Senate Budget and Fiscal Review Subcommittee No. 3 on Health and Human Services

Senate Budget Subcommitee 3 will now begin. Thank you all so much for being here. This hearing will take less than two hours. We will have one Department item up for discussion, Department of Social Services.

We will solicit public comment after completion of the presentation items within the agenda, at which time the public may comment on any of the previous items. We will begin with issue number one, Child Care Overview, and the Department may begin whenever you're ready.

Good morning, Madam Chair and staff. Jennifer Troia, Director of the Department of Social Services. Good to be here with you this morning. Our first items relate to the state subsidized child care and development system.

We provide subsidized child care to some Low income families through these programs, including both families participating in the CalWORKS welfare to work program and families who are not receiving CalWORKS. At CDSS, we administer these programs both through voucher based programs and through programs that we contract with directly.

In the last five years, we've nearly doubled total funding for child care and development programs. We've significantly increased the number of children served.

We've negotiated our first and subsequent memorandums of understanding between the State and child care providers United Union and we've taken steps to unify and reform our reimbursement rate structures which you'll discuss further in the next item. The Governor's Budget includes $6.4 billion, 4.6 billion of which is General Fund for CDSs administered child care and development programs.

Within this total, the budget includes $698.5 million in funding that is needed to maintain reimbursement levels at the levels that were in effect on June 302024 inclusive of the cost of care plus rates. You also asked about the expansion of child care slots.

More specifically, since 2021, more than 129,000 additional child care slots were added across our child care programs and those slots are maintained in the governor's 2526 budget. Included in that total are approximately 11,000 slots that were for CCTR. They were included in the Budget act of 2024. All of those CCTR slots have been awarded to contractors.

At this time, I will defer to the Department of Finance with respect to the unspent funds from 2023-24. Question and before I do, I'll just answer your final question related to the federal rule for improving childcare access, affordability and stability. It has two components.

One related to reimbursement based on Enrollment, second related to prospective pay with respect to reimbursement based on Enrollment as a part of Our response to the COVID 19 pandemic, the state enacted reimbursement flexibilities. We refer to them frequently as the hold harmless to ensure that child care providers would not be penalized for children's absences at that time.

Since that time in 2024, federal regulations have changed to now require states and territories to make timely payments based on enrollment rather than attendance.

Our current state policy requiring the state to reimburse based on enrollment instead of attendance is scheduled to expire June 302025 and the Governor's Budget does not currently include a continuation of that policy for represented child care providers, the family child care providers who CCPU represents.

This policy is within the scope of CCPU representation and subject to bargaining which is currently underway for center based providers.

We will work with the Legislature regarding the policy that will be reflected in the final budget and then finally with respect to prospective pay, in keeping with an intent for states to establish payment practices that reflect the generally accepted practices that apply to the private market as well.

The new federal regulations, which were finalized in 2024, also require prospective payments at the beginning of service delivery to child care providers receiving federal funding. California requested and was granted a waiver from the Federal Government which allows us to implement this new requirement effective August 12026 for represented providers.

This policy is also within the scope of CCPU representation and subject to bargaining. For contractors who provide direct center based services, prospective pay is currently already implemented to some degree as those contractors receive initial apportionments in July for projected services from for the first quarter of the fiscal year.

Thank you. So we will be in compliance with the federal requirement for child to do it based on child enrollment and not child attendance.

We do not currently have a proposal in the Governor's Budget to extend the policy, but we are aware of the federal requirement and we are currently bargaining with the family child care providers and expect to be in compliance. Yes, but what about those who are not a part of that is something.

That will have to be enacted as a part of the final budget. Okay.

So we will be in compliance with them. Yes. Okay. Thank you.

Good morning, Chair. Krishan Malhotra, Department of Finance. In response to question two about the unspent child care funds from 2324, the supplemental reporting language provided by DSS reflects the estimated unspent child care contract Fund funds at the end of fiscal year 2023-24 and a projection of unspent funds for contracts in 2024. 25.

The report reflects only unspent funds related to child care program contract expenditures, not the entire child care appropriation item. The Department of Finance reconciles expenditures through a regular year end close process as part of the Governor's Budget development.

Through that process, Finance compares actual expenditures to the budget appropriation anytime there are expenditures that are less than the appropriation that differ scored as savings. The 2025-26 Governor's Budget assumes savings of 1.1 billion in General Fund from fiscal year 2023-24 under the Child care appropriation item.

And this item includes funding for additional programs that are not included in the SRL report, including the child and adult care food program and supplemental rates that would be paid outside.

Thank you, LAO.

Good morning. Edgar Cabral with the Legislative Analyst Office. In terms of what's in the Governor's Budget, I think we would just note that the Governor's Budget includes $698 million. That's equivalent to the cost of monthly cost of care plus payments that are currently being made to child care providers.

And with this amount of funding in the budget, the Governor's Budget ensures that there's funding sufficient to comply with a statutory requirement that was added last year that says that rate in 2526 be no less than the rates that are currently in effect.

We also just wanted to highlight a few recommendations that we made in a recent analysis related to child care, and these are three policies that we think we recommend the Legislature revisit as they may no longer align with the Legislature's key priorities.

The first is related to is related to statutory cost of living adjustment that's made for certain providers who are funded on the standard reimbursement rate. We recommend repealing that statutory requirement because the current policy effectively prioritizes additional funding for providers that are already receiving rates that are relatively high compared to the private market in their area.

We also recommend that the Legislature consider modifying a statutory cost of living adjustment for the voucher based child care programs. The current approach that the state has is to provide a COLA to both components of that program and there's a component that's related to administrative costs and then there's a component that's related to provider payments.

However, providing a COLA for provider payments does not make sense because the state doesn't annually increase those rates by COLA. The state, when it does increase rates, makes an appropriate budget adjustment in the budget. So we don't think this COLA adjustment is necessary.

The Legislature could continue to provide the COLA for administrative costs but no longer apply that COLA for provider payments and Then finally, related to the issue of reimbursement flexibility for direct contract providers, we recommend for that. We do recommend allowing that flexibility to expire at the end of June 30th.

This flexibility was first established during the pandemic to provide fiscal stability for providers. It allows them to receive funding that's equal to their pre pandemic contract amounts regardless of attendance. And although this flexibility was important during the pandemic, we think maintaining the policy disconnects funding from the number of children that providers are currently serving.

Now, as was noted previously and as in page eight of your agenda, there is a recent federal rule change that says the state would need to Fund providers based on enrollment. If this flexibility sunsets, the default state policy is funding based on attendance.

So it could be that the state may need to modify itself current what's in statute to then Fund based on enrollment. We do think that still is preferable to maintaining to extending the flexibility in the future because that would connect funding back again to current service levels and based on the number of children providers are currently serving.

That concludes my comments, but I'm happy to answer any questions.

Thank you. Anything else from the Department of Finance?

We have nothing further to add.

Thank you. Senator Menjavar.

Thank you.

Sorry, Madam Chair, ahead of time. I have very passionate about this topic, so I have a lot of questions. I heard some laughter. Can you talk to me first about the savings that you mentioned and how we attribute savings when those were supposed to be for the slots that were supposed to be distributed?

Yeah. So the, Krishan Malhotra, Department of Finance. So the savings that are in the supplemental reporting language report before you are estimated unspent contract funds. And so this was taken point in time. I believe it was January of 2025. So all this money is not necessarily unspent as of now, contractors still do go back.

They have final audits, they update their invoices. There's a lot of process that they can go through that would bring this unspent money lower than it is in the report that you may have in front of you. And so at the time it's just a point in time projection of what we're thinking is unspent right now.

How much do we have unspent for?

2324. We're estimating 1.3 billion unspent for child care contract funds.

And I have one, at least one example in my district. I told tour CCRT location last Friday, they have their letter from December 2024. And I'm wondering how long is the process to get these fundings out to recipients.

Yeah. Dr. Lupe Jaime-Mileham, Deputy Director CDSS I'm happy to answer that question. So the process varies. Once we are, once they are awarded then we we issue a notice where we work alongside that future contractor in regards to making sure that they are licensed.

And when I'm referencing license I want to make sure that we're also noting that there is processes within the license components such as fire marshals, city codes, et cetera that may impact then the licensing. Once they're licensed then they're able to receive the funding to continue to enroll families that can range.

Some contractors are ready because there was a lot of pre work and others may take time depending on these type of factors.

And what does the communication with these contracts look like? Is it ongoing updates?

It's ongoing and it's connected with quite a few of our team Members. So different components of a new contract will include discussions regarding our fiscal team to make sure that they are aware of what is allowable in regards to cost. If they're a new contractor, it could be with community care licensing in regards to.

To making sure that they are continuing to go through that process. And looping in our team too to make sure we're in sync and not creating unnecessary barriers. And if it's programmatic then we have a separate team that also reaches out so they have multiple points of contact and then they know how to reach me too.

Okay, thank you so much.

And then are we going to for a little while classify these as savings?

So I'll take the output cat. It's okay. So again it's a point of time. This does not necessarily going this we know that at that point of time that is the Maximum Dollars that is right now unspent. However, families are still being enrolled, voluntary transfers are still happening which is. This is our peak time for that.

And then we also have the auditing that contractors do at the end of the year. So there's a lot of factors that will most likely change that amount.

Okay, thank you for that. Under COLA, I'm wondering if the Administration intended to do kind of like an equitable approach to COLAs where SRR gets it and not rmr.

That's the way the statute, the statute is designed to be designated as a COLA for the SRR with respect to the RMR we see set those rates through the budget process. That's historically how it has worked. And the COLA on the voucher based side is actually applied to the entire allocation for the agencies under The AP side.

So that's just historically how the structure has worked. In the last year's budget, we didn't actually apply that COLA per the normal historical method. It was instead redirected to be a part of the cost of care plus payments for providers.

Maybe. I apologize if you could. Maybe a misunderstanding when I'm reading here. If we're allocating the budget just as like the 2.3, the 2.43% COLA for one side, where do we see the. Where's the COLA for the other side? Where's the allocation for that? Maybe Aleo can help explain this to me.

Yeah, there is no allocation on the other side. I think this is part of the issue is just the fact that we did. The state started to transition by trying to move most of the providers over to the rmr, but we still have some that are based on the srr. And so historically we've had two different rates.

The SRR received an annual COLA. That's how so rates were annually adjusted. On the RMR side, there was no statutory COLA. The Legislature would decide at some point whether to move to a new survey or increase to a different percentile in the survey. So it was less frequent. And that's just kind of how it always operated.

I think for us, the reason we bring it up is because it's a little bit more awkward at this point. Now we have direct contract providers running the exact same program, meeting the same standards. Some of them are in one part of the state, some of them are in other parts of the state.

One gets a COLA, and that one, usually compared to their regional costs, has a higher level of funding. The reason they're on the Sr is because they're being held harmless. So they get a COLA and then other providers don't.

And so that arm our provider, the. Ones remaining are usually in the place of that's higher cost and they're not getting the COLA increase. I guess that's my question. Are we going to address this uneven distribution of COLA?

The Governor's Budget proposes a $90 million COLA across all early education programs, including some state preschool programs. But we're happy to take anything.

Miss, you said across all does that. Are you saying that everyone's going to get it?

Not in the direct rate form, but it may be their program. Their contract amount would be getting a COLA.

We don't have a proposal at this time to deviate from the way the statute designed the COLA.

Okay, so it is an intentional unbalanced approach to distributing COLAs. It's consistent with the current law. Okay. I mean, status quo is not. It was okay. Right? Okay. Just to me, this seems completely unfair to have one side. Do COLAs and other entities not have a COLA when they're doing the exact same work?

I'd like to also hear from the Administration regarding the federal rule on reimbursement policies. If the federal rule is to say that we have to move towards funding based on enrollment versus attendance, don't we have to follow the federal rule?

We do need to comply with that federal rule related to enrollment rather than attendance as the basis for reimbursement. And we. As we testified just a little bit ago, the current law does comply with that rule. It expires under current law on June 30th of this year.

However, for family child care providers, it is subject to collective bargaining. And we are currently at the table. Collective bargaining. Now, for the center base, it is. Subject to collect the bargaining. If it's federal law, it is within. The scope of bargaining. How we comply with that federal law. So we.

If it's a federal law, how do you negotiate? Negotiate how to approach a statute federally. Isn't that already telling us what we have to do?

We do have to comply with the federal law in many instances as we. As we implement federal laws, we have choices about how we choose to do so, and that is within the scope of bargaining.

Okay. For the. For the ones that aren't at the table for bargaining the other providers, is that an automatic approach then?

No. The current law would expire. It is something that is a part of the final budget. Would need to be included to be in compliance with federal law. It would have to be. Okay, yes. Perfect.

All right. And then I'll save my risk of questions for issue two. Thank you.

Thank you so much. We will now move to issue two, Child care rate reform update. And so for this panel, we have Edgar Cabral, Deputy Legislative Analyst from the LAO office. Jackie Barocio. Thank you. Central Operations Branch, Chief, Child Care and Development Division, also known as cdds. Cdss.

Eric Sonefield, Assistant Administrative, Tulare County County Office of Education, Marine Allegory, Child Care Provider Union, ccpu. And is Adriana here yet?

She couldn't be here, but I'm gonna read her testimony.

Okay, thank you so much. Thank you. Okay, so you may begin when you're.

Ready with Edgar again, Edgar Cabral with the Legislative oust office. So I was asked to provide a brief overview just to quickly describe the current rates and the current timelines and statute associated with the transition to the alternative reimbursement methodology. And I believe that you should have a handout that walks through that.

And our handout is also available on our website for anybody who's following along. So on page one, we briefly cover the current rates. These are sort of the current ongoing child care rates. They were Last updated in 2021. But the state historically has had two different provider rates.

There's the standard reimbursement rate, which is a fixed rate for all providers across the state. And then there's a regional market rate which varies based on the county that the provider resides. And it's based on market surveys that are periodically updated of the rates that private providers charge in their area.

The state in 2021 shifted most providers to the regional market rate. But because of a whole timeless provision that's in effect, there are still some counties where providers where some providers are funded based on the standard reimbursement rate. So those are the base ongoing rates.

On page two, we talk about one temporary rate that was negotiated in the most recent MOU and was applied to licensed child care centers as well. And these are what's known as the monthly cost of care plus payments. This is monthly per child payments that range from $140 to $211 for licensed providers.

And the amount varies depending on the region that the provider is located in. And these are made pursuant to statute from January 12024 through June 30th of 2025. So this is a temporary payment.

The reason we bring it up is because this is associated with statutory language that was added in last year's budget in the trailer Bill that specifies that as we transition to a new rate, that the rates beginning July 12025 should be no less than our current rates, including this monthly cost of care plus payment.

So on page three, we start walking through some of the components of the alternative methodology. So the state really began transitioning to an alternative methodology in 2021. In the 2122 Budget act, there was a variety of trailer Bill that some of it was from provisions that were collectively bargained in the MOU and added to statute.

Other cases, the Legislature added additional detail, but there was a requirement that there be two different working groups that make recommendations about a transition to a single reimbursement rate structure. One working group was convened by the Department of Social Services in consultation with the Department of ED and included range of child care stakeholders.

And then there was another set of recommendations from a joint Labor Management Committee that was established between the state and the child care Providers united.

Those recommendations for those reports were made in summer fall of 2022, and those recommendations really were to move to a reimbursement rate structure that rather than looking at market rate surveys and looking at what private providers charged in counties, to instead focus on what the costs are associated with, what the direct costs are for the providers, and taking into account variation, meaning statutory requirements, et cetera.

Then finally, on page four, we have a set of the specific milestones that are in statute and some of the reporting requirements. The first three bullets in terms of those timelines, they've already passed and they've been met.

The one I would just highlight is July 1st of 2025, which is when the state must set new rates under the alternative methodology. And what statute says is that if rates are not ready to implement, then the Department of Social Services must submit a transition plan to the Legislature.

And those new reimbursement rates, again, they have to be essentially no less than the rates that are currently in effect. State law does also have some reporting requirements. So there are quarterly reporting requirements from October 1st of 2024 through January 1st of 2026 for the Department to provide updates to the Legislature.

And then there was an additional reporting requirement 60 days after, within 60 days of federal approval for the single rate structure. So the state does have to get federal approval for transitioning from the old rate structure to the new rate structure.

And the Federal Government did approve the plan November 8th of 2024, and the Department provided a report in January. I would just just one other note that we just would point out. As you can see from those timelines, the timeline for setting a new rate is July 1. The Legislature's deadline for passing a budget is June 15.

And so it is possible that the Legislature will not have any information or will not have much time to review information prior to adopting its own budget. And so the Legislature may want to consider taking proactive action if it's concerned about getting information on time to build its own budget.

So, for example, it could it's concerned about making sure there's funding available to address costs, could set aside funding in its budget to ensure there's funding to cover costs associated with the alternative reimbursement rate structure.

If there's concern about meeting that July 1 deadline and there's interest in a transition plan, the Legislature could begin to develop that transition plan for child care centers, though it couldn't do so for family child care homes or family friend and neighbor providers, as that would need to be collectively bargained. And that concludes my presentation.

I'm happy to answer questions at the appropriate time.

Thank you. You may go.

Jackie Barocio, Department of Social Services I'll just go over responses to the questions outlined in the agenda so the first question regarding the range of costs associated with implementation of the single rate structure.

The exact magnitude of total cost, of course, is associated with implementing the single rate structure ultimately depend on the completion of the alternative methodology, but then also the rate setting process, which are both underway.

But as recently stated in the Assembly Subcommitee budget hearing, a reasonable cost range for 100% total cost of care can be in the tens of billions. But again, that is a very rough order of magnitude.

Just to give folks a General sense of the potential cost associated with that full implementation, the exact cost again would be subject to the budget outcomes and the rate setting process itself. For question number two related to the steps being taken to meet that July 12025 deadline, but then also the ultimate implementation of rates.

So by July 1st we intend to finalize the values associated with those selection points for centers and family child care providers and then in addition, setting rates informed by the alternative methodology as required under statute, setting rates again will be subject to the budget process and then for family child care providers, the collective bargaining process.

The timeline for implementation of the rates that are set ultimately depend on two factors. One is what is the actual outcome and the structure of the rates that are set through the budget negotiations and for family child care providers, the collective bargaining process.

But then also those automation and program implementation components of when the single rate structure can actually be implemented and take effect.

Regarding the implementation plan and those automation activities, the Department is conducting a more detailed discussion assessment of the state level child care and development automation and program modifications that would be required for the implementation of the single rate structure so that we get a better sense of the implementation timeline.

But at this time, the only timing update that we can provide is that this may take more than one year to complete the necessary automation changes at the state level, and then we also have to be cognizant that there are contractor implications as well when it comes to implementation.

To the third question regarding the transition plan, as the Leo stated, under statute, we are required to provide those quarterly implementation report updates and we will provide those updates as required, and then we'll provide any other available updates regarding the implementation by the alternative methodology at the the Governor's May revision the last question in the agenda is regarding how and when the Administration intends to partner with the Legislature to set rates.

I just want to kind of take a Step back and highlight the remaining key milestones for the alternative methodology. Include finalizing the alternative methodology, establishing the single rate structure, setting rates based off of that single rate structure and alternative methodology, and then the implementation of the rates themselves.

So the key components of finalizing the alternative methodology that include those selection point values, those will be presented for the centers and the new single rate structure at our public rate and quality advisory panel. And then we'll ensure that we provide the Legislature that information as well as soon as it becomes available.

But at this time we don't do not have the exact date. And then following the completion of those components, that is when the Administration will work with the Legislature through the budget development process to set rates and then implement rates themselves. Thank you.

Thank you. You may proceed.

Good morning. Thank you. My name is Eric Sonnenfeld, Tulare County Office Education. I'm the assistant administrator in the Early Education Department. Department. I also serve as a Member on the rate and quality work group.

We've been doing this work for almost two plus years and we as a Member, I'm a little bit frustrated that we are at this point we still don't know what the rates are or how much it's going to cost.

And of concern specifically for the non represented side of the rate reform conversation that do not have a collective bargaining process and the sunshine that needs to be brought into that and the public discourse related to how much the Title V direct contracted centers would be getting.

And there is a huge concern that whatever is going to be negotiated through the collective bargaining process just will be automatically applied to the direct contractor side. And that's inequitable because the direct contractors have some additional duties. I'm not talking about the quality or the environment related to the care of individual children.

I'm talking about the Administration of the State requirements such as the eligibility determination, the need determination, all the state reporting that's required as a direct state contractor and all the state compliance with all the various rules, Title 5, ed code, welfare institutions code, community care, licensing, federal regulation. And I can go on and on.

There is a cost to that that is not currently in probably a conversation with CCPU as part of negotiations and was a huge subject of the conversation at the rate inequality Workgroup that the calculator that is being developed has an actual cost for doing business with that.

But until we get actually the results of that calculator in a public school, there's no way to determine if that is an accurate or equitable amount. And there's a huge fear that the Rush to get this done by statutory requirements, we are going to be stepping over ourselves.

And yes, we're building the plane as we're flying it, but we're not actually building the Runway to land it. That's more of a concern than building the plane itself. And the Legislature is going to need a Runway and the Administration to figure out how we're going to eventually pay for this.

What is the goalpost we're going to set? Is it 2 billion, is it 10 billion, is it 12 billion? Whatever that number is. And then the discussion of how much can we afford in every year given year to get to that point, we're not even close enough to that conversation. And that's a huge concern.

One of the other concerns is that the current structure is very antiquated. It's very confusing. It's. It's inequitable. It was created in a different time for a different world. And I'm so glad that we are moving into something more current.

However, I would recommend that since the Administration already budgeted the cost of care plus payments, that those become permanent rate adjustments because having these funds outside of contract allocations is not helpful. If you're a public entity, you cannot add that to your salary scale because these are one time in nature funds.

So they kind of are, I'll just say floating out there because they can't be committed on an ongoing basis. So if the funds are already budgeted in the governor's proposal, make those rates permanent as part of the hold harmless that's included in the authorizing budget language and then build rate reform on top of that.

It will then also negotiate with the center based side, get the rates established, move to paying based upon enrollment on the direct contracted side so that we are partially compliant with the federal rules and you can so market progress while you're still negotiating on the CCPU side.

To pay by enrollment would be a suggestion, but one of the hugest outstanding concerns as a work group Member is we don't have all the data to make good, sound recommendations to the Legislature because as a Member of the panel, our charge is to make the recommendation to the Legislature.

The GLMC is there to make the recommendations as part of collective bargaining. But if we don't have the proper information, we can't make an accurate recommendation to the Legislature for the Leo and the Administration to determine what they can do with that.

All that being said is that whatever is renegotiated with ccpu, there needs to be a cost factor included for direct contracted providers because of the cost of doing business with the state. And until we see what the rates are, we can't determine if that's an appropriate rate. And that's the end of my comments.

Thank you. You may begin.

Madam Chair, my name is Vina Nalgorre and I'm speaking on behalf of UDW CCPU, the union who represents home based childcare providers through the bargaining process. I'm a proud second generation family child care provider from San Diego following on my mother's footsteps.

The history of childcare in America has forced women of color to care for older children while struggling to support their own families. Today in California, we have the historic opportunity to break these centuries old cycle.

The Legislature, Governor and thousands of family child care providers are aligned to shift from a broken reimbursement system to one based on the actual cost of care. We need rate reform now to stabilize the workforce. Providers like us enable Low wage workers to support their families through state subsidy programs. Yet we often risk our own financial stability.

Many of us lose money monthly because subsidy rates haven't kept pace with inflation. I frequently pay out of pocket to meet children's needs, reducing my own earnings. The status quo cannot continue. We can just put lipstick on a pig. The current model is failing. Providers and families. Providers are closing their doors due to inadequate funding.

Families with non traditional hours with infants and toddlers, families who are struggling to keep their cultural identities and who need before and after school care. They all depend on us. We're failing to recruit licensed providers which forces families looking for quality care to choose between earning a paycheck or staying home to take care of their children.

And in many cases that means applying for state assistance for food, rent, for health care and more. And I strongly believe that can put a much greater strain on the state budget than childcare reform. In regards to what's happening at the bargaining table, we have put 12 proposals over the table to the Administration.

The COVID matters from adopting an actual cost of care model, presumptive payments as required by the Federal Government, additional funding for the health care and retirement trust, paid time off, and a proposal for what happens if the state can implement the new rate methodology on July 1st.

To this date, there hasn't been a response to any of CCPU's proposals. It is hard to bargain when there is no responses from your bargaining partner. We're at a critical fork in the road. Either adopt the new methodology based on actual care cost or continue with a broken system that's created these crisis.

CCPU urges your continued support for RAID reform in a System reflecting our values, helping families break the cycle of poverty. Thank you for listening and I'm happy to answer questions. Thank you.

Good morning everyone. My name is Amarantha Silva. I'm a community organizer with Prime Voices and I'm going to read the testimony of our Member in behalf of like she couldn't be here because her daughter was sick this morning. Hi, my name is Adriana Puchetta Cakesba.

I live in Hayward with my partner and my son and I'm a leader with Parent Voices. My son is just three months old but already has been very difficult for our family not having a childcare.

When I first found about four Cs I was excited because I knew even when I was pregnant it would be hard for our family to not have a childcare. We will need to work in order to pay for everything. But the process has been harder than I thought.

I have been calling them but they always tell me that the same thing that I need to wait, that it takes a long time and they don't have any more funding to provide me with childcare right now.

They tell me that there are a lot of other families waiting just in our county that I'm not the only one. It feels really bad being on the waiting list. I'm already feeling no hope and it is only been few months.

I really cannot imagine what a family is going to do if we need to wait much longer. But it doesn't seem like there is any end inside to this waiting list. My experience shows why this is such an important issue for Parent Voices being important voices. I have learned why it is that we have the waiting list.

For one, we need more funding for childcare spaces. But also if we do not pay child care providers what they deserve, how are we even going to have enough people to actually care for our kids? And if the providers are waiting such are making such Low wages they will be stressed out and worried.

The work they do is really important and they deserve to make a good salary for helping us raise our children so that we can go to work, pay rent and put food on our tables. Especially with how expensive everything it is now in California.

I hope that one day nobody has to feel the feeling of desperate that is being on the waiting list.

And I know that until we pay child care providers a good salary we will continue to have a waiting list because there will not be enough people who want to do this job or take care of all the kids who need it.

That is what I'm proud to be here today and speak on behalf of the other families like mine who are sitting on the waiting list waiting for the day to be called. And I also want to speak up and show support for the child care providers out there and the ones on this room.

Only parents who need child care know just how valuable childcare is and just how valuable child care providers are. I'm urging this Committee to do everything in your power to make sure we accomplish rate reform so child care providers can finally earn what they deserve and more families like mine can come out of the waiting list. Thank you.

Thank you for all of those who presented today. Senator Menjevar.

Jackie, so sad. We miss you on the other side. Now you're gonna have to give me filtered answers. No more unfiltered answers. L ao I'd like to start with you and your presentation on page under the specific milestones, July 1st, the second sentence. Can you explain what that looks like or what is necessary?

If rates are not ready to implement, DSS must submit a transition plan. So if by July 1, there's no methodology, all they have to do is provide a transition plan.

So, yeah, we in writing this, we tied specifically to what's the language and statute. But you're right, there's not a lot more detail in the statute about what that means in practice. Right. That would probably mean that we need to know before July 1st. Right.

So that we have a transition plan so people know beginning July 1st what the rate structure will be. The statute does not say DSS needs to provide that transition plan by a certain date. So that's, there's not a lot of clarity in the statute around what that works.

But that's the, that's what's in the statute is if there's, if there, if we're not ready to set new rates by, for July 1, then there needs to be a transition plan.

So hypothetically speaking, we can miss the July 1 deadline and the transition plan doesn't have to be submitted until a year.

Right. I mean, I think that's. The statute is not clear about that. Obviously, there are more practical consequences. Like, most importantly, providers want to know what they're getting paid this year. Right. So the state will have to develop that. It just may be that that's maybe becomes part of the budget negotiations and the budget process.

I think that's why we highlighted in our comments that, you know, if the Legislature is concerned about those timelines, there are some things the Legislature can do. The Legislature can't, you know, has to wait for collective bargaining. But for centers who are not part of collective bargaining.

The Legislature could take action proactively to try to address some of those concerns. Okay.

Thank you so much. Scary. Mr. Eric, I appreciate your analogy. I love the Runway analogy. So, Jackie, I know you answered somewhat of the question of the steps, but I think you talked a lot about just building the plane. Can you share more about this Runway?

I know you said July 1st is going to be ready, but where are we at in stepwise? Because maybe Aleo can help me. Correct me if I'm wrong. Last year's conversations very similar to this year's conversation.

And I'm trying to pinpoint what changed from last year's sub 3 hearing to this year's sub 3 hearing and moving us forward. I don't see much change. Maybe a window was added to the plane, but that's about it.

So I'm very worried that come June 27, we're going to get a plan and we're going to scramble for 72 hours to actually implement the new rate.

Even though you did say there's a minimum of one year, minimum of one year to implement claiming your rate, but it gives us only, hypothetically speaking, 72 hours to discuss, go back and forth. So Jackie, can you dive a little bit more into what are actually the steps to get us to July 1st?

Why hasn't the Legislature been including in conversations outside of the collective bargaining, at least for the center base and having ongoing conversations? Because I just keep hearing we're in negotiations with the or no, we're going to be partnering with the Legislature.

But I think we have reached out, our staff has reached out and we haven't been included in any conversation yet.

Definitely hear you about wanting better insights on the steps and probably what I can provide today won't be sufficient. But I know as a part of statute there are those quarterly required regular updates and that's where we're trying to provide those opportunities for more updated point in time information.

So I guess where we are today is that finalization of the alternative methodology and it took a lot to get here as well. This is years in the making and we are at those final stages and I don't want to lose sight of a lot has been done and we're very close.

So in terms of where we are at, it's that finalization of the alternative methodology which includes those key components of we've defined the rate elements and those were defined last year. Now we have to determine the selection point values.

I have a training rate element, how many hours of training that is where we're at for both the centers and for child care providers.

Last year the presentation was we're at what we're going to include. We just don't have numbers. And a year has passed and we're literally at the same place. You can understand the frustration of the people you, you were frustrated last year of the lack of movement towards this. We're at this exact same place.

It is completely unfair for the Administration to come to us here 365 days later with the exact same report we're continuing to hear in these stories. It's not okay. We need to be included with the center base. We should have this methodology and values already associated at least for the center base.

So at least we can show we're done with this. We're just waiting for collective bargaining because we have no say in that. I understand that. But this is completely unacceptable that we have no update on this. People are waiting for this. The Administration needs to come to us with an update. And I'm not talking may revise.

I'm not talking about June. We need something now.

Yeah. And we are working towards that July 12025 date, the federally required date that would require us to have those alternative methodologies completed.

It also requires the Administration to work with the Legislature and there is no partnership right now whatsoever that's also required. And this is should be a three party conversation and only one party is preview to the conversations right now. And the Legislature is being excluded from that.

Thank you. Senator Menjivar, Want to echo your frustration. So the Joint Legislative Budget Committee requested that the transition plan be included in the Governor's May revise. Do we have your commitment that that will be in the May Revise.

Krishan Malhotra, Department of Finance the Administration is currently developing the May revision to the Governor's Budget confidential process up until the release of the May revision. So I can't comment on that at this time.

Department of Finance Just to sort of add on, as sort of my colleague at the Department of Social Services sort of noted, the Administration sort of is committed towards that July 1st date sort of transitioning towards a single methodology and sort of having rates that are informed by that process and so working as expeditiously as possible to sort of provide information.

But sort of the exact timing is, you know, something we sort of can't comment on at this point, as we're sort of working diligently to have something ready for the Legislature to consider.

So completely understand the level of frustration for childcare providers and parents alike. As a parent myself, I've used and continue to use childcare providers as I have worked their entire lives.

But from a budgetary standpoint, if we don't have the information, then how are we supposed to do our jobs as legislators and pass a balanced budget in June? If you all keep talking about something in July.

The sort of enacted budget will sort of have to reflect the, you know, joint decision by the Administration, sort of by the Legislature to deliver a balanced budget. But sort of the particulars of that we sort of can't speak to sort of given.

So I don't understand. I can't balance a budget accurately if we don't have the information.

And I think not only just in this area, but there is just there's so much frustration amongst legislators, amongst Californians that we every year are doing this process of voting on a budget and then realizing, oops, we got it wrong because we didn't have the information.

And I think you can't always know everything, but in this situation where you have been working for years and years and years and doing presentations like we should have this information, especially since we've been asking for it. So it's beyond frustrating.

And this is my first hearing with the human services side on this issue, but I'm sitting here like how can I even vote on something when I don't have all the information? And you're telling me that we won't have it until July. We are now going to move to issue number three, child care budget change proposals.

Thank you for those who came to testify in that last item. You may begin when you're ready.

So in regard to issue number three, child care budget proposals, I am going to respond directly to the question in regards to brief overview. This proposal is a technical change without general fund impact to the internal of our federal funding authority of 34.4 million.

CDSS is requesting a permanent funding federal authority increase for the Child Care and Development Fund Administration Administration. Previously, CDSS had an interagency agreement with the California Department of Education which allowed for the 34.4 million in reimbursement in 2021 once the programs transferred over to the California Department of Social Services.

This annual budget revision which is inefficient as CDSS receives the ongoing funding each year. So benefits is that the ongoing federal funding will streamline the child Care and Development Fund management. That concludes the overview.

Thank you. LAO.

Ginny Bello with the Legislative Analyst Office. We have no concerns with the proposals.

Thank you. Anything else from the Department of Finance?

Krishan Malhotra, Department of Finance Nothing to add.

Any questions?

No, I'd just like. Are we hiring all the fired and federal employees to work here? Federally funded. Just saying.

Thank you. We will move now to issue number four, child Care cleanup language.

I had one more BCP on issue number three. Okay, sorry, I thought you had finished. My apologies. I should have referenced that. On the second bcp, which is the Child Care Policy Program Administration and Support Staffing needs.

This proposal requests 33.0 permanent positions and a 6.4 million federal Fund in fiscal year 2526 and 6.2 million federal funds ongoing. The reason for that is to support the expansion to the states and federal child care and funding, including the federal mandates.

It also supports the increased workload related to the slot expansion, monitoring, technical assistance, contract processing, processing payments, et cetera. And then it also includes the implementation and compliance in regards to the federal requirements as well as updating outdated state regulations. That concludes. I'm happy to answer questions.

Thank you. LAO.

Ginny Bello with the Analyst's Office. No issues to raise.

Nothing further to add.

Thank you. So we will now move to issue number four, child care cleanup language.

Yes. So these are truly cleanup language that I will speak to again in regards to the first one, it's the CDSS reporting requirement and removing of the California Department of Education.

So background on this is that this proposal removes references to programs administrated by the California Department of Education that was inadvertently carried over to the WIC code on Welfare and Institution Code when the Child Care and Development Program was transferred from CTE to cdss. We'll pause there for any questions.

Perfect.

And for the second one, which is the child care part time and full time cleanup, the response in regards to the background on this is that again another cleanup. So the Legislator updated the part time and full time definition from 30 to 25 hours per week.

Senate Bill 140 but a provision was inadvertently left defining the full time as 6 hours versus 5. So this proposal in a sense addresses that discrepancy. Though we've issued guidance, it's always nice to point to this correct statute. Thank you.

Anything from lao? No concerns with these technical changes?

Nothing.

Thank you. Any questions? We will now move to issue number five, child care 12 month eligibility for new children.

And so for this particular one, it's insurance 12 month eligibility when a new child is added. So the to meet federal requirement, the budget proposes to allow it to extend the family eligibility period to add a child care when a child is added to the family.

Example of this is the family, for instance is adding an infant, for example. This would ensure that the state that the family is aligned with federal rules which will require that infant to receive 12 months of eligibility.

No issues to raise with the proposed language.

Nothing to add.

Seeing no questions. We will now move to issue number six, child welfare overview and tiered rate structure implementation and you may begin when you're ready.

Thank you again. Jennifer Troia, Director of the Department of Social Services. We are responsible for oversight of the state's Child Welfare Services and foster care systems which are locally administered in California. They include services that prevent child abuse and neglect and aim to help keep families together.

They also include temporary out of home care placements and supports for the safety, permanency and well being of children who have been removed from their parents care. With respect to your question about the Governor's total budget for Child Welfare Services programs, the Governor's Budget includes $10.8 billion in fiscal year 2526 for these children and family services programs.

In terms of caseload, the Child Welfare Services caseload for 2526 is projected to be approximately 111,000 children. The foster care caseload is projected to be approximately 42,300 children. You also asked us to emphasize an update on our implementation of the tiered rate structure for foster care which will take effect on July 1st of 2027.

As a brief reminder, last year the Legislature and Governor enacted really transformational reforms to the foster care rate reimbursement system. At the core of the reforms is the understanding that children who must live apart from their parents do best when cared for in committed, nurturing family homes, especially those of their own relatives and extended family Members.

The rate structure we're working to implement includes supports that are based on the assessed needs of the child and not on the type of placement in which they reside.

This ensures that children can have their needs met in families and that providers can develop more community based programming rather than the child needing to move into a higher level or more restrictive level of care in order to be served at that higher level of supports and services.

We also invest for the first time ever in two new sources of support, the Strength Building and Maintenance Program and Immediate Needs Program. Since passage of the Tiered Rate Structure, we have hosted 28 listening sessions and working groups to inform our implementation.

The working groups are focused on the Strengths Building Program, the Immediate Needs Program, the CANS Assessment Tool, and Fidelity to that Assessment Tool, the conditions that allow children to receive higher support upon exit from foster care to adoption or guardianship, and finally automation. We have had more than 1,000 individuals participate in those working groups.

The priority issues that have been raised by stakeholders including foster youth and caregivers, have included first, ensuring that the Strengths Building Program allows children and youth to access enrichment activities in a flexible and efficient manner second, creating tools and processes to assure that the Child and Family Team meetings and the CANS assessments are done to Fidelity Third, developing the Immediate Needs Program in a way that streamlines access to a robust array of services and does not create additional barriers for counties or providers and finally, ensuring adequate supports for permanency to ensure access to information about implementation.

We have also created a website where all upcoming workgroup meetings and listening sessions are posted. The notes from the prior meetings are shared. We also have a bi monthly newsletter detailing our progress and all the opportunities for engagement.

We fully intend to continue this very robust level of engagement over the next two years to ensure that the Tiered Rate Structure is successful and that we ultimately achieve our shared goal of improving outcomes for the children and families we serve through the foster care system.

I will turn it over to Angie Schwartz, our Deputy Director for Child and Family Services, to address the remaining questions under this item.

Good morning Chair Members of the Committee Angie Schwartz, Deputy Director of Children and Family Services with regard to the question about how we're defining and implementing High Fidelity Wraparound in conjunction with the Immediate Needs Program and the Tiered Rate Structure, the Immediate Needs Program and High Fidelity Wraparound are being designed together along with DHCS and stakeholders.

High fidelity wraparound standards have been under development for several years and they'll be updated again upon the release of the Aftercare letter that we're releasing jointly with DHCS this summer. Draft standards are currently posted on the UC Davis Resource Center for Family Focused Practice website and trainings are currently being conducted on these draft standards.

Trainings and technical assistance are currently available for free to counties and providers as part of the design of the Immediate Needs Program.

The Tiered Rate Structure Statute mandates that CDSS conduct an analysis of the immediate needs of children within tiers 23 and 3 and the types of services necessary to address those needs, the reasonable Administration and operational activities that will be required by our providers as well as a cost analysis.

In the fall of 2024, we held two listening sessions to inform the scope of work of that analysis. One listening session was held with stakeholders and another with tribes. Informed by those listening sessions. We drafted the Scope of work and we are now working with the Public Consulting Group to conduct that analysis.

We'll be aligning our efforts around the High Fidelity RAP and the Immediate Needs program with DHCs and are engaged in weekly meetings as to those efforts.

With regard to the question about how the integration of the Strength Building Program under the Tiered Rate structure will happen with the activity stipends under BHConnect, again, we are working actively with DHCS regarding the interactions between the two programs, the Activity Funds and the Strength Building Program.

The anticipated timing of guidance for the BHConnect activity funds is July 2025 and the tiered Rate Structured Strength Building Program will not implement until July of 2027.

Despite having similar goals, Activity Funds have more specific requirements for distribution and limitations on what those Activity funds can be used for as compared to the Strength Building funds under the Tiered Rate structure.

To qual for the Activity Funds initiative, a Member must be enrolled in Medicaid or CHIP and then also meet specific additional requirements and the services and items provided through the Activity Funds must clearly link to an assessed need established in an eligible member's clinical record and must be determined to meet the Member need by a provider.

Conversely, the Strength Building Funds will be available through a self determination model for a much broader range of activities identified by the youth and their parent or caregiver. Currently, CDSS and DHCS are partnering on a joint request for information in order to collect information on who might be available to administer both funds through Fiscal management support.

We are expecting that RFI to post within the next week.

Thank you. Anything from the lao?

Good morning, Angela Short with the Legislative Analyst Office. Just a few comments we wanted to highlight for you today regarding the tiered rate structure as well as BHConnect. So to begin with the tiered rate structure, as noted in your agenda, there are many questions and comments that various stakeholders have raised.

Also, as described in your agenda and as mentioned by the Administration, already there are many steps and processes that have begun to work toward full implementation of this very significant and substantial reform of our state's foster care rate structure, and this will be ongoing for the next two plus years.

Also, as noted in your agenda, the Administration has shared an initial implementation plan in terms of breaking down implementation into five categories as well as three broad phases between this past fall and through June 2027.

We suggest that the Legislature may wish to request from the Administration an even more detailed implementation roadmap that identifies specific milestones for each category and within each phase.

We think that this could help the Legislature not only better track progress, but also understand at which points various elements of stakeholder feedback and concerns would be expected to be addressed. We would also note that statute implementing the tiered rate structure already requires regular reporting to the Legislature throughout the implementation process.

So we think this more detailed roadmap could be incorporated as part of those updates that the Legislature will already be receiving from the Administration. One other question we did want to flag for the Legislature regarding the Governor's Budget proposal for the tiered rate structure. There is funding included in the Governor's Budget for cans, training and Fidelity tools.

We are hoping to just understand more exactly what that will entail. Our understanding is that there are draft tools and draft guidance that have been circulated for stakeholder feedback. So we'll look forward to reviewing the updated guidance and tools once those are available and can share back with the Legislature our analysis at that time.

Moving on to BHConnect, mainly, we wanted to flag today for the Legislature that we will expect to see some savings in the May revision proposal relative to the Governor's Budget.

This is because Governor's Budget assumed that a couple elements of BHconnect under DSS, namely the joint home care visits that will be taking place as well as the activity funds were assumed to begin implementation in January 2025. As you heard from the Administration, that has not yet happened. We're now looking at more likely July implementation.

Therefore, we should expect to see not a huge amount but some savings reflected for those elements at the time of the Governor's May revision. Thank you and happy to answer any questions. Thank you.

Department of Finance Kiachon Department of Finance. No additional comments. Thank you. Any questions? Senator Menjivar.

Just some clarification on the activity funds initiative. And you were describing the difference between that and the strength space. That's more self determination approach. This is not a self determination approach. Then the activity funds initiative.

Sorry, it's not built on a self determination model. That's correct. They have to meet the criteria that's established. So be under the age of 21, have age out of the child welfare system and be under the age of 26. And they have to have a diagnosed behavioral health condition.

Be at high risk for a behavioral health condition that's still being assessed through a diagnostic process, but who have been determined to need a service by a licensed behavioral health professional.

This is where the advocates want to learn more flexibility. Was it on this one?

If I can just add. I just want to distinguish that the activity funds that we're talking about under BH Connect are a medi Cal program administered by dhcs. So they're really focused on medical necessity, which is the criteria that you were hearing about.

The strengths building program that we were talking so much about with respect to the child welfare rates is up to 500. That's the one that implements. Yeah. July 12027. And is the self determination model that is separate. There will be some degree to which the can work together well to provide even more opportunities to families.

But they are distinct.

Okay, thank you for the clarification.

Let's go ahead.

Madam Chair, thank you. So how would the Department ensure that the administrative rate offered to foster family agencies in a tiered rate structure adequately supports the cost to provide services by.

Regulations and contracts under the tiered rate structure? Under the tiered rate structure, the administrative rate for children that are placed through ffas is also based on the tier. So there's a tier one admin rate and then tier two is higher to support those kids that have those higher needs. And then tier 3 and 3 plus.

That's how it works under our current system. There's an LOC level of care system right now and the admin rate goes up with each of the four level of cares. And there's a higher admin rate for children that receive intensive service foster care.

The difference is under the tiered rate structure, the minimum rate that children will receive is equal to the highest LOC under our current system. So everyone goes up to at least LOC4. That's equivalent to tier one under the tiered rate structure. And then tier two is equivalent to the intensive services foster care rate.

However, as Director Troia noted, the distribution of youth among the tiers is based on a validated functional assessment of their needs and strengths. And using that assessment tool, we predict that many, many more youth will be within tiers 2 and 3 and 3 plus than are currently within our intensive services foster care system.

Which means the FFAs will be receiving the admin funding that's really commensurate with the higher level of needs of a larger population of young people. Also, there isn't any funding commensurate with tiers 3 and 3 plus for children that are in family homes right now. Those rates are really tied to the STRTP rate.

And also as Director Troia noted, there isn't any funding available to support youth with that really acute level of complexity of needs within a family setting. But under the tiered rate structure there will be and there will also be higher admin funding to support those higher level of needs.

So the right sizing of like how you Fund children based on their actual needs and then tying admin funding to that right sizing also means that the FFAs will receive commensurate funding to support the youth that they're actually supporting.

Thank you.

Thank you.

Seeing no further questions, we will move to issue number seven, Foster Family Agency Closures.

Thank you very much again, Jennifer Troya on behalf of the Department, your agenda describes the insurance coverage related changes that have been impacting foster family agencies across the state and poses a number of questions for us.

CDSS has been working on several fronts along with our key partners to take immediate steps to prevent disruptions in placements and services for children and to identify options for longer term solutions to potentially support the stability of foster family agencies. In response to the specific questions you posed, as of April 19 FFAs have closed.

For seven of those FFAs that closed prior to March 2025, there were a total of 49 resource families who ported their resource family approval. So they moved their approval from the FFA they were with to another FFA or to the county. These FFAs supported a total of 61 children in those 49 placements.

The numbers associated with the two FFAs that closed in March 2025 are still being determined. This means that it's essential to emphasize that the children who were in those placements when the FFA is closed were not disrupted by the closure of the FFA.

The FFA, the approval of that family moved to the county or another FFA to help prevent disruptions in placement and services in the event that there are further closures CDSS and our partners have been surveying FFAs about their insurers and providing technical assistance to support FFAs.

Our licensing division requires FFAs to notify the Department 60 days in advance of any closure so that we can work together to identify the needs or challenges prior to the closure and to ensure that there are no placement or service disruptions to the youth.

While there haven't been any placement disruptions to date associated with the closures, I think it is also important for us to acknowledge that we continue to hear from many more FFAs about the potential for a much larger number of closures and the stress and pressures that they are under due to increases in the rates that they are now paying for insurance.

It's also important to acknowledge that if the rate of FFA closures did increase significantly, it's possible that there would be challenges with counties or FFAs being able to continue absorbing and supporting the resource homes in the way that they have that I would describe has happened to date.

You also asked about the connections between the current interim rate structure, the tiered rate structure, and the role of FFAs. I think this will cross over a little bit into the conversation that we closed out the last issue with.

Under the tiered rate structure, to reiterate, all children who are assessed as having the urgent needs that are preventing them from benefiting from school, social or home environments would receive immediate needs needs funding to address those needs. We expect that to be about a third of children and youth in foster care based on our early analysis.

Under this model, FFAs and STRTPs will be able to become certified immediate needs providers and to serve a much larger population of youth than they do today. Tailoring services to meet the needs of children who are placed in the home of, for example, relatives and extended family members.

The difference being in today's system for the foster family agencies to support them, they usually will be resource families who are approved by that foster family agency. Under the tiered rate structure, they can be immediate needs providers to serve any child in any placement.

The expansion of community services will require us to have many diverse types of immediate needs providers, and FFAs are likely a key part of that expansion.

For those youth who are placed in FFAs under the tiered rate structure at as the Deputy Director was referencing, there's already separate funding to support the administrative costs of children who are placed through the FFA and they will be based on the tier that the youth is assigned to.

You also asked about the concerns that providers have raised regarding the sufficiency of the interim rates. And I will acknowledge that the Governor's Budget does not include any proposals to change these rates at this time.

Your agenda also notes that there's legislation, Assembly Bill 2496 that requires the Department to continue work that we've been doing to coordinate with both the Department of Assurance and a wide variety of stakeholders, the providers, the counties and others to and to share information with the Legislature related to options for making insurance available to ffa.

So in the short term, the measures we took were related to the expedited ability to do the porting that I talked about in the event that there was a closure.

But there is a longer term conversation here that we are also having about what are the potential solutions to the larger crisis and the insurance increase, the increases of costs.

We have held a series of meetings with the Department of Insurance who has been very engaged partner in addition to the California alliance of Child and Family Services, the County Welfare Directors Association, county Child Welfare Services agencies, the chief probation officers of California individual providers and with insurance associations, consumer attorneys.

We're working to coordinate soon a meeting with the reinsurance market and we will in this month or early may be coordinating a larger meeting that will pull all of those folks together.

So we've thus far had sort of more individual conversations and listening sessions, but we will also gather everyone on altogether in a larger meeting to talk about the solution planning.

We will be reporting to the Legislature by the time of the May revision in mid May related to the outcomes of those conversations and what it is that we are hearing. A few of the things that our partners have been doing that they're sharing with us already.

Just as a preview of that information, the alliance sent out a survey to FFAs to assess the impacts of those insurance costs and we're expecting those results from them. CWDA surveyed counties to assess liability insurance coverage amounts.

The alliance is also conducting a feasibility study related to the possibility of creating a risk pool to provide a more sustainable solution to the insurance challenges that are facing FFAs.

CDSS and the Department of Insurance have been exploring how limits or sub limits in insurance policies are used in the medical malpractice arena and how that relates to litigation to see if there are any parallel relevance opportunities related to FFA insurance issues.

CDI is also engaging with other states through the National Association of Insurance Commissioners to discuss the impact of these issues as it's being seen in other states. We do understand that this may be a national issue. I think that Works through most of your initial questions.

Happy to take any additional questions or follow up after the rest of the panelists had the opportunity.

Thank thank you. Want to welcome Brittany Lucas, Chief Financial Officer from Redwood Community Services. You may begin.

Good morning. Thank you for giving me the opportunity to speak today. I'm Brittany Lucas, the Chief Financial Officer of Redwood Community Services, a Member of the California alliance of Child and Families Agency and Services. I'm here to describe the severe financial hardships we are facing due to the recent and drastic increases in our liability insurance premiums.

We operate three foster family agencies in three rural Northern California counties inclusive of intensive services foster care. We were one of the agencies not renewed by NIACC for our liability insurance. After 20 years of membership.

We were notified on August 8th of 2024 with only weeks to make our decisions to keep our FFAs open, strategize how to survive it and acquire insurance coverage before October 6th. Affording our current liability insurance has caused a financial crisis. Our insurance has quadrupled to 401% increase.

Three months after we had negotiated our contracts that amount to more than 95% of our annual funding, our insurance increased from 215,000 to 863,000, nearly a $650,000 increase. This increase has placed a substantial strain on our financial resources affecting all aspects of our operations.

To address these challenges, we have been working on proposals to increase rates and have decreased operational costs in all feasible areas. Additionally, we're experiencing families dropping out of the certification process and families have left. The agency are no longer fostering children. We're doing all that we can to survive this while holding our mission and values closely.

Truly barely making ends meet. My request is to support the bridge funding of 47 million over the next two years until the tier rated structure is implemented in 2027. This funding is crucial for us to continue providing essential services to the families and children who rely on us.

In conclusion, our leadership was faced with a desperate and dreadful situation. The insurance crisis for organizations employing FFAs has created an unprecedented financial burden on our organization and others like it. We need your support to bridge this gap and ensure that we can continue to serve our communities effectively. Thank you for your time.

Thank you. Anything from the LAo? Anything from the Department of Finance? Thank you. Any questions? Senator Menjewar Director.

I mean you hit it on the nail right? FFAs are a key part of the expansion and necessary and I worry and I think some numbers I've gotten that nine FFAs have closed in the next two years that could Double really diminishing our infrastructure as we implement historically wonderful new rate reforms in 2027.

And the ask here, I know it's a small yet big ask, 47 million. I know we're dealing with a lot of things under especially Health and Human Services, but this small investment is necessary because I think in two years that's going to increase. Well, not even.

You won't even have the opportunity to come back and ask for money because they're going to be closed. I implore the Administration to take the situation seriously because this is a dire situation. We need FFAs and I know that it wasn't disruptive so far, but it's not sustainable for the next two years. Not sustainable whatsoever.

I don't think this is something our counties can take on for the next two years and I think again can get into a situation where it will be disruptive for the kids in the next two years. So this is really serious.

I think it should be part of the May revise because I'm happy that two years ago this body, the Subcommitee, led efforts to do a COLA 25 million or something like that. Two years ago that helped for the meantime. But we need to come back to this conversation. Department of Finance.

This is something that I hope gets calculated into the May revise because we're in two years. I'm still going to, we're still going to be on the Subcommitee and we're like, what happened? We could have invested two years ago a mere 47 million to address this situation.

Thank you, Senator Mentavar. So understanding the critical role foster family agencies, when will the Department be ready to present for review their short, mid and long term solutions to ensure that they have what they need to remain open and viable?

Some of the short term solutions are things that we have already implemented like the porting flexibilities that I described in expediting that process.

In terms of the long term options that we are receiving ideas from related to the Department of Insurance and all of the stakeholders, AB 2496 requires us to provide that information to the Legislature by mid May and we will do so.

Okay, thank you. And how, when you're looking at foster family agencies, how is it a Department accounting for or tracking or are you even tracking those agencies who have reduced, reduced or stopped taking placement of children versus just monitoring those that close or have their license removed?

So for example, if you had one that would normally take 60 and had to reduce it in half, how are you tracking that?

We are tracking the closures, obviously in terms of the FFAs that have reduced, we are seeing overall trends of a decreased number of use in FFA placements. I'm sure we could track that on the individual FFA level.

The only thing I'd add is that our community care licensing team, I think, is in very close contact with the foster family agencies related to the insurance. They've surveyed them regularly, but also in providing technical assistance.

So, for example, when we received information at the outset of these conversations from some foster family agencies related to insurers that they utilize that were not niac, we shared the information about who those insurers were and what the premiums were that people were paying with other FFAs to make sure that they were aware of who else was in the market.

So we are having regular conversations and providing the technical assistance that we can, recognizing that those longer term conversations about solutions are the ask of many of them. And we can't necessarily answer that yet. But where there is information to provide, we are.

And if they do talk to us about their capacity, capacity planning, that is a conversation that we can bridge between our licensing and our child and family services divisions.

Yeah, it might be a good idea to track those agencies that have reduced the number of children that they're able to accommodate, just to get a better sense of the gravity of the concern. So, for example, one of the FFAs in my community has had to reduce their staffing capacity to care for foster use by 50%.

And that represents 36 children that they're no longer able to care for. And so that information is extremely important when we're looking at the overall impact of some of these things. All right, well, thank you so very much for everyone who presented today.

We will now move to issue number eight, Child Welfare Services, California Automated Response and Engagement System.

You may begin.

Okay. Sorry, just making sure it's on. Hi and good morning. My name is Jessica Rougeux. I'm the branch chief of the Child Welfare System branch at the Department of Social Services and I sit as the project representative on the CARES Project alongside with my colleague Cynthia.

I'm going to do the introduction, then I'll hand off midway through our presentation to Cynthia. Thank you for the opportunity to present today. We are looking forward to sharing more updates with you about CWS CARES and our move towards actually delivering the system. It's been very long anticipated.

We'll be addressing your questions as well as we go through. So we are in the final stages of development for version one of CARES, which is very exciting. And the goal for version one of CARES is to replace our legacy system, CWS CMS that's been in operation since 1998.

But in addition to just replacing that system holistically, we are also looking at it as the opportunity to implement several key system enhancements or program areas for child welfare holistically.

That includes the implementation of the tiered rate structure for July 1 of 27, the Family First Prevention Services Act Part 1, functionality that will allow counties to draw down Federal rates through 4E for direct services if it also includes bidirectional interface with our eligibility systems for enhanced feedback back and forth between the two systems around foster care rates.

It brings in statewide functionality for adoptions and for our resource family approval process statewide and gives a single statewide system as well as becomes the basis for our financial management system for Child Welfare Services. So these are large key initiatives that have been critical to child welfare reform and improvement.

Systemically we are looking forward to bringing all of those things and then they're tied together in doing this work. The project has requested 25.6 million in total funds with up to 92.9 in additional funds subject to provisional language for fiscal year 2526.

The BCP includes three new positions for the Department and they will aid us in effectively getting through the final development and statewide implementation and adoption of CWS CARES by all the current user base and a number of new users that will be included.

It will also support compliance, data quality monitoring and allows for the collaboration with counties, both child welfare and probation and tribes in the decommissioning of external systems that are duplicative that have been running in parallel in our transition to develop the system.

One of the things that was identified in 23 and 24 is that we had an increased number of user feedback, increased volumes of user feedback coming in after initial development was occurring. And the project looked at how we could resolve that, increase user feedback and engagement and change some of our development activities.

And we shifted to what we are calling holistic design, which is rather than developing in an isolated milestone by milestone, it moves all of the work together into a larger grouping so that you can look at an entire business process area.

So you could look across case management, for example, from the moment a child comes in the door through the end of the case, you can look more broadly at activities that happen. And we did design and development in a different methodology to improve that.

We also increased the amount of touch points where there was user feedback and stakeholder engagement in that process so that we could develop a higher quality product and reduce the amount of feedback long term. This shift in holistic design also caused a change in our overall schedule that was adopted last July.

And as part of the move into question two regarding the federal financial enhanced participation rate. As we shifted into holistic design, that shift in schedule became one of the areas that our federal partners had said they would like to see us move further out with a project demonstration.

And so we have a project demonstration scheduled for them in May, the week of May 15 this spring, to show them how we have implemented the holistic design activities, how it has improved both the rate and the quality of the product that's being delivered, and how it's increased the engagement and the feedback loops with our partners.

After that project demonstration, we anticipate within 60 days receiving feedback from our federal oversight partners on the return to the enhanced federal participation rate.

All right.

And then I would just say that in the final part of your question about how are we addressing the increased General Fund costs, currently we have been operating with enough cost savings to be able to offset the increased General Fund costs until we are returned to that enhanced participation rate.

And that we can right size our federal claiming. But the Administration does not currently have a proposal that we are ready to present to offset the potential loss of federal funds if that were to continue beyond July of this year.

No, I'm the one having the problem. Hi, Cynthia Tucker with the Office of Technology and Solutions Integration.

So with regard to the underspend in the previous year, so as Jessica had touched on, we had identified in testing in early calendar year 2023 through early 2024 that we had disconnects in some of as we were looking at areas by service, service, service.

The job of child welfare is very interdependent across all the different service areas is what we call them. You know, pieces of functionality. It's far more interdependent, it's not transactional, it's not linear. Families aren't linear.

And so when we started finding these disconnects, when we got our user feedback, it identified that we had some rework to do in order to close the loop because if we didn't, the functionality really wouldn't be operational for the county user. And so with that, it caused some delay in some of the work in 2324, in 2425.

I'm making sure I get the dates right. So this is when we did our updated schedule and actually implemented holistic design. It took us a couple of months to refine the process, get people understanding what it was. But that I believe kicked off in September, September, October with the counties of last year.

So with both of those, it moved, it moved completed work later in the schedule. So now a lot of this work is moved into the 2526 scope as well as all the original work from our special project report.

But it also includes the development of of the new tiered rate structure so that it will be ready for July 1st of 2027. Getting my dates right. But it also includes, we are actually very thrilled, the development of the core system for version one to go live in October 2026.

That build will be completed by the end of November this year. And so with that, it will end up going through the final quality assurance. It'll end up going through a number of user feedback with counties, tribes, CDSS program, et cetera, the ultimate users. And we'll be doing all of our development of our training documents, final.

I'm not saying final, but a lot of the county readiness activities, there is a lot of work in order to prepare, not only finish the system, but there's a lot of preparatory work that our counties and other program partners have to do in order to be ready to move over to CARES from the legacy system.

So all of this, a bulk of it, except for the actual implementation, actual training, all that preparatory work is really occurring in 2526. So with the delayed, not delayed, but with the reschedule, we had to move things in as well as the original planning. It's one of the reasons why we are. We don't believe we've overestimated.

Thank you. Any comments from LAO?

Yes, again, Angela Short with the Legislative Analyst Office. Our office recently published our analysis of the CWS CARE project and we wanted to highlight a few of our recommendations based on that analysis.

Foremost, as described in your agenda on page 39, our office recommends changing the funding approach for the project for 202526 specifically to lower the initial funding appropriation and rather increasing the allowable augmentations, thereby subjecting a larger amount of the proposed grand total for the project to satisfactory progress and greater legislative oversight.

Importantly, we are not suggesting to change the total amount of funding available, rather just lowering that initial appropriation and increasing the allowable augmentation as a mechanism to increase legislative oversight of the project.

Given the changes and the revamped schedule and the significant work that is scheduled scheduled to be completed in 202526 and all of the related legislative priorities such as implementation of the tiered rate structure.

We have discussed this recommendation with the Administration and we plan to continue working with them to see if we can find a specific funding amount that would allow for that greater level of legislative oversight, but importantly without unintentionally impeding the project's progress.

So we are will continue to work with the Administration on that specific on those specific numbers.

Additionally, we recommend the Legislature ask the Administration to keep the Legislature closely informed over the next few months as the Federal Administration for Children and Families makes its determination related to returning the project to the enhanced federal financial participation rate and beyond just the federal financial participation issue generally.

We do also recommend the Legislature continue to closely oversee the project, such as through the ongoing monthly meetings between legislative staff and project team staff.

As noted, several legislative priorities do depend on the completion and there will be many major milestones coming up in the next few months and this budget year in order to pave the way for the launch of version one in October 2026. With that, happy to take any questions. Thank you.

Thank you. Department of Finance.

Yes, thank you. Just confirming that we are continuing discussions with LAL and their recommendations as to what may be feasible, not feasible, what concerns we have and where we may come to an agreement. Thanks.

Thank you.

Senator Menjivar.

This is really frustrating because last year you sat here and said we're going to spend all the money even though the year before you didn't spend all the money and we're here again for two years running because you underspent the money. $45 million were unspent. Do you know how much we just talked about for the FFAs?

$47 million that could have been spent on FFA's last year and all the cuts we did last year we saved a lot. I have no faith that you're not going to underspent again. This is DSS version of the High Speed Rail. It's A complete disaster.

To get to the final point, and the final point is necessary, we need the system. But we have completely screwed our pathway to this program. Completely.

So I'd like to hear why we should have faith that you believe that the Federal Government won't continue to withhold funding if you failed to meet the guidelines for the Federal Government and they pulled back their funding. What assumptions?

Why are we making the assumptions that you think you're going to meet the guideline or the milestones and then you're assuming under this allocation that you don't, we won't need to subsidize further because you think the Federal Government is going to come to the table and next year, potentially we have the potential that you're gonna come back and say we need more money because the Federal Government did not give us money.

And then I'm gonna lose my lip completely on that because I'll be three straight years. I just need. I don't, I don't have faith. I don't think we should. Madam Chair. I don't think.

I think we should put guardrails where they have to spend the unspent money first before they get more money that we don't, that we decrease the amount of money they're asking for and they come back to make sure until that's spent for them to spend more money.

But this lack of us just, I mean, Mamcha, I think you asked this question, why are we still in this situation that we owe. Overestimate, underestimate how much money is needed that puts other programs at risk. Then we come back the next year, oops, we made a mistake.

But the oops is a big oops because it hinders other programs. So this system's, this longest running IT program has really upset me in the past three years of our lack of ability to get this right.

And additionally you are at the finish line transitioning to a new design, transitioning to this holistic design, making we'll say we'll meet the October 26 deadline, but making it even difficult or making it even harder for me to believe that we're going to get to October 2026 when the changes are happening so late in the game.

Department of Finance, I think this was a complete mismanagement of money, mismanagement of accountability on our end. Our fault too. This is a three party fault situation. But I would say fool me one, shame on you, fool me twice, shame on me.

And we're at that point now and I don't think we should move forward with an item that's going to give them another chance.

Thank you, Senator Menjivar. Senator Grove.

So recently I had another agency in my office, and something that the state was working on, the state hired their own people, and it was a 750% increase in the cost, taking it away from the private sector, who had the expertise, the industry. And I feel like that's the same thing with you guys.

You're not industry technology experts. I don't know who you're hiring or why you brought them in and who verified these individuals, but I could give you the cell phone number for Joe Gregory at Grapevine MSP, and he could probably solve your problem in 30 days. He's that smart. So I just.

And I'm not trying to promote somebody else. I'm being sarcastic, but I just think that I agree with my colleague that sits on this Committee with me regarding this. We sat here last year and the year before her as the chair, she being the chair, and you promise this, and still you.

And it's this wonderful thing, and it's going to track this child from this point to this point. You know, everything's going to be updated automatically. And every contact that's made or however many times we've contacted this child or what their issues are is going to be documented in this system.

These children that you're talking about are going to be 40 years old before you finish this project. And it's just unacceptable that you guys would allow that to happen. And I applaud my colleague from the other side of the aisle. I mean, we push back on you guys all the time for these ridiculous requests.

You don't spend the money, and then you also. I don't think you have adequate people working on this project, or you have people that are just delaying this project. Kind of like a veterans facility that I have in Bakersfield that gets $500,000 a month to not provide veterans treatment.

And I know I'm going off the rails on that, but, you know, but they don't stop the contract. You just keep spinning the money and government keeps funding it. When are you going to say, like you said, the project's gonna be on pilot for 2026. Is that correct?

It goes. I'm sorry, it goes live October of 2026.

Yeah, it goes live October. So the end. When's the pilot start? The pilot starts October 26th. No, that's.

The production pilot would begin in, I believe, late August, early September.

Okay, what's the delay? What's the delay? You started this four years ago. Five years ago. Five years ago. 5 years ago for a computer program.

So it's the entire child welfare information system for the state. The legacy system cannot be replaced in pieces. It has to be replaced completely. And it's been very complex to build along under the federal CCWIS Regulations. It requires many bidirectional interfaces and that we assume other external systems. It's a complex road to do all of that.

Have it stood up and tested and rolled out to all counties. Additionally, there have been a lot of new initiatives such as the tiered rate structure, other things that we are building in simultaneously where we need guidance and stakeholder engagement.

Part of the structure of the CARES project is that it includes the county Welfare Directors Association as part of the governing body and the counties so that we are doing this in alignment.

So it's not just a system that's built and pushed out to the counties, but it's built with them to meet their business needs, that it's tested and that when something that changes in automation is implemented, it's implemented in a way that is usable across the 58 counties, both for child welfare and probation and for our 4e tribes.

One of the challenges there is there's a difference in business practice from county to county. And so developing a single system for that is complex. It's not transactional in nature, and there are many interdependencies.

So I would say the sheer number of partnerships, the design and development of requirements, and then the build and test of all of these functionalities. And as we build and test the functionality, functionality, it sits in a base waiting for that large waterfall release.

So the delay is not that it's not being built, but it has to be released all at once to avoid a child safety situation with data being out of sync across the state and make it manageable enough for the child welfare agencies throughout the state to implement statewide without critical failures.

I know I wasn't here, but I read the data, the committees that I, or the testimony they missed on the panels before you. We are failing our child welfare system now. So for you to say that this delay could possibly, you know, not have one child protected.

There are thousands of children not being protected just because of the way this, not this system, but the way the child welfare system works.

So I just, I look at things through a business lens and I know you're not going to like this comment, but I mean, we could bring Elon Musk in here and he could fix it or the people that work for him. It's ridiculous to think that this is taking five years in order to implement this.

All this money that we allocate to you that you don't spend that other people and other agencies, medically fragile children, we heard that last week, they're not getting taken care of. They could die in the wheelchair if something doesn't happen and they don't have somebody to care for them at that moment. They have to have continuous care.

They. They're not getting the funding they need. And you guys are withholding these dollars to be spent on a computer program that you've been working on five years that is probably outdated by the time it goes into implementation in 2026. I'm with my colleague, actually, probably more. I'm with my colleague. We agree on some.

You know, this is great that we sit on this Committee because there's a lot of things that we agree on. But not Elon Musk, Senator. Not on this. Not Elon Musk. Okay, yeah, she's not with the Elon Musk thing. I shouldn't have thrown that out political.

But the bottom line is I just want to make my comments very strong that this is completely unacceptable. We tout that we are the fifth largest economy. We tout that we're like a nation state and we can compete with other nations. And it's five years to implement something to protect children. It's absurd. So thank you.

Thank you, Madam Chair. Thank you.

So just help me understand something, as this is my first hearing on this. Is this something that the Department is creating and building, or are you contracting out with private entities who are supposedly experts in this area? How is this working?

I would say it's a mixture. So statute put into place a three pronged structure. The Department is the sponsor and has representation there from my branch in the Department, we partner with the Office of Systems and Technology Implementation through agency as our IT partner in infrastructure.

And then we have primary contracts out with major contractors for the bulk of the workforce in the technical space. So we have system integrator and technology. We have business expertise, expertise and analysis, and we have back end development encoders. So the bulk of that technical infrastructure is through experts in their subject matter areas.

The bulk of the work of the development, et cetera, is via contracts with private sector contractors. So we need that expertise on the platform and on a variety of technical infrastructure things. That is why we contract out for it.

And I might have missed this in your comments, but how much funding is being left on the table by not having a system that meets requirements for federal claiming at this point.

So the CCWIS regulations, at the enhanced rate, it's a 5050 split if we do not meet the CCWIS regulations. The regular rate, the admin rate, it varies slightly based on our current discount rate, which has to do with calculations on how many children are in care. But roughly it's about 25 to 27% would be the federal share.

Okay, so.

And just out of curiosity, you have, you know, had funds allocated that have not been used over a couple of years, what is the rationale behind asking for more money instead of just using. Starting off by using the money that has already been allocated?

I think. Kia, can we have assistance?

Sure. So I think I'll just first start out by saying that funding for the project has sort of been parsed out over the last couple years. So there's an amount that's appropriated and then there's the rest of the funding. And the for the budget for that year is actually just held in provisional language.

And so I would just note that over the last couple years, the Department has fully expended the amount that has been appropriated. So it's really. The savings is coming from the amounts that are held in provisional language.

So when I see something that says that they've underspent 54 million million and they're projected to underspend by 30 million, that's not money that we've actually given to them. Great, so I'll try to explain this again.

Yeah, so if we haven't given them. That money, where is that money? They have a budget based on like, all the activities that they need. And it's consistent with like, what's in the special, the last special project report each year. So they have, you know, they identify a total budget. Part of that budget is actually appropriated.

The remaining is held in provisional language and subject to like, progress demonstration before they can access that. So they've been fully expending their appropriated dollars. It's some of the savings is the dollars that are held in the provisional language. So those amounts aren't actually appropriated. So they have not underspent the money that they were.

If you are looking at their total budget for that fiscal year, which includes both the appropriation amount and the amounts held in provisional language, then there is some underspending from that perspective.

So the provisional amount, where is that money? Because, I mean, we're under the impression that they've been given all of the funds that, you know, have been appropriate. So where is that funding?

That funding we have to do like a JLBC notification and then we have to like, meet the requirements of the provisional language. And then at that point we can give them that money. So why don't we do that instead of going and getting more money?

So I think that's part of the LAO's recommendation and that's what we're having ongoing conversations on. I think there's some concerns about that we need to continue discussing, but there's some concerns about timing of when that appropriated amount runs out and when we would have to come forward to do a JLPC notification.

But there's also some complications with how to demonstrate progress given that it would come earlier in the process than when we typically would, where we've done user testing and CDT has done an assessment following that user testing.

So all part of the conversation that we're having with lio. Okay, so, but you understand what we're saying up here, it makes absolutely no sense if we've appropriated them a certain, and we voted for it in the budget for a certain amount of funds. Our belief and our expectation is that that's the funds that they've gotten.

And so when we hear that, zero, they've underspent, they underspent and now they're asking for more money, that doesn't really make any sense. And so if we have the funds, we should figure out how to give them the funds that we have already appropriated before we start saying we're going to give you more funds.

So thank you for clarifying that. Want to thank you all so much for your time. We will now move to the next issue. Item item number 9, Child Welfare Fair budget change proposals.

Hello again, Madam Chair, Members of the Committee, Angie Schwartz, Deputy Director, Children and Family Services at the Department of Social Services. With regard to the overview of our 33 budget change proposals, the first pertains to the first phase of the foster care tiered rate structure.

State operations requesting 1.8 million General Fund in FY2526 and 1.7 million ongoing for six permanent positions to support the first phase of implementation of the permanent foster care rate structure. Some of these positions will support the Department in measuring and supporting cans and supporting counties to ensure fidelity to the cans and also providing that technical assistance.

In addition, the final statutory language for the rates implementation requires inclusion of those with lived experience, including tribal representatives, in the development of the permanent rate structure.

The requested resources will support the coordination of access to lived experts and is imperative as we cannot effectively promote equity and improve how our child welfare system engages children and families without the participation of those who have lived it.

With regards to the second BCP related to ongoing funding for foster care placement services requesting 1.2 million General Fund for FY2526 and ongoing for six permanent positions to address the workload associated with developing a congregate Career Continuous Quality Improvement Network.

The funding provides permanent support to counties, providers and other stakeholders regarding STRTP standards and will address the quality of care concerns of youth within congregate care facilities.

Also support cdss in providing technical assistance to counties as a component of the Department's response to unlicensed care and unlawful overstays and shelter care and address the workload needs by developing and implementing tools to measure the quality of services provided by counties and congregate care providers, including creating and analyzing data reports, developing, administering county self assessments, conducting qualitative case reviews, developing recommendations, and managing intensive provider and county engagement.

These resources will additionally support the integration of the above activities within the AB28 2083 system of care Technical Assistance Framework and the Joint Resolution Team. The final BCP pertains to the California Hope for Children trust account request.

The Department requests 374,000 General Fund for FY2526 and 364,000 ongoing for two positions to implement the California HOPE Opportunity Perseverance and Empowerment Program for eligible foster children as required by SB242. The HOPE program ensures children in foster care who are unable to reunify with their families are provided necessary financial security to help them establish Independence and adulthood.

The trust accounts will decrease the number of children in foster care system who become homeless and will provide more educational opportunities which they would not otherwise be able to afford. The requested resources assist in identifying eligible children, assigning HOPE account numbers, transferring authorized information to the State Treasurer's office and creating reports for eligibility, communication and outreach. Happy to answer additional questions.

Thank you. Anything from LAO?

We have no concerns to raise with these proposals.

Thank you. Anything from Department of Finance?

No additional comments.

Well, thank you all so much for presenting on issue number nine. We will now move to public comment. You will have one minute for public comment per person. Thank you.

Is this on? Oh, it's on. Oh, okay. Hello, Madam Chair. My name is Yvonne Cottage. I am a Member of CCPU, the union that represents home based family child care providers, educators like myself.

I have been providing early care and education for I have provided early care and education for over 200 families over the past 18 years and I stand before you here today representing them as well as my union brothers and sisters and the staff that my small business employs as well.

The Governor has made a commitment to adopting the new rate structure, recognizing the actual cost of care. But we've seen little movement at the negotiation table towards this implementation. Now, the hold harmless or enrollment versus attendance has been enveloped into this cost of care.

And this is the only thing that safeguarded the child care workforce and provided stabilization for the childcare industry since COVID It is important, it is urgent that the state adopt and implement a new rate structure before July 1 is called for in statute, before more providers close their doors, before child care employees like mine lose their jobs, and before more young children lose the opportunity for positive early educational experiences. Thank you for your time. Thank you.

Hi, my name is Terry Rivers. I'm a child care provider in Long Beach. I've been a child care provider for 20 years. Now, I can stand here and I could talk about what we offer, what we do, and how we're not really being paid the true cost.

But I really want to hit on some remarks that were made. If they're holding on. I've never seen a federal funding be saved. And that's the only thing that the California Department of Social Service kept on mentioning is savings. When are we saving money that's supposed to be used for that year, that fiscal period?

So everything is being saved. The other thing is if I just feel like we're being sabotaged, we're being sabotaged as childcare providers. The whole role. I know you guys are professionals. I know you guys speak intelligently.

But when it comes to the funding and when it comes to what we need, you guys been in your position for this for two years and nothing has been done. They've been in their position for five years. I feel like we're going to be sitting here and they're going to be telling you guys the same thing.

And then you're talking about bargaining. She mentioned the a federal law, and you're saying, well, even though it's federal law, this is something that's back at the table. This is something that we're going to talk about. As far as bargaining, that's preposterous. That's crazy. I don't understand any of that.

We're sitting back and we have to be quiet. We have to be quiet here while you guys speak. We have to wait to the end of all of this stuff that we just heard with everything they're saying. It's like if. If you're willing and able to do something, then you do it.

If you're willing and not able to do it, then somebody should train you. But if you're willing and able and just won't do it, then you're a sabotage. And if you guys are saying you're willing to do it and you're able to do it but yet you're not doing it, you're sabotaging child care providers.

You're sabotaging our positions as providers, as people that take care of these children. No further.

Thank you, Diana Boyer on behalf of the County Welfare Directors Association, we appreciate as we prepare to implement the tiered rate structure. We note and we agree with the Administration on the importance of investing in the pre implementation activities related to accurate and timely cans and child and family team meetings.

We also appreciate the proposed investment of $1.2 million General Fund for model fidelity. CWDA requests additional funds be invested for Model Fidelity directly into our statewide training system to provide targeted training to social workers.

We also believe an additional $19.5 million General Fund is needed to fill the funding gap that exists currently in the existing workload for cans and cfts and to address new mandates that are going to be in effect start starting this July 1st. Separately, the Governor's Budget provides partial funding to implement AB 2906.

This is a Bill that requires counties to conserve a foster child Social Security benefits for their future use. CWDA supports this policy, but the Governor's Budget does not backfill counties for the revenue loss which we preliminarily estimate to be in the 4 to 5 $1.0 million General Fund range. Thank you.

Lastly, we also support the Alliance's FFA insurance proposal. Thank you. Thank you.

Lisa Wilkin, Child Development Consortium of Los Angeles, a center based and family child care network contractor being reimbursed at the 75th percentile of the 2018 market rate is insufficient and unacceptable, particularly since the hold harmless provisions are expiring in June. At the very least, we need a COLA for all direct service contractors.

We need a rate that reflects the significant increase in operating costs in the. Past seven years and reimburses us based. On enrollment with adjustments for attendance, which. Is the standard in the child care industry at large. The abandonment of care policy established by CDSS penalizes providers and contractors when attendance adjustments are applied. Thank you for listening to this very important issue. Thank you.

Good afternoon. My name is Valerie Denero and I am with Everychild California. I am here to represent over 1200 state subsidized contractors. We thank you for understanding the urgent. Need to fulfill the federal requirements of. Contract earnings based on certified enrollment and rates based on the true cost of. Care as outlined today.

Center based programs are not part of the collective bargaining process and they are in budget development for 2526 fiscal year. Without this information, these programs are going to be forced to making pretty harsh. Decisions which is program reductions and staff layoffs. We cannot wait for this. We need answers now. Thank you so much for understanding the urgency. Thank you.

Hello chair and Members. My name is Jennifer Greppi. I'm the Director of Parent Policy with Parent Voices California. I stand here today representing all of the parents who traveled from all over California to be here and the over 130 parents who wrote written comments to the Committee and the folks that are standing in the audience today.

We stand in solidarity with every child care provider as we demand that there be no cuts and no delays to child care. Parents and providers are tired of being asked to wait. We've been waiting on the no hope list for years, hoping to receive the call that childcare is available for our families.

Providers have been waiting for generations to be paid a worthy wage that represents 100% of the true cost of care that they're providing.

Until you're ready to ask the California billionaires to delay OR cut their 69 billion in tax giveaways that they get every year, no questions asked, we demand no cuts, no delays to child care, promises for slots and rate reform. Thank you.

Julia Forte Frudden, Senior Policy Analyst at the Child Care Law Center and a Member of the Early Care and Education Coalition. First, we want to thank the Committee Members and the Legislator for your partnership, dedication, and tireless efforts, over the past several years and now, to move this life changing and just policy forward.

Childcare providers are dedicated professionals who should be paid fairly for their knowledge, experience, and talent. Yet for decades, California has underpaid childcare providers who deliver publicly funded, affordable childcare. This upholds a racist and sexist policy with historical ties to enslavement.

For too long, the State's poverty level payments have harmed and taken advantage of childcare providers, who are mostly women of color, and many are immigrants. And as a result, 47% of child care providers rely on at least one public assistance program.

And this is happening when over 2 million children are eligible for publicly funded childcare, but only 14% are actually enrolled. That's why in 2023, the State made a commitment to change how it pays providers, based on the cost of care.

The state payments must cover all the costs needed to provide enriching care, meet state regulations, and operate a thriving business, and this must be implemented as soon as possible. The ECE Coalition's budget letter was submitted to the Committee, and we urge, respectfully, that the Committee include the Coalition's request in the Budget Act.

Thank you.

This is how we strengthen California's childcare and create more options for families. Thank you.

Hi, Esmeralda Martin-Singh, with the Low-Income Investment Fund in Build Up California. In addition to supporting the ECE Coalition's priorities, LIIF would like to highlight the need to ensure funding for high quality facilities for children and providers and also make sure that this funding is nontaxable. Thank you.

Thank you.

Hi, good morning. I'm Sara Salazar and I'm with Educational Enrichment Systems. We are a nonprofit early education agency in San Diego County, and I want to commend your commitment to ensuring that subsidized early education providers receive the true cost of care through the adopted alternative methodology.

As we move forward with its implementation, I strongly urge a bridge year in 2025-'26 to maintain the "Hold Harmless" contract reimbursement. I fully understand and respect the budget challenges California faces, as well as the shifts of federal Administration that we've seen.

However, I want to emphasize the urgency of upholding the commitments made to our youngest residents and to our families, and to the dedicated staff members that we have. Their future depends on it. Thank you so much.

Thank you.

Good morning. Kim Lewis, representing Aspiranet, and we are a foster family agency. On Issue 6, I would just elevate, we appreciate the Director raising that there was 1,000 folks participating in the stakeholder comments, but we think that could be even more impactful, if the agenda and questions posed were provided ahead of time, especially for our young people.

Regarding Issues 7 and 10, we, of course, support the $47 million for the FFA budget request. We would just note that our insurance went up $500,000 last year in December when we were renewed and non-renewed by NIAC, for lower limits and higher deductibles.

And we appreciate the comments that the interim rate is not adequate, and we maybe suspect that the TRS may not be adequate as well, given the increased cost of insurance. Thank you.

Thank you.

Hello, Elsa Jacobson with the Early Care and Education Consortium. Our members operate childcare centers in 47 states and D.C., including 483 childcare centers in California.

We're also a member of the statewide ECE Coalition, and we've seen the positive impacts of cost modeling in other states and want to share two quick examples to underscore the urgency of California's efforts to implement an alternative rate methodology.

In Virginia, reporters—providers—have reported that cost-based rates have enabled them to increase their subsidy enrollment, improve their financial situations, raise wages, and provide higher quality care.

And in New Mexico, provider participation in the state's Child Care Subsidy Program has increased an incredible 107% since the state began using a cost model to inform rates and also increase family eligibility for care.

So, this has increased childcare options for families, and we urge California to implement the alternative rate methodology to bring about similar benefits for families and providers. Thank you so much.

Thank you.

Good afternoon. Purva Bhattacharjee, with the California Alliance of Child and Family Services, representing over 160 nonprofit agencies across California that provide critical services to children and youth.

Regarding Issue 7 on the FFA insurance crisis, as our member, Redwood Community Services, spoke about, we urge legislators in this Committee to please support our budget request of $47 million, championed by Assemblymember Ramos and Senator Durazo, which will help sustain FFAs, while we work with CDSS and other organizations to find a longer term solution to the FFA insurance crisis, to help preserve placements of the 7,500 children that FFA serve currently.

For Issue 6, while we are excited for the new rate structure, we're concerned that the rates are insufficient, in part because they were developed using the current rate amounts that CDSS previously determined to be inadequate.

We strongly recommend that the cost analysis includes the increasing cost of services, the higher insurance costs, and the salaries of the social workers and program experts trained to support high-needs youth. Thank you.

Thank you.

Good afternoon, I'm Annie Patzold, and I'm here on behalf of Educational Enrichment Systems in San Diego. I've been a proud La Mesa resident for many years and in the childcare field for over 20 years. I'm here today to speak up for California's youngest children and their families.

The "Hold Harmless" contract reimbursement, created to help childcare programs during COVID-19, has been crucial in keeping programs open and supporting families. As the work continues to fix the current reimbursement system, I ask that you include a bridge year in the 2025-2026 budget to maintain these critical reimbursements.

We have a childcare workforce crisis, and contractors cannot revise their salary scales with one-time funding. Failing to support center-based programs will hurt working parents and leave children without the essential services, during the most impactful years of their lives. Let's stand together, ensure—ensure our families and children get the support they deserve. Thank you.

Thank you.

Good afternoon, Madam Chair. Carly Selzer on behalf of the California Behavioral Health Association. Appreciate the attention that was brought by the Senators on the dais around the issues our foster family agencies are facing.

As was mentioned, with insurance premiums skyrocketing and no viable alternatives, many agencies are at risk of closure, which, as was stated, would displace thousands of youth and overwhelm our county systems. Several have recently closed, including one operated by our member organization, Victor. These issues require immediate intervention from the state.

We urge the Legislature to support the 47 million bridge funding request, which is critical to stabilizing these agencies, ensuring continued placement, and protecting the wellbeing of the vulnerable children they serve. Also, echo our colleagues' clients around the need for cost analysis with a new tiered rate structure. Thank you.

Thank you.

Good afternoon, Chair. Emerald Evans with Grace in Child Poverty California. Regarding Items 2 and 10, we stand in solidarity with Parent Voices, CCPU, ECE partners, in asking you to prioritize paying providers. Childcare providers are essential to our economy and families, yet they are among the lowest paid workers in our state.

We stand with CCPU in calling for a contract that ensures fair wages and respect for their critical work raising the next generation. In addition, we would like for you to keep the promise for childcare spaces. The State must keep its promises to fund 200,000 additional childcare spaces by 2027-'28.

Families are still struggling to access care, and we cannot afford any delays. And lastly, target support for LA providers, childcare providers in LA who lost their homes and businesses in wildfires, need targeted relief to recover and reopen. Also, regarding Issue 10, we support the need of emergency bridge funding to prevent the collapse of FFAs.

We urge the Legislature to prioritize these issues in the budget and raise any additional revenues, as needed. Thank you.

Thank you.

Good afternoon, Madam Chair. I'm Elizabeth Espanosa, here today on behalf of Happy Trails for Kids, which is a nonprofit organization offering overnight camp and other educational and extracurricular activities, for children and teens experiencing foster care.

We greatly appreciate the Subcommittee's consideration of a one-time investment of $2.4 million to rehabilitate and reimagine a 135-acre property in Acton, California, recently deeded to Happy Trails by the County of Los Angeles, where a permanent site for the camp will be established. The Happy Trails program is the first of its kind in the nation.

It builds on our growing understanding of the—of how important extracurricular activities are in the foster care experience. It promotes wellbeing, belonging, and healthy childhood experiences.

The state funds being sought would help Happy Trails open its doors for the summer 2026 season and would directly contribute to a transformative—transformative and life changing experience for foster youth, as well as their caregivers. Thank you for your consideration of this proposal for investment.

Thank you.

Good afternoon. Josh Gauger, on behalf of the Santa Clara County Board of Supervisors, as a co-sponsor of Senator Cortese's SB 33, we just wanted to express our strong support for the California Success Opportunity and Academic Resiliency Guaranteed Income Program. Really appreciate the Committee's time and consideration on this.

Thank you.

Good afternoon, Madam Chair. I'm Heidi Kaiser, proudly speaking on behalf of Child Action and Thriving Families California. Our CBO deploys 127 million annually to provide subsidized childcare for over 16,000 Sacramento children and their 8,500 plus families. Yet today, 4,000 children in Sacramento remain desperately waiting for childcare, not due to lack of need, but because dedicated providers cannot sustain their operations, with these crushingly small reimbursement rates.

This crisis forces parents to choose between work and childcare. We stand united with the ECE Coalition. Prioritize fair pay for providers now. Let's unlock access for families, empower educators, and build a state where every child thrives.

Thank you for your time.

Thank you.

My name is Shanae Lasalle, and I am an advocate with Black Californians United for Early Care and Education Lift Every Voice Campaign, a coalition of dozens of black early care and education providers, who demand to be heard.

I have been an early educator for over 30 years, providing a brand of loving care that is unique to black early educators. Strengthened by my ancestors, who were our nation's first childcare providers during the Chattel slavery, I am continuing this legacy of nurturing, raising, educating all children.

But as a black early educator, we are paid an average nearly a dollar less per hour than our white counterparts, and up to $3 less than when we are Director or Lead Teacher in a center-based care. Rate reform can be addressed program funding that reflects the true cost of care, with thriving wages for black women and their peers.

Rate reform can fund salary scales driven by a combination of years of experience and education and training. The true cost of care must be included in next year's budget. Thank you.

Thank you.

Hello, my name is Linda Asato, and I'm with the California Child Care Resource and Referral Network. On Issue Number 2, want to just speak to the urgency of the alternative methodology. We ask ourselves how long and how much should childcare providers endure for others to go to work, build assets, go to school.

And so, we just want to log our support for that urgency and also for the commitment and no longer delay on the slots for families.

I also want to speak to Item Number 10, on the childcare emergency response with the RNR's childcare resource and referral agencies—be able to protect, support, preserve the childcare infrastructure, and to be able to fulfill the responsibilities in the state—childcare state disaster plan—and be able to be funded to do that, so thank you.

Thank you.

Sara Bachas, with Children Now, an ECE coalition partner. Thank you so much for your leadership to ensure that next year's budget justly compensates our ECE providers and educators and lifts up our most vulnerable and disadvantaged families with children, as they continue to weather the uncertainty before us.

We support the Legislature setting in statute a transition plan with expectations that ensure that the new rate system is based on livable wages and truly associated—in all associated cost of services, to ensure that we rebuilt this essential care program, that provides resiliency and economic stability for our families, children, and providers. Thank you.

Thank you.

Hi. Esperanza, with Seneca Family of Agencies. I am here to speak on the importance of FFAS and to support the 47 million budget asset provides bridge funding to FFAs. Seneca provides a wide range of Child Welfare Services, including intensive service foster care, which provides specialized services to youth with intensive needs.

ISFC is a crucial program in helping youth step down from short-term residential therapeutic programs, or STRTPs, to community and family-based settings. Seneca's liability insurance will end this July, and we estimate our premiums could increase by 1.5 million.

FFAs are crucial in ensuring the excess of the tiered rate structure, which works towards the state and provider's goal of keeping kids with families. We ask that you support the FFA budget ask and to continue to engage FFAs, during the rollout of the tiered rate structure. Thank you.

Thank you.

Good afternoon, I'm Elizabeth Phillips with Catalyst Family. We are a statewide nonprofit organization, operating programs like Catalyst Kids and Catalyst Community, and I wanted to thank you for your dedication to improving California's childcare systems. These programs are essential to families across the state.

But right now, the delayed implementation of the alternative rate methodology has perpetuated financial strains on our field, including our programs and particularly, our Alternative Payment Programs, like Catalyst Community. We urge a clear implementation timeline and increased administrative supports to, ensure quality, equitable services for all families, so we can continue to budget and sustain our operations.

Likewise, our licensed programs, Catalyst Kids, faces rising costs and inadequate rates for our teachers. This has resulted in fewer teachers accepting our offers, particularly in our infant toddler programs, and which has then delayed the opening of our infant toddler classrooms, resulting in slots going unused, and it's reduced access to families in need.

Rate reform must reflect the true cost of care and include fair compensation for staff. Thank you.

Thank you.

Susanna Kniffen, Director of Child Welfare Policy at Children Now. In the days and weeks following a wildfire or flood, California's children and youth in foster care and their caregivers struggle with the added costs of replacing destroyed belongings, securing temporary housing, and finding transportation options, to maintain critical community connections.

The state is legally responsible for meeting the needs of children and youth in foster care. However, there is no dedicated assistance—financial assistance—available to cover unexpected costs that arise after a natural disaster. This is unacceptable.

AB 689, authored by Assemblymember Blanca Rubio, would create a statewide child welfare disaster response fund, to ensure we fulfill our responsibility to children and youth in foster care, in the event of a natural disaster.

We ask the Committee to consider including $12 million one time for this fund in the budget package, in order to meet the of children and youth in foster care, when they need it most. Thank you.