by the department for the measurement of the costs of care in California for all childcare and preschool programs described in subdivision (k), and shall include, but not be limited to, all of the following costs:
(A)Salaries and wages.
(B)Geography.
(C)Type of care setting.
(D)Regulatory and statutory requirements applicable to each type of care setting.
(E)Time categories, including, but not limited to, non-traditional hours.
(F)Child age.
(G)Cost for delivering inclusion supports.
(m)(n)Commencing July 1, 2026, rates for all programs described in subdivision (k) shall receive the cost-of-living adjustment granted by the Legislature annually pursuant to Section 42238.15 of the Education Code as a minimum annual rate increase for all subsidized childcare providers.
(n)(o)If the United States Department of Health and Human Services, Administration for Children and Families does not approve the alternative methodology developed pursuant to this section, the department shall develop and conduct a survey of the market rates for childcare services.
(o)(p)If the provisions of this section are in conflict with the provisions of a memorandum of understanding reached pursuant to Section 10426, the memorandum of understanding shall be controlling without further legislative action, except that if such provisions of a memorandum of understanding require the expenditure of funds, the provisions shall not become effective unless approved by the Legislature in the annual Budget Act.
(q)When updating the alternative methodology, as required by the triennial federal Child Care Development fund plan, the department shall use values or selection points that reflect the actual, established costs of providing care.
SEC. 4.SEC. 5.Section 10227.7 is added to the Welfare and Institutions Code, to read:10227.7.(a)When establishing new reimbursement rates using a single-rate structure informed by an alternative methodology, pursuant to subdivision (i) of Section 10227.6, to the extent it is consistent with the approved Child Care and Development Fund state plan, the department department, in consultation with the State Department of Education, shall do all of the following:
(1)Vary rates based on the following geographic regions: geographic regions established by the department and determined by the cost of living.
(A)Region 1 shall consist of the Counties of Alpine, Amador, Butte, Calaveras, Colusa, Del Norte, Fresno, Glenn, Humboldt, Imperial, Inyo, Kern, Kings, Lake, Lassen, Madera, Mariposa, Mendocino, Merced, Modoc, Plumas, San Bernardino, San Joaquin, Shasta, Sierra, Siskiyou, Stanislaus, Sutter, Tehama, Trinity, Tulare, Tuolumne, and Yuba.(B)Region 2 shall consist of the Counties of Alameda, El Dorado, Mono, Nevada, Riverside, Sacramento, San Luis Obispo, Solano, and Yolo.(C)Region 3 shall consist of the County of Los Angeles.(D)Region 4 shall consist of the Counties of Contra Costa, Monterey, Napa, Orange, Placer, San Benito, San Diego, Santa Barbara, Sonoma, and Ventura.(E)Region 5 shall consist of the Counties of Marin, San Francisco, San Mateo, Santa Clara, and Santa Cruz.(2)Vary rates, at a minimum, based on whether the childcare provider is being provided in a license-exempt childcare provider, setting, a licensed family daycare home, or a licensed daycare center. center setting.
(3)Vary rates based on regulatory and statutory requirements applicable to each type of care setting.
(3)(4)Vary rates, at a minimum, based on the following time category considerations:
(A)The availability of part-time care and full-time care.(A)Part-time and full-time certified need.
(B)When A week, for purposes of determining the hours of certified need in a week, that the week begins at midnight on Sunday and ends at 11:59 p.m. on Saturday.
(C)For families certified for full-time care or with a variable schedule, if more than 40 hours of care are used in a week, the provider shall be paid the full-time rate for the first 40 hours of care and an hourly rate for all care time in excess of 40 hours.(D)The provision of two weeks notice to a childcare provider in advance of the implementation of a change in a familys certified need.(4)(5)Vary rates, at a minimum, based on the following child age considerations:
(A)Reimbursing program at the same rate if they serve children of the same age and are required to satisfy the same program requirements.(A)All programs that serve the same age of children and have the same program requirements receive the same reimbursable base payment rate, regardless of the type of program contract.
(B)The establishment of rates based on the following child age groupings:
(i)Children who are younger than two years of age. age, the care of whom will be reimbursed at the infant rate.
(ii)Children who are two years of age. age, the care of whom will be reimbursed at the toddler rate.
(iii)Children who are three to five six years of age, inclusive, and children who are six years of age who are not yet enrolled in first grade. grade, the care of whom will be reimbursed at the preschool rate.
(iv)Children who are six five years of age and older who are enrolled in first grade and children who are seven years of age and older. grade, the care of whom will be reimbursed at the schoolage rate.
(5)(A)Include an extended hours care rate that is equal to 125 percent of the base rate.(B)For the purposes of this subdivision, extended hours care means certified need from 6:00 p.m. to 7:00 a.m. any day of the week and certified need from 7:00 a.m. to 6:00 p.m. on Saturday or Sunday.(6)Include an enhanced inclusion rate for children who have an individualized family service plan, individual program plan, individualized education program, a plan pursuant to Section 504 of the federal Rehabilitation Act of 1973 (29 U.S.C. Sec. 794), or an active incidental medical services plan. The enhanced inclusion rate shall be 130 percent of the base rate for children with exceptional needs and 160 percent of the base rate for severely disabled children and shall be retroactive to either the date the referral was made that led to the plan being enacted, or the date when eligibility was granted, whichever occurred earlier.(7)Include an enhanced transportation reimbursement rate for the cost to childcare providers of transporting children to and from care that is equal to the rate approved by the Internal Revenue Service pursuant to Section 162 of the Internal Revenue Code in connection with deductible mileage expenses under the federal income tax law. If a childcare provider is receiving the enhanced transportation reimbursement rate, the provider shall be required to include a record of daily miles driven for children receiving transportation services.(8)Ensure that the reimbursement rates permit reimbursement for a specific child to include all rate enhancements for which the child is eligible, and does not limit the number of rate enhancements that can be provided for a specific child.(9)Ensure that reimbursement rates are based on families certified need, as follows:(A)Providers shall be reimbursed based on the maximum certified hours of care, regardless of attendance.(B)For families certified for a variable schedule, providers shall be reimbursed based on the maximum certified hours of care.(C)For license-exempt providers that provide part-time services, providers shall be reimbursed based on the maximum certified hours of care.(b)Reimbursement rates established under the alternative methodology, pursuant to subdivision (i) of Section 10227.6, shall be implemented with regards to family childcare providers within 90 days of the state and the provider organization representing those providers reaching agreement on the rates.(c)Reimbursement rates established under the alternative methodology, pursuant to subdivision (i) of Section 10227.6, shall not be reduced below the amounts in effect on the effective date of the act that added this section.(6)Include an enhanced rate for nonstandard hours of care.
(7)(A)Include an enhanced inclusion rate, which shall be administered as a per-child amount and for which programs shall be able to claim reimbursement, consistent with the rules and regulations developed by the department and the State Department of Education, as applicable. To receive an enhanced inclusion rate for a child, the family data file shall include documentation of at least one of the following:
(i)A current individualized family service plan.
(ii)A current individualized education program.
(iii)A current individual program plan.
(iv)An active plan pursuant to Section 504 of the federal Rehabilitation Act of 1973 (29 U.S.C. Sec. 794).
(v)An active incidental medical services plan, as described in Section 1596.802 of the Health and Safety Code.
(B)The documentation described in subparagraph (A) may be unsigned if the family did not consent to the childs receipt of services, despite the child being deemed eligible.
(8)May include other enhanced rates, as determined through the annual Budget process.
(9)Ensure that the reimbursement rates for a specific child, payable to an individual provider or contractor, includes all enhanced rates for which the child is eligible, and that are for services the child is receiving from the individual provider or contractor.
(10)Ensure that base payment rates are based on a childs maximum certified hours of care with an individual provider, regardless of attendance.
(b)Notwithstanding the rulemaking provisions of the Administrative Procedure Act (Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code), the department may implement and administer this section by all-county letters, childcare bulletins, or similar written instructions until regulations are adopted. These all-county letters or similar written instructions shall have the same force and effect as regulations.
SEC. 6.Section 4.5 of this bill incorporates amendments to Section 10227.6 of the Welfare and Institutions Code proposed by this bill and either Assembly Bill 190 or Senate Bill 190. That section of this bill shall only become operative if (1) both bills are enacted and become effective on or before January 1, 2027, (2) each bill amends Section 10227.6 of the Welfare and Institutions Code, and (3) this bill is enacted after either Assembly Bill 190 or Senate Bill 190, in which case Section 10227.6 of the Welfare and Institutions Code, as amended by either Assembly Bill 190 or Senate Bill 190, shall remain operative only until the operative date of this bill, at which time Section 4.5 of this bill shall become operative, and Section 4 of this bill shall not become operative.
SEC. 5.SEC. 7.This act is an urgency statute necessary for the immediate preservation of the public peace, health, or safety within the meaning of Article IV of the California Constitution and shall go into immediate effect. The facts constituting the necessity are:
In order to prevent further delays transitioning to the new systems for setting reimbursement rates for subsidized childcare programs, it is necessary for this act to take effect immediately.
This act shall be known, and may be cited, as the True Cost of Child Care Act.
SEC. 2.(a)The Legislature finds and declares all of the following:
(1)The Legislature passed, and the Governor signed to enact, the Building a Better Early Care and Education System Act in 2019, codifying that family childcare providers have the right to form, join, and participate in a provider organization of their choosing to represent them and bargain on matters related to their employment terms and conditions.
(2)Pursuant to the process established by the Building a Better Early Care and Education System Act, childcare providers organized and elected a statewide union, known as Child Care Providers United (CCPU), representing over 70,000 home-based childcare providers, which has successfully negotiated three contracts with the State of California.
(3)The rate of pay for providers negotiated between the state and CCPU is informed by the rate methodology established in state law and funded in the state budget, and the current rate methodology is largely understood to leave providers significantly underpaid, leaving families without access to adequate, quality, reliable childcare in the locations, languages, and other necessities to meet families needs.
(4)The Legislature has determined that the state should use a new alternative methodology. This methodology will apply the actual cost of care to calculate how subsidy payments are made to early childhood educators with one goal being to stabilize and improve childcare options for families.
(5)California is committed to advancing racial, economic, geographic, and gender equity across its publicly funded systems, including early learning and care.
(6)Federal regulations allow states to use a cost estimation model. This model can replace a market rate survey to better reflect the true cost of high-quality childcare. It includes adequate compensation for the workforce, investments in health and safety, and compliance with licensing requirements.
(7)Californias existing market-rate methodology significantly underestimates the actual cost of care, with a recent study from the state showing that providers earned just 30 percent of the cost of care in 2024. In a broken market where rates are set based on what families can pay as opposed to what it actually costs to provide quality, developmentally appropriate care reliance on regional market surveys perpetuate historic inequities by embedding disparities in family income, neighborhood wealth, and access to private tuition into the states reimbursement structure.
(8)The early care and education workforce is almost exclusively female and predominantly people of color, including many recent immigrants, first-generation college students, and working mothers. An estimated 43 percent of early educators turn to public safety-net support to meet the basic needs of their family.
(9)Chronic underpayment has led to workforce instability, program closures, and less access to care for working families. These impacts are especially felt in low-income communities, rural areas, and communities of color.
(10)Childcare deserts are most prevalent in low-income communities, rural areas, tribal communities, and communities of color, where the market fails to generate rates sufficient to sustain licensed and license-exempt providers serving subsidized families.
(11)As part of developing the alternative methodology, the State Department of Social Services was required to consult early childhood educator stakeholders. This includes Child Care Providers United, the bargaining representative for licensed and license-exempt family childcare providers receiving state subsidies. The goal was to inform the development of a cost-based rate model.
(12)Despite this statutory direction and extensive stakeholder engagement, a rate structure based on the actual cost of care is nowhere near completion. This delay prevents much-needed stabilization of the childcare sector.
(13)Adopting a true cost of care methodology is needed to support the childcare workforce, help families in the states subsidized childcare system, and protect the states economy.
(b)Therefore, it is the intent of the Legislature to enact the statutory changes to implement a childcare reimbursement methodology based on the actual cost of care and to ensure its timely implementation.
SEC. 3.Section 10227.6 of the Welfare and Institutions Code is amended to read:10227.6.(a)It is the intent of the Legislature to use an alternative methodology, as defined in subdivision (ak) of Section 10213.5, to inform the setting of reimbursement rates for subsidized childcare.
(b)Reimbursement rates are subject to agreement and codification by the Legislature.
(c)The department, in collaboration with the State Department of Education, shall develop and conduct an alternative methodology. The department shall begin the process of data collection and analysis pursuant to developing an alternative methodology by July 1, 2023, and consult with the State Department of Education on data collection, analysis, and methodology for preschool programs. The alternative methodology shall build on the recommendations of the working group established pursuant to Section 10280.2 and shall be aligned with the recommendations of the Joint Labor Management Committee established pursuant to subdivision (a) of Section 10280.2.
(d)No later than February 15, 2024, the department, in collaboration with the State Department of Education and the Joint Labor Management Committee established pursuant to subdivision (a) of Section 10280.2, using information from the cost estimation model, shall define elements of the base rate and any enhanced rates to inform the states proposed single-rate structure and rates. These elements shall be subject to the mandated public engagement state plan process and legislative review. The department shall report to the Senate Health and Human Services budget subcommittees, Assembly and Senate Education budget subcommittees, and the Legislative Analysts Office on progress made to conduct an alternative methodology and cost-estimate model.
(e)No later than May 15, 2024, the department shall report on the status of the draft Child Care and Development Fund state plan to the Senate Health and Human Services budget subcommittees, Assembly and Senate Education budget subcommittees, and the Legislative Analysts Office on the states proposed single-rate structure to be submitted to the United States Department of Health and Human Services, Administration for Children and Families.
(f)No later than July 1, 2024, the department shall submit necessary information to support use of a single-rate structure using the alternative methodology to the United States Department of Health and Human Services, Administration for Children and Families in the Child Care and Development Fund state plan or an amendment to the state plan. The department shall provide a copy of the Child Care and Development Fund state plan or amendment to the state plan submitted to the United States Department of Health and Human Services, Administration for Children and Families to the Senate Health and Human Services budget subcommittees, Assembly and Senate Education budget subcommittees, and the Legislative Analysts Office no later than July 10, 2024.
(g)(1)Within 60 days of federal approval of the single-rate structure utilizing the alternative methodology in the state plan, the department, in collaboration with the State Department of Education, shall provide the Assembly Committee on Budget, the Senate Committee on Budget and Fiscal Review, and the Legislative Analysts Office with a report that outlines the implementation components for the approved single-rate structure. For a period of 30 days, the Legislature shall have the opportunity to review and provide feedback regarding draft guidance for implementation of policies. The report shall include all of the following:
(A)The departments plan to set new reimbursement rates under the alternative methodology by no later than July 1, 2025.
(B)The estimated costs and estimated timelines associated with the implementation components of the approved single-rate structure, including, but not limited to, state operations resources, technology and infrastructure changes, and any regulatory or statutory changes necessary to implement the approved single-rate structure.
(2)The department shall, from October 1, 2024, until the new reimbursement rates set under the alternative methodology are fully implemented, provide the Assembly Committee on Budget, the Senate Committee on Budget and Fiscal Review, and the Legislative Analysts Office with quarterly updates on the implementation of the new reimbursement rates set under the alternative methodology. The quarterly updates shall include any changes to the information provided in the report described in paragraph (1).
(h)Beginning October 1, 2025, and through July 1, 2027, inclusive, the department shall update the Legislature not more frequently than quarterly, to the extent information is available or reported to the department by contractors, regarding progress on implementation of prospective payment and paying based on enrollment, in keeping with the goals set for funds appropriated pursuant to Provision 19 of Item 5180-101-0001 of the Budget Act of 2025 and with subparagraph (i) of paragraph (2) of subdivision (m) of Section 98.45 of Subpart E of Part 98 of Subchapter A of Subtitle A of Title 45 of the Code of Federal Regulations.
(i)The Governor and the Legislature shall, by no later than July 1, 2025, establish reimbursement rates based on the alternative methodology. Provider reimbursement rates shall not be reduced from the reimbursement rates that were in effect on June 30, 2024, pursuant to Sections 10280 and 10374.5 of this code and Section 8242 of the Education Code, inclusive of the cost of care plus rates established pursuant to subdivision (b) of Section 10277.1 and subdivision (b) of Section 10277.2.
(j)(1)If the new reimbursement rates established pursuant to subdivision (i) do not take effect on July 1, 2025, the department shall provide the Chairperson of the Joint Legislative Budget Committee with the departments anticipated timeline for transitioning from the rates that are in effect on July 1, 2025, to the new rates established pursuant to subdivision (i).
(2)Any temporary reimbursement rates established as part of the transition timeline required by paragraph (1) shall be, at minimum, equivalent to the reimbursement rates established pursuant to Sections 10280 and 10374.5 of this code and Section 8242 of the Education Code, inclusive of the cost of care plus rates established pursuant to subdivision (b) of Section 10277.1 and subdivision (b) of Section 10277.2.
(k)The single-rate structure shall apply to all programs funded by the State Department of Social Services under Chapter 3 (commencing with Section 10225), Chapter 6 (commencing with Section 10235), Chapter 7 (commencing with Section 10240), Chapter 8 (commencing with Section 10250), Chapter 9 (commencing with Section 10260), Chapter 21 (commencing with Section 10370), and Chapter 2 (commencing with Section 11461.6) of Part 2, and the State Department of Education under Chapter 2 (commencing with Section 8200) of Part 6 of Division 1 of Title 1 of the Education Code.
(l)(1)Except as required by subdivision (n), it is the intent of the Legislature, beginning July 1, 2025, to cease using a regional market rate survey pursuant to Section 10436, and instead use an alternative methodology, as defined in subdivision (ak) of Section 10213.5, for the purpose of informing the setting of future childcare rates.
(2)It is the intent of the Legislature that:
(A)Reimbursement rates are set pursuant to statute and informed by the alternative methodology, as defined in subdivision (ak) of Section 10213.5.
(B)Under the single-rate structure, all programs described in subdivision (k) shall be reimbursed under a unified structure that takes into account a common set of rate elements.
(C)Rate levels shall be informed by the costs associated with meeting health and safety requirements and program requirements.
(D)Base rates shall be administered as a per-child amount, and programs shall be able to claim reimbursement for services they deliver consistent with enhanced rates, if any.
(E)Rates shall vary based on all of the following:
(i)Geography.
(ii)Type of care setting.
(iii)Regulatory requirements applicable to each type of care setting.
(iv)Time categories.
(v)Child age.
(m)Commencing July 1, 2026, rates for all programs described in subdivision (k) shall receive the cost-of-living adjustment granted by the Legislature annually pursuant to Section 42238.15 of the Education Code as a minimum annual rate increase for all subsidized childcare providers.
(n)If the United States Department of Health and Human Services, Administration for Children and Families does not approve the alternative methodology developed pursuant to this section, the department shall develop and conduct a survey of the market rates for childcare services.
(o)If the provisions of this section are in conflict with the provisions of a memorandum of understanding reached pursuant to Section 10426, the memorandum of understanding shall be controlling without further legislative action, except that if such provisions of a memorandum of understanding require the expenditure of funds, the provisions shall not become effective unless approved by the Legislature in the annual Budget Act.
(p)When updating the alternative methodology, as required by the triennial federal Child Care Development fund plan, the department shall use values or selection points that reflect the actual, established costs of providing care.
SEC. 4.Section 10227.7 is added to the Welfare and Institutions Code, to read:10227.7.(a)When establishing new reimbursement rates using an alternative methodology, pursuant to subdivision (i) of Section 10227.6, to the extent it is consistent with the Child Care and Development Fund state plan, the department shall do all of the following:
(1)Vary rates based on the following geographic regions:
(A)Region 1 shall consist of the Counties of Alpine, Amador, Butte, Calaveras, Colusa, Del Norte, Fresno, Glenn, Humboldt, Imperial, Inyo, Kern, Kings, Lake, Lassen, Madera, Mariposa, Mendocino, Merced, Modoc, Plumas, San Bernardino, San Joaquin, Shasta, Sierra, Siskiyou, Stanislaus, Sutter, Tehama, Trinity, Tulare, Tuolumne, and Yuba.
(B)Region 2 shall consist of the Counties of Alameda, El Dorado, Mono, Nevada, Riverside, Sacramento, San Luis Obispo, Solano, and Yolo.
(C)Region 3 shall consist of the County of Los Angeles.
(D)Region 4 shall consist of the Counties of Contra Costa, Monterey, Napa, Orange, Placer, San Benito, San Diego, Santa Barbara, Sonoma, and Ventura.
(E)Region 5 shall consist of the Counties of Marin, San Francisco, San Mateo, Santa Clara, and Santa Cruz.
(2)Vary rates, at a minimum, based on whether the childcare provider is a license-exempt childcare provider, a licensed family daycare home, or a daycare center.
(3)Vary rates, at a minimum, based on the following time category considerations:
(A)The availability of part-time care and full-time care.
(B)When determining the hours of certified need in a week, that the week begins at midnight on Sunday and ends at 11:59 p.m. on Saturday.
(C)For families certified for full-time care or with a variable schedule, if more than 40 hours of care are used in a week, the provider shall be paid the full-time rate for the first 40 hours of care and an hourly rate for all care time in excess of 40 hours.
(D)The provision of two weeks notice to a childcare provider in advance of the implementation of a change in a familys certified need.
(4)Vary rates, at a minimum, based on the following child age considerations:
(A)Reimbursing program at the same rate if they serve children of the same age and are required to satisfy the same program requirements.
(B)The establishment of rates based on the following age groupings:
(i)Children who are younger than two years of age.
(ii)Children who are two years of age.
(iii)Children who are three to five years of age, inclusive, and children who are six years of age who are not yet enrolled in first grade.
(iv)Children who are six years of age who are enrolled in first grade and children who are seven years of age and older.
(5)(A)Include an extended hours care rate that is equal to 125 percent of the base rate.
(B)For the purposes of this subdivision, extended hours care means certified need from 6:00 p.m. to 7:00 a.m. any day of the week and certified need from 7:00 a.m. to 6:00 p.m. on Saturday or Sunday.
(6)Include an enhanced inclusion rate for children who have an individualized family service plan, individual program plan, individualized education program, a plan pursuant to Section 504 of the federal Rehabilitation Act of 1973 (29 U.S.C. Sec. 794), or an active incidental medical services plan. The enhanced inclusion rate shall be 130 percent of the base rate for children with exceptional needs and 160 percent of the base rate for severely disabled children and shall be retroactive to either the date the referral was made that led to the plan being enacted, or the date when eligibility was granted, whichever occurred earlier.
(7)Include an enhanced transportation reimbursement rate for the cost to childcare providers of transporting children to and from care that is equal to the rate approved by the Internal Revenue Service pursuant to Section 162 of the Internal Revenue Code in connection with deductible mileage expenses under the federal income tax law. If a childcare provider is receiving the enhanced transportation reimbursement rate, the provider shall be required to include a record of daily miles driven for children receiving transportation services.
(8)Ensure that the reimbursement rates permit reimbursement for a specific child to include all rate enhancements for which the child is eligible, and does not limit the number of rate enhancements that can be provided for a specific child.
(9)Ensure that reimbursement rates are based on families certified need, as follows:
(A)Providers shall be reimbursed based on the maximum certified hours of care, regardless of attendance.
(B)For families certified for a variable schedule, providers shall be reimbursed based on the maximum certified hours of care.
(C)For license-exempt providers that provide part-time services, providers shall be reimbursed based on the maximum certified hours of care.
(b)Reimbursement rates established under the alternative methodology, pursuant to subdivision (i) of Section 10227.6, shall be implemented with regards to family childcare providers within 90 days of the state and the provider organization representing those providers reaching agreement on the rates.
(c)Reimbursement rates established under the alternative methodology, pursuant to subdivision (i) of Section 10227.6, shall not be reduced below the amounts in effect on the effective date of the act that added this section.
SEC. 4.SEC. 5.This act is an urgency statute necessary for the immediate preservation of the public peace, health, or safety within the meaning of Article IV of the California Constitution and shall go into immediate effect. The facts constituting the necessity are:
In order to prevent further delays transitioning to the new systems for setting reimbursement rates for subsidized childcare programs, it is necessary for this act to take effect immediately.
This act shall be known, and may be cited, as the True Cost of Child Care Act.
SEC. 2.(a)The Legislature finds and declares all of the following:
(1)The Legislature passed, and the Governor signed to enact, the Building a Better Early Care and Education System Act in 2019, codifying that family childcare providers have the right to form, join, and participate in a provider organization of their choosing to represent them and bargain on matters related to their employment terms and conditions.
(2)Pursuant to the process established by the Building a Better Early Care and Education System Act, childcare providers organized and elected a statewide union, known as Child Care Providers United (CCPU), representing over 70,000 home-based childcare providers, which has successfully negotiated three contracts with the State of California.
(3)The rate of pay for providers negotiated between the state and CCPU is informed by the rate methodology established in state law and funded in the state budget, and the current rate methodology is largely understood to leave providers significantly underpaid, leaving families without access to adequate, quality, reliable childcare in the locations, languages, and other necessities to meet families needs.
(4)The Legislature has determined that the state should use a new alternative methodology. This methodology will apply the actual cost of care to calculate how subsidy payments are made to early childhood educators with one goal being to stabilize and improve childcare options for families.
(5)California is committed to advancing racial, economic, geographic, and gender equity across its publicly funded systems, including early learning and care.
(6)Federal regulations allow states to use a cost estimation model. This model can replace a market rate survey to better reflect the true cost of high-quality childcare. It includes adequate compensation for the workforce, investments in health and safety, and compliance with licensing requirements.
(7)Californias existing market-rate methodology significantly underestimates the actual cost of care, with a recent study from the state showing that providers earned just 30 percent of the cost of care in 2024. In a broken market where rates are set based on what families can pay as opposed to what it actually costs to provide quality, developmentally appropriate care reliance on regional market surveys perpetuate historic inequities by embedding disparities in family income, neighborhood wealth, and access to private tuition into the states reimbursement structure.
(8)The early care and education workforce is almost exclusively female and predominantly people of color, including many recent immigrants, first-generation college students, and working mothers. An estimated 43 percent of early educators turn to public safety-net support to meet the basic needs of their family.
(9)Chronic underpayment has led to workforce instability, program closures, and less access to care for working families. These impacts are especially felt in low-income communities, rural areas, and communities of color.
(10)Childcare deserts are most prevalent in low-income communities, rural areas, tribal communities, and communities of color, where the market fails to generate rates sufficient to sustain licensed and license-exempt providers serving subsidized families.
(11)As part of developing the alternative methodology, the State Department of Social Services was required to consult early childhood educator stakeholders. This includes Child Care Providers United, the bargaining representative for licensed and license-exempt family childcare providers receiving state subsidies. The goal was to inform the development of a cost-based rate model.
(12)Despite this statutory direction and extensive stakeholder engagement, a rate structure based on the actual cost of care is nowhere near completion. This delay prevents much-needed stabilization of the childcare sector.
(13)Adopting a true cost of care methodology is needed to support the childcare workforce, help families in the states subsidized childcare system, and protect the states economy.
(b)Therefore, it is the intent of the Legislature to enact the statutory changes to implement a childcare reimbursement methodology based on the actual cost of care and to ensure its timely implementation.
SEC. 3.Section 10227.6 of the Welfare and Institutions Code is amended to read:10227.6.(a)It is the intent of the Legislature to use an alternative methodology, as defined in subdivision (ak) of Section 10213.5, to inform the setting of reimbursement rates for subsidized childcare.
(b)Reimbursement rates are subject to agreement and codification by the Legislature.
(c)The department, in collaboration with the State Department of Education, shall develop and conduct an alternative methodology. The department shall begin the process of data collection and analysis pursuant to developing an alternative methodology by July 1, 2023, and consult with the State Department of Education on data collection, analysis, and methodology for preschool programs. The alternative methodology shall build on the recommendations of the working group established pursuant to Section 10280.2 and shall be aligned with the recommendations of the Joint Labor Management Committee established pursuant to subdivision (a) of Section 10280.2.
(d)No later than February 15, 2024, the department, in collaboration with the State Department of Education and the Joint Labor Management Committee established pursuant to subdivision (a) of Section 10280.2, using information from the cost estimation model, shall define elements of the base rate and any enhanced rates to inform the states proposed single-rate structure and rates. These elements shall be subject to the mandated public engagement state plan process and legislative review. The department shall report to the Senate Health and Human Services budget subcommittees, Assembly and Senate Education budget subcommittees, and the Legislative Analysts Office on progress made to conduct an alternative methodology and cost-estimate model.
(e)No later than May 15, 2024, the department shall report on the status of the draft Child Care and Development Fund state plan to the Senate Health and Human Services budget subcommittees, Assembly and Senate Education budget subcommittees, and the Legislative Analysts Office on the states proposed single-rate structure to be submitted to the United States Department of Health and Human Services, Administration for Children and Families.
(f)No later than July 1, 2024, the department shall submit necessary information to support use of a single-rate structure using the alternative methodology to the United States Department of Health and Human Services, Administration for Children and Families in the Child Care and Development Fund state plan or an amendment to the state plan. The department shall provide a copy of the Child Care and Development Fund state plan or amendment to the state plan submitted to the United States Department of Health and Human Services, Administration for Children and Families to the Senate Health and Human Services budget subcommittees, Assembly and Senate Education budget subcommittees, and the Legislative Analysts Office no later than July 10, 2024.
(g)(1)Within 60 days of federal approval of the single-rate structure utilizing the alternative methodology in the state plan, the department, in collaboration with the State Department of Education, shall provide the Assembly Committee on Budget, the Senate Committee on Budget and Fiscal Review, and the Legislative Analysts Office with a report that outlines the implementation components for the approved single-rate structure. For a period of 30 days, the Legislature shall have the opportunity to review and provide feedback regarding draft guidance for implementation of policies. The report shall include all of the following:
(A)The departments plan to set new reimbursement rates under the alternative methodology by no later than July 1, 2025.
(B)The estimated costs and estimated timelines associated with the implementation components of the approved single-rate structure, including, but not limited to, state operations resources, technology and infrastructure changes, and any regulatory or statutory changes necessary to implement the approved single-rate structure.
(2)The department shall, from October 1, 2024, until the new reimbursement rates set under the alternative methodology are fully implemented, provide the Assembly Committee on Budget, the Senate Committee on Budget and Fiscal Review, and the Legislative Analysts Office with quarterly updates on the implementation of the new reimbursement rates set under the alternative methodology. The quarterly updates shall include any changes to the information provided in the report described in paragraph (1).
(h)Beginning October 1, 2025, and through July 1, 2027, inclusive, the department shall update the Legislature not more frequently than quarterly, to the extent information is available or reported to the department by contractors, regarding progress on implementation of prospective payment and paying based on enrollment, in keeping with the goals set for funds appropriated pursuant to Provision 19 of Item 5180-101-0001 of the Budget Act of 2025 and with subparagraph (i) of paragraph (2) of subdivision (m) of Section 98.45 of Subpart E of Part 98 of Subchapter A of Subtitle A of Title 45 of the Code of Federal Regulations.
(i)The Governor and the Legislature shall, by no later than July 1, 2025, establish reimbursement rates based on the alternative methodology. Provider reimbursement rates shall not be reduced from the reimbursement rates that were in effect on June 30, 2024, pursuant to Sections 10280 and 10374.5 of this code and Section 8242 of the Education Code, inclusive of the cost of care plus rates established pursuant to subdivision (b) of Section 10277.1 and subdivision (b) of Section 10277.2.
(j)(1)If the new reimbursement rates established pursuant to subdivision (i) do not take effect on July 1, 2025, the department shall provide the Chairperson of the Joint Legislative Budget Committee with the departments anticipated timeline for transitioning from the rates that are in effect on July 1, 2025, to the new rates established pursuant to subdivision (i).
(2)Any temporary reimbursement rates established as part of the transition timeline required by paragraph (1) shall be, at minimum, equivalent to the reimbursement rates established pursuant to Sections 10280 and 10374.5 of this code and Section 8242 of the Education Code, inclusive of the cost of care plus rates established pursuant to subdivision (b) of Section 10277.1 and subdivision (b) of Section 10277.2.
(k)The single-rate structure shall apply to all programs funded by the State Department of Social Services under Chapter 3 (commencing with Section 10225), Chapter 6 (commencing with Section 10235), Chapter 7 (commencing with Section 10240), Chapter 8 (commencing with Section 10250), Chapter 9 (commencing with Section 10260), Chapter 21 (commencing with Section 10370), and Chapter 2 (commencing with Section 11461.6) of Part 2, and the State Department of Education under Chapter 2 (commencing with Section 8200) of Part 6 of Division 1 of Title 1 of the Education Code.
(l)(1)Except as required by subdivision (n), it is the intent of the Legislature, beginning July 1, 2025, to cease using a regional market rate survey pursuant to Section 10436, and instead use an alternative methodology, as defined in subdivision (ak) of Section 10213.5, for the purpose of informing the setting of future childcare rates.
(2)It is the intent of the Legislature that:
(A)Reimbursement rates are set pursuant to statute and informed by the alternative methodology, as defined in subdivision (ak) of Section 10213.5.
(B)Under the single-rate structure, all programs described in subdivision (k) shall be reimbursed under a unified structure that takes into account a common set of rate elements.
(C)Rate levels shall be informed by the costs associated with meeting health and safety requirements and program requirements.
(D)Base rates shall be administered as a per-child amount, and programs shall be able to claim reimbursement for services they deliver consistent with enhanced rates, if any.
(E)Rates shall vary based on all of the following:
(i)Geography.
(ii)Type of care setting.
(iii)Regulatory requirements applicable to each type of care setting.
(iv)Time categories.
(v)Child age.
(m)Commencing July 1, 2026, rates for all programs described in subdivision (k) shall receive the cost-of-living adjustment granted by the Legislature annually pursuant to Section 42238.15 of the Education Code as a minimum annual rate increase for all subsidized childcare providers.
(n)If the United States Department of Health and Human Services, Administration for Children and Families does not approve the alternative methodology developed pursuant to this section, the department shall develop and conduct a survey of the market rates for childcare services.
(o)If the provisions of this section are in conflict with the provisions of a memorandum of understanding reached pursuant to Section 10426, the memorandum of understanding shall be controlling without further legislative action, except that if such provisions of a memorandum of understanding require the expenditure of funds, the provisions shall not become effective unless approved by the Legislature in the annual Budget Act.
SEC. 4.This act is an urgency statute necessary for the immediate preservation of the public peace, health, or safety within the meaning of Article IV of the California Constitution and shall go into immediate effect. The facts constituting the necessity are:
In order to prevent further delays transitioning to the new systems for setting reimbursement rates for subsidized childcare programs, it is necessary for this act to take effect immediately.
This act shall be known, and may be cited, as the True Cost of Child Care Act.
SEC. 2.(a)The Legislature finds and declares all of the following:
(1)The Legislature passed, and the Governor signed to enact, the Building a Better Early Care and Education System Act in 2019, codifying that family childcare providers have the right to form, join, and participate in a provider organization of their choosing to represent them and bargain on matters related to their employment terms and conditions.
(2)Pursuant to the process established by the Building a Better Early Care and Education System Act, childcare providers organized and elected a statewide union, known as Child Care Providers United (CCPU), representing over 70,000 home-based childcare providers, which has successfully negotiated three contracts with the State of California.
(3)The rate of pay for providers negotiated between the state and CCPU is informed by the rate methodology established in state law and funded in the state budget, and the current rate methodology is largely understood to leave providers significantly underpaid, leaving families without access to adequate, quality, reliable childcare in the locations, languages, and other necessities to meet families needs.
(4)The Legislature has determined that the state should use a new alternative methodology. This methodology will apply the actual cost of care to calculate how subsidy payments are made to early childhood educators with one goal being to stabilize and improve childcare options for families.
(5)California is committed to advancing racial, economic, geographic, and gender equity across its publicly funded systems, including early learning and care.
(6)Federal regulations allow states to use a cost estimation model. This model can replace a market rate survey to better reflect the true cost of high-quality childcare. It includes adequate compensation for the workforce, investments in health and safety, and compliance with licensing requirements.
(7)Californias existing market-rate methodology significantly underestimates the actual cost of care, with a recent study from the state showing that providers earned just 30 percent of the cost of care in 2024. In a broken market where rates are set based on what families can pay as opposed to what it actually costs to provide quality, developmentally appropriate care reliance on regional market surveys perpetuate historic inequities by embedding disparities in family income, neighborhood wealth, and access to private tuition into the states reimbursement structure.
(8)The early care and education workforce is almost exclusively female and predominantly people of color, including many recent immigrants, first-generation college students, and working mothers. An estimated 43 percent of early educators turn to public safety-net support to meet the basic needs of their family.
(9)Chronic underpayment has led to workforce instability, program closures, and less access to care for working families. These impacts are especially felt in low-income communities, rural areas, and communities of color.
(10)Childcare deserts are most prevalent in low-income communities, rural areas, tribal communities, and communities of color, where the market fails to generate rates sufficient to sustain licensed and license-exempt providers serving subsidized families.
(11)As part of developing the alternative methodology, the State Department of Social Services was required to consult early childhood educator stakeholders. This includes Child Care Providers United, the bargaining representative for licensed and license-exempt family childcare providers receiving state subsidies. The goal was to inform the development of a cost-based rate model.
(12)Despite this statutory direction and extensive stakeholder engagement, a rate structure based on the actual cost of care is nowhere near completion. This delay prevents much-needed stabilization of the childcare sector.
(13)Adopting a true cost of care methodology is needed to support the childcare workforce, help families in the states subsidized childcare system, and protect the states economy.
(b)Therefore, it is the intent of the Legislature to enact the statutory changes to implement a childcare reimbursement methodology based on the actual cost of care and to ensure its timely implementation.
SECTION 1.SEC. 3.Section 10227.6 of the Welfare and Institutions Code is amended to read:10227.6.(a)It is the intent of the Legislature to use an alternative methodology, as defined in subdivision (ak) of Section 10213.5, to inform the setting of reimbursement rates for subsidized childcare.
(b)Reimbursement rates are subject to agreement and codification by the Legislature.
(c)The department, in collaboration with the State Department of Education, shall develop and conduct an alternative methodology. The department shall begin the process of data collection and analysis pursuant to developing an alternative methodology by July 1, 2023, and consult with the State Department of Education on data collection, analysis, and methodology for preschool programs. The alternative methodology shall build on the recommendations of the working group established pursuant to Section 10280.2 and shall be aligned with the recommendations of the Joint Labor Management Committee established pursuant to subdivision (a) of Section 10280.2.
(d)No later than February 15, 2024, the department, in collaboration with the State Department of Education and the Joint Labor Management Committee established pursuant to subdivision (a) of Section 10280.2, using information from the cost estimation model, shall define elements of the base rate and any enhanced rates to inform the states proposed single rate single-rate structure and rates. These elements shall be subject to the mandated public engagement state plan process and legislative review. The department shall report to the Senate Health and Human Services budget subcommittees, Assembly and Senate Education budget subcommittees, and the Legislative Analysts Office on progress made to conduct an alternative methodology and cost estimate cost-estimate model.
(e)No later than May 15, 2024, the department shall report on the status of the draft Child Care and Development Fund state plan to the Senate Health and Human Services budget subcommittees, Assembly and Senate Education budget subcommittees, and the Legislative Analysts Office on the states proposed single rate single-rate structure to be submitted to the United States Department of Health and Human Services, Administration for Children and Families.
(f)No later than July 1, 2024, the department shall submit necessary information to support use of a single rate single-rate structure using the alternative methodology to the United States Department of Health and Human Services, Administration for Children and Families in the Child Care and Development Fund state plan or an amendment to the state plan. The department shall provide a copy of the Child Care and Development Fund state plan or amendment to the state plan submitted to the United States Department of Health and Human Services, Administration for Children and Families to the Senate Health and Human Services budget subcommittees, Assembly and Senate Education budget subcommittees, and the Legislative Analysts Office no later than July 10, 2024.
(g)(1)Within 60 days of federal approval of the single rate single-rate structure utilizing the alternative methodology in the state plan, the department, in collaboration with the State Department of Education, shall provide the Assembly Committee on Budget, the Senate Committee on Budget and Fiscal Review, and the Legislative Analysts Office with a report that outlines the implementation components for the approved single rate single-rate structure. For a period of 30 days, the Legislature shall have the opportunity to review and provide feedback regarding draft guidance for implementation of policies. The report shall include all of the following:
(A)The departments plan to set new reimbursement rates under the alternative methodology by no later than July 1, 2025.
(B)The estimated costs and estimated timelines associated with the implementation components of the approved single rate single-rate structure, including, but not limited to, state operations resources, technology and infrastructure changes, and any regulatory or statutory changes necessary to implement the approved single rate single-rate structure.
(2)The department shall, from October 1, 2024, to July 1, 2027, inclusive, until the new reimbursement rates set under the alternative methodology are fully implemented, provide the Assembly Committee on Budget, the Senate Committee on Budget and Fiscal Review, and the Legislative Analysts Office with quarterly updates on the implementation of the new reimbursement rates set under the alternative methodology. The quarterly updates shall include any changes to the information provided in the report described in paragraph (1).
(h)Beginning October 1, 2025, and through July 1, 2027, inclusive, the department shall update the Legislature not more frequently than quarterly, to the extent information is available or reported to the department by contractors, regarding progress on implementation of prospective payment and paying based on enrollment, in keeping with the goals set for funds appropriated pursuant to Provision 19 of Item 5180-101-0001 of the Budget Act of 2025 and with subparagraph (i) of paragraph (2) of subdivision (m) of Section 98.45 of Subpart E of Part 98 of Subchapter A of Subtitle A of Title 45 of the Code of Federal Regulations.
(i)The Governor and the Legislature shall, by no later than July 1, 2025, establish reimbursement rates based on the alternative methodology. Provider reimbursement rates shall not be reduced from the reimbursement rates that were in effect on June 30, 2024, pursuant to Sections 10280 and 10374.5 of this code and Section 8242 of the Education Code, inclusive of the cost of care plus rates established pursuant to subdivision (b) of Section 10277.1 and subdivision (b) of Section 10277.2.
(j)(1)(A)If the new reimbursement rates established pursuant to subdivision (i) do not take effect on July 1, 2025, the department shall provide the Chairperson of the Joint Legislative Budget Committee with the departments anticipated timeline for transitioning from the rates that are in effect on July 1, 2025, to the new rates established pursuant to subdivision (i).
(B)The information required to be provided in subparagraph (A) shall be sent no later than January 31, 2027, and every subsequent year until the rates established pursuant to subdivision (i) are in effect.(2)Any temporary reimbursement rates established as part of the transition timeline required by paragraph (1) shall be, at minimum, equivalent to the reimbursement rates established pursuant to Sections 10280 and 10374.5 of this code and Section 8242 of the Education Code, inclusive of the cost of care plus rates established pursuant to subdivision (b) of Section 10277.1 and subdivision (b) of Section 10277.2.
(k)The single rate single-rate structure shall apply to all programs funded by the State Department of Social Services under Chapter 3 (commencing with Section 10225), Chapter 6 (commencing with Section 10235), Chapter 7 (commencing with Section 10240), Chapter 8 (commencing with Section 10250), Chapter 9 (commencing with Section 10260), Chapter 21 (commencing with Section 10370), and Chapter 2 (commencing with Section 11461.6) of Part 2, and the State Department of Education under Chapter 2 (commencing with Section 8200) of Part 6 of Division 1 of Title 1 of the Education Code.
(l)(1)Except as required by subdivision (n), it is the intent of the Legislature, beginning July 1, 2025, to cease using a regional market rate survey pursuant to Section 10436, and instead use an alternative methodology, as defined in subdivision (ak) of Section 10213.5, for the purpose of informing the setting of future childcare rates.
(2)It is the intent of the Legislature that:
(A)Reimbursement rates are set pursuant to statute and informed by the alternative methodology, as defined in subdivision (ak) of Section 10213.5.
(B)Under the single rate single-rate structure, all programs described in subdivision (k) shall be reimbursed under a unified structure that takes into account a common set of rate elements.
(C)Rate levels shall be informed by the costs associated with meeting health and safety requirements and program requirements.
(D)Base rates shall be administered as a per-child amount, and programs shall be able to claim reimbursement for services they deliver consistent with enhanced rates, if any.
(E)Rates shall vary based on all of the following:
(i)Geography.
(ii)Type of care setting.
(iii)Regulatory requirements applicable to each type of care setting.
(iv)Time categories.
(v)Child age.
(m)Commencing July 1, 2026, rates for all programs described in subdivision (k) shall receive the cost-of-living adjustment granted by the Legislature annually pursuant to Section 42238.15 of the Education Code as a minimum annual rate increase for all subsidized childcare providers.
(n)If the United States Department of Health and Human Services, Administration for Children and Families does not approve the alternative methodology developed pursuant to this section, the department shall develop and conduct a survey of the market rates for childcare services.
(o)If the provisions of this section are in conflict with the provisions of a memorandum of understanding reached pursuant to Section 10426, the memorandum of understanding shall be controlling without further legislative action, except that if such provisions of a memorandum of understanding require the expenditure of funds, the provisions shall not become effective unless approved by the Legislature in the annual Budget Act.
(a)It is the intent of the Legislature to use an alternative methodology, as defined in subdivision (ak) of Section 10213.5, to inform the setting of reimbursement rates for subsidized childcare.
(b)Reimbursement rates are subject to agreement and codification by the Legislature.
(c)The department, in collaboration with the State Department of Education, shall develop and conduct an alternative methodology. The department shall begin the process of data collection and analysis pursuant to developing an alternative methodology by July 1, 2023, and consult with the State Department of Education on data collection, analysis, and methodology for preschool programs. The alternative methodology shall build on the recommendations of the working group established pursuant to Section 10280.2 and shall be aligned with the recommendations of the Joint Labor Management Committee established pursuant to subdivision (a) of Section 10280.2.
(d)No later than February 15, 2024, the department, in collaboration with the State Department of Education and the Joint Labor Management Committee established pursuant to subdivision (a) of Section 10280.2, using information from the cost estimation model, shall define elements of the base rate and any enhanced rates to inform the states proposed single rate structure and rates. These elements shall be subject to the mandated public engagement state plan process and legislative review. The department shall report to the Senate Health and Human Services budget subcommittees, Assembly and Senate Education budget subcommittees, and the Legislative Analysts Office on progress made to conduct an alternative methodology and cost estimate model.
(e)No later than May 15, 2024, the department shall report on the status of the draft Child Care and Development Fund state plan to the Senate Health and Human Services budget subcommittees, Assembly and Senate Education budget subcommittees, and the Legislative Analysts Office on the states proposed single rate structure to be submitted to the United States Department of Health and Human Services, Administration for Children and Families.
(f)No later than July 1, 2024, the department shall submit necessary information to support use of a single rate structure using the alternative methodology to the United States Department of Health and Human Services, Administration for Children and Families in the Child Care and Development Fund state plan or an amendment to the state plan. The department shall provide a copy of the Child Care and Development Fund state plan or amendment to the state plan submitted to the United States Department of Health and Human Services, Administration for Children and Families to the Senate Health and Human Services budget subcommittees, Assembly and Senate Education budget subcommittees, and the Legislative Analysts Office no later than July 10, 2024.
(g)(1)Within 60 days of federal approval of the single rate structure utilizing the alternative methodology in the state plan, the department, in collaboration with the State Department of Education, shall provide the Assembly Committee on Budget, the Senate Committee on Budget and Fiscal Review, and the Legislative Analysts Office with a report that outlines the implementation components for the approved single rate structure. For a period of 30 days, the Legislature shall have the opportunity to review and provide feedback regarding draft guidance for implementation of policies. The report shall include all of the following:
(A)The departments plan to set new reimbursement rates under the alternative methodology by no later than July 1, 2025.
(B)The estimated costs and estimated timelines associated with the implementation components of the approved single rate structure, including, but not limited to, state operations resources, technology and infrastructure changes, and any regulatory or statutory changes necessary to implement the approved single rate structure.
(2)The department shall, from October 1, 2024, to July 1, 2027, inclusive, provide the Assembly Committee on Budget, the Senate Committee on Budget and Fiscal Review, and the Legislative Analysts Office with quarterly updates on the implementation of the new reimbursement rates set under the alternative methodology. The quarterly updates shall include any changes to the information provided in the report described in paragraph (1).
(h)Beginning October 1, 2025, and through July 1, 2027, inclusive, the department shall update the Legislature not more frequently than quarterly, to the extent information is available or reported to the department by contractors, regarding progress on implementation of prospective payment and paying based on enrollment, in keeping with the goals set for funds appropriated pursuant to Provision 19 of Item 5180-101-0001 of the Budget Act of 2025 and with subparagraph (i) of paragraph (2) of subdivision (m) of Section 98.45 of Subpart E of Part 98 of Subchapter A of Subtitle A of Title 45 of the Code of Federal Regulations.
(i)The Governor and the Legislature shall, by no later than July 1, 2025, establish reimbursement rates based on the alternative methodology. Provider reimbursement rates shall not be reduced from the reimbursement rates that were in effect on June 30, 2024, pursuant to Sections 10280 and 10374.5 of this code and Section 8242 of the Education Code, inclusive of the cost of care plus rates established pursuant to subdivision (b) of Section 10277.1 and subdivision (b) of Section 10277.2.
(j)(1)(A)If the new reimbursement rates established pursuant to subdivision(i) subdivision (i) do not take effect on July 1, 2025, the department shall provide the Legislature with a Chairperson of the Joint Legislative Budget Committee with the departments anticipated timeline for transitioning from the rates that are in effect on July 1, 2025, to the new rates established pursuant to subdivision (i).
(B)The information required to be provided in subparagraph (A) shall be sent no later than January 31, 2027, and every subsequent year until the rates established pursuant to subdivision (i) are in effect.
(2)Any temporary reimbursement rates established as part of the transition timeline required by paragraph (1) shall be, at minimum, equivalent to the reimbursement rates established pursuant to Sections 10280 and 10374.5 of this code and Section 8242 of the Education Code, inclusive of the cost of care plus rates established pursuant to subdivision (b) of Section 10277.1 and subdivision (b) of Section 10277.2.
(k)The single rate structure shall apply to all programs funded by the State Department of Social Services under Chapter 3 (commencing with Section 10225), Chapter 6 (commencing with Section 10235), Chapter 7 (commencing with Section 10240), Chapter 8 (commencing with Section 10250), Chapter 9 (commencing with Section 10260), Chapter 21 (commencing with Section 10370), and Chapter 2 (commencing with Section 11461.6) of Part 2, and the State Department of Education under Chapter 2 (commencing with Section 8200) of Part 6 of Division 1 of Title 1 of the Education Code.
(l)(1)Except as required by subdivision (n), it is the intent of the Legislature, beginning July 1, 2025, to cease using a regional market rate survey pursuant to Section 10436, and instead use an alternative methodology, as defined in subdivision (ak) of Section 10213.5, for the purpose of informing the setting of future childcare rates.
(2)It is the intent of the Legislature that:
(A)Reimbursement rates are set pursuant to statute and informed by the alternative methodology, as defined in subdivision (ak) of Section 10213.5.
(B)Under the single rate structure, all programs described in subdivision (k) shall be reimbursed under a unified structure that takes into account a common set of rate elements.
(C)Rate levels shall be informed by the costs associated with meeting health and safety requirements and program requirements.
(D)Base rates shall be administered as a per-child amount, and programs shall be able to claim reimbursement for services they deliver consistent with enhanced rates, if any.
(E)Rates shall vary based on all of the following:
(i)Geography.
(ii)Type of care setting.
(iii)Regulatory requirements applicable to each type of care setting.
(iv)Time categories.
(v)Child age.
(m)Commencing July 1, 2026, rates for all programs described in subdivision (k) shall receive the cost-of-living adjustment granted by the Legislature annually pursuant to Section 42238.15 of the Education Code as a minimum annual rate increase for all subsidized childcare providers.
(n)If the United States Department of Health and Human Services, Administration for Children and Families does not approve the alternative methodology developed pursuant to this section, the department shall develop and conduct a survey of the market rates for childcare services.
(o)If the provisions of this section are in conflict with the provisions of a memorandum of understanding reached pursuant to Section 10426, the memorandum of understanding shall be controlling without further legislative action, except that if such provisions of a memorandum of understanding require the expenditure of funds, the provisions shall not become effective unless approved by the Legislature in the annual Budget Act.
|
Date
|
Status
|
|---|---|
| Sep 27, 2026 | Chaptered by Secretary of State - Chapter 567, Statutes of 2026. |
| Sep 27, 2026 | Approved by the Governor. |
| Sep 14, 2026 | Enrolled and presented to the Governor at 1:30 p.m. |
| Aug 31, 2026 | Senate amendments concurred in. To Engrossing and Enrolling. (Ayes 79. Noes 0.). |
| Aug 31, 2026 | Senate amendments concurred in. To Engrossing and Enrolling. (Ayes 79. Noes 0. Page 6965.). |
| Aug 31, 2026 | Senate amendments concurred in. To Engrossing and Enrolling. |
| Aug 30, 2026 | In Assembly. Concurrence in Senate amendments pending. |
| Aug 30, 2026 | Read third time. Urgency clause adopted. Passed. Ordered to the Assembly. (Ayes 40. Noes 0.). |
| Aug 28, 2026 | Read second time. Ordered to third reading. |
| Aug 27, 2026 | Read third time and amended. Ordered to second reading. |
| Aug 24, 2026 | Read second time. Ordered to third reading. |
| Aug 21, 2026 | Read third time and amended. Ordered to second reading. |
| Aug 13, 2026 | Read second time. Ordered to third reading. |
| Aug 13, 2026 | From committee: Do pass. (Ayes 7. Noes 0.) (August 13). |
| Jun 29, 2026 | In committee: Referred to APPR. suspense file. |
| Jun 16, 2026 | From committee: Do pass and re-refer to Com. on APPR. (Ayes 4. Noes 0.) (June 15). Re-referred to Com. on APPR. |
| Jun 10, 2026 | From committee chair, with author's amendments: Amend, and re-refer to committee. Read second time, amended, and re-referred to Com. on HUMAN S. |
| May 6, 2026 | Referred to Com. on HUMAN S. |
| Apr 23, 2026 | In Senate. Read first time. To Com. on RLS. for assignment. |
| Apr 23, 2026 | Read third time. Urgency clause adopted. Passed. Ordered to the Senate. (Ayes 74. Noes 0.). |
| Apr 23, 2026 | Read third time. Urgency clause adopted. Passed. Ordered to the Senate. (Ayes 74. Noes 0. Page 4795.). |
| Apr 16, 2026 | Read second time. Ordered to Consent Calendar. |
| Apr 15, 2026 | From committee: Do pass. To Consent Calendar. (Ayes 13. Noes 0.) (April 15). |
| Apr 6, 2026 | Re-referred to Com. on APPR. |
| Mar 26, 2026 | Read second time and amended. |
| Mar 25, 2026 | From committee: Amend, and do pass as amended and re-refer to Com. on APPR. with recommendation: To Consent Calendar. (Ayes 7. Noes 0.) (March 24). |
| Mar 23, 2026 | Re-referred to Com. on HUM. S. |
| Mar 20, 2026 | From committee chair, with author's amendments: Amend, and re-refer to Com. on HUM. S. Read second time and amended. |
| Mar 2, 2026 | Referred to Com. on HUM. S. |
| Feb 14, 2026 | From printer. May be heard in committee March 16. |
| Feb 13, 2026 | Read first time. To print. |
|
Date
|
Description
|
Location
|
Votes
|
|
|---|---|---|---|---|
| Aug 31, 2026 | AB 1981 Aguiar-Curry Concurrence in Senate Amendments | Assembly Floor |
Passed |
|
| Aug 30, 2026 | Assembly 3rd Reading AB1981 Aguiar-Curry et al. By Reyes Urgency Clause | Senate Floor |
Passed |
|
| Aug 13, 2026 | Do pass | Senate Standing Committee on Appropriations |
Passed |
|
| Jun 29, 2026 | Placed on suspense file | Senate Standing Committee on Appropriations |
Passed |
|
| Jun 15, 2026 | Do pass, but first be re-referred to the Committee on [Appropriations] | Senate Standing Committee on Human Services |
Passed |
|
| Apr 23, 2026 | AB 1981 Aguiar-Curry Consent Calendar Second Day Regular Session | Assembly Floor |
Passed |
|
| Apr 15, 2026 | Do pass. To Consent Calendar. | Assembly Standing Committee on Appropriations |
Passed |
|
| Mar 24, 2026 | Do pass as amended, and be re-referred to the Committee on [Appropriations] with recommendation: To Consent Calendar | Assembly Standing Committee on Human Services |
Passed |
This list shows positions taken on this bill by organizations on the date displayed, which is linked to the original source.
Positions by individuals are not included.
|
Organization
|
Position
|
Date
|
|---|---|---|
| American Federation Of State, County And Municipal Employees, Afl-Cio | ** Support | |
| Beverly Hills Synagogue | ** Support | |
| Black ECE | ** Support | |
| CA Legislative Women's Caucus | ** Support | |
| CA Legislative Women’s Caucus | ** Support | |
| California Chamber Of Commerce | ** Support | |
| California Child Care Resource and Referral Network | ** Support | |
| Child Action | ** Support | |
| Child Care Alliance of Los Angeles | ** Support | |
| Child Care Law Center | ** Support | |
| Child Care Providers United | ** Support | |
| Democrats for Israel Los Angeles | ** Support | |
| Early Edge California | ** Support | |
| Etsy | ** Support | |
| EveryChild California | ** Support | |
| First 5 Alameda County | ** Support | |
| First 5 California | ** Support | |
| First Five Alameda | ** Support | |
| Hadassah, the Women's Zionist of America, INC. | ** Support | |
| Hadassah, the Women’s Zionist of America, INC. | ** Support | |
| Hillel of San Diego | ** Support | |
| Inland Empire Children’s Cabinet | ** Support | |
| JCC/Federation of San Luis Obispo | ** Support | |
| JCRC Bay Area | ** Support | |
| JCRC Santa Barbara County | ** Support | |
| Jewish California (formerly JPAC) | ** Support | |
| Jewish Center for Justice | ** Support | |
| Jewish Council for Public Affairs | ** Support | |
| Jewish Democratic Club of Marin | ** Support | |
| Jewish Family Service of San Diego | ** Support | |
| Jewish Family Service of the Desert | ** Support | |
| Jewish Family Services of Silicon Valley | ** Support | |
| Jewish Federation Bay Area | ** Support | |
| Jewish Federation of Greater Santa Barbara | ** Support | |
| Jewish Federation of Orange County | ** Support | |
| Jewish Federation of the Desert | ** Support | |
| Jewish Federation of The Greater San Gabriel and Pomona Valleys | ** Support | |
| Jewish Partisan Educational Foundation | ** Support | |
| JFCS East Bay | ** Support | |
| JFCS Long Beach and Orange County | ** Support | |
| JVS Bay Area | ** Support | |
| JVS SoCal | ** Support | |
| Los Angeles County | ** Support | |
| Los Angeles Unified School District | ** Support | |
| National Council of Jewish Women -sf | ** Support | |
| National Council of Jewish Women-sf | ** Support | |
| Oakland Starting Smart & Strong | ** Support | |
| Parent Voices California | ** Support | |
| SEIU California State Council | ** Support | |
| Unidosus | ** Support | |
| United Domestic Workers/AFSCME Local 3930 | ** Support |
CONCURRENCE IN SENATE AMENDMENTS
CSA1 Bill Id:AB 1981
Author:(Aguiar-Curry)
As Amended Ver:August 27, 2026
2/3 vote. Urgency
SUMMARY
Requires the California Department of Social Services (CDSS), when establishing rates under the single rate structure, to vary them by region, setting, applicable requirements, time category, and four specified age groupings, and include enhanced rates for nonstandard hours and for inclusion of children with disability-related plans. Sets July 1, 2028, as the end date for quarterly implementation reporting, and requires CDSS to identify the remaining policy frameworks by January 10, 2028.
Senate Amendments
- Add requirements for how CDSS builds the rate structure, in consultation with the Department of Education and to the extent consistent with the approved federal state plan, to vary rates by geographic region, care setting type, regulatory and statutory requirements, time category, and child age; to include an enhanced rate for nonstandard hours and an enhanced inclusion rate for children with disability-related plans; to ensure a child′s rate includes all enhanced rates they qualify for; and to base rates on maximum certified hours rather than attendance.
- Add definitions for ″nonstandard hours,″ ″base payment rate,″ and ″enhanced rate.″
- Revise the definition of the alternative methodology from a cost-based rate setting method ″on which to base″ payment rates to one that ″informs″ payment rates.
- Remove quarterly implementation updates until new rates are fully implemented and replaced with a fixed end date of July 1, 2028.
- Add a requirement that CDSS identify the remaining foundational policy frameworks of the single rate structure by January 10, 2028, and a requirement that when updating the methodology for the triennial federal plan, CDSS use values reflecting the actual established costs of providing care.
- Add a detailed content requirement for one quarterly report: the report due by May 14, 2027, must address what it would take to fold the monthly cost of care plus payments into existing contract rates across the listed programs: data system updates, statutory and regulatory changes, and the activities needed for contractors to pay providers through a rate that includes those payments, with estimated timeframes where practicable.
- Rewrite legislative findings to reframe the bill′s stated purpose from implementing a methodology based on the actual cost of care to codifying a single rate structure informed by the alternative methodology.
- Authorize implementation by all-county letter, childcare bulletin, or similar written instruction, with the same force and effect as regulations, until regulations are adopted.
- Add provisions from AB 190 (Gabriel) or SB 190 (Committee on Budget and Fiscal Review) to avoid chaptering out conflicts, add co-authors and make technical changes to include renaming the act the True Cost of Childcare Act.
COMMENTS
Subsidized Childcare. California′s subsidized childcare system is established under the Child Care and Development Services Act, intended to provide a coordinated, comprehensive, and cost-effective system of care for children from birth to 13 years of age and their families. Childcare and development services include supervision, health, and support services delivered through full- and part-time programs to meet the needs of families working, in training, seeking employment, incapacitated, or in need of respite.
The system is funded through a combination of federal and state funds and operates through a mixed delivery model, including licensed childcare centers, family childcare homes and license-exempt providers, such as family, friends or neighbors. Major childcare programs include CalWORKs administered through a three-stage system, the CCTR, which provides care through contracted centers and family childcare home education networks, and AAPs, which provide vouchers that allow families to choose care in centers, family childcare homes, or license-exempt settings. California also offers the California State Preschool Program (CSPP) for eligible three-and four-year old children, providing part- or full-day services.
For non-CalWORKs programs, families must meet both eligibility and need requirements, including income below 85% of the state median income ($89,664 for a family of three), participation in certain public assistance programs, or circumstances such as homelessness or child welfare involvement. Families must also demonstrate a qualifying need, such as employment or training. Once deemed eligible, families are authorized for services for at least 24 months without recertification, unless income exceeds the threshold.
Current Rate Structure (RMR and SRR). California has historically used two different reimbursement rates: the RMR and the SRR, which apply differently across the mixed-delivery system.
The RMR is used for voucher-based programs, including APPs and CalWORKs, and is federally funded through the Child Care and Development Block Grant. The RMR is informed by a market rate survey that reflects the prices providers charge families. Rates vary by county, provider type, child age, and hours of care, and providers are reimbursed up to a regional ceiling. Currently, rates are set at the 75th percentile of the 2018 survey or the rate in effect as of December 31, 2021, whichever is greater. While intended to reflect regional variation and support parental choice, the RMR is based on what families can afford, not the actual cost of care.
The SRR, by contrast, is used for direct service programs, including CCTR and CSPP, which is funded through nonfederal funding sources such as Proposition 98 funds and is a statewide rate established through the budget. Unlike the RMR, it does not vary by region and has historically not reflected differences in the cost of care. The current SRR is $54.93 per child per day, with adjustments based on factors such as age and hours of care. In 2021-22, the state allowed direct service providers to receive the higher SRR or RMR.
Both systems have notable limitations. The RMR can undervalue care in low-income communities where market prices are suppressed, while the SRR does not account for regional cost differences. Maintaining two separate rate structures has also led to inconsistences across programs, inequities in provider reimbursement, and administrative complexity. Reimbursement rates have also not kept pace with rising costs and inflation. Family childcare providers report working an average of 64 hours per week, earning $8.77 per hour or less, which contributes to financial instability among providers, with an estimated 17% living in poverty.
Shift to Alternative Methodology and Single Rate Structure. California is transitioning to a cost-based alternative methodology to set reimbursement rates, moving away from the RMR′s price-based approach. This shift is driven by both policy and collective bargaining efforts.
In 2019, AB 378 (Limon), Chapter 385, Statutes of 2019, granted family childcare providers the right to unionize and collectively bargain with the state, leading to the formation of the CCPU. AB 131 (Committee on Budget), Chapter 116, Statutes of 2021, ratified the first agreement between CCPU and the state, required the creation of a JLMC to develop recommendations for an SRS, and provided one-time funding to supplement reimbursement rates for both family childcare and center-based providers and address rate inequities. AB 131 also established the Rate and Quality Workgroup, which found that the RMR system institutionalizes race- and income-based inequities and recommended adopting a cost-based alternative methodology and a unified SRS with base and enhanced rates.
To support this transition, CDSS, in partnership with Prenatal to Five Fiscal Strategies, developed a cost estimation model based on provider data and stakeholder input across all 58 counties[1]. The model aims to estimate the true cost of care by accounting for factors such as staffing, program type, child age, and geographic variation. The JLMC recommendations released in December 2025,[2] emphasized that the model should inform, but not cap, rate-setting and should be regularly updated to reflect evolving costs. Under the proposed SRS, reimbursement rates would be determined using a consistent, cost-informed methodology across programs, with base rates supporting general operations and enhanced rates for factors such as non-traditional hours and inclusion supports.
Following federal approval of the alternative methodology through the CCDF State Plan, CDSS is required to provide CCPU with an implementation plan and engage in further negotiations on rates and funding. CDSS is also required to provide quarterly updates to the Legislature on implementation through July 1, 2027. If rates were not implemented by the statutory deadline of July 1, 2025, CDSS is also required to provide a transition timeline. Currently, the rates are still not implemented. According to CDSS′ January 2026 rate reform update[3], full implementation of the SRS is expected to take at least two additional years and remains contingent on budget decisions, collective bargaining outcomes, and significant data system and administrative changes.
According to the Author
″Child care providers are the backbone of our early education system and a critical part of California′s economy, yet too many of these mostly women- and minority-owned small businesses are barely scraping by. [This bill] is about ensuring providers are paid based on the true cost of delivering care. [This bill] ensures continued transparency and accountability by requiring ongoing quarterly updates from CDSS on the transition to the new reimbursement rate system until it is fully implemented. After nearly two decades of unfulfilled commitments to reform child care rates, the Legislature deserves clear accountability and transparency from the Administration on when these changes will finally take effect. Paying providers fairly will help stabilize the child care workforce, keep providers′ doors open, and ensure families can access the care they need. This is especially critical as the federal government implements the work requirements included in H.R. 1, and other policies that raise the cost of living for California families. Now more than ever, working parents need reliable child care to remain employed and support their families.″
Arguments in Support
First Five Alameda writes, ″In recent years, the Legislature and Administration have worked to strengthen the child care system by transitioning to a reimbursement structure that reflects providers′ true costs and expanding access through 200,000 new care slots. While the recent agreement with Child Care Providers United moves the state in this direction, important work remains to meet the long-term needs of children, families, and providers. Quality affordable care helps children build social and educational skills to be school-ready and supports parents who work or attend school. Too often, care is hard to find, wait lists are long, and providers are at risk of closing due to low rates—jeopardizing children′s futures, adding stress for parents, and weakening the state′s economy.
″As is sorely needed, [this bill] establishes a single, cost-based reimbursement rate for subsidized childcare, ensuring payments reflect the true-cost of quality care rather than outdated market rates. The bill provides enhanced reimbursement for nonstandard hours and children with special needs, supporting families with diverse needs and promoting inclusion. It guarantees annual cost-of-living adjustments, helping child care providers keep pace with rising expenses and maintain financial stability. By basing rates on actual costs, [this bill] addresses historic underpayment of providers, supporting workforce retention and quality improvement.″
Arguments in Opposition
None on file.
FISCAL COMMENTS
According to the Senate Appropriations Committee, ″Unknown, potential ongoing General Fund costs for child care reimbursement rates to the extent the bill′s provisions would impact the development of the new rate structure required under current law.″
VOTES:
ASM HUMAN SERVICES: 7-0-0
YES: Lee, Castillo, Gipson, Elhawary, Jackson, Solache, Tangipa
ASM APPROPRIATIONS: 13-0-2
YES: Wicks, Hoover, Arambula, Calderon, Caloza, Dixon, Fong, Mark González, Krell, Pacheco, Solache, Ta, Tangipa
ABS, ABST OR NV: Muratsuchi, Pellerin
ASSEMBLY FLOOR: 74-0-6
YES: Aguiar-Curry, Ahrens, Alanis, Alvarez, Arambula, Ávila Farías, Bains, Bauer-Kahan, Bennett, Berman, Boerner, Bonta, Bryan, Calderon, Caloza, Carrillo, Castillo, Chen, Connolly, Davies, DeMaio, Dixon, Elhawary, Ellis, Flora, Fong, Gabriel, Gallagher, Garcia, Gipson, Jeff Gonzalez, Mark González, Haney, Harabedian, Hart, Hoover, Irwin, Jackson, Johnson, Kalra, Krell, Lackey, Lee, Lowenthal, Macedo, McKinnor, Muratsuchi, Nguyen, Ortega, Pacheco, Papan, Patel, Patterson, Pellerin, Petrie-Norris, Quirk-Silva, Ramos, Ransom, Michelle Rodriguez, Rogers, Blanca Rubio, Sanchez, Schiavo, Schultz, Solache, Stefani, Ta, Tangipa, Valencia, Wallis, Ward, Wilson, Zbur, Rivas
ABS, ABST OR NV: Addis, Hadwick, Celeste Rodriguez, Sharp-Collins, Soria, Wicks
UPDATED
VERSION: June 10, 2026
CONSULTANT: Bri-Ann Hernandez-Mengual / HUM. S. / (916) 319-2089 FN: 0004428
https://www.sandiegouniontribune.com/wp-content/uploads/sdcdn/ca-cost-of-quality-final-design-sept2022.pdf ↑
https://childcareprovidersunited.org/wp-content/uploads/2025/12/DRAFT-JLMC-Final-Report-SRS-Recommendations_12.1.25_final.pdf ↑
https://cdss.ca.gov/Portals/9/CalWORKs/CCT/CCDD/January%20Update%20to%20the%20Report%20to%20the%20Legislature%20on%20Implementation%20of%20the%20Single%20Rate%20Structure.pdf ↑
SENATE RULES COMMITTEE Office of Senate Floor Analyses (916) 651-4171 | AB 1981 |
THIRD READING
Bill No: AB 1981
Author: Aguiar-Curry (D), et al.
Amended: 8/26/26 in Senate
Vote: 27 - Urgency
SENATE HUMAN SERVICES COMMITTEE: 4-0, 6/15/26
AYES: Becker, Ochoa Bogh, Laird, Pérez
NO VOTE RECORDED: Weber Pierson
SENATE APPROPRIATIONS COMMITTEE: 7-0, 8/13/26
AYES: Cervantes, Seyarto, Cabaldon, Dahle, Grayson, Richardson, Wahab
ASSEMBLY FLOOR: 74-0, 4/23/26 (Consent) - See last page for vote
SUBJECT: Subsidized childcare: reimbursement rates: reporting
SOURCE: Child Care Providers United
SEIU California State Council
United Domestic Workers/AFSCME Local 3930
DIGEST:
This bill (1) revises requirements for the California Department of Social Services (CDSS) to provide updates to the Legislature regarding the implementation of reimbursement rates for subsidized child care based on the alternative methodology; and (2) adopts several recommendations in the Single Rate Structure report.
Senate floor amendments of 8/26/26 change a quarterly report requirement date and make other technical changes.
Senate floor amendments of 8/21/26 make a number of technical and substantive changes.
ANALYSIS:
Existing law:
- Establishes the Child Care and Development Services Act to provide a comprehensive, coordinated, and cost-effective system of child care and development services for children from infancy to 13 years of age and their parents, including a full range of supervision, health, and support services through full- and part-time programs. (Welfare and Institutions Code [WIC] § 10207 et seq.)
- Establishes the Building a Better Early Care and Education System Act to promote quality, access, and stability in the early care and education system by authorizing an appropriate unit of family child care providers to choose a provider organization to act as their unit’s representative on all matters specified under the Act. (WIC § 10420 et seq.)
- States it is the intent of the Legislature to use an alternative methodology, as defined, to inform the setting of reimbursement rates for subsidized child care. Provides that reimbursement rates are subject to agreement and codification by the Legislature. (WIC §10227.6(a) and (b))
- Requires CDSS, in collaboration with the California Department of Education, to develop and conduct an alternative methodology. Establishes a timeline for the development of an alternative methodology, including reporting requirements. (WIC § 10227.6)
This bill:
- Makes various findings and declarations.
- Changes the sunset date for CDSS to provide quarterly updates on the implementation of the new reimbursement rates set under the alternative methodology from July 1, 2027, to July 1, 2028.
- Requires the July 2027 quarterly report to consist of considerations required to add monthly cost of care plus rates, as specified, to existing reimbursement rates that are funded within existing child care and development contracts, as specified.
- Requires CDSS to provide the Chairperson of the Joint Legislative Budget Committee, rather than the Legislature, with CDSS’ anticipated timeline for transitioning from the rates that are in effect on July 1, 2025, to the new rates if the new reimbursement rates do not take effect on July 1, 2025.
- Adds that it is the intent of the Legislature for CDSS to use values or selection points that reflect the actual, established costs of providing care when updating the alternative methodology, as required by the triennial federal Child Care Development Fund plan.
- Requires CDSS, in consultation with the California Department of Education, when establishing new reimbursement rates using a single-rate structure informed by an alternative methodology, to the extent it is consistent with the approved Child Care and Development Fund state plan, to do all of the following:
- Vary rates based on geographic regions; provider type; regulatory and statutory requirements; time considerations; and child age; as specified.
- Include an enhanced rate for nonstandard hours of care, enhanced inclusion rate, and other enhanced rates, as determined through the annual Budget process.
- Ensure that the reimbursement rate for a specific child, payable to an individual provider, includes all enhanced rates for which the child is eligible, and that are for services the child is receiving from the individual provider or contractor.
- Ensure that base payment rates are based on a child’s maximum certified hours of care with an individual provider, regardless of attendance.
- Authorizes CDSS to implement and administer this act by all-county letters, child care bulletins, or similar written instructions until regulations are adopted. Specifies that these instructions shall have the same force and effect as regulations.
- States this act is an urgency statue necessary for the immediate preservation of the public peace, health, or safety within the meaning of Article IV of the California Constitution and shall go into immediate effect.
Background
Purpose of the Bill. According to the author, “Child care providers are the backbone of our early education system and a critical part of California’s economy, yet too many of these mostly women- and minority-owned small businesses are barely scraping by. AB 1981 is about ensuring providers are paid based on the true cost of delivering care. This bill ensures continued transparency and accountability by requiring ongoing quarterly updates from CDSS on the transition to the new reimbursement rate system until it is fully implemented.
“After nearly two decades of unfulfilled commitments to reform child care rates, the Legislature deserves clear accountability and transparency from the Administration on when these changes will finally take effect. Paying providers fairly will help stabilize the child care workforce, keep providers’ doors open, and ensure families can access the care they need. This is especially critical as the federal government implements the work requirements included in H.R. 1, and other policies that raise the cost of living for California families. Now more than ever, working parents need reliable child care to remain employed and support their families.”
Subsidized Child Care. California’s subsidized child care system is designed to provide assistance for income eligible parents and guardians who are working, in training, seeking employment, incapacitated, or in need of respite. The state’s largest subsidized child care programs are General Child Care, Alternative Payment, CalWORKs Child Care, and the California State Preschool Program.
General Child Care provides care through contracted centers and family child care home education networks. Alternative Payment provides vouchers to families, which they can use to obtain child care at a center, family child care home, or from a license-exempt provider. Families are income eligible for General Child Care or Alternative Payment if their household income is below 85% of the State Median Income, depending on family size. In 2025–26, a family of four is income eligible if their annual family income is at or below $108,237.
CalWORKs Child Care provides vouchers for families to use at a center, family child care home, or with a license-exempt provider. Families are eligible for CalWORKs Child Care from when they are enrolled in CalWORKs until 24 months after a family has been off cash aid. CalWORKs is organized into three stages. Stage 1 and Stage 2 are considered entitlement programs, meaning anyone who is eligible and has a qualifying need must receive services. Stage 3 Child Care is dependent on the availability of funding and is not an entitlement program.
The California State Preschool Program provides care for three- and four-year-olds at local educational agencies and some community-based centers. Current law additionally allows California State Preschool Programs to serve two-year-olds through June 30, 2027. Families are eligible for the California State Preschool Program if their income based on family size falls below 100% of the State Median Income. In 2025–26, a family of four is income eligible if their annual family income is at or below $127,338. California State Preschool Programs are under the purview of the Senate Education Committee.
History of Reimbursement Rate Reform. AB 131 (Committee on Budget, Chapter 116, Statutes of 2021) established the state’s efforts to move to a single reimbursement rate structure. The first was a Joint Labor Management Committee, established between the State and Child Care Providers United (CCPU), the family child care providers union. The Joint Labor Management Committee was tasked with developing recommendations for a single reimbursement rate structure that addresses quality standards for equity and accessibility. The second effort was the Rate and Quality Stakeholder Workgroup, established by CDSS in consultation with the California Department of Education. The Workgroup was tasked with assessing the methodology for establishing reimbursement rates and the existing quality standards for child care and preschool programs. AB 131 also increased rates for all contractors.
AB 116 (Committee on Budget, Chapter 41, Statutes of 2023) required CDSS, in consultation with the California Department of Education, to develop and conduct an alternative methodology for setting reimbursement rates. CDSS contracted with Prenatal to Five Fiscal Strategies to assist in designing and implementing an alternative methodology process. SB 140 (Committee on Budget and Fiscal Review, Chapter 193, Statutes of 2023) added a timeline for adoption of a new alternative methodology, requiring CDSS to submit information on the alternative methodology to the federal Administration for Children and Families in the Child Care and Development Fund state plan by July 1, 2024. Additionally, the timeline in SB 140 required CDSS to provide the Legislature with an outline for planned implementation of the single rate structure utilizing the alternative methodology within 60 days of federal approval, upon which the Legislature shall have 30 days to review and provide feedback for implementation of these policies.
SB 163 (Committee on Budget and Fiscal Review, Chapter 73, Statutes of 2024) required CDSS to provide the Assembly and Senate Budget Committees with a report that outlines the implementation components for the approved single rate structure, including the department’s plan to set new reimbursement rates under the alternative methodology by no later than July 1, 2025, and the estimated costs and estimated timelines associated with implementation. SB 163 required CDSS to provide quarterly updates on implementation, including any changes to the information provided in the report. SB 163 provided that the Governor and Legislature shall, by no later than July 1, 2025, establish reimbursement rates based on the alternative methodology, and if new reimbursement rates do not take effect, CDSS shall provide the Legislature with a timeline for transitioning from the rates in effect on July 1, 2025, to the new rates.
SB 120 (Committee on Budget and Fiscal Review, Chapter 13, Statutes of 2025) revised the sunset date for quarterly updates on the implementation of the new reimbursement rates to July 1, 2027, and stated the intent of the Legislature to cease using a regional market rate survey and instead use an alternative methodology beginning July 1, 2025. In December 2025, the Joint Labor Management Committee published a final report with joint recommendations for a single rate structure. The final report additionally included State recommendations and CCPU recommendations that were not jointly agreed upon. This bill would adopt several of these recommendations. The recommendations to be adopted through this bill include varying rates based on geographic regions, provider type, time-of-day considerations, and child age considerations; and including an enhanced rate for nonstandard hours of care, enhanced inclusion rate, and other enhanced rates, as determined through the annual Budget process.
According to the July 2025 Update to the Report to the Legislature on Implementation of the Single Rate Structure, CDSS projects that, upon finalization of a single rate structure, a minimum of two years will be needed to complete the necessary automation and program implementation activities required to implement the new structure. However, this timeline is subject to change based on various factors, such as implementation of the Joint Labor Management Committee joint recommendations, which will require statutory changes. Further, the Memorandum of Understanding between the State and CCPU states that a single rate structure will become operable upon the parties reaching agreement on the specific rates. This bill would extend the sunset for quarterly updates on the implementation of new reimbursement rates by one year to July 1, 2028.
Related/Prior Legislation
SB 120 (Committee on Budget and Fiscal Review, Chapter 13, Statutes of 2025), a budget trailer bill, revised the sunset date for quarterly updates on the implementation of the new reimbursement rates to July 1, 2027, and stated the intent of the Legislature to cease using a regional market rate survey and instead use an alternative methodology beginning July 1, 2025, among other things.
SB 163 (Committee on Budget and Fiscal Review, Chapter 73, Statutes of 2024), a budget trailer bill, required CDSS to publish a report that outlines the implementation timeline for the approved single rate structure, including a plan to set new reimbursement rates under the alternative methodology by no later than July 1, 2025, and required CDSS to provide quarterly updates on implementation. SB 163 provided that the Governor and Legislature shall, by no later than July 1, 2025, establish reimbursement rates based on the alternative methodology, and if new reimbursement rates do not take effect, CDSS shall provide the Legislature with a timeline for transitioning from the rates in effect on July 1, 2025, to the new rates.
SB 140 (Committee on Budget and Fiscal Review, Chapter 193, Statutes of 2023), a budget trailer bill, established various intermediate deadlines toward the submission of the Child Care and Development Fund state plan with necessary information to support use of a single rate structure utilizing the alternative methodology.
AB 116 (Committee on Budget, Chapter 41, Statutes of 2023), a budget trailer bill, stated the intent of the Legislature to utilize an alternative methodology, as defined, to inform the setting of reimbursement rates for subsidized child care. AB 116 required CDSS, in collaboration with the California Department of Education, to develop and conduct an alternative methodology.
AB 131 (Committee on Budget, Chapter 116, Statutes of 2021), a budget trailer bill, transferred administration of child care and development programs from the California Department of Education to CDSS. AB 131 also established the Joint Labor Management Committee and Rate and Quality Stakeholder Workgroup, among other things.
AB 378 (Limón, Chapter 385, Statutes of 2019) authorized family childcare home providers to form, join, and participate in the activities of a provider organization (union) of their own choosing for the purpose of representing them and bargaining on matters regarding the terms and conditions of their employment.
Comments
This bill seeks to continue transparent communication to the Legislature regarding the transition to a new single rate structure by extending quarterly reporting requirements by one year. This bill would adopt several single rate structure recommendations published in the Joint Labor Management Committee’s final report to codify rate-setting principles in preparation of reimbursement rate negotiations—to determine the actual percentages and/or dollar amounts to be paid—and implementation of the new rate structure. The report was published by the Joint Labor Management Committee, comprised of representatives from CDSS, the California Department of Education, and CCPU. The communication and proactive implementation goals of this bill seem to align with the Legislature’s years-long efforts to adopt a single rate structure using an alternative methodology.
[NOTE: See the Senate Human Services Committee analysis for additional background on this bill.]
FISCAL EFFECT: Appropriation: No Fiscal Com.: Yes Local: No
According to the Senate Appropriations Committee, “Unknown, potential ongoing General Fund costs for child care reimbursement rates to the extent the bill’s provisions would impact the development of the new rate structure required under current law.”
SUPPORT: (Verified 8/26/26)
Child Care Providers United (co-source)
SEIU California State Council (co-source)
United Domestic Workers/AFSCME Local 3930 (co-source)
American Federation of State, County and Municipal Employees, Afl-cio
Beverly Hills Synagogue
Black Ece
CA Legislative Women's Caucus
California Child Care Resource and Referral Network
Child Action
Child Care Alliance of Los Angeles
Child Care Law Center
Democrats for Israel Los Angeles
Early Edge California
Etsy
Everychild California
First 5 Alameda County
First 5 California
Hadassah, the Women's Zionist of America, INC.
Hillel of San Diego
Inland Empire Children’s Cabinet
Jcc/federation of San Luis Obispo
Jcrc Bay Area
Jcrc Santa Barbara County
Jewish California (formerly Jpac)
Jewish Center for Justice
Jewish Council for Public Affairs
Jewish Democratic Club of Marin
Jewish Family Service of San Diego
Jewish Family Service of the Desert
Jewish Family Services of Silicon Valley
Jewish Federation Bay Area
Jewish Federation of Greater Santa Barbara
Jewish Federation of Orange County
Jewish Federation of the Desert
Jewish Federation of the Greater San Gabriel and Pomona Valleys
Jewish Partisan Educational Foundation
Jfcs East Bay
Jfcs Long Beach and Orange County
Jvs Bay Area
Jvs Socal
Los Angeles County
Los Angeles Unified School District
National Council of Jewish Women -sf
Unidosus
OPPOSITION: (Verified 8/26/26)
ASSEMBLY FLOOR: 74-0, 4/23/26
AYES: Aguiar-Curry, Ahrens, Alanis, Alvarez, Arambula, Ávila Farías, Bains, Bauer-Kahan, Bennett, Berman, Boerner, Bonta, Bryan, Calderon, Caloza, Carrillo, Castillo, Chen, Connolly, Davies, DeMaio, Dixon, Elhawary, Ellis, Flora, Fong, Gabriel, Gallagher, Garcia, Gipson, Jeff Gonzalez, Mark González, Haney, Harabedian, Hart, Hoover, Irwin, Jackson, Johnson, Kalra, Krell, Lackey, Lee, Lowenthal, Macedo, McKinnor, Muratsuchi, Nguyen, Ortega, Pacheco, Papan, Patel, Patterson, Pellerin, Petrie-Norris, Quirk-Silva, Ramos, Ransom, Michelle Rodriguez, Rogers, Blanca Rubio, Sanchez, Schiavo, Schultz, Solache, Stefani, Ta, Tangipa, Valencia, Wallis, Ward, Wilson, Zbur, Rivas
NO VOTE RECORDED: Addis, Hadwick, Celeste Rodriguez, Sharp-Collins, Soria, Wicks
Prepared by: Diana Dominguez / HUMAN S. / (916) 651-1524
8/28/26 11:28:43
**** END ****
SENATE RULES COMMITTEE Office of Senate Floor Analyses (916) 651-4171 | AB 1981 |
THIRD READING
Bill No: AB 1981
Author: Aguiar-Curry (D), et al.
Amended: 8/21/26 in Senate
Vote: 27 - Urgency
SENATE HUMAN SERVICES COMMITTEE: 4-0, 6/15/26
AYES: Becker, Ochoa Bogh, Laird, Pérez
NO VOTE RECORDED: Weber Pierson
SENATE APPROPRIATIONS COMMITTEE: 7-0, 8/13/26
AYES: Cervantes, Seyarto, Cabaldon, Dahle, Grayson, Richardson, Wahab
ASSEMBLY FLOOR: 74-0, 4/23/26 (Consent) - See last page for vote
SUBJECT: Subsidized childcare: reimbursement rates: reporting
SOURCE: Child Care Providers United
SEIU California State Council
United Domestic Workers/AFSCME Local 3930
DIGEST:
This bill (1) revises requirements for the California Department of Social Services (CDSS) to provide updates to the Legislature regarding the implementation of reimbursement rates for subsidized child care based on the alternative methodology; (2) adopts several recommendations in the Single Rate Structure report.
Senate floor amendments of 8/21/26 make a number of technical and substantive changes.
ANALYSIS:
Existing Law:
- Establishes the Child Care and Development Services Act to provide a comprehensive, coordinated, and cost-effective system of child care and development services for children from infancy to 13 years of age and their parents, including a full range of supervision, health, and support services through full- and part-time programs. (Welfare and Institutions Code [WIC] § 10207 et seq.)
- Establishes the Building a Better Early Care and Education System Act to promote quality, access, and stability in the early care and education system by authorizing an appropriate unit of family child care providers to choose a provider organization to act as their unit’s representative on all matters specified under the Act. (WIC § 10420 et seq.)
- States it is the intent of the Legislature to use an alternative methodology, as defined, to inform the setting of reimbursement rates for subsidized child care. Provides that reimbursement rates are subject to agreement and codification by the Legislature. (WIC §10227.6(a) and (b))
- Requires CDSS, in collaboration with the California Department of Education, to develop and conduct an alternative methodology. Establishes a timeline for the development of an alternative methodology, including reporting requirements. (WIC § 10227.6)
This Bill:
- Makes various findings and declarations.
- Changes the sunset date for CDSS to provide quarterly updates on the implementation of the new reimbursement rates set under the alternative methodology from July 1, 2027, to July 1, 2028.
- Requires CDSS to provide the Chairperson of the Joint Legislative Budget Committee, rather than the Legislature, with CDSS’ anticipated timeline for transitioning from the rates that are in effect on July 1, 2025, to the new rates if the new reimbursement rates do not take effect on July 1, 2025.
- Adds that it is the intent of the Legislature for CDSS to use values or selection points that reflect the actual, established costs of providing care when updating the alternative methodology, as required by the triennial federal Child Care Development Fund plan.
- Requires CDSS, in consultation with the California Department of Education, when establishing new reimbursement rates using an a single-rate structure informed by an alternative methodology, to the extent it is consistent with the approved Child Care and Development Fund state plan, to do all of the following:
- Vary rates based on geographic regions; provider type; regulatory and statutory requirements; time considerations; and child age; as specified.
- Include an enhanced rate for nonstandard hours of care, enhanced inclusion rate, and other enhanced rates, as determined through the annual Budget process.
- Ensure that the reimbursement rate for a specific child, payable to an individual provider, includes all enhanced rates for which the child is eligible, and that are for services the child is receiving from the individual provider or contractor.
- Ensure that base payment rates are based on a child’s maximum certified hours of care with an individual provider, regardless of attendance.
- Authorizes CDSS to implement and administer this act by all-county letters, child care bulletins, or similar written instructions until regulations are adopted. Specifies that these instructions shall have the same force and effect as regulations.
- States this act is an urgency statue necessary for the immediate preservation of the public peace, health, or safety within the meaning of Article IV of the California Constitution and shall go into immediate effect.
Background
Purpose of the Bill. According to the author, “Child care providers are the backbone of our early education system and a critical part of California’s economy, yet too many of these mostly women- and minority-owned small businesses are barely scraping by. AB 1981 is about ensuring providers are paid based on the true cost of delivering care. This bill ensures continued transparency and accountability by requiring ongoing quarterly updates from CDSS on the transition to the new reimbursement rate system until it is fully implemented.
“After nearly two decades of unfulfilled commitments to reform child care rates, the Legislature deserves clear accountability and transparency from the Administration on when these changes will finally take effect. Paying providers fairly will help stabilize the child care workforce, keep providers’ doors open, and ensure families can access the care they need. This is especially critical as the federal government implements the work requirements included in H.R. 1, and other policies that raise the cost of living for California families. Now more than ever, working parents need reliable child care to remain employed and support their families.”
Subsidized Child Care. California’s subsidized child care system is designed to provide assistance for income eligible parents and guardians who are working, in training, seeking employment, incapacitated, or in need of respite. The state’s largest subsidized child care programs are General Child Care, Alternative Payment, CalWORKs Child Care, and the California State Preschool Program.
General Child Care provides care through contracted centers and family child care home education networks. Alternative Payment provides vouchers to families, which they can use to obtain child care at a center, family child care home, or from a license-exempt provider. Families are income eligible for General Child Care or Alternative Payment if their household income is below 85% of the State Median Income, depending on family size. In 2025–26, a family of four is income eligible if their annual family income is at or below $108,237.
CalWORKs Child Care provides vouchers for families to use at a center, family child care home, or with a license-exempt provider. Families are eligible for CalWORKs Child Care from when they are enrolled in CalWORKs until 24 months after a family has been off cash aid. CalWORKs is organized into three stages. Stage 1 and Stage 2 are considered entitlement programs, meaning anyone who is eligible and has a qualifying need must receive services. Stage 3 Child Care is dependent on the availability of funding and is not an entitlement program.
The California State Preschool Program provides care for three- and four-year-olds at local educational agencies and some community-based centers. Current law additionally allows California State Preschool Programs to serve two-year-olds through June 30, 2027. Families are eligible for the California State Preschool Program if their income based on family size falls below 100% of the State Median Income. In 2025–26, a family of four is income eligible if their annual family income is at or below $127,338. California State Preschool Programs are under the purview of the Senate Education Committee.
History of Reimbursement Rate Reform. AB 131 (Committee on Budget, Chapter 116, Statutes of 2021) established the state’s efforts to move to a single reimbursement rate structure. The first was a Joint Labor Management Committee, established between the State and Child Care Providers United (CCPU), the family child care providers union. The Joint Labor Management Committee was tasked with developing recommendations for a single reimbursement rate structure that addresses quality standards for equity and accessibility. The second effort was the Rate and Quality Stakeholder Workgroup, established by CDSS in consultation with the California Department of Education. The Workgroup was tasked with assessing the methodology for establishing reimbursement rates and the existing quality standards for child care and preschool programs. AB 131 also increased rates for all contractors.
AB 116 (Committee on Budget, Chapter 41, Statutes of 2023) required CDSS, in consultation with the California Department of Education, to develop and conduct an alternative methodology for setting reimbursement rates. CDSS contracted with Prenatal to Five Fiscal Strategies to assist in designing and implementing an alternative methodology process. SB 140 (Committee on Budget and Fiscal Review, Chapter 193, Statutes of 2023) added a timeline for adoption of a new alternative methodology, requiring CDSS to submit information on the alternative methodology to the federal Administration for Children and Families in the Child Care and Development Fund state plan by July 1, 2024. Additionally, the timeline in SB 140 required CDSS to provide the Legislature with an outline for planned implementation of the single rate structure utilizing the alternative methodology within 60 days of federal approval, upon which the Legislature shall have 30 days to review and provide feedback for implementation of these policies.
SB 163 (Committee on Budget and Fiscal Review, Chapter 73, Statutes of 2024) required CDSS to provide the Assembly and Senate Budget Committees with a report that outlines the implementation components for the approved single rate structure, including the department’s plan to set new reimbursement rates under the alternative methodology by no later than July 1, 2025, and the estimated costs and estimated timelines associated with implementation. SB 163 required CDSS to provide quarterly updates on implementation, including any changes to the information provided in the report. SB 163 provided that the Governor and Legislature shall, by no later than July 1, 2025, establish reimbursement rates based on the alternative methodology, and if new reimbursement rates do not take effect, CDSS shall provide the Legislature with a timeline for transitioning from the rates in effect on July 1, 2025, to the new rates.
SB 120 (Committee on Budget and Fiscal Review, Chapter 13, Statutes of 2025) revised the sunset date for quarterly updates on the implementation of the new reimbursement rates to July 1, 2027, and stated the intent of the Legislature to cease using a regional market rate survey and instead use an alternative methodology beginning July 1, 2025. In December 2025, the Joint Labor Management Committee published a final report with joint recommendations for a single rate structure. The final report additionally included State recommendations and CCPU recommendations that were not jointly agreed upon. This bill would adopt several of these recommendations. The recommendations to be adopted through this bill include varying rates based on geographic regions, provider type, time-of-day considerations, and child age considerations; and including an enhanced rate for nonstandard hours of care, enhanced inclusion rate, and other enhanced rates, as determined through the annual Budget process.
According to the July 2025 Update to the Report to the Legislature on Implementation of the Single Rate Structure, CDSS projects that, upon finalization of a single rate structure, a minimum of two years will be needed to complete the necessary automation and program implementation activities required to implement the new structure. However, this timeline is subject to change based on various factors, such as implementation of the Joint Labor Management Committee joint recommendations, which will require statutory changes. Further, the Memorandum of Understanding between the State and CCPU states that a single rate structure will become operable upon the parties reaching agreement on the specific rates. This bill would extend the sunset for quarterly updates on the implementation of new reimbursement rates by one year to July 1, 2028.
Related/Prior Legislation
SB 120 (Committee on Budget and Fiscal Review, Chapter 13, Statutes of 2025), a budget trailer bill, revised the sunset date for quarterly updates on the implementation of the new reimbursement rates to July 1, 2027, and stated the intent of the Legislature to cease using a regional market rate survey and instead use an alternative methodology beginning July 1, 2025, among other things.
SB 163 (Committee on Budget and Fiscal Review, Chapter 73, Statutes of 2024), a budget trailer bill, required CDSS to publish a report that outlines the implementation timeline for the approved single rate structure, including a plan to set new reimbursement rates under the alternative methodology by no later than July 1, 2025, and required CDSS to provide quarterly updates on implementation. SB 163 provided that the Governor and Legislature shall, by no later than July 1, 2025, establish reimbursement rates based on the alternative methodology, and if new reimbursement rates do not take effect, CDSS shall provide the Legislature with a timeline for transitioning from the rates in effect on July 1, 2025, to the new rates.
SB 140 (Committee on Budget and Fiscal Review, Chapter 193, Statutes of 2023), a budget trailer bill, established various intermediate deadlines toward the submission of the Child Care and Development Fund state plan with necessary information to support use of a single rate structure utilizing the alternative methodology.
AB 116 (Committee on Budget, Chapter 41, Statutes of 2023), a budget trailer bill, stated the intent of the Legislature to utilize an alternative methodology, as defined, to inform the setting of reimbursement rates for subsidized child care. AB 116 required CDSS, in collaboration with the California Department of Education, to develop and conduct an alternative methodology.
AB 131 (Committee on Budget, Chapter 116, Statutes of 2021), a budget trailer bill, transferred administration of child care and development programs from the California Department of Education to CDSS. AB 131 also established the Joint Labor Management Committee and Rate and Quality Stakeholder Workgroup, among other things.
AB 378 (Limón, Chapter 385, Statutes of 2019) authorized family childcare home providers to form, join, and participate in the activities of a provider organization (union) of their own choosing for the purpose of representing them and bargaining on matters regarding the terms and conditions of their employment.
Comments
This bill seeks to continue transparent communication to the Legislature regarding the transition to a new single rate structure by extending quarterly reporting requirements by one year. This bill would adopt several single rate structure recommendations published in the Joint Labor Management Committee’s final report to codify rate-setting principles in preparation of reimbursement rate negotiations—to determine the actual percentages and/or dollar amounts to be paid—and implementation of the new rate structure. The report was published by the Joint Labor Management Committee, comprised of representatives from CDSS, the California Department of Education, and CCPU. The communication and proactive implementation goals of this bill seem to align with the Legislature’s years-long efforts to adopt a single rate structure using an alternative methodology.
[NOTE: See the Senate Human Services Committee analysis for additional background on this bill.]
FISCAL EFFECT: Appropriation: No Fiscal Com.: Yes Local: No
According to the Senate Appropriations Committee, “Unknown, potential ongoing General Fund costs for child care reimbursement rates to the extent the bill’s provisions would impact the development of the new rate structure required under current law.”
SUPPORT: (Verified 8/21/26)
Child Care Providers United (co-sponsor)
SEIU California State Council (co-sponsor)
United Domestic Workers/AFSCME Local 3930 (co-sponsor)
American Federation of State, County and Municipal Employees, Afl-cio
Beverly Hills Synagogue
Black Ece
CA Legislative Women's Caucus
California Child Care Resource and Referral Network
Child Action
Child Care Alliance of Los Angeles
Child Care Law Center
Democrats for Israel Los Angeles
Early Edge California
Etsy
Everychild California
First 5 California
Hadassah, the Women's Zionist of America, INC.
Hillel of San Diego
Jcc/federation of San Luis Obispo
Jcrc Bay Area
Jcrc Santa Barbara County
Jewish California (formerly Jpac)
Jewish Center for Justice
Jewish Council for Public Affairs
Jewish Democratic Club of Marin
Jewish Family Service of San Diego
Jewish Family Service of the Desert
Jewish Family Services of Silicon Valley
Jewish Federation Bay Area
Jewish Federation of Greater Santa Barbara
Jewish Federation of Orange County
Jewish Federation of the Desert
Jewish Federation of the Greater San Gabriel and Pomona Valleys
Jewish Partisan Educational Foundation
Jfcs East Bay
Jfcs Long Beach and Orange County
Jvs Bay Area
Jvs Socal
Los Angeles County
Los Angeles Unified School District
National Council of Jewish Women -sf
Unidosus
OPPOSITION: (Verified 8/21/26)
ASSEMBLY FLOOR: 74-0, 4/23/26
AYES: Aguiar-Curry, Ahrens, Alanis, Alvarez, Arambula, Ávila Farías, Bains, Bauer-Kahan, Bennett, Berman, Boerner, Bonta, Bryan, Calderon, Caloza, Carrillo, Castillo, Chen, Connolly, Davies, DeMaio, Dixon, Elhawary, Ellis, Flora, Fong, Gabriel, Gallagher, Garcia, Gipson, Jeff Gonzalez, Mark González, Haney, Harabedian, Hart, Hoover, Irwin, Jackson, Johnson, Kalra, Krell, Lackey, Lee, Lowenthal, Macedo, McKinnor, Muratsuchi, Nguyen, Ortega, Pacheco, Papan, Patel, Patterson, Pellerin, Petrie-Norris, Quirk-Silva, Ramos, Ransom, Michelle Rodriguez, Rogers, Blanca Rubio, Sanchez, Schiavo, Schultz, Solache, Stefani, Ta, Tangipa, Valencia, Wallis, Ward, Wilson, Zbur, Rivas
NO VOTE RECORDED: Addis, Hadwick, Celeste Rodriguez, Sharp-Collins, Soria, Wicks
Prepared by: Diana Dominguez / HUMAN S. / (916) 651-1524
8/24/26 14:09:18
**** END ****
SENATE RULES COMMITTEE Office of Senate Floor Analyses (916) 651-4171 | AB 1981 |
THIRD READING
Bill No: AB 1981
Author: Aguiar-Curry (D), et al.
Amended: 6/10/26 in Senate
Vote: 27 - Urgency
SENATE HUMAN SERVICES COMMITTEE: 4-0, 6/15/26
AYES: Becker, Ochoa Bogh, Laird, Pérez
NO VOTE RECORDED: Weber Pierson
SENATE APPROPRIATIONS COMMITTEE: 7-0, 8/13/26
AYES: Cervantes, Seyarto, Cabaldon, Dahle, Grayson, Richardson, Wahab
ASSEMBLY FLOOR: 74-0, 4/23/26 (Consent) - See last page for vote
SUBJECT: Subsidized childcare: reimbursement rates: reporting
SOURCE: Child Care Providers United
SEIU California State Council
United Domestic Workers/AFSCME Local 3930
DIGEST:
This bill (1) revises requirements for the California Department of Social Services (CDSS) to provide updates to the Legislature regarding the implementation of reimbursement rates for subsidized child care based on the alternative methodology; (2) adopts several recommendations in the Single Rate Structure report.
ANALYSIS:
Existing Law:
- Establishes the Child Care and Development Services Act to provide a comprehensive, coordinated, and cost-effective system of child care and development services for children from infancy to 13 years of age and their parents, including a full range of supervision, health, and support services through full- and part-time programs. (Welfare and Institutions Code [WIC] § 10207 et seq.)
- Establishes the Building a Better Early Care and Education System Act to promote quality, access, and stability in the early care and education system by authorizing an appropriate unit of family child care providers to choose a provider organization to act as their unit’s representative on all matters specified under the Act. (WIC § 10420 et seq.)
- States it is the intent of the Legislature to use an alternative methodology, as defined, to inform the setting of reimbursement rates for subsidized child care. Provides that reimbursement rates are subject to agreement and codification by the Legislature. (WIC §10227.6(a) and (b))
- Requires CDSS, in collaboration with the California Department of Education, to develop and conduct an alternative methodology. Establishes a timeline for the development of an alternative methodology, including reporting requirements. (WIC § 10227.6)
This Bill:
- Makes various findings and declarations.
- Strikes the sunset date of July 1, 2027, for CDSS to provide quarterly updates on the implementation of the new reimbursement rates set under the alternative methodology and extends the requirement until the new reimbursement rates set under the alternative methodology are fully implemented.
- Requires CDSS to provide the Chairperson of the Joint Legislative Budget Committee, rather than the Legislature, with CDSS’ anticipated timeline for transitioning from the rates that are in effect on July 1, 2025, to the new rates if the new reimbursement rates do not take effect on July 1, 2025.
- Adds that it is the intent of the Legislature for CDSS to use values or selection points that reflect the actual, established costs of providing care when updating the alternative methodology, as required by the triennial federal Child Care Development Fund plan.
- Requires CDSS, when establishing new reimbursement rates using an alternative methodology, to the extent it is consistent with the Child Care and Development Fund state plan, to do all of the following:
- Vary rates based on geographic regions; provider type; time considerations; and child age; as specified.
- Include an extended hours care rate, enhanced inclusion rate, and an enhanced transportation rate, as specified.
- Ensure that the reimbursement rates permit reimbursement for a specific child to include all rate enhancements for which the child is eligible and does not limit the number of rate enhancements that can be provided for a specific child.
- Ensure that reimbursement rates are based on families’ certified need, as specified.
- Requires reimbursement rates established under the alternative methodology to be implemented with regards to family child care providers within 90 days of the state and the provider organization representing those providers reaching agreement on the rates.
- Requires reimbursement rates established under the alternative methodology to not be reduced below the amounts in effect on the effective date of this bill.
- States this act is an urgency statue necessary for the immediate preservation of the public peace, health, or safety within the meaning of Article IV of the California Constitution and shall go into immediate effect.
Background
Purpose of the Bill. According to the author, “Child care providers are the backbone of our early education system and a critical part of California’s economy, yet too many of these mostly women- and minority-owned small businesses are barely scraping by. AB 1981 is about ensuring providers are paid based on the true cost of delivering care. This bill ensures continued transparency and accountability by requiring ongoing quarterly updates from CDSS on the transition to the new reimbursement rate system until it is fully implemented.
“After nearly two decades of unfulfilled commitments to reform child care rates, the Legislature deserves clear accountability and transparency from the Administration on when these changes will finally take effect. Paying providers fairly will help stabilize the child care workforce, keep providers’ doors open, and ensure families can access the care they need. This is especially critical as the federal government implements the work requirements included in H.R. 1, and other policies that raise the cost of living for California families. Now more than ever, working parents need reliable child care to remain employed and support their families.”
Subsidized Child Care. California’s subsidized child care system is designed to provide assistance for income eligible parents and guardians who are working, in training, seeking employment, incapacitated, or in need of respite. The state’s largest subsidized child care programs are General Child Care, Alternative Payment, CalWORKs Child Care, and the California State Preschool Program.
General Child Care provides care through contracted centers and family child care home education networks. Alternative Payment provides vouchers to families, which they can use to obtain child care at a center, family child care home, or from a license-exempt provider. Families are income eligible for General Child Care or Alternative Payment if their household income is below 85% of the State Median Income, depending on family size. In 2025–26, a family of four is income eligible if their annual family income is at or below $108,237.
CalWORKs Child Care provides vouchers for families to use at a center, family child care home, or with a license-exempt provider. Families are eligible for CalWORKs Child Care from when they are enrolled in CalWORKs until 24 months after a family has been off cash aid. CalWORKs is organized into three stages. Stage 1 and Stage 2 are considered entitlement programs, meaning anyone who is eligible and has a qualifying need must receive services. Stage 3 Child Care is dependent on the availability of funding and is not an entitlement program.
The California State Preschool Program provides care for three- and four-year-olds at local educational agencies and some community-based centers. Current law additionally allows California State Preschool Programs to serve two-year-olds through June 30, 2027. Families are eligible for the California State Preschool Program if their income based on family size falls below 100% of the State Median Income. In 2025–26, a family of four is income eligible if their annual family income is at or below $127,338. California State Preschool Programs are under the purview of the Senate Education Committee.
History of Reimbursement Rate Reform. AB 131 (Committee on Budget, Chapter 116, Statutes of 2021) established the state’s efforts to move to a single reimbursement rate structure. The first was a Joint Labor Management Committee, established between the State and Child Care Providers United (CCPU), the family child care providers union. The Joint Labor Management Committee was tasked with developing recommendations for a single reimbursement rate structure that addresses quality standards for equity and accessibility. The second effort was the Rate and Quality Stakeholder Workgroup, established by CDSS in consultation with the California Department of Education. The Workgroup was tasked with assessing the methodology for establishing reimbursement rates and the existing quality standards for child care and preschool programs. AB 131 also increased rates for all contractors.
AB 116 (Committee on Budget, Chapter 41, Statutes of 2023) required CDSS, in consultation with the California Department of Education, to develop and conduct an alternative methodology for setting reimbursement rates. CDSS contracted with Prenatal to Five Fiscal Strategies to assist in designing and implementing an alternative methodology process. SB 140 (Committee on Budget and Fiscal Review, Chapter 193, Statutes of 2023) added a timeline for adoption of a new alternative methodology, requiring CDSS to submit information on the alternative methodology to the federal Administration for Children and Families in the Child Care and Development Fund state plan by July 1, 2024. Additionally, the timeline in SB 140 required CDSS to provide the Legislature with an outline for planned implementation of the single rate structure utilizing the alternative methodology within 60 days of federal approval, upon which the Legislature shall have 30 days to review and provide feedback for implementation of these policies.
SB 163 (Committee on Budget and Fiscal Review, Chapter 73, Statutes of 2024) required CDSS to provide the Assembly and Senate Budget Committees with a report that outlines the implementation components for the approved single rate structure, including the department’s plan to set new reimbursement rates under the alternative methodology by no later than July 1, 2025, and the estimated costs and estimated timelines associated with implementation. SB 163 required CDSS to provide quarterly updates on implementation, including any changes to the information provided in the report. SB 163 provided that the Governor and Legislature shall, by no later than July 1, 2025, establish reimbursement rates based on the alternative methodology, and if new reimbursement rates do not take effect, CDSS shall provide the Legislature with a timeline for transitioning from the rates in effect on July 1, 2025, to the new rates.
SB 120 (Committee on Budget and Fiscal Review, Chapter 13, Statutes of 2025) revised the sunset date for quarterly updates on the implementation of the new reimbursement rates to July 1, 2027, and stated the intent of the Legislature to cease using a regional market rate survey and instead use an alternative methodology beginning July 1, 2025. In December 2025, the Joint Labor Management Committee published a final report with joint recommendations for a single rate structure. The final report additionally included State recommendations and CCPU recommendations that were not jointly agreed upon. This bill would adopt several of these recommendations, including both joint recommendations and CCPU recommendations. The recommendations to be adopted through this bill include varying rates based on defined geographic regions, varying rates based on provider type, varying rates based on time-of-day considerations, varying rates based on child age considerations, including an extended hours rate, including an enhanced inclusion rate, and including an enhanced transportation rate.
According to the July 2025 Update to the Report to the Legislature on Implementation of the Single Rate Structure, CDSS projects that, upon finalization of a single rate structure, a minimum of two years will be needed to complete the necessary automation and program implementation activities required to implement the new structure. However, this timeline is subject to change based on various factors, such as implementation of the Joint Labor Management Committee joint recommendations, which will require statutory changes. Further, the Memorandum of Understanding between the State and CCPU states that a single rate structure will become operable upon the parties reaching agreement on the specific rates. This bill would extend the sunset for quarterly updates on the implementation of new reimbursement rates until the new rates are fully implemented.
Related/Prior Legislation
SB 120 (Committee on Budget and Fiscal Review, Chapter 13, Statutes of 2025), a budget trailer bill, revised the sunset date for quarterly updates on the implementation of the new reimbursement rates to July 1, 2027, and stated the intent of the Legislature to cease using a regional market rate survey and instead use an alternative methodology beginning July 1, 2025, among other things.
SB 163 (Committee on Budget and Fiscal Review, Chapter 73, Statutes of 2024), a budget trailer bill, required CDSS to publish a report that outlines the implementation timeline for the approved single rate structure, including a plan to set new reimbursement rates under the alternative methodology by no later than July 1, 2025, and required CDSS to provide quarterly updates on implementation. SB 163 provided that the Governor and Legislature shall, by no later than July 1, 2025, establish reimbursement rates based on the alternative methodology, and if new reimbursement rates do not take effect, CDSS shall provide the Legislature with a timeline for transitioning from the rates in effect on July 1, 2025, to the new rates.
SB 140 (Committee on Budget and Fiscal Review, Chapter 193, Statutes of 2023), a budget trailer bill, established various intermediate deadlines toward the submission of the Child Care and Development Fund state plan with necessary information to support use of a single rate structure utilizing the alternative methodology.
AB 116 (Committee on Budget, Chapter 41, Statutes of 2023), a budget trailer bill, stated the intent of the Legislature to utilize an alternative methodology, as defined, to inform the setting of reimbursement rates for subsidized child care. AB 116 required CDSS, in collaboration with the California Department of Education, to develop and conduct an alternative methodology.
AB 131 (Committee on Budget, Chapter 116, Statutes of 2021), a budget trailer bill, transferred administration of child care and development programs from the California Department of Education to CDSS. AB 131 also established the Joint Labor Management Committee and Rate and Quality Stakeholder Workgroup, among other things.
AB 378 (Limón, Chapter 385, Statutes of 2019) authorized family childcare home providers to form, join, and participate in the activities of a provider organization (union) of their own choosing for the purpose of representing them and bargaining on matters regarding the terms and conditions of their employment.
Comments
This bill seeks to continue transparent communication to the Legislature regarding the transition to a new single rate structure by extending quarterly reporting requirements until new rates are implemented. This bill would adopt several single rate structure recommendations published in the Joint Labor Management Committee’s final report to codify rate-setting principles in preparation of reimbursement rate negotiations—to determine the actual percentages and/or dollar amounts to be paid—and implementation of the new rate structure. While the report was published by the Joint Labor Management Committee, comprised of representatives from CDSS, the California Department of Education, and CCPU, the report included joint recommendations, State recommendations, and CCPU recommendations. This bill would adopt several joint recommendations as well as several CCPU recommendations. The communication and proactive implementation goals of this bill seem to align with the Legislature’s years-long efforts to adopt a single rate structure using an alternative methodology.
[NOTE: See the Senate Human Services Committee analysis for additional background on this bill.]
FISCAL EFFECT: Appropriation: No Fiscal Com.: Yes Local: No
According to the Senate Appropriations Committee, “Unknown, potential ongoing General Fund costs for child care reimbursement rates to the extent the bill’s provisions would impact the development of the new rate structure required under current law.”
SUPPORT: (Verified 8/13/26)
Child Care Providers United (Sponsor)
SEIU California State Council (Sponsor)
United Domestic Workers/AFSCME Local 3930 (Sponsor)
American Federation of State, County and Municipal Employees, Afl-cio
Beverly Hills Synagogue
Black Ece
CA Legislative Women's Caucus
California Child Care Resource and Referral Network
Child Action
Child Care Alliance of Los Angeles
Child Care Law Center
Democrats for Israel Los Angeles
Early Edge California
Etsy
Everychild California
First 5 California
Hadassah, the Women's Zionist of America, INC.
Hillel of San Diego
Jcc/federation of San Luis Obispo
Jcrc Bay Area
Jcrc Santa Barbara County
Jewish California (formerly Jpac)
Jewish Center for Justice
Jewish Council for Public Affairs
Jewish Democratic Club of Marin
Jewish Family Service of San Diego
Jewish Family Service of the Desert
Jewish Family Services of Silicon Valley
Jewish Federation Bay Area
Jewish Federation of Greater Santa Barbara
Jewish Federation of Orange County
Jewish Federation of the Desert
Jewish Federation of the Greater San Gabriel and Pomona Valleys
Jewish Partisan Educational Foundation
Jfcs East Bay
Jfcs Long Beach and Orange County
Jvs Bay Area
Jvs Socal
Los Angeles County
Los Angeles Unified School District
National Council of Jewish Women -sf
Unidosus
OPPOSITION: (Verified 8/13/26)
ASSEMBLY FLOOR: 74-0, 4/23/26
AYES: Aguiar-Curry, Ahrens, Alanis, Alvarez, Arambula, Ávila Farías, Bains, Bauer-Kahan, Bennett, Berman, Boerner, Bonta, Bryan, Calderon, Caloza, Carrillo, Castillo, Chen, Connolly, Davies, DeMaio, Dixon, Elhawary, Ellis, Flora, Fong, Gabriel, Gallagher, Garcia, Gipson, Jeff Gonzalez, Mark González, Haney, Harabedian, Hart, Hoover, Irwin, Jackson, Johnson, Kalra, Krell, Lackey, Lee, Lowenthal, Macedo, McKinnor, Muratsuchi, Nguyen, Ortega, Pacheco, Papan, Patel, Patterson, Pellerin, Petrie-Norris, Quirk-Silva, Ramos, Ransom, Michelle Rodriguez, Rogers, Blanca Rubio, Sanchez, Schiavo, Schultz, Solache, Stefani, Ta, Tangipa, Valencia, Wallis, Ward, Wilson, Zbur, Rivas
NO VOTE RECORDED: Addis, Hadwick, Celeste Rodriguez, Sharp-Collins, Soria, Wicks
Prepared by: Diana Dominguez / HUMAN S. / (916) 651-1524
8/14/26 13:45:29
**** END ****
SENATE COMMITTEE ON
Senator Sabrina Cervantes, Chair
2025 - 2026 Regular Session
AB 1981 (Aguiar-Curry) - Subsidized childcare: reimbursement rates: reporting
Version: | Policy Vote: |
Urgency: | Mandate: |
Hearing Date: | Consultant: |
Bill Summary:
AB 1981, an urgency measure, would specify requirements for rate reimbursements for subsidized child care programs.
Fiscal Impact:
Unknown, potential ongoing General Fund costs for child care reimbursement rates to the extent the bill’s provisions would impact the development of the new rate structure required under current law.
Background:
Subsidized Child Care System. California’s subsidized child care system is designed to provide assistance for income eligible parents and guardians who are working, in training, seeking employment, incapacitated, or in need of respite. The state’s subsidized child care programs include General Child Care, Alternative Payment, CalWORKs Child Care, and the California State Preschool Program.
Alternative Methodology for Child Care Reimbursement Rates. Current law states the intent of the Legislature, beginning July 1, 2025, to cease using a regional market rate survey, and instead use an alternative methodology, as defined, for the purpose of informing the setting of future childcare rates. Current law requires the Governor and the Legislature to, by no later than July 1, 2025, establish reimbursement rates based on the alternative methodology. If the new reimbursement rates established do not take effect on July 1, 2025, the CDSS must provide the Legislature with a timeline for transitioning from the rates that are in effect on July 1, 2025, to the new rates. Current law requires CDSS to, from October 1, 2024, to July 1, 2027, provide the Assembly Committee on Budget, the Senate Committee on Budget and Fiscal Review, and the Legislative Analyst’s Office with quarterly updates on the implementation of the new reimbursement rates set under the alternative methodology. According to the July 2025 update to the Legislature, CDSS projects that, upon finalization of a single rate structure, a minimum of two years will be needed to complete the necessary automation and program implementation activities required to implement the new structure.
Proposed Law:
Specific provisions of the bill would:
- Extend the timeline for quarterly updates to the Legislature to until the new reimbursement rates set under the alternative methodology are fully implemented.
- Require CDSS, when establishing new reimbursement rates using an alternative methodology, to do all of the following:
- Vary rates based on specified geographic regions.
- Vary rates, at a minimum, based on whether the childcare provider is a license-exempt childcare provider, a licensed family daycare home, or a daycare center.
- Vary rates, at a minimum, based on specified time category considerations.
- Vary rates, at a minimum, based on specified child age considerations.
- Include an extended hours care rate that is equal to 125 percent of the base rate.
- Include an enhanced inclusion rate for children who have an individualized family service plan, individual program plan, individualized education program, a plan pursuant to the federal Rehabilitation Act as specified, or an active incidental medical services plan, as specified.
- Include an enhanced transportation reimbursement rate for the cost to childcare providers of transporting children to and from care, as specified.
- Ensure that the reimbursement rates permit reimbursement for a specific child to include all rate enhancements for which the child is eligible, and does not limit the number of rate enhancements that can be provided for a specific child.
- Ensure that reimbursement rates are based on families’ certified need, as specified.
- Require that reimbursement rates established under the alternative methodology be implemented with regards to family childcare providers within 90 days of the state and the provider organization representing those providers reaching agreement on the rates.
- Contain an urgency clause.
Staff Comments: The CDSS is currently in the process of working towards implementing the alternative methodology for purposes of determining reimbursement rates and the actual costs for the new single rate structure are yet to be determined. The cost impacts due to the bill’s provisions are indeterminate since it is unknown to what extent the provisions would impact the outcome of the final reimbursement rates under the single rate structure.
-- END --
SENATE COMMITTEE ON HUMAN SERVICES
Senator Becker, Chair
2025 - 2026 Regular
Bill No: | AB 1981 | ||
Author: | Aguiar-Curry | ||
Version: | June 10, 2026 | Hearing Date: | June 15, 2026 |
Urgency: | Yes | Fiscal: | Yes |
Consultant: | Diana Dominguez | ||
Subject: Subsidized childcare: reimbursement rates: reporting
SUMMARY
This bill would revise requirements for the California Department of Social Services (CDSS) to provide updates to the Legislature regarding the implementation of reimbursement rates for subsidized child care based on the alternative methodology. This bill would also adopt several of the recommendations in the Single Rate Structure report related to rate considerations.
ABSTRACT
Existing Law:
- Establishes the Child Care and Development Services Act to provide a comprehensive, coordinated, and cost-effective system of child care and development services for children from infancy to 13 years of age and their parents, including a full range of supervision, health, and support services through full- and part-time programs. (Welfare and Institutions Code [WIC] 10207 et seq.)
- Establishes the Building a Better Early Care and Education System Act to promote quality, access, and stability in the early care and education system by authorizing an appropriate unit of family child care providers to choose a provider organization to act as their unit’s representative on all matters specified under the Act. (WIC 10420 et seq.)
- States it is the intent of the Legislature to use an alternative methodology, as defined, to inform the setting of reimbursement rates for subsidized child care. Provides that reimbursement rates are subject to agreement and codification by the Legislature. (WIC 10227.6(a) and (b))
- Requires CDSS, in collaboration with the California Department of Education, to develop and conduct an alternative methodology. Establishes a timeline for the development of an alternative methodology, including reporting requirements. (WIC 10227.6)
This Bill:
- Makes various findings and declarations related to the state’s intent to implement a new alternative methodology for setting reimbursement rates for child care providers, chronic underpayment of child care providers; and the need to adopt and implement reimbursement rates based on the true cost of care.
- Strikes the sunset date of July 1, 2027, for CDSS to provide quarterly updates on the implementation of the new reimbursement rates set under the alternative methodology and extends the requirement until the new reimbursement rates set under the alternative methodology are fully implemented.
- Requires CDSS to provide the Chairperson of the Joint Legislative Budget Committee, rather than the Legislature, with CDSS’ anticipated timeline for transitioning from the rates that are in effect on July 1, 2025, to the new rates if the new reimbursement rates do not take effect on July 1, 2025.
- Adds that it is the intent of the Legislature for CDSS to use values or selection points that reflect the actual, established costs of providing care when updating the alternative methodology, as required by the triennial federal Child Care Development Fund plan.
- Requires CDSS, when establishing new reimbursement rates using an alternative methodology, to the extent it is consistent with the Child Care and Development Fund state plan, to do all of the following:
- Vary rates based on geographic regions, as specified.
- Vary rates, at a minimum, based on whether the child care provider is a license-exempt child care provider, a licensed family daycare home, or a daycare center.
- Vary rates, at a minimum, based on the following time category considerations:
- The availability of part-time care and full-time care.
- When determining the hours of certified need in a week, that the week begins at midnight on Sunday and ends at 11:59 p.m. on Saturday.
- For families certified for full-time care or with a variable schedule, if more than 40 hours of care are used in a week, the provider shall be paid the full-time rate for the first 40 hours of care and an hourly rate for all care time in excess of 40 hours.
- The provision of two weeks’ notice to a child care provider in advance of the implementation of a change in a family’s certified need.
- Vary rates, at a minimum, based on the following child age considerations:
- Reimbursing programs at the same rate if they serve children of the same age and are required to satisfy the same program requirements.
- The establishment of rates based on the following age groupings:
- Children who are younger than two years of age.
- Children who are two years of age.
- Children who are three to five years of age, inclusive, and children who are six years of age who are not yet enrolled in first grade
- Children who are six years of age who are enrolled in first grade and children who are seven years of age and older.
- Include an extended hours care rate that is equal to 125% of the base rate. Defines “extended hours care” as certified need from 6:00 p.m. to 7:00 a.m. any day of the week and certified need from 7:00 a.m. to 6:00 p.m. on Saturday or Sunday.
- Include an enhanced inclusion rate, as specified, that is equal to 130% of the base rate for children with exceptional needs and 160% of the base rate for severely disabled children. Makes the enhanced inclusion rate retroactive, as specified.
- Include an enhanced transportation reimbursement rate for the cost to child care providers of transporting children to and from care, as specified. If a child care provider is receiving the enhanced transportation reimbursement rate, the provider shall be required to include a record of daily miles driven for children receiving transportation services.
- Ensure that the reimbursement rates permit reimbursement for a specific child to include all rate enhancements for which the child is eligible and does not limit the number of rate enhancements that can be provided for a specific child.
- Ensure that reimbursement rates are based on families’ certified need, as follows:
- Providers shall be reimbursed based on the maximum certified hours of care, regardless of attendance.
- For families certified for a variable schedule, providers shall be reimbursed based on the maximum certified hours of care.
- Requires reimbursement rates established under the alternative methodology to be implemented with regards to family child care providers within 90 days of the state and the provider organization representing those providers reaching agreement on the rates.
- Requires reimbursement rates established under the alternative methodology to not be reduced below the amounts in effect on the effective date of this bill.
- States this act is an urgency statue necessary for the immediate preservation of the public peace, health, or safety within the meaning of Article IV of the California Constitution and shall go into immediate effect.
FISCAL IMPACT
According to the Assembly Appropriations Committee, “CDSS indicates costs are minor and absorbable.”
BACKGROUND AND DISCUSSION
Purpose of the Bill:
According to the author, “Child care providers are the backbone of our early education system and a critical part of California’s economy, yet too many of these mostly women- and minority-owned small businesses are barely scraping by. AB 1981 is about ensuring providers are paid based on the true cost of delivering care. This bill ensures continued transparency and accountability by requiring ongoing quarterly updates from CDSS on the transition to the new reimbursement rate system until it is fully implemented.
“After nearly two decades of unfulfilled commitments to reform child care rates, the Legislature deserves clear accountability and transparency from the Administration on when these changes will finally take effect. Paying providers fairly will help stabilize the child care workforce, keep providers’ doors open, and ensure families can access the care they need. This is especially critical as the federal government implements the work requirements included in H.R. 1, and other policies that raise the cost of living for California families. Now more than ever, working parents need reliable child care to remain employed and support their families.”
California’s subsidized child care system is designed to provide assistance for income eligible parents and guardians who are working, in training, seeking employment, incapacitated, or in need of respite. The state’s largest subsidized child care programs are General Child Care, Alternative Payment, CalWORKs Child Care, and the California State Preschool Program.
General Child Care provides care through contracted centers and family child care home education networks. Alternative Payment provides vouchers to families, which they can use to obtain child care at a center, family child care home, or from a license-exempt provider. Families are income eligible for General Child Care or Alternative Payment if their household income is below 85% of the State Median Income, depending on family size. In 2025–26, a family of four is income eligible if their annual family income is at or below $108,237.[1]
CalWORKs Child Care provides vouchers for families to use at a center, family child care home, or with a license-exempt provider. Families are eligible for CalWORKs Child Care from when they are enrolled in CalWORKs until 24 months after a family has been off cash aid. CalWORKs is organized into three stages. Stage 1 and Stage 2 are considered entitlement programs, meaning anyone who is eligible and has a qualifying need must receive services. Stage 3 Child Care is dependent on the availability of funding and is not an entitlement program.
The California State Preschool Program provides care for three- and four-year-olds at local educational agencies and some community-based centers. Current law additionally allows California State Preschool Programs to serve two-year-olds through June 30, 2027. Families are eligible for the California State Preschool Program if their income based on family size falls below 100% of the State Median Income. In 2025–26, a family of four is income eligible if their annual family income is at or below $127,338.[2] California State Preschool Programs are under the purview of the Senate Education Committee.
History of Reimbursement Rate Reform
AB 131 (Committee on Budget, Chapter 116, Statutes of 2021) established the state’s efforts to move to a single reimbursement rate structure. The first was a Joint Labor Management Committee, established between the State and Child Care Providers United (CCPU), the family child care providers union. The Joint Labor Management Committee was tasked with developing recommendations for a single reimbursement rate structure that addresses quality standards for equity and accessibility. The second effort was the Rate and Quality Stakeholder Workgroup, established by CDSS in consultation with the California Department of Education. The Workgroup was tasked with assessing the methodology for establishing reimbursement rates and the existing quality standards for child care and preschool programs. AB 131 also increased rates for all contractors.
AB 116 (Committee on Budget, Chapter 41, Statutes of 2023) required CDSS, in consultation with the California Department of Education, to develop and conduct an alternative methodology for setting reimbursement rates. CDSS contracted with Prenatal to Five Fiscal Strategies to assist in designing and implementing an alternative methodology process. SB 140 (Committee on Budget and Fiscal Review, Chapter 193, Statutes of 2023) added a timeline for adoption of a new alternative methodology, requiring CDSS to submit information on the alternative methodology to the federal Administration for Children and Families in the Child Care and Development Fund state plan by July 1, 2024. Additionally, the timeline in SB 140 required CDSS to provide the Legislature with an outline for planned implementation of the single rate structure utilizing the alternative methodology within 60 days of federal approval, upon which the Legislature shall have 30 days to review and provide feedback for implementation of these policies.
SB 163 (Committee on Budget and Fiscal Review, Chapter 73, Statutes of 2024) required CDSS to provide the Assembly and Senate Budget Committees with a report that outlines the implementation components for the approved single rate structure, including the department’s plan to set new reimbursement rates under the alternative methodology by no later than July 1, 2025, and the estimated costs and estimated timelines associated with implementation. SB 163 required CDSS to provide quarterly updates on implementation, including any changes to the information provided in the report. SB 163 provided that the Governor and Legislature shall, by no later than July 1, 2025, establish reimbursement rates based on the alternative methodology, and if new reimbursement rates do not take effect, CDSS shall provide the Legislature with a timeline for transitioning from the rates in effect on July 1, 2025, to the new rates.
SB 120 (Committee on Budget and Fiscal Review, Chapter 13, Statutes of 2025) revised the sunset date for quarterly updates on the implementation of the new reimbursement rates to July 1, 2027, and stated the intent of the Legislature to cease using a regional market rate survey and instead use an alternative methodology beginning July 1, 2025. In December 2025, the Joint Labor Management Committee published a final report with joint recommendations for a single rate structure.[3] The final report additionally included State recommendations and CCPU recommendations that were not jointly agreed upon. This bill would adopt several of these recommendations, including both joint recommendations and CCPU recommendations. The recommendations to be adopted through this bill include varying rates based on defined geographic regions, varying rates based on provider type, varying rates based on time-of-day considerations, varying rates based on child age considerations, including an extended hours rate, including an enhanced inclusion rate, and including an enhanced transportation rate.
According to the July 2025 Update to the Report to the Legislature on Implementation of the Single Rate Structure, CDSS projects that, upon finalization of a single rate structure, a minimum of two years will be needed to complete the necessary automation and program implementation activities required to implement the new structure.[4] However, this timeline is subject to change based on various factors, such as implementation of the Joint Labor Management Committee joint recommendations, which will require statutory changes. Further, the Memorandum of Understanding between the State and CCPU states that a single rate structure will become operable upon the parties reaching agreement on the specific rates. This bill would extend the sunset for quarterly updates on the implementation of new reimbursement rates until the new rates are fully implemented.
Related/Prior Legislation:
SB 120 (Committee on Budget and Fiscal Review, Chapter 13, Statutes of 2025), a budget trailer bill, revised the sunset date for quarterly updates on the implementation of the new reimbursement rates to July 1, 2027, and stated the intent of the Legislature to cease using a regional market rate survey and instead use an alternative methodology beginning July 1, 2025, among other things.
SB 163 (Committee on Budget and Fiscal Review, Chapter 73, Statutes of 2024), a budget trailer bill, required CDSS to publish a report that outlines the implementation timeline for the approved single rate structure, including a plan to set new reimbursement rates under the alternative methodology by no later than July 1, 2025, and required CDSS to provide quarterly updates on implementation. SB 163 provided that the Governor and Legislature shall, by no later than July 1, 2025, establish reimbursement rates based on the alternative methodology, and if new reimbursement rates do not take effect, CDSS shall provide the Legislature with a timeline for transitioning from the rates in effect on July 1, 2025, to the new rates.
SB 140 (Committee on Budget and Fiscal Review, Chapter 193, Statutes of 2023), a budget trailer bill, established various intermediate deadlines toward the submission of the Child Care and Development Fund state plan with necessary information to support use of a single rate structure utilizing the alternative methodology.
AB 116 (Committee on Budget, Chapter 41, Statutes of 2023), a budget trailer bill, stated the intent of the Legislature to utilize an alternative methodology, as defined, to inform the setting of reimbursement rates for subsidized child care. AB 116 required CDSS, in collaboration with the California Department of Education, to develop and conduct an alternative methodology.
AB 596 (Reyes, 2023) would have required CDSS, in collaboration with the California Department of Education, to develop and implement an alternative reimbursement rate setting methodology, among other things. AB 596 was held on the Senate Appropriations Committee suspense file.
AB 131 (Committee on Budget, Chapter 116, Statutes of 2021), a budget trailer bill, transferred administration of child care and development programs from the California Department of Education to CDSS. AB 131 also established the Joint Labor Management Committee and Rate and Quality Stakeholder Workgroup, among other things.
SB 246 (Leyva, 2021) would have required CDSS to establish a single reimbursement rate for childcare programs and State Preschool, including variation for regional costs and quality adjustment factors. SB 246 was referred to the Assembly Appropriations Committee with no further action.
AB 378 (Limón, Chapter 385, Statutes of 2019) authorized family childcare home providers to form, join, and participate in the activities of a provider organization (union) of their own choosing for the purpose of representing them and bargaining on matters regarding the terms and conditions of their employment.
SB 174 (Leyva, 2019) would have required, subject to an appropriation, specified providers of subsidized childcare be reimbursed based upon an updated Regional Market Rate. SB 174 was co-joined with AB 125 (McCarty, 2019). SB 174 was referred to the Assembly Appropriations Committee with no further action.
AB 125 (McCarty, 2019) would have revised the state’s system and rates for reimbursing subsidized childcare programs to create a more uniform reimbursement system reflecting regional costs of care. AB 125 was co-joined with SB 174 (Leyva, 2019). AB 125 was referred to the Senate Appropriations Committee with no further action.
AB 2125 (Ridley-Thomas, 2014) would have required the Superintendent of Public Instruction to review the plan that establishes standards and assigns reimbursement rates for childcare programs, and to submit recommendations for a single reimbursement system that reflects the actual current cost of childcare based on the most recent regional market rate survey. AB 2125 was held in the Senate Appropriations Committee.
COMMENTS
This bill seeks to continue transparent communication to the Legislature regarding the transition to a new single rate structure by extending quarterly reporting requirements until new rates are implemented. This bill would adopt several single rate structure recommendations published in the Joint Labor Management Committee’s final report to codify rate-setting principles in preparation of reimbursement rate negotiations—to determine the actual percentages and/or dollar amounts to be paid—and implementation of the new rate structure. While the report was published by the Joint Labor Management Committee, comprised of representatives from CDSS, the California Department of Education, and CCPU, the report included joint recommendations, State recommendations, and CCPU recommendations. This bill would adopt several joint recommendations as well as several CCPU recommendations. The communication and proactive implementation goals of this bill align with the Legislature’s years-long efforts to adopt a single rate structure using an alternative methodology.
PRIOR VOTES
Assembly Floor: | 74 - 0 |
Assembly Appropriations Committee: | 13 - 0 |
Assembly Human Services Committee: | 7 - 0 |
POSITIONS
Support:
Child Care Providers United (CCPU) (Sponsor)
SEIU California State Council (Sponsor)
United Domestic Workers/AFSCME Local 3930 (Sponsor)
American Federation of State, County and Municipal Employees, AFL-CIO
Beverly Hills Synagogue
Black ECE
CA Legislative Women’s Caucus
California Child Care Resource and Referral Network
Child Action
Child Care Alliance of Los Angeles
Child Care Law Center
Democrats for Israel Los Angeles
Early Edge California
Etsy
EveryChild California
First 5 California
Hadassah, the Women’s Zionist of America, INC.
Hillel of San Diego
JCC/Federation of San Luis Obispo
JCRC Bay Area
JCRC Santa Barbara County
Jewish California (formerly JPAC)
Jewish Center for Justice
Jewish Council for Public Affairs
Jewish Democratic Club of Marin
Jewish Family Service of San Diego
Jewish Family Service of the Desert
Jewish Family Services of Silicon Valley
Jewish Federation Bay Area
Jewish Federation of Greater Santa Barbara
Jewish Federation of Orange County
Jewish Federation of the Desert
Jewish Federation of the Greater San Gabriel and Pomona Valleys
Jewish Partisan Educational Foundation
JFCS East Bay
JFCS Long Beach and Orange County
JVS Bay Area
JVS SoCal
Los Angeles County
Los Angeles Unified School District
National Council of Jewish Women-SF
Unidosus
Oppose:
None received
-- END --
https://www.cdss.ca.gov/Portals/9/Additional-Resources/Letters-and-Notices/CCBs/2025/CCB_25-17.pdf?ver=u4mUIjWBWHLzf2SrlJQ8iA%3d%3d ↑
https://www.cde.ca.gov/sp/cd/ci/mb2505.asp ↑
https://www.cdss.ca.gov/Portals/9/CalWORKs/CCT/CCDD/2025%20JLMC%20Final%20Report%20-%20SRS%20Recommendations.pdf ↑
https://cdss.ca.gov/Portals/9/CalWORKs/CCT/CCDD/January%20Update%20to%20the%20Report%20to%20the % 20Legislature%20on%20Implementation%20of%20the%20Single%20Rate%20Structure.pdf ↑
Date of Hearing: April 15, 2026
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Buffy Wicks, Chair
ABPCA Bill Id:AB 1981
Author:(Aguiar-Curry) – As Amended Ver:March 26, 2026
Policy Committee: | Human Services | Vote: | 7 - 0 |
|
| ||
|
|
Urgency: Yes State Mandated Local Program: No Reimbursable: No
SUMMARY:
This bill deletes the July 1, 2027, sunset date for the California Department of Social Services (CDSS) to provide the Assembly and Senate budget committees and the Legislative’s Analyst’s Office with quarterly updates on the implementation of the new subsidized childcare reimbursement rates set under the alternative methodology, and instead requires those updates to continue until the new reimbursement rates are fully implemented.
This bill also requires CDSS to provide the Joint Legislative Budget Committee, rather than the Legislature, with CDSS’ anticipated timeline for transitioning to the new rates.
FISCAL EFFECT:
CDSS indicates costs are minor and absorbable.
COMMENTS:
- Purpose. According to the author:
[This bill] ensures continued transparency and accountability by requiring ongoing quarterly updates from CDSS on the transition to the new reimbursement rate system until it is fully implemented. After nearly two decades of unfulfilled commitments to reform childcare rates, the Legislature deserves clear accountability and transparency from the Administration on when these changes will finally take effect. Paying providers fairly will help stabilize the childcare workforce, keep providers’ doors open, and ensure families can access the care they need.
- Background. Existing law requires CDSS, in collaboration with the California Department of Education (CDE), to develop and conduct an alternative methodology to inform reimbursement rate setting for subsidized childcare and to establish a single rate structure to reimburse all subsidized childcare programs. Existing law requires the Governor and the Legislature, by July 1, 2025, to establish reimbursement rates based on the alternative methodology.
Existing law requires CDSS to provide quarterly updates to the Legislature on implementation of the new rates through July 1, 2027. If the new rates do not take effect on July 1, 2025, CDSS must provide the Legislature with its timeline for transitioning to the new rates.
According to CDSS’ January 2026 rate reform update, full implementation of the single rate structure is expected to take at least two additional years. This bill extends the requirement that CDSS provide quarterly updates to the Legislature until the new reimbursement rates are fully implemented and clarifies that CDSS must provide its transition timeline to the Joint Legislative Budget Committee.
Analysis Prepared by: Jennifer Swenson / APPR. / (916) 319-2081
Date of Hearing: March 24, 2026
ASSEMBLY COMMITTEE ON HUMAN SERVICES
Alex Lee, Chair
ABPCA Bill Id:AB 1981 (
Author:Aguiar-Curry) – As Amended Ver:March 20, 2026
SUBJECT: Subsidized childcare: reimbursement rates: reporting
SUMMARY: Revises requirements placed on the California Department of Social Services (CDSS) to provide updates to the Legislature regarding the implementation of alternative methodology reimbursement rates for subsidized childcare. Specifically, this bill:
- Removes the July 1, 2027, sunset for the CDSS requirement to provide the Assembly Committee on Budget, the Senate Committee on Budget and Fiscal Review, and the Legislative’s Analyst’s Office with quarterly updates on the implementation of the new reimbursement rates set under the alternative methodology, and instead requires those updates to continue until the new reimbursement rates are fully implemented.
- Revises the requirement placed on CDSS, if the new reimbursement rates did not take effect on July 1, 2025, to provide the Legislature with a timeline for transitioning to the new rates, to now require CDSS to provide the Chairperson of the Joint Legislative Budget Committee with CDSS’ anticipated timeline for transitioning to the new rates.
- Makes technical and conforming changes.
- Makes the following findings and declarations:
- The Legislature passed, and the Governor signed to enact, the Building a Better Early Care and Education System Act in 2019, codifying that family childcare providers have the right to form, join, and participate in a provider organization of their choosing to represent them and bargain on matters related to their employment terms and conditions;
- Pursuant to the process established by the Building a Better Early Care and Education System Act, childcare providers organized and elected a statewide union, known as Child Care Providers United (CCPU), representing over 70,000 home-based childcare providers, which has successfully negotiated three contracts with the state;
- The rate of pay for providers negotiated between the state and CCPU is informed by the rate methodology established in state law and funded in the state budget, and the current rate methodology is largely understood to leave providers significantly underpaid, leaving families without access to adequate, quality, reliable childcare in the locations, languages, and other necessities to meet families’ needs;
- The Legislature has determined that the state should use a new alternative methodology. This methodology will apply the actual cost of care to calculate how subsidy payments are made to early childhood educators with one goal being to stabilize and improve childcare options for families;
- California is committed to advancing racial, economic, geographic, and gender equity across its publicly funded systems, including early learning and care;
- Federal regulations allow states to use a cost estimation model. This model can replace a market rate survey to better reflect the true cost of high-quality childcare. It includes adequate compensation for the workforce, investments in health and safety, and compliance with licensing requirements;
- California’s existing market-rate methodology significantly underestimates the actual cost of care, with a recent study from the state showing that providers earned just 30% of the cost of care in 2024. In a broken market where rates are set based on what families can pay as opposed to what it actually costs to provide quality, developmentally appropriate care reliance on regional market surveys perpetuate historic inequities by embedding disparities in family income, neighborhood wealth, and access to private tuition into the state’s reimbursement structure;
- The early care and education workforce is almost exclusively female and predominantly people of color, including many recent immigrants, first-generation college students, and working mothers. An estimated 43% of early educators turn to public safety-net support to meet the basic needs of their family;
- Chronic underpayment has led to workforce instability, program closures, and less access to care for working families. These impacts are especially felt in low-income communities, rural areas, and communities of color;
- Childcare deserts are most prevalent in low-income communities, rural areas, tribal communities, and communities of color, where the market fails to generate rates sufficient to sustain licensed and license-exempt providers serving subsidized families;
- As part of developing the alternative methodology, CDSS was required to consult early childhood educator stakeholders. This includes CCPU, the bargaining representative for licensed and license-exempt family childcare providers receiving state subsidies. The goal was to inform the development of a cost-based rate mode;
- Despite this statutory direction and extensive stakeholder engagement, a rate structure based on the actual cost of care is nowhere near completion. This delay prevents much-needed stabilization of the childcare sector;
- Adopting a true cost of care methodology is needed to support the childcare workforce, help families in the state’s subsidized childcare system, and protect the state’s economy;
- Therefore, states legislative intent to enact the statutory changes to implement a childcare reimbursement methodology based on the actual costs of care and to ensure its timely implementation.
EXISTING LAW:
- Establishes the Child Care and Development Services Act to provide childcare and development services as part of a coordinated, comprehensive, and cost-effective system serving children from birth to 13 years of age and their parents, including a full range of supervision, health, and support services through full- and part-time programs. (Welfare and Institutions Code [WIC] § 10207 et seq.)
- States legislative intent that all families have access to childcare and development services, through resource and referral services where appropriate, and regardless of demographic background or special needs, and that families are provided the opportunity to attain financial stability through employment while maximizing growth and development of their children and enhancing their parenting skills through participation in childcare and development programs. (WIC § 10207.5)
- Establishes a reimbursement rate system for subsidized childcare programs, including setting the standard reimbursement rate (SRR), requiring rates to be greater of specified benchmarks, and defining how contract reimbursement is calculated based on costs, enrollment, and program operations. (WIC § 10280)
- Requires CDSS to establish and implement a regional market rate (RMR) reimbursement schedule for subsidized childcare based on periodic market rate surveys, with rates applied to alternative payment programs and updated consistent with federal requirements. (WIC § 10436)
- Defines “alternative methodology” as a cost-based rate setting method, including a cost estimation model, on which to base payment rates pursuant to the requirements set forth in federal regulations in 11) below. (WIC § 10213.5(ak))
- Declares legislative intent to use an alternative methodology, as defined in 5) above, to inform the setting of reimbursement rates for subsidized childcare (WIC § 10227.6(a))
- Requires CDSS, in collaboration with the California Department of Education (CDE), to develop and conduct an alternative methodology to inform the setting of reimbursement rates for subsidized childcare and establish a single rate structure (SRS). (WIC § 10227.6(c))
- Required the Governor and the Legislature, by no later than July 1, 2025, to establish reimbursement rates based on the alternative methodology. Requires provider reimbursement rates to not be reduced from the reimbursement rates that were in effect on June 30, 2024, pursuant to state law, inclusive of the cost of care plus rates. (WIC § 10277.6(i))
- Requires the Governor and CCPU, consistent with the agreement dated June 25, 2021, to establish a Joint Labor Management Committee (JLMC) to develop recommendations for an SRS structure that addresses quality standards for equity and accessibility while supporting positive learning and developmental outcomes for children. (WIC § 10280.2(a)(1))
- Declares legislative intent that:
- Reimbursement rates are set pursuant to statute and informed by the alternative methodology;
- Under the SRS, all programs, including the Alternative Payment Programs (APPs), Migrant Childcare and Development Programs, General Childcare and Development Programs (CCTR), Family Childcare Home Education Networks, Childcare and Development Services for Children with Special Needs, Childcare for Recipients of the CalWORKs Program, the Emergency Childcare Bridge Program for Foster Children, and education programs in the Early Education Act, as described, shall be reimbursed under a unified structure that takes into account a common set of rate elements;
- Rate levels shall be informed by the costs associated with meeting health and safety requirements and program requirements;
- Base rates shall be administered as a per-child amount, and programs shall be eligible to claim reimbursement for services they deliver consistent with enhances rates, if any;
- Rates shall vary based on all of the following: geography; type of care setting; regulatory requirements applicable to each type of care setting; time categories; and, child age. (WIC § 10277.6(l)(2))
Federal law:
- Requires states administering the Child Care and Development Fund (CCDF) to set childcare reimbursement rates and payment practices sufficient to ensure eligible families have equal access to care comparable to nonsubsidized families, based on a market rate survey or an approved alternative methodology. (45 Code of Federal Regulations § 98.45)
FISCAL EFFECT: Unknown, this bill has not been analyzed by a fiscal committee.
COMMENTS:
Background: Subsidized Childcare. California’s subsidized childcare system is established under the Child Care and Development Services Act, intended to provide a coordinated, comprehensive, and cost-effective system of care for children from birth to 13 years of age and their families. Childcare and development services include supervision, health, and support services delivered through full- and part-time programs to meet the needs of families working, in training, seeking employment, incapacitated, or in need of respite.
The system is funded through a combination of federal and state funds and operates through a mixed delivery model, including licensed childcare centers, family childcare homes and license-exempt providers, such as family, friends or neighbors. Major childcare programs include CalWORKs administered through a three-stage system, the CCTR, which provides care through contracted centers and family childcare home education networks, and AAPs, which provide vouchers that allow families to choose care in centers, family childcare homes, or license-exempt settings. California also offers the California State Preschool Program (CSPP) for eligible three-and four-year old children, providing part- or full-day services.
For non-CalWORKs programs, families must meet both eligibility and need requirements, including income below 85% of the state median income ($89,664 for a family of three), participation in certain public assistance programs, or circumstances such as homelessness or child welfare involvement. Families must also demonstrate a qualifying need, such as employment or training. Once deemed eligible, families are authorized for services for at least 24 months without recertification, unless income exceeds the threshold.
Current Rate Structure (RMR and SRR). California has historically used two different reimbursement rates: the RMR and the SRR, which apply differently across the mixed-delivery system.
The RMR is used for voucher-based programs, including APPs and CalWORKs, and is federally funded through the Child Care and Development Block Grant. The RMR is informed by a market rate survey that reflects the prices providers charge families. Rates vary by county, provider type, child age, and hours of care, and providers are reimbursed up to a regional ceiling. Currently, rates are set at the 75th percentile of the 2018 survey or the rate in effect as of December 31, 2021, whichever is greater. While intended to reflect regional variation and support parental choice, the RMR is based on what families can afford, not the actual cost of care.
The SRR, by contrast, is used for direct service programs, including CCTR and CSPP, which is funded through nonfederal funding sources such as Proposition 98 funds and is a statewide rate established through the budget. Unlike the RMR, it does not vary by region and has historically not reflected differences in the cost of care. The current SRR is $54.93 per child per day, with adjustments based on factors such as age and hours of care. In 2021-22, the state allowed direct service providers to receive the higher SRR or RMR.
Both systems have notable limitations. The RMR can undervalue care in low-income communities where market prices are suppressed, while the SRR does not account for regional cost differences. Maintaining two separate rate structures has also led to inconsistences across programs, inequities in provider reimbursement, and administrative complexity. Reimbursement rates have also not kept pace with rising costs and inflation. Family childcare providers report working an average of 64 hours per week, earning $8.77 per hour or less, which contributes to financial instability among providers, with an estimated 17% living in poverty.
Shift to Alternative Methodology and Single Rate Structure. California is transitioning to a cost-based alternative methodology to set reimbursement rates, moving away from the RMR’s price-based approach. This shift is driven by both policy and collective bargaining efforts.
In 2019, AB 378 (Limon), Chapter 385, Statutes of 2019, granted family childcare providers the right to unionize and collectively bargain with the state, leading to the formation of the CCPU. AB 131 (Committee on Budget), Chapter 116, Statutes of 2021, ratified the first agreement between CCPU and the state, required the creation of a JLMC to develop recommendations for an SRS, and provided one-time funding to supplement reimbursement rates for both family childcare and center-based providers and address rate inequities. AB 131 also established the Rate and Quality Workgroup, which found that the RMR system institutionalizes race- and income-based inequities and recommended adopting a cost-based alternative methodology and a unified SRS with base and enhanced rates.
To support this transition, CDSS, in partnership with Prenatal to Five Fiscal Strategies, developed a cost estimation model based on provider data and stakeholder input across all 58 counties[1]. The model aims to estimate the true cost of care by accounting for factors such as staffing, program type, child age, and geographic variation. The JLMC recommendations released in December 2025,[2] emphasized that the model should inform, but not cap, rate-setting and should be regularly updated to reflect evolving costs. Under the proposed SRS, reimbursement rates would be determined using a consistent, cost-informed methodology across programs, with base rates supporting general operations and enhanced rates for factors such as non-traditional hours and inclusion supports.
Following federal approval of the alternative methodology through the CCDF State Plan, CDSS is required to provide CCPU with an implementation plan and engage in further negotiations on rates and funding. CDSS is also required to provide quarterly updates to the Legislature on implementation through July 1, 2027. If rates were not implemented by the statutory deadline of July 1, 2025, CDSS is also required to provide a transition timeline. Currently, the rates are still not implemented. According to CDSS’ January 2026 rate reform update[3], full implementation of the SRS is expected to take at least two additional years and remains contingent on budget decisions, collective bargaining outcomes, and significant data system and administrative changes.
To ensure continued legislative oversight and progress toward cost-based reimbursement rates, this bill extends the requirement for quarterly updates until the SRS is fully implemented.
Author’s Statement: According to the Author, “Child care providers are the backbone of our early education system and a critical part of California’s economy, yet too many of these mostly women- and minority-owned small businesses are barely scraping by. [This bill] is about ensuring providers are paid based on the true cost of delivering care. [This bill] ensures continued transparency and accountability by requiring ongoing quarterly updates from CDSS on the transition to the new reimbursement rate system until it is fully implemented. After nearly two decades of unfulfilled commitments to reform child care rates, the Legislature deserves clear accountability and transparency from the Administration on when these changes will finally take effect. Paying providers fairly will help stabilize the child care workforce, keep providers’ doors open, and ensure families can access the care they need. This is especially critical as the federal government implements the work requirements included in H.R. 1, and other policies that raise the cost of living for California families. Now more than ever, working parents need reliable child care to remain employed and support their families.”
Equity Implications: Expanding reporting to support a cost-based rate system can improve transparency, oversight, and accountability, as well as help ensure reimbursement more accurately reflects the cost of care across regions and provider types, which may benefit serving low-income and historically underserved communities, while benefiting a workforce that is disproportionately women of color.
Policy Considerations: CDSS has indicated that full implementation is expected to take at least two additional years beyond the original statutory timeline, prolonging the period during which reimbursement rates do not reflect the true cost of care. These delays may continue to strain providers, particularly those serving subsidized care, and risk further reductions in childcare supply in high-need communities.
Should this bill move forward, the Author may wish to consider adding an urgency clause given the ongoing delay in implementing the SRS.
Arguments in Support: Co-sponsors CCPU, SEIU California State Council, and United Domestic Workers/AFSCME Local 3930 writes, “[This bill] seeks to address inequities in access to affordable child care by strengthening accountability for implementing reimbursement rates that reflect the true cost of care. The bill would benefit several vulnerable populations, including low-income families, children in subsidized childcare programs, and the childcare workforce—who are overwhelmingly women and disproportionately women of color. When reimbursement rates remain below the true cost of care, providers serving subsidized families often struggle to stay open or expand capacity. By requiring the California Department of Social Services to submit and annually update a timeline for implementing cost-based reimbursement rates, [This bill] promotes accountability and progress toward a more sustainable funding structure. This can help stabilize providers, preserve childcare supply in high-need communities, and improve access to affordable, reliable care for families who depend on subsidized programs.”
Arguments in Opposition: None on file.
RELATED AND PRIOR LEGISLATION:
SB 120 (Committee on Budget), Chapter 13, Statutes of 2025, extended quarterly updates to the Legislature on the implementation of childcare rate reform through July 1, 2027.
AB 596 (Aguiar-Curry) of 2023, would have required CDSS, in collaboration with CDE, to develop and implement an alternative methodology for calculating subsidy payment rates for childcare services and CSPP services; would have required CDSS, in consultation with CDE, to develop an equitable sliding scale for the payment of family fees and prohibit family fees from being collected until the new equitable sliding scale was implemented; and would have increased reimbursements to state preschool and childcare providers, as specified. AB 596 was held on the Senate Appropriations suspense file.
SB 246 (Leyva) of 2021, would have required CDSS to establish an SRS for early learning and care programs, including variation for regional costs and quality adjustment factors. SB 246 was referred to the Assembly Appropriations Committee with no further action.
AB 131 (Committee on Budget), Chapter 116, Statutes of 2021, see comments above.
AB 378 (Limón), Chapter 385, Statutes of 2019, see comments above.
REGISTERED SUPPORT / OPPOSITION:
Support
Child Care Providers United (CCPU) (Co-Sponsor)
SEIU California State Council (Co-Sponsor)
United Domestic Workers/AFSCME Local 3930 (Co-Sponsor)
California Chamber of Commerce
Early Edge California
Oakland Starting Smart & Strong
Parent Voices California
Opposition
None on file.
Analysis Prepared by: Bri-Ann Hernández-Mengual / HUM. S. / (916) 319-2089
https://www.sandiegouniontribune.com/wp-content/uploads/sdcdn/ca-cost-of-quality-final-design-sept2022.pdf ↑
https://childcareprovidersunited.org/wp-content/uploads/2025/12/DRAFT-JLMC-Final-Report-SRS-Recommendations_12.1.25_final.pdf ↑
https://cdss.ca.gov/Portals/9/CalWORKs/CCT/CCDD/January%20Update%20to%20the%20Report%20to%20the%20Legislature%20on%20Implementation%20of%20the%20Single%20Rate%20Structure.pdf ↑
Discussed in Hearing
1MIN
Assembly Floor
1MIN
Senate Floor
13MIN
Senate Standing Committee on Human Services
Bill Author
Bill Co-Author(s):
