Existing law, the Child Care and Development Services Act, administered by the State Department of Social Services, requires the department to administer childcare and development programs, including, among others, general childcare and development, migrant childcare and development, and alternative payment programs, that offer a full range of services to eligible children from infancy to 13 years of age, inclusive. Existing law requires the department to contract with local contracting agencies for alternative payment programs for childcare services to be provided throughout the state. Existing law then requires alternative payment programs to reimburse childcare providers for providing childcare to eligible children.

Existing federal law provides for allocation of federal funds through the federal Temporary Assistance for Needy Families (TANF) block grant program to eligible states. Existing law provides for the California Work Opportunity and Responsibility to Kids (CalWORKs) program, under which, through a combination of state and county funds and federal funds received through the TANF program, each county provides cash assistance and other benefits to qualified low-income families. Existing law provides for state-subsidized childcare programs and childcare for recipients of benefits under the CalWORKs program and establishes 3 stages of childcare services managed by county welfare departments and agencies contracting with the State Department of Social Services.

This bill would require the department to, no less than quarterly, identify unspent or projected unexpended moneys from subsidized childcare and development programs, as specified. The bill would require the department, to the maximum extent permitted by federal and state law, to redirect and deposit the unspent or unexpended moneys identified to the Alternative Payment Program Enrollment Fund, as established by the bill. The bill would continuously appropriate all moneys in the fund to the department for the purpose of enrolling additional eligible families in alternative payment programs. The bill would require the department to notify each local childcare and development planning council whenever moneys are identified as unspent, or projected to remain unexpended, and are subject to transfer or redirection pursuant to these provisions. By authorizing existing appropriated moneys to be used for a new purpose, and by creating a continuously appropriated fund, this bill would make an appropriation.

Existing law, the Child Care and Development Services Act, administered by the State Department of Social Services, establishes a system of childcare and development services for children up to 13 years of age. Existing law authorizes, upon departmental approval, the use of appropriated funds for alternative payment programs to allow for maximum parental choice. Existing law authorizes those programs to include, among other things, a subsidy that follows the family from one provider to another, or choices among hours of service.

This bill would establish the California Alternative Payment Support Program (CAPSP) for the purpose of augmenting the current funding for alternative payment programs. The bill would require the California Alternative Payment Support Program Board, which the bill would create in state government, consisting of specified members, to administer the CAPSP. The bill would require the board to manage and invest revenue deposited in the California Alternative Payment Support Program Trust Fund, which the bill would create in the State Treasury, with moneys in that fund available, upon appropriation, to finance alternative payment programs. Commencing July 1, 2027, the bill would require each employer and each worker to pay contributions to the trust fund through a payroll deduction at an unspecified rate with respect to wages, of 0.03% of wages for employers and 0.01% for employees, thereby imposing a tax.

Existing law establishes a threshold for initial or ongoing income eligibility for purposes of services under the act, with the threshold set as a familys adjusted monthly income that is at or below 85% of the state median income, adjusted for family size, as specified.

This bill would, beginning January 1, 2028, increase the above-described threshold to 90% of the state median income for services provided through alternative payment programs.

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.

This bill would require, upon the establishment of those reimbursement rates, alternative payment programs to reimburse providers at 100% of the cost of care and would require, beginning one year after the establishment of those rates, alternative payment programs to reimburse providers at 110% of the cost of care.

Existing law, the Child Care and Development Services Act, administered by the State Department of Social Services, establishes a system of childcare and development services for children up to 13 years of age, inclusive. Under the act, childcare is provided through a variety of programs, including, among others, general childcare and development programs and migrant childcare and development programs.

This bill would state the intent of the Legislature to enact legislation to help Californians obtain affordable, high-quality childcare.

SENATE COMMITTEE ON

Senator Sabrina Cervantes, Chair

2025 - 2026 Regular Session

AB 2258 (Ávila Farías) - Early childhood education and childcare: alternative payment programs

Bill Summary:

AB 2258 would require the California Department of Social Services (CDSS) to identify unspent or projected unexpended moneys from all subsidized child care and development programs for the purpose of enrolling additional eligible families in alternative payment programs, as specified.

Fiscal Impact:

The CDSS estimates annual General Fund costs of $3 million for state administration.

Background:

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. CDSS administers both voucher-based programs and direct contract programs.

Voucher-based programs provide vouchers for families to obtain care at a licensed child care center, licensed family child care home, or from a license-exempt provider (family, friend, and neighbor). Voucher-based programs include the Alternative Payment Program, Migrant Alternative Payment Program, CalWORKs Child Care, and the Emergency Child Care Bridge Program for Foster Children. Alternative payment programs help families arrange child care services and make payments for those services directly to the child care provider selected by the family.

Direct contract programs are contracted directly with the state for a fixed number of child care slots in a licensed child care center or a network of family child care homes. Direct contract programs administered by CDSS include General Child Care and Development (General Child Care), Migrant Child Care and Development, Child Care and Development Services for Children with Severe Disabilities, and Family Child Care Home Education Networks.

Proposed Law:

Specific provisions of the bill would:

• Require CDSS, in consultation with contractors, no less than quarterly, to identify unspent or projected unexpended moneys from all subsidized child care and development programs, as specified.
• Require CDSS, in consultation with contractors, to redirect and deposit the unspent or unexpended moneys identified to the Alternative Payment Program Enrollment Fund, to be created in the State Treasury.
• Provide that all moneys in the Alternative Payment Program Enrollment Fund are continuously appropriated, without regard to fiscal years, to the CDSS for the purpose of enrolling additional eligible families in alternative payment programs, as specified.
• Require CDSS to establish a streamlined and timely process for the transfer or redirection of moneys, including improvements to or expansion of existing voluntary temporary transfer processes, to ensure that moneys are fully utilized within the applicable fiscal period.
• Prohibit moneys redirected from being subjected to administrative delays that would prevent their timely obligation or expenditure.
• Require CDSS to notify each local child care and development planning council whenever moneys are identified as unspent, or projected to remain unexpended, and are subject to transfer or redirection, as specified.

Related Legislation:

AB 150 (Committee on Budget, Chapter 25, Statutes of 2026) authorizes CDSS to transfer funding, including funds that are not allocated to contracts or otherwise fully expended, across and within alternative payment programs and across and within direct contract child care programs, as specified.

AB 2314 (Rogers) would establish a process for the transfer of funds between providers in the alternative payment program. The bill is scheduled to be heard August 3, 2026 in this committee.

-- END --

SENATE COMMITTEE ON HUMAN SERVICES

Senator Becker, Chair

2025 - 2026 Regular

Subject: Early childhood education and childcare: alternative payment programs

SUMMARY

This bill would establish the Alternative Payment Program Enrollment Fund. This bill would require the California Department of Social Services (CDSS) to identify unspent or projected unspent moneys from subsidized child care and development programs and redirect or deposit those moneys into the Alternative Payment Program Enrollment Fund. This bill would require CDSS to spend that money to enroll additional eligible families.

ABSTRACT

Existing Law:

1. 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 [WIC] 10207 et seq.)
2. Defines “alternative payments” as including payments that are made by one child care agency to another agency or child care provider for the provision of child care and development services, as well as payments that are made by an agency to a parent for the parent to purchase child care and development services. (WIC 10213.5)
3. Defines “alternative payment program” (APP) as a local government agency or nonprofit organization that has contracted with CDSS to provide alternative payments and to provide support services to parents and providers. (WIC 10213.5(b))
4. Authorizes, upon the approval of CDSS, appropriated funds to be used for APPs to allow for maximum parental choice. To provide for maximum parental choice, APPs may include the following:
   1. A subsidy that follows the family from one provider to another.
   2. Choices, whenever possible, among hours of service including before and after school, evenings, weekends, and split shifts.
   3. Child care and development services according to parental choice, including use of family child care homes, general center based programs, and other state-funded programs, as specified, excluding state preschool programs. (WIC 10225)
5. Provides that an APP shall have no less than 12 months, and no more than 24 months, to expend funds in any fiscal year. Provides that this does not apply to CalWORKs Stage Two and Stage Three services. (WIC 10225.5(d))
6. Defines “maximum reimbursable amount” as the total dollar amount of a contract. Provides that reimbursement from the State shall not exceed the maximum reimbursable amount. (5 California Code of Regulations 18013(o))
7. Requires CDSS to promote full utilization of child care and development funds and match available unused funds with identified service needs. Requires CDSS to arrange interagency adjustments between different contractors with the same type of contract when both agencies mutually agree to a temporary transfer of funds for the balance of the fiscal year. Requires CDSS to establish timelines for intra-agency contract fund transfers. (WIC 10330.5)
8. Requires CDSS to establish a contract classification system for purposes of identifying, monitoring, and providing technical assistance to contractors including a clear contract, provisional contract, and conditional contract, as specified. (WIC 10397(a))
9. Provides that agencies with conditional status shall receive technical assistance from the Child Care and Development Division of CDSS. Provides that technical assistance shall be provided to any contracting agency making a written request to its assigned consultant or administrator within 60 days of the request. (WIC 10397(b-c))
10. Authorizes a contractor to be placed on conditional contract status if a contractor demonstrates fiscal or programmatic noncompliance during the contract period, as specified. Provides that the contractor shall receive notice and may request an administrative review of the proposed action. Provides that, if the contract is placed on conditional status during the last 90 days of the contract period and the contractor is offered continued funding, the contract for the subsequent contract period will also be on conditional status. (5 CCR 18304)
11. Provides that a conditional status contract shall contain a Conditional Status Addendum explaining the contract conditions, including the specific items of noncompliance that the contractor must correct and the time period within which the contractor must complete the corrections, among others. Requires a contractor on conditional status to submit monthly enrollment and attendance reports. Provides that a contractor shall remain on conditional status until the contractor has corrected deficiencies and/or has met requirements identified in the Addendum. (5 CCR 18305–18307)
12. Provides that a family shall be considered to meet all eligibility and need requirements for child care services, upon establishing initial or ongoing eligibility, for not less than 24 months, shall receive those services for not less than 24 months before having their eligibility or need recertified, and shall not be required to report changes to income or other changes for at least 24 months. (WIC 10271(h))
13. Clarifies the minimum 12-month eligibility requirement applies when children are newly added to families already participating in the subsidy program. Encourages Child Care and Development Fund Lead Agencies to align eligibility periods to the new child’s eligibility period. (45 Code of Federal Regulations 98.21(d) and 98.16(h))
14. Defines “displace families” as the disenrollment of families in order to reduce service levels due to insufficient funding or inability of a contractor to operate one or more sites because of incomplete renovations due to natural disasters, as specified. (5 CCR 18078(e); WIC 10286.5)
15. Establishes local child care and development planning councils (Local Planning Councils) to provide a forum for the identification of local priorities for child care and the development of policies to meet the needs identified within those priorities. (WIC 10485)
16. Provides that, during a period of liquidation of encumbrances, whenever the Department of Finance determines the purpose for which the appropriation was made is completed and a portion of the appropriation is deemed not necessary, that portion shall, upon order of the Department of Finance, revert to and become a part of the fund from which the appropriation was made. (Government Code 16304.1)
17. Requires moneys to first be set aside from all state revenues to be applied by the state for support of the public school system and public institutions of higher education. This is known as the Proposition 98 minimum guarantee. (California Constitution, Article XVI, Section 8)
18. Establishes in the General Fund the Proposition 98 Reversion Account. Requires the Legislature, from time to time, to transfer into the Proposition 98 Reversion Account moneys previously appropriated, as specified, that have not been disbursed or otherwise encumbered for the purposes for which they were appropriated. Provides that moneys that are appropriated under the Proposition 98 minimum funding obligation that would otherwise revert to the unexpended balance of the General Fund shall instead be deposited in the Proposition 98 Reversion Account. (Education Code 41207.5)

This Bill:

1. Finds and declares that unspent child care funds represent missed opportunities to serve eligible families and maximizing the use of all currently appropriated funds is an essential first step toward achieving universal access to child care in California.
2. States it is the intent of the Legislature to do all of the following:
   1. Prioritize continuity of care for children and families, including maintaining care placements across eligibility periods and minimizing disruptions due to administrative processes.
   2. Ensure that California’s child care system operates as a coordinated, responsive infrastructure that meets families where they are and eliminates barriers to access.
   3. Ensure that all appropriated child care funds are fully utilized to serve eligible families and that systems are aligned to maximize enrollment, continuity of care, and timely access to services.
3. Requires CDSS, in consultation with contractors, no less than quarterly, to identify unspent or projected unspent moneys from all subsidized child care and development programs administered pursuant to Division 9 of the Welfare and Institutions Code, including, but not limited to:
   1. General Child Care and Development programs.
   2. Migrant Child Care programs.
   3. CalWORKs Child Care programs, including Stages One, Two, and Three.
   4. Any other state- or federally funded subsidized child care programs.
4. Requires CDSS, in consultation with contractors, to the maximum extent permitted by federal and state law, to redirect and deposit the unspent or unexpended moneys to the Alternative Payment Program Enrollment Fund (APP Enrollment Fund).
5. Provides that, notwithstanding Section 13340 of the Government Code, all moneys in the APP Enrollment Fund are continuously appropriated, without regard to fiscal years, to CDSS for the purpose of enrolling additional eligible families in APPs.
6. Requires CDSS to expend moneys in the APP Enrollment Fund in a manner that prioritizes all of the following:
   1. Contractors with demonstrated capacity to enroll additional families.
   2. Enrollment of families currently on waitlists or in the eligibility determination process.
   3. Continuity of care for children, including maintaining placements for siblings and preventing disruptions in care.
7. Requires CDSS to establish a streamlined and timely process for the transfer or redirection of moneys, including improvements to or expansion of existing Voluntary Temporary Transfer processes, to ensure that moneys are fully utilized within the applicable fiscal period.
8. Prohibits redirected moneys from being subject to administrative delays that would prevent their timely obligation or expenditure.
9. Requires CDSS to notify each local child care and development planning council (Local Planning Council), whenever moneys are identified as unspent or projected to remain unexpended, and are subject to transfer or redirection pursuant to this bill. Requires the notification to identify the applicable subsidized child care and development program and the amount of moneys subject to transfer or redirection.
10. Provides that nothing in this bill shall be construed to reduce or eliminate funding allocations for existing contracts. Provides that this bill is intended solely to maximize the utilization of moneys that would otherwise remain unspent.
11. Provides that, notwithstanding any other provision of this bill, funds used to meet the Proposition 98 minimum funding obligation shall not be subject to identification, transfer, redirection, deposit, or expenditure pursuant to this bill.

FISCAL IMPACT

According to the Assembly Appropriations Committee:

Ongoing General Fund costs of an unknown amount, but potentially in the low millions of dollars annually to CDSS for approximately eight to 10 staff to implement the requirements of the bill, including identifying unspent moneys in multiple funds, establishing a streamlined process for redirecting those funds and spending the funds according to specified criteria. These tasks will likely require close monitoring of the transfers and coordination with multiple other offices.

The Legislative Analyst’s Office recently warned of General Fund structural deficits of around $35 billion per year in the 2027-28 fiscal year and ongoing.

BACKGROUND AND DISCUSSION

Purpose of the Bill:

According to the author, “About 1.8 million income-eligible children in California do not have access to subsidized childcare. California has made significant public investments in subsidized childcare and early learning programs. However, a portion of these funds remain unspent each year due to administrative barriers, time misalignments, and structural inefficiencies across programs. Unspent childcare funds represent missed opportunities to serve eligible families and maximizing the use of previously appropriated funds is a cost-neutral first step toward achieving universal access to childcare in California.

“APP contractors serve as the primary delivery system for voucher-based childcare and are uniquely positioned to rapidly enroll families, support parental choice, and deploy available funding efficiently. AB 2258 addresses the gap between funding and subsidized childcare by requiring the Department of Social Services to identify unspent funds across all childcare programs and redirect those funds, where allowable, to APP contractors for immediate use.”

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. As of July 2021, CDSS administers child care and development programs. CDSS administers both voucher-based programs and direct contract programs, also known as Title 5 programs.

Voucher-based programs provide vouchers for families to obtain care at a licensed child care center, licensed family child care home, or from a license-exempt provider (Family, Friend, and Neighbor). Voucher-based programs include Alternative Payment, Migrant Alternative Payment, CalWORKs Child Care (Stage One, Two, and Three), and the Emergency Child Care Bridge Program for Foster Children. Voucher-based programs are subject to Title 22 health and safety requirements.

Direct contract programs are contracted directly with the state for a fixed number of child care slots in a licensed child care center or a network of family child care homes. Direct contract programs administered by CDSS include General Child Care and Development (General Child Care), Migrant Child Care and Development, Child Care and Development Services for Children with Severe Disabilities, and Family Child Care Home Education Networks. Direct contract programs are subject to Title 22 and Title 5, which requires more stringent child-to-adult ratios and staff qualifications than Title 22.

Families are income eligible for subsidized child care 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. Certain programs have additional eligibility requirements. For example, the Migrant Alternative Payment and Migrant Child Care and Development programs serve migrant families, CalWORKs serves CalWORKs recipients, the Emergency Child Care Bridge Program for Foster Children serves resource families regardless of income, and the Child Care and Development Services for Children with Severe Disabilities Program serves children with exceptional needs up to 21 years of age regardless of income.

Funding for Subsidized Child Care Slots

CalWORKs Stage One and Stage Two are considered entitlement programs, meaning anyone who is eligible and has a qualifying need must receive services. All other subsidized child care programs are dependent on the availability of funding. Despite recent historic investments in California’s subsidized child care system, the state has more children eligible for subsidized child care than it has the funding to serve. According to the California Budget and Policy Center, only 16% of children eligible for CDSS child care programs receive care.^[1] In 2024, 349,000 children were enrolled in CDSS child care programs, and over 1.7 million were eligible but not enrolled^[2].

California’s subsidized child care system was subject to significant cuts following the Great Recession. These cuts were achieved by shifting child care funding to the state preschool program, reducing funding for CalWORKs Stage One and Stage Three, excluding child care from Proposition 98, and elimination of slot funding^[3],[4]. The 2011 Budget Act eliminated funding for 35,500 slots and the 2012 Budget Act eliminated funding for 10,500 slots. According to the Legislative Analyst’s Office, savings from eliminated child care funding would be achieved through attrition (and not enrolling new families into those slots), and, to the degree necessary, by disenrolling currently served children from higher-income families (reverse income priority)^[5]. The Legislature applied across-the-board reductions to CalWORKs Stage Three, Alternative Payment, General Child Care, and migrant child care programs^[6].

Since 2013, the state has worked to restore the number of child care slots to pre-recession levels. This has been achieved by a combination of restored child care slots, expansion of the California State Preschool Program, and the rollout of universal Transitional Kindergarten. As part of the 2021 Budget Act, Governor Newsom and the Legislature agreed to increase the number of child care slots by 206,800 across voucher programs and General Child Care by 2025–26. Prior to the 2021 Budget Act, the state funded approximately 100,000 non-CalWORKs child care slots. The slot expansion proposal would triple the number of child care slots in non-CalWORKs (non-entitlement) programs over a five-year period.

The state’s child care system was not able to fill slots as quickly as funding was made available, resulting in unspent funding. Because of this, the 2023 and 2024 Budget Acts included partial delays and codified a revised slot expansion plan, subject to appropriation, to be fully phased in by 2027–28. These delays generated savings, meaning funding appropriated for slots went back to the General Fund. These savings included a projected $136 million in 2023–24, $371.6 million in 2024–25, $690.1 million in 2025–26, and $1.24 billion in 2026–27.^[7],[8] As opposed to the reduction in slot funding following the Great Recession, these slots were unfulfilled, so the number of families served did not decrease and no families were disenrolled. As of April 2026, about 130,000 expansion slots have been funded.

This bill would require CDSS to identify unspent or projected unspent moneys from all subsidized child care and development programs on a quarterly basis, and to redirect and deposit those moneys into the APP Enrollment Fund, which would be established by this bill. This bill would provide that all moneys in the APP Enrollment Fund are continuously appropriated, without regard to fiscal years, to CDSS for the purpose of enrolling additional eligible families in Alternative Payment.

Solutions to Unspent Child Care Funding

Unspent child care funding is not a new occurrence. According to an analysis of the 2008–09 Governor’s Budget by the Legislative Analyst’s Office, at least $200 million of appropriated child care and development funding was unspent from the previous five fiscal years^[9]. This funding was carried over to fund future years of service. At this time, child care programs were funded primarily through Proposition 98 and federal funds^[10]. Proposition 98, established by voters in 1988, requires the state to calculate an annual minimum guarantee for school and community college funding. Importantly, Education Code 41207.5 allows Proposition 98 moneys that have not been disbursed or encumbered to be reverted back to the Proposition 98 Reversion Account rather than the General Fund.

Beginning in 2011–12, all child care programs received state funding from the General Fund due to being removed from the Proposition 98 minimum guarantee. This changed how unspent child care funding was handled. Under Government Code 16304.1, if the Department of Finance deems that a portion of an appropriation is unnecessary, that portion shall be returned to the fund from which the appropriation was made. This meant that unspent child care funding would now revert back to the General Fund and would no longer be earmarked for education spending. This bill seeks to mirror how child care funding was reverted prior to 2011–12 by redirecting unspent child care moneys into a new APP Enrollment Fund, as established by this bill. This bill would continuously appropriate all moneys in the APP Enrollment Fund, without regard to fiscal years, to CDSS for the purpose of enrolling additional eligible families in Alternative Payment.

Voluntary Temporary Transfer of Funds (VTT)

The VTT process was established as a result of chronic child care carryover issues to allow for the transfer of funds between over-earning and under-earning contractors within the same contract type. Over-earning a contract means the contractor has expended, or is projected to expend, more dollars than they are contracted for. Conversely, under-earning a contract means the contractor has expended, or is projected to expend, fewer dollars than they are contracted for. The VTT process allows under-earning contractors to voluntarily and temporarily relinquish funds to another contractor to cover expenses in excess of their contract funding. Contract types that are eligible to participate in VTT include Alternative Payment, Migrant Alternative Payment, General Child Care, Migrant Child Care and Development, Child Care and Development Services for Children with Severe Disabilities, and Family Child Care Home Education Networks. Factors such as area birth rate, availability and cost of child care services (for voucher programs), attrition, facility construction and renovation, Fire Marshal approval, and staffing may affect a contractor’s ability to earn its contract. A contractor’s ability to earn its contract may fluctuate from year to year.

The VTT process is facilitated by Local Planning Councils and CDSS and is meant to redirect child care funding that would otherwise go unspent. VTTs may only be processed within the same contract type. Similarly, this bill seeks to create a process to require CDSS to redirect unspent child care moneys from all child care programs into a new, singular fund established in the State Treasury. From these moneys, this bill would only require appropriations to be made to APPs for the purpose of enrolling additional families in Alternative Payment.

By definition, VTT funding is temporary. The VTT process cannot be used to permanently increase a contractor’s contract funding. While an infusion of funding would benefit an APP receiving VTT funding in the short-term, that APP is expected to absorb associated ongoing costs within their next year’s contract funding. Ideally, APPs should not rely on the VTT process for funding in future years, as this would assume that another APP would continuously relinquish funding.

This bill does not specify whether appropriations from the APP Enrollment Fund would be one-time or ongoing. However, the APP Enrollment Fund’s goal of enrolling additional families implies that moneys would go toward slots, which are an ongoing cost. Once a family is enrolled for a child care slot, they may recertify for services after each 24-month period so long as the family remains income eligible and the child remains age eligible. A family may be disenrolled from services for various reasons, such as if they falsify information, abandon services, or do not provide information during the recertification window. A family may also be disenrolled, or displaced, if there is an unavailability of program funds, as seen following the Great Recession. Disenrollment of families is not ideal, as it would add significant financial burden and create added stress.

Related/Prior Legislation:

AB 2314 (Rogers) would establish a new VTT process for APPs. AB 2314 would require CDSS to respond to a VTT request within 30 calendar days of receipt by either approving, conditionally approving, or denying the request. AB 2314 would specify that a VTT request may only be denied under certain circumstances. AB 2314 is scheduled to be heard by this committee on June 29, 2026.

SB 163 (Committee on Budget and Fiscal Review, Chapter 73, Statutes of 2024), a budget trailer bill, codified the plan for the state to fund over 200,000 new child care slots above 2020–21 slot levels by Fiscal Year 2027–28. Required slot levels to be maintained according to the expansion plan in 2028–29 and each fiscal year thereafter.

AB 107 (Gabriel, Chapter 22, Statutes of 2024), a budget trailer bill, enacted a two-year pause on the expansion of subsidized child care slots, to resume in 2026. AB 107 also reduced General Child Care funding to only the estimated number of awarded slots, resulting in $1.0 billion in savings over two years.

AB 131 (Committee on Budget, Chapter 116, Statutes of 2021), a budget trailer bill, transferred child care programs and authority from the California Department of Education to the CDSS. Among other things, AB 131 provided $403 million in the 2021–22 fiscal year and $336 million for the 2022–23 fiscal year for the expansion of child care slots.

AB 1808 (Committee on Budget, Chapter 32, Statutes of 2018), a budget trailer bill, authorized an APP to have no less than 12 months, and no more than 24 months, to expend funds allocated to that program in any fiscal year, except for CalWORKs Stage Two and Stage Three programs. AB 1808 required the Superintendent to develop a process to implement multiyear APP contracts.

AB 1106 (Weber, Chapter 716, Statutes of 2017) authorized an APP to have no less than 36 months to expend funds allocated to that program in any fiscal year, except for CalWORKs Stage Two and Stage Three programs. AB 1106 required the Superintendent of State Instruction to develop a process to implement multiyear APP contracts.

SB 1016 (Committee on Budget and Fiscal Review, Chapter 38, Statutes of 2012), a budget trailer bill, required families to be disenrolled from subsidized child care services, effective July 1, 2012, in reverse priority order.

AB 114 (Committee on Budget, Chapter 43, Statutes of 2011), a budget trailer bill, required families to be disenrolled from subsidized child care services, effective July 1, 2011, in reverse priority order.

COMMENTS

This bill seeks to keep unspent child care funding within the child care system. Prior to 2011, unspent child care funding could informally be carried over for future spending, however, this is no longer the case. Although the VTT process exists to redirect funding that would potentially be unspent, it may only be used within the same contract type. This bill would establish an APP Enrollment Fund in the State Treasury to capture unspent funding across all child care programs and redirect those moneys to enroll families in Alternative Payment vouchers.

This bill poses two main concerns. First is the concern that all unspent child care funding would be funneled solely to Alternative Payment. Although Alternative Payment vouchers may be used at child care centers, family child care homes, and license-exempt providers, vouchers cannot be used for direct-contract programs, including Title 5 centers. When the Legislature funds new slots, it allocates a specific number to Alternative Payment and to General Child Care, which are the major non-CalWORKs programs. By directing all unspent child care funding to Alternative Payment, this bill seems to bypass the Legislature’s intent of funding both programs as part of a mixed delivery model. Further, this bill would broadly revert unspent funding from all child care programs. This includes CalWORKs Stage One and Stage Two, which are entitlement programs that are budgeted based on projected caseload rather than a set amount of funding.

The second concern is that the bill would create a fiscal cliff. The bill seems to establish an ongoing funding commitment from an uncertain funding source. Alternative Payment is not an entitlement program, meaning the number of slots or vouchers is limited to federal and state funding made available through the state budget. Under this bill, if funding is not required to be one-time, APPs could become reliant on receiving additional out-of-contract funding to avoid disenrolling families. This could result in a portion of contract funding from other programs to be permanently diverted for use by APPs, therefore decreasing the ability of other programs to be able to serve their community needs. If other contracts were to fully utilize their funding, it is unclear where moneys for slots funded by the APP Enrollment Fund would come from. As the General Fund continues to face a structural deficit, it is possible this could result in the need to disenroll families. The state has projected reversions of hundreds of millions of dollars in unspent child care funding. This would equate to thousands of families. Even if the bill were to specify that appropriations from the APP Enrollment Fund are one-time, it is unlikely that any APP could absorb that much spending into their contract, or put otherwise, absorb that many families into their slot allocation.

This bill asserts that unspent child care funds represent missed opportunities to serve eligible families and seeks to increase access to child care by giving more families vouchers. However, this does not address the availability of child care facilities and providers—the supply side of the issue. The former Deputy Cabinet Secretary for New Mexico’s Early Childhood Education and Care Department, wrote, “Vouchers put money in families’ hands, but they don’t build buildings, train teachers, or navigate the process of licensing and opening a new business.”^[11] While vouchers are an important component of the mixed delivery system and encourage parent choice, they cannot the only spending priority.

This bill seeks to implement a structural change in how the state budgets for child care programs. This bill would capture unspent child care funding in a new APP Enrollment Fund rather than revert funding back to the General Fund. This bill would appropriate funding from the APP Enrollment Fund exclusively to Alternative Payment vouchers. There are several unanswered questions about the potential implementation of this bill, such as whether funding would be prioritized within the county of origin, how and which contractors would be consulted, whether the Legislature would maintain oversight of how funds are spent, and how an uncertain funding source could pay for slots, which are an ongoing cost.

SUPPORT/OPPOSITION

Arguments in Support:

According to Thriving Families California Foundation, “Each year, child care dollars appropriated by the Legislature go unspent and ultimately revert to the General Fund while eligible children and families remain on waiting lists. AB 2258 ensures that when child care dollars cannot be utilized within the original contract structure, those funds remain available to help families access the care that best meets their needs rather than reverting unused to the General Fund. Before any funds would ever be available under AB 2258, the California Department of Social Services already has the authority through the Voluntary Temporary Transfer (VTT) process to move projected unspent dollars from contractors that cannot fully utilize their funding to contractors that can serve additional children. AB 2258 does not replace or interfere with VTT. Rather, it addresses the narrow circumstance in which funds remain projected to go unspent even after existing transfer opportunities have been exhausted. When those dollars are redirected through Alternative Payment Programs, families gain the ability to choose the care setting that best meets their needs. Those choices may include licensed child care centers, family child care homes, license-exempt providers, or other eligible care arrangements. In this way, AB 2258 strengthens California's mixed-delivery system and advances equity by ensuring that unspent child care funds remain available to support the full spectrum of providers serving families throughout the state. The bill does not favor one provider type over another; it empowers families to make the choice that works best for them. The need for this solution is substantial. During a prior budget hearing, the Legislative Analyst's Office identified approximately $450 million in unspent General Child Care funding. These dollars were not left unused because families did not need care. Rather, they reflect the realities of administering child care programs within annual fiscal and contracting structures. If those funds had been available for redeployment, California could have served approximately 20,000 to 33,000 additional children.”

Arguments in Opposition:

According to EveryChild California, “AB 2258 takes money from several DSS programs, but only benefits one. First, AB 2258 identifies unspent or projected unexpended funds from multiple DSS-administered subsidized child care and development programs, including general child care, migrant child care, CalWORKs child care Stages 1, 2, and 3, and other state- or federally funded subsidized child care programs. However, the bill redirects those dollars only into the Alternative Payment Program Enrollment Fund and continuously appropriates the money for the purpose of enrolling additional eligible families in alternative payment programs. If the source of funds is broader than APPs, the reinvestment mechanism should also be broader than APPs. California has an established mixed-delivery commitment - this bill does not align with that commitment. Second, the bill moves in the opposite direction of the state’s broader rate-reform and mixed-delivery alignment goals. California is in the process of moving toward a more consistent reimbursement structure across child care and State Preschool providers. A reinvestment mechanism that privileges one delivery model risks deepening program silos at the exact moment the state is trying to align reimbursement, stabilize providers, and support families across the full early learning and care system. As written, this bill increases inequity. Third, an AP-only structure is not sufficient in supply-constrained communities. Vouchers are important, but a voucher cannot create a child care slot where no slot exists. Families in child care deserts and other constrained communities depend on actual child care infrastructure, including centers, direct-service contractors, family child care home education networks, migrant care, and other subsidized settings. Center-based infrastructure is especially important because centers hold larger licensed capacity, meaning the opening or closure of even a small number of centers can substantially affect the availability of child care spaces in a community. If AB 2258 is intended to maximize enrollment and timely access, it should allow redirected funds to support the full infrastructure needed to make care available.”

PRIOR VOTES

POSITIONS

Support:

Thriving Families California (TFC)

Oppose:

EveryChild California

-- END --

1. https://calbudgetcenter.org/resources/understanding-californias-1-8-million-gap-in-publicly-funded-child-care/ ↑

2. Ibid. ↑

3. https://calbudgetcenter.org/app/uploads/120327_ChildCare_KeyFacts.pdf ↑

4. https://lao.ca.gov/reports/2011/bud/spend_plan/spend_plan_081211.pdf ↑

5. https://lao.ca.gov/reports/2012/bud/spending_plan/spending-plan-091312.aspx#childcare ↑

6. Ibid. ↑

7. https://sbud.senate.ca.gov/sites/sbud.senate.ca.gov/files/_Final%20Actions%20Report_2023_II.pdf ↑

8. https://sbud.senate.ca.gov/system/files/2024-10/final-actions-report-a-summary-of-the-2024-budget-act.pdf ↑

9. https://lao.ca.gov/2008/spend_plan/spending_plan_08-09.pdf ↑

10. https://lao.ca.gov/analysis_2009/education/ed_anl09002.aspx ↑

11. https://www.vox.com/the-highlight/489750/universal-child-care-new-mexico-demand-supply ↑

ASSEMBLY THIRD READING

ATR Bill Id:AB 2258

Author:(Ávila Farías)

As Amended Ver:April 14, 2026

2/3 vote

SUMMARY

Requires the California Department of Social Services (CDSS) to identify on a quarterly basis unspent or projected unexpended subsidized childcare funds and, to the maximum extent permitted by law, redirect those funds into a newly created and continuously appropriated Alternative Payment Program (APP) Enrollment Fund to enroll additional eligible families.

Major Provisions

1. Requires CDSS, notwithstanding any other law, to, no less than quarterly, identify unspent or projected unexpended moneys from all administered subsidized childcare and development programs, including, but not limited to:
   1. General childcare and development programs (CCTR);
   2. Migrant childcare programs (CMIG);
   3. California Work Opportunity and Responsibility to Kids (CalWORKs) childcare programs, including Stages 1, 2, and 3; and,
   4. Any other state- or federally funded subsidized childcare programs.
2. Requires CDSS, to the maximum extent permitted by federal and state law, to redirect and deposit the identified unspent or unexpended moneys to the APP Enrollment Fund, as hereby created in the State Treasury.
3. Provides that all moneys in the APP Enrollment Fund are continuously appropriated, without regard to fiscal years, to CDSS for the purpose of enrolling additional eligible families in APPs.
4. Requires CDSS to expend moneys in the APP Enrollment Fund in a manner that prioritizes all of the following:
   1. Contractors with demonstrated capacity to enroll additional families;
   2. Enrollment of families currently on waitlists or in the eligibility determination process; and,
   3. Continuity of care for children, including maintaining placements for siblings and preventing disruptions in care.
5. Requires CDSS to establish a streamlined and timely process for the transfer or redirection of moneys, including improvements to or expansion of existing voluntary temporary transfer of funds (VTT) processes, to ensure that moneys are fully utilized within the applicable fiscal period.
6. Prohibits moneys redirected from being subject to administrative delays that would prevent their timely obligation or expenditure.
7. Provides that nothing in these provisions shall be construed to reduce or eliminate funding allocations for existing contracts. Provides that these provisions are intended solely to maximize the utilization of moneys that would otherwise remain unspent.

COMMENTS

Background: Alternative Payment Programs are one of California's primary delivery systems for subsidized childcare and are administered through contracts between CDSS and local alternative payment agencies, many of which are community-based organizations. APPs provide vouchers that allow families to choose their own childcare provider, including licensed childcare centers, family childcare homes, and license-exempt providers.

Providers are reimbursed based on authorized hours of care and applicable reimbursement rate rules, and APPs receive funding for both services and administrative costs. APPs also manage countywide centralized eligibility lists, enroll families from waitlists, and track caseload and expenditure data for the state. Agencies are required to report monthly data to CDSS on expenditures, unit costs, and family fees, which the state uses to monitor how allocated funds are used and to inform decisions about redistributing or allocating additional funding. As of 2025-26, approximately 70 APPs serve 161,332 children.

Local Childcare Planning Councils were created by legislation in 1991, following the federal establishment of the Child Care and Development Block Grant program, to ensure that local voices influence how these funds are allocated. Each county in California has an LPC established to identify local childcare priorities and develop policies to address those needs. State law requires the county board of supervisors and county superintendents of schools to appoint members to these councils, ensuring balanced representation with equal parts of consumers, childcare providers, public agency representatives, community representatives, and discretionary appointees.

LPCs are responsible for conducting comprehensive childcare needs assessments at least every five years, developing countywide childcare plans, and establishing zip-code level priorities to guide the allocation of state and federal childcare funding. They also maintain or support centralized eligibility lists, which track family demand and waitlists for subsidized care, and provide key data on gaps between supply and need. LPCs also facilitate the VTT process by identifying contractors with unspent funds and those with the capacity to enroll additional families, and by supporting the local matching and transfer of funds.^[1]

The Voluntary Temporary Transfer of Funds process is facilitated by the Child Care and Development Division of CDSS, which allows childcare contractors with unspent funds ("under-earning") to temporarily transfer those funds to contractors that are able to fully utilize additional funding ("over-earning"), in order to maximize the use of appropriate childcare funds. The following contract types are eligible to participate in the VTT process: CCTR, CMIG, Family Child Care Home Education Networks, Severely Handicapped Programs, and APPs.^[2]

The VTT process is locally coordinated by LPCs, which must adopt fair and transparent policies, designate a coordinator or subcommittee, and convene contractors to identify voluntary participation and available funding. LPCs, in consultation with CDSS, verify fiscal eligibility and ensure transfers occur only within the same contract type and that receiving contractors have the capacity to immediately serve additional children. Matching is first attempted locally, then statewide if needed. Once matched, contractors submit formal documentation through the LPC to CDSS for review.

CDSS has sole authority to approve, modify, or deny transfers, issues contract amendments upon approval, and provides written justification for denials. While the process is designated to optimize utilization of children funds, statutory timelines for CDSS action are not specified, which may contribute to delays in funding adjustments and service delivery.

Advocates state that the VTT process is administratively complex, lacks clear timelines, relies on outdated structures, and does not support timely reallocation of funds. As a result, some agencies underspend available funding while others are over-enrolled and unable to serve additional families, and funds are not consistently directed to areas with the greatest need.

Nuances for Alternative Payment Program Contracts. According to CDSS' 2024 Childcare Fiscal Handbook,^[3] APPs have multi-year contracts and ongoing contract adjustments based on expenditures and caseload in order to maximize the use of childcare funds. State law allows APP contractors up to 24 months to expend funds allocated in a given fiscal year, allowing unspent funds from a prior fiscal year to be carried over and utilized in a subsequent year through a contract amendment. As a result, contractors may have two active contracts at the same time: a prior-year contract that has been extended into a second-year and a current-year contract. Contractors that fully expend their prior-year funds will generally have a single, current-year contract.

Additionally, CDSS continuously monitors contractor expenditures and caseload data to determine whether agencies are on track to fully utilize their funding. Based on this information, CDSS may increase contract amounts for agencies that are able to serve families or reduce funding for agencies that are projected to under-earn to better align funding with demand. These adjustments rely on contract-reported data and require administrative processes, including projections, documentation, and contract amendments.

Advocates contend that fiscal processes are largely structured around single fiscal-year assumptions, resulting in contractors having to project enrollment months in advance, account for families who are approved but not yet enrolled, and manage demand across fiscal years. Advocates further note that without fiscal tools that align with these multi-year timelines, contractors face planning challenges and risk both over-enrollment and under-enrollment. Furthermore, while the state budget takes effect on July 1, funding is often not distributed to contractors until several months into the fiscal year. As a result, contracts must either enroll families without confirmed funding or delay enrollment despite having approved capacity, which can lead to under-enrollment early in the year and reduce the efficiency of service delivery.

The VTT and APP contracting processes show that while the state can redirect unspent childcare funds to areas of need, the approach is largely reactive and administratively driven. This bill aims to create a more proactive and systemic process to identify and redirect unspent funds to enroll additional families and improve timely fund use. This bill also prioritizes the use of these funds to enroll families on waitlists or in the eligibility process, support contractors with the capacity to serve additional families, and maintain continuity of care for children. This bill further requires CDSS to streamline the transfer of funds to ensure timely expenditure within the fiscal year and clarifies that this process is intended to maximize the use of existing funding without reducing current contract allocations.

According to the Author

"About 1.8 million income-eligible children in California do not have access to subsidized childcare. California has made significant public investments in subsidized childcare and early learning programs. However, a portion of these funds remain unspent each year due to administrative barriers, time misalignments, and structural inefficiencies across programs. Unspent childcare funds represent missed opportunities to serve eligible families and maximizing the use of previously appropriated funds is a cost-neutral first step toward achieving universal access to childcare in California.

"Alternative Payment Program (APP) contractors serve as the primary delivery system for voucher-based childcare and are uniquely positioned to rapidly enroll families, support parental choice, and deploy available funding efficiently. [This bill] addresses the gap between funding and subsidized childcare by requiring the Department of Social Services to identify unspent funds across all childcare programs and redirect those funds, where allowable, to APP contractors for immediate use."

Arguments in Support

According to First 5 California, "[This bill] improves efficiency in subsidized childcare programs by requiring the Department of Social Services to identify unspent funds and redirect them to Alternative Payment Programs to expand childcare access. By redirecting unused funds into these flexible programs, the bill helps ensure that available resources are more quickly translated into additional childcare slots for eligible families.

"Despite significant public investment, many eligible families remain on waitlists while funds go unspent due to administrative delays or timing issues. This disconnect reduces the effectiveness of existing programs and limits access to care for families who need it most.

"[This bill] ensures that existing resources are used more efficiently to expand access to childcare without requiring additional funding, helping more families receive timely support."

Arguments in Opposition

No opposition on file for the current version of the bill.

FISCAL COMMENTS

According to the Assembly Appropriations Committee on May 13, 2026:

Ongoing General Fund costs of an unknown amount, but potentially in the low millions of dollars annually to CDSS for approximately eight to 10 staff to implement the requirements of the bill, including identifying unspent moneys in multiple funds, establishing a streamlined process for redirecting those funds and spending the funds according to specified criteria. These tasks will likely require close monitoring of the transfers and coordination with multiple other offices.

The Legislative Analyst's Office recently warned of General Fund structural deficits of around $35 billion per year in the 2027-28 fiscal year and ongoing.

VOTES

ASM HUMAN SERVICES: 6-0-1

YES: Lee, Calderon, Elhawary, Blanca Rubio, Ahrens, Tangipa

ABS, ABST OR NV: Castillo

ASM APPROPRIATIONS: 15-0-0

YES: Wicks, Hoover, Aguiar-Curry, Calderon, Caloza, Dixon, Fong, Mark González, Krell, Pacheco, Pellerin, Sharp-Collins, Solache, Ta, Tangipa

UPDATED

VERSION: April 14, 2026

CONSULTANT: Bri-Ann Hernández-Mengual / HUM. S. / (916) 319-2089 FN: 0003034

1. https://www.cdss.ca.gov/Portals/9/CCDD/Contractor-Resources/CLPC%20Program%20Requirements%20FY%2025.26.docx ↑

2. https://www.cdss.ca.gov/inforesources/child-care-and-development/quality-improvement-initiatives/local-child-care-and-development-planning-councils/local-planning-council-forms/vtt-guidance ↑

3. https://www.cdss.ca.gov/Portals/9/CCDD/FiscalResources/Fiscal%20Handbook/FY%2023-24%20Child%20Care%20Fiscal%20Handbook_APU%20Approved.pdf?ver=2024-04-02-133439-770 ↑

Date of Hearing: May 13, 2026

ASSEMBLY COMMITTEE ON APPROPRIATIONS

Buffy Wicks, Chair

ABPCA Bill Id:AB 2258

Author:(Ávila Farías) – As Amended Ver:April 14, 2026

Urgency: No State Mandated Local Program: No Reimbursable: No

SUMMARY:

This bill requires the California Department of Social Services (CDSS) to identify on a quarterly basis unspent or projected unexpended subsidized childcare funds and, to the maximum extent permitted by law, redirect those funds into a newly created Alternative Payment Program (APP) Enrollment Fund to enroll additional eligible families.

Specifically, this bill:

1. Requires CDSS to, at least quarterly, identify unspent or projected unexpended moneys from all administered subsidized childcare and development programs, and to redirect and deposit the identified unspent or unexpended moneys to the APP Enrollment Fund, newly created in the State Treasury, to be continuously appropriated to CDSS for the purpose of enrolling additional eligible families in APPs.
2. Requires CDSS to expend moneys in the APP Enrollment Fund according to specified priorities.
3. Requires CDSS to establish a streamlined and timely process for the transfer or redirection of moneys, including improvements to existing voluntary temporary transfer of funds (VTT) processes, to ensure moneys are fully utilized within the applicable fiscal period.
4. Prohibits moneys redirected from being subject to administrative delays that would prevent their timely obligation or expenditure.
5. Provides that these provisions are intended solely to maximize the utilization of moneys that would otherwise remain unspent.

FISCAL EFFECT:

Ongoing General Fund costs of an unknown amount, but potentially in the low millions of dollars annually to CDSS for approximately eight to 10 staff to implement the requirements of the bill, including identifying unspent moneys in multiple funds, establishing a streamlined process for redirecting those funds and spending the funds according to specified criteria. These tasks will likely require close monitoring of the transfers and coordination with multiple other offices.

The Legislative Analyst’s Office recently warned of General Fund structural deficits of around $35 billion per year in the 2027-28 fiscal year and ongoing.

COMMENTS:

1. Purpose. According to the author:

About 1.8 million income-eligible children in California do not have access to subsidized childcare. California has made significant public investments in subsidized childcare and early learning programs. However, a portion of these funds remain unspent each year due to administrative barriers, time misalignments, and structural inefficiencies across programs. Unspent childcare funds represent missed opportunities to serve eligible families and maximizing the use of previously appropriated funds is a cost-neutral first step toward achieving universal access to childcare in California. [This bill] addresses the gap between funding and subsidized childcare by requiring CDSS to identify unspent funds across all childcare programs and redirect those funds, where allowable, to APP contractors for immediate use.

1. Background. APPs are one of California’s primary delivery systems for subsidized childcare and are administered through contracts between CDSS and local alternative payment agencies, many of which are community-based organizations. APPs provide vouchers that allow families to choose their own childcare provider, including licensed childcare centers, family childcare homes, and license-exempt providers.

Providers are reimbursed based on authorized hours of care and applicable reimbursement rate rules, and APPs receive funding for both services and administrative costs. APPs also manage countywide centralized eligibility lists, enroll families from waitlists, and track caseload and expenditure data for the state. Agencies are required to report monthly data to CDSS on expenditures, unit costs, and family fees, which the state uses to monitor how allocated funds are used and to inform decisions about redistributing or allocating additional funding.

The VTT process is facilitated by the Child Care and Development Division of CDSS, which allows childcare contractors with unspent funds to temporarily transfer those funds to contractors able to fully utilize additional funding in order to maximize the use of appropriate childcare funds.

Advocates state the VTT process is administratively complex, lacks clear timelines, relies on outdated structures, and does not support timely reallocation of funds. As a result, some agencies underspend available funding while others are over-enrolled and unable to serve additional families, and funds are not consistently directed to areas with the greatest need.

This bill creates a proactive and systemic process to identify and redirect unspent funds to enroll additional families and improve timely fund use.

1. Related Legislation. AB 2314 (Rogers), of this legislative session, requires CDSS to prioritize full and timely expenditure of childcare funds allocated to APPs, and authorizes funding transfers to maximize utilization of appropriated funds. AB 2314 is pending in this committee.

Analysis Prepared by: Jennifer Swenson / APPR. / (916) 319-2081

Date of Hearing: April 23, 2026

ASSEMBLY COMMITTEE ON HUMAN SERVICES

Alex Lee, Chair

ABPCA Bill Id:AB 2258 (

Author:Ávila Farías) – As Amended Ver:April 14, 2026

SUBJECT: Early childhood education and childcare: alternative payment support program

SUMMARY: Requires the California Department of Social Services (CDSS) to identify on a quarterly basis unspent or projected unexpended subsidized childcare funds and, to the maximum extent permitted by law, redirect those funds into a newly created and continuously appropriated Alternative Payment Program (APP) Enrollment Fund to enroll additional eligible families. Specifically, this bill:

1. Requires CDSS, notwithstanding any other law, to, no less than quarterly, identify unspent or projected unexpended moneys from all administered subsidized childcare and development programs, including, but not limited to:
   1. General childcare and development programs (CCTR);
   2. Migrant childcare programs (CMIG);
   3. California Work Opportunity and Responsibility to Kids (CalWORKs) childcare programs, including Stages 1, 2, and 3; and,
   4. Any other state- or federally funded subsidized childcare programs.
2. Requires CDSS, to the maximum extent permitted by federal and state law, to redirect and deposit the identified unspent or unexpended moneys to the APP Enrollment Fund, as hereby created in the State Treasury.
3. Provides that all moneys in the APP Enrollment Fund are continuously appropriated, without regard to fiscal years, to CDSS for the purpose of enrolling additional eligible families in APPs.
4. Requires CDSS to expend moneys in the APP Enrollment Fund in a manner that prioritizes all of the following:
   1. Contractors with demonstrated capacity to enroll additional families;
   2. Enrollment of families currently on waitlists or in the eligibility determination process; and,
   3. Continuity of care for children, including maintaining placements for siblings and preventing disruptions in care.
5. Requires CDSS to establish a streamlined and timely process for the transfer or redirection of moneys, including improvements to or expansion of existing voluntary temporary transfer of funds (VTT) processes, to ensure that moneys are fully utilized within the applicable fiscal period.
6. Prohibits moneys redirected from being subject to administrative delays that would prevent their timely obligation or expenditure.
7. Provides that nothing in these provisions shall be construed to reduce or eliminate funding allocations for existing contracts. Provides that these provisions are intended solely to maximize the utilization of moneys that would otherwise remain unspent.
8. Makes the following findings and declarations:
   1. California’s economy depends on the ability of working families to access stable, affordable, and reliable childcare. Childcare is essential workforce infrastructure that enables parents to work, employers to operate, and businesses to grow;
   2. Access to consistent childcare promotes healthy child development, supports school readiness, and contributes to long-term educational and economic outcomes for children;
   3. Disruptions in childcare arrangements create instability for children and families, undermine workforce participation, and result in lost productivity for employers and the state’s economy;
   4. California has made significant public investments in subsidized childcare and early learning programs; however, a portion of these funds remain unspent each year due to administrative barriers, timing misalignments, and structural inefficiencies across programs;
   5. APP contractors serve as the primary delivery system for voucher-based childcare and are uniquely positioned to rapidly enroll families, support parental choice, and deploy available funding efficiently;
   6. Community-based organizations administering childcare programs play a critical role in connecting families to childcare and related supports, including food, housing, and health services, thereby strengthening family stability and economic self-sufficiency;
   7. Maximizing the use of existing childcare funding, in addition to making new investments, is essential to serving more families without unnecessary delay or additional cost; and,
   8. Unspent childcare funds represent missed opportunities to serve eligible families and maximizing the use of all currently appropriated funds is an essential first step toward achieving universal access to childcare in California.
9. Declares legislative intent to do all of the following:
   1. Prioritize continuity of care for children and families, including maintaining care placements across eligibility periods and minimizing disruptions due to administrative processes;
   2. Ensure that California’s childcare system operates as a coordinated, responsive infrastructure that meets families where they are and eliminates barriers to access; and,
   3. Ensure that all appropriated childcare funds are fully utilized to serve eligible families and that systems are aligned to maximize enrollment, continuity of care, and timely access to services.

EXISTING LAW:

1. 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.)
2. States legislative intent that all families have access to childcare and development services, through resource and referral 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)
3. Defines “childcare and development services” to mean services designed to meet a wide variety of children and families’ needs while parents and 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. (WIC § 10213.5(j))
4. Defines “alternative payment program” as a local government agency or nonprofit organization that has contracted with CDSS, as specified, to provide alternative payments and to provide support services to parents and providers. (WIC § 10213.5(b))
5. Provides that an APP shall have between 12 and 24 months to expend allocated funds in any fiscal year, requires CDSS to develop a process implementing this timeframe, and exempts CalWORKs Stage 2 and 3 childcare contracts from these provisions. (WIC § 10225.5(d))
6. Requires an APP, including agencies administering CMIG to report monthly to CDSS on childcare caseloads in both alternative payment and migrant programs, including county-level caseload data, expenditures, unit costs, family fees, and any additional variables requested by CDSS to inform any additional state allocations to these programs and support emergency response. (WIC § 10234)
7. Requires CDSS and the California Department of Education (CDE) to maximize the use of childcare funds by facilitating both intra-agency and interagency transfers of unused funds to meet service needs, and authorizes implementation through guidance, including timelines for submitting transfer requests. (WIC § 10300.5)
8. Declares legislative intent that local childcare planning councils (LPCs) provide a forum for the identification of local priorities for childcare and the development of policies to meet the needs identified within those priorities. (WIC § 10485(a))
9. Requires an LPC, upon approval by the county board of supervisors and the county superintendent of schools, to annually submit to CDSS and CDE by May 30 the county childcare priorities based on a comprehensive needs assessment conducted at least every five years that evaluates supply, demand, cost, and market rates, including subsidized and unsubsidized families, waitlists, vulnerable populations, income, language, geography, and age cohorts; and, to document findings, solicit public input through at least one hearing, develop a countywide childcare plan, periodically review state-funded programs, collaborate with providers and stakeholders, design a system to consolidate waiting lists if none exists, coordinate part-day programs with full-day care, obtain local approval prior to submission, and designate up to two representatives to participate in state proposal review processes outside their jurisdiction. (WIC § 10486(b))
10. Requires CDSS to allocate funding within each county in accordance with the priorities identified by the LPC of that county and submitted to CDSS, unless the priorities do not meet the requirements of state or federal law. (WIC § 10486(e))

FISCAL EFFECT: Unknown, this bill has not been analyzed by a fiscal committee.

COMMENTS:

Background: Subsidized Childcare. California’s subsidized childcare system, established under the Child Care and Development Services Act, is intended to provide a coordinated, comprehensive, and cost-effective system of care for children from birth to 13 years of age. Services include supervision, health, and support services delivered through full- and part-time programs for families who are 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 that includes licensed childcare centers, family childcare homes and license-exempt providers, such as family, friends or neighbors. Major programs include CalWORKs administered through a three-stage system, CCTR, which provides care through contracted centers and family childcare home education networks, and APPs, 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 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 at or below 85% of the state median income, which is $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 enrolled, families are authorized for services for at least 24 months without recertification, unless income exceeds the threshold.

According to the California Budget & Policy Center, approximately 1.8 million children eligible for subsidized childcare are not enrolled, largely due to limited childcare slots and insufficient funding, leaving tens of thousands of families on long waiting lists and unable to access affordable care.^[1] While prior commitments aimed to expand childcare access to more than 200,000 children, the state has indefinitely paused funding for planning expansions that would have added about 129,800 new slots. The Governor’s 2026-27 Budget does not propose additional slot increases.

Alternative Payment Programs are one of California’s primary delivery systems for subsidized childcare and are administered through contracts between CDSS and local alternative payment agencies, many of which are community-based organizations. APPs provide vouchers that allow families to choose their own childcare provider, including licensed childcare centers, family childcare homes, and license-exempt providers.

Providers are reimbursed based on authorized hours of care and applicable reimbursement rate rules, and APPs receive funding for both services and administrative costs. APPs also manage countywide centralized eligibility lists, enroll families from waitlists, and track caseload and expenditure data for the state. Agencies are required to report monthly data to CDSS on expenditures, unit costs, and family fees, which the state uses to monitor how allocated funds are used and to inform decisions about redistributing or allocating additional funding.

As of 2025-26, approximately 70 APPs serve 161,332 children.

Local Childcare Planning Councils were created by legislation in 1991, following the federal establishment of the Child Care and Development Block Grant program, to ensure that local voices influence how these funds are allocated. Each county in California has an LPC established to identify local childcare priorities and develop policies to address those needs. State law requires the county board of supervisors and county superintendents of schools to appoint members to these councils, ensuring balanced representation with equal parts of consumers, childcare providers, public agency representatives, community representatives, and discretionary appointees.

LPCs are responsible for conducting comprehensive childcare needs assessments at least every five years, developing countywide childcare plans, and establishing zip-code level priorities to guide the allocation of state and federal childcare funding. They also maintain or support centralized eligibility lists, which track family demand and waitlists for subsidized care, and provide key data on gaps between supply and need. LPCs also facilitate the VTT process by identifying contractors with unspent funds and those with the capacity to enroll additional families, and by supporting the local matching and transfer of funds.^[2]

The Voluntary Temporary Transfer of Funds process is facilitated by the Child Care and Development Division of CDSS, which allows childcare contractors with unspent funds (“under-earning”) to temporarily transfer those funds to contractors that are able to fully utilize additional funding (“over-earning”), in order to maximize the use of appropriate childcare funds. The following contract types are eligible to participate in the VTT process: CCTR, CMIG, Family Child Care Home Education Networks, Severely Handicapped Programs, and APPs.^[3]

The VTT process is a collaborative process involving state-funded childcare contractors, LPCs, Program Quality and Improvement (PQI) Consultants, CDSS Fiscal Analysts, and the CDSS LPC Liaison. Under this process, CDSS requires each LPC to establish a local, fair, and transparent policy to govern the temporary transfer of contract funds pursuant to state law requiring CDSS and CDE to maximize the use of childcare funds by facilitating both intra-agency and interagency transfers of unused funds to meet service needs.

Each LPC designates a coordinator, either an individual or a subcommittee, to administer the process. If a subcommittee is formed, it must operate free of financial or personal conflicts of interest and develop procedures to facilitate transfer requests. The LPC convenes meetings with state-funded contractors in the county to explain the VTT process, timelines, and eligibility requirements. Participation is voluntary, but contractors may identify themselves as under-earning or over-earning and indicate the amount of funding they can release or are prepared to accept.

Once contractors express interest, LPC coordinators consult with CDSS PQI Consultants and Fiscal Analysts to assess contractor standing and verify fiscal capacity. Transfers are limited to the same contract types (e.g. CCTR to CCTR), and receiving contractors must demonstrate the ability to exceed their current contract earnings within existing licensed capacity and be prepared to immediately enroll additional children or already be over-earning.

After eligibility is confirmed, LPCs attempt to match under- and over-earning contractors within the county. If no local match is available, LPCs coordinate with CDSS to identify potential matches across counties. Once a match is identified, contractors compile formal documentation indicating their agreement to release or accept funds, along with a cover letter that requests review of the submitted documents. These requests are then submitted electronically by the LPC to the CDSS PQI Consultant and Fiscal Analyst, typically between November 1 and November 15 and April 15 and April 30, although CDSS may process additional requests between November 1 and April 30 on an as-needed basis.

After CDSS receives the request to transfer funds, the department reviews all submitted documentation to ensure the request is complete and evaluates whether the proposed transfer amount aligns with each participating agency’s projected service earnings and allowable reimbursable costs. CDSS retains sole authority to approve, modify, or deny all VTT requests. Upon review, CDSS notifies the LPC of the determination. If the agreement is modified, CDSS provides the opportunity to agree before the contract modification is finalized. When the request is approved or modified, CDSS issues contract amendments and fiscal adjustments to participating agencies. In cases where funds are released, the transferring contractor must execute and return contract amendments before funds can be reallocated to the receiving contractor. If a request is denied, CDSS provides written justification to the affected agencies. The fiscal handbook and statute do not specify a timeline for CDSS to respond to contractor requests for funding adjustments, which may result in decisions and access to care being delayed and a reduced ability for contractors to respond to real-time service needs.

Advocates state that the VTT process is administratively complex, lacks clear timelines, relies on outdated structures, and does not support timely reallocation of funds. As a result, some agencies underspend available funding while others are over-enrolled and unable to serve additional families, and funds are not consistently directed to areas with the greatest need.

Nuances for Alternative Payment Program Contracts. According to CDSS’ 2024 Childcare Fiscal Handbook,^[4] APPs have multi-year contracts and ongoing contract adjustments based on expenditures and caseload in order to maximize the use of childcare funds. State law allows APP contractors up to 24 months to expend funds allocated in a given fiscal year, allowing unspent funds from a prior fiscal year to be carried over and utilized in a subsequent year through a contract amendment. As a result, contractors may have two active contracts at the same time: a prior-year contract that has been extended into a second-year and a current-year contract. Contractors that fully expend their prior-year funds will generally have a single, current-year contract.

Additionally, CDSS continuously monitors contractor expenditures and caseload data to determine whether agencies are on track to fully utilize their funding. Based on this information, CDSS may increase contract amounts for agencies that are able to serve families or reduce funding for agencies that are projected to under-earn to better align funding with demand. These adjustments rely on contract-reported data and require administrative processes, including projections, documentation, and contract amendments.

Advocates contend that fiscal processes are largely structured around single fiscal-year assumptions, resulting in contractors having to project enrollment months in advance, account for families who are approved but not yet enrolled, and manage demand across fiscal years. Advocates further note that without fiscal tools that align with these multi-year timelines, contractors face planning challenges and risk both over-enrollment and under-enrollment. Furthermore, while the state budget takes effect on July 1, funding is often not distributed to contractors until several months into the fiscal year. As a result, contracts must either enroll families without confirmed funding or delay enrollment despite having approved capacity, which can lead to under-enrollment early in the year and reduce the efficiency of service delivery.

The VTT and APP contracting processes show that while the state can redirect unspent childcare funds to areas of need, the approach is largely reactive and administratively driven. This bill aims to create a more proactive and systemic process to identify and redirect unspent funds to enroll additional families and improve timely fund use. This bill also prioritizes the use of these funds to enroll families on waitlists or in the eligibility process, support contractors with the capacity to serve additional families, and maintain continuity of care for children. This bill further requires CDSS to streamline the transfer of funds to ensure timely expenditure within the fiscal year and clarifies that this process is intended to maximize the use of existing funding without reducing current contract allocations.

Author’s Statement: According to the Author, “About 1.8 million income-eligible children in California do not have access to subsidized childcare. California has made significant public investments in subsidized childcare and early learning programs. However, a portion of these funds remain unspent each year due to administrative barriers, time misalignments, and structural inefficiencies across programs. Unspent childcare funds represent missed opportunities to serve eligible families and maximizing the use of previously appropriated funds is a cost-neutral first step toward achieving universal access to childcare in California.

“Alternative Payment Program (APP) contractors serve as the primary delivery system for voucher-based childcare and are uniquely positioned to rapidly enroll families, support parental choice, and deploy available funding efficiently. [This bill] addresses the gap between funding and subsidized childcare by requiring the Department of Social Services to identify unspent funds across all childcare programs and redirect those funds, where allowable, to APP contractors for immediate use.”

Equity Implications: This bill could improve equity in counties by directing unspent childcare funds toward families with the greatest unmet need, particularly those on waitlists or in the eligibility process, and may reduce disruptions in care that disproportionally affect families with unstable work schedules or limited childcare options. Because APPs often serve diverse, low-income families and those needing flexible care, this bill may expand access for populations that have historically faced barriers to subsidized childcare.

Arguments in Support: None on file.

Arguments in Opposition: None on file.

RELATED AND PRIOR LEGISLATION:

AB 2314 (Rogers) of the current legislative session, requires CDSS to prioritize full and timely expenditure of childcare and development funds allocated to APPs, conduct periodic fiscal reviews and authorize funding transfers to maximize utilization of appropriated funds, promote continuity of care by preventing disenrollment or transfer of eligible families, and provide an annual summary of funds allocated, expended, and unexpended. AB 2314 is set to be heard by the Assembly Committee on Human Services on April 23, 2026.

AB 131 (Committee on Budget), Chapter 116, Statutes of 2021, required an APP to have no less than 24 months to expend allocated funds in any fiscal year, required CDSS to develop a contracting process enabling this expenditure timeframe, and stipulated that the APP spending timeframe does not apply to CalWORKs Stages 2 and 3 childcare contracts.

AB 1106 (Weber), Chapter 716, Statutes of 2017, required an APP to have no less than 36 months to expend allocated funds in any fiscal year, required the Superintendent of Public Instruction to develop a contracting process enabling this expenditure timeframe, and stipulated that the APP spending timeframe does not apply to CalWORKs Stages 2 and 3 childcare contracts.

REGISTERED SUPPORT / OPPOSITION:

Support

None on file.

Opposition

Acclamation Insurance Management Services

Allied Managed Care

California Retailers Association

Family Business Association of California

Flasher Barricade Association

National Federation of Independent Business

Orange County Business Council

Solano County Taxpayers Association

Southern California Rental Housing Association

Analysis Prepared by: Bri-Ann Hernández-Mengual / HUM. S. / (916) 319-2089

1. https://calbudgetcenter.org/resources/understanding-californias-1-8-million-gap-in-publicly-funded-child-care/ ↑

2. https://www.cdss.ca.gov/Portals/9/CCDD/Contractor-Resources/CLPC%20Program%20Requirements%20FY%2025.26.docx ↑

3. https://www.cdss.ca.gov/inforesources/child-care-and-development/quality-improvement-initiatives/local-child-care-and-development-planning-councils/local-planning-council-forms/vtt-guidance ↑

4. https://www.cdss.ca.gov/Portals/9/CCDD/FiscalResources/Fiscal%20Handbook/FY%2023-24%20Child%20Care%20Fiscal%20Handbook_APU%20Approved.pdf?ver=2024-04-02-133439-770 ↑