The 2020-21 Budget: Early Education Analysis

The 2020-21 Budget: Early Education Analysis GABRIEL PETEK LEGISLATIVE ANALYST FEBRUARY 21, 2020 analysis full gutter 2020-21 BUDGET LEGISLATIVE ANALYST’S OFFICE analysis full gutter 2020-21 BUDGET Executive Summary The Governor’s budget for 2020-21 includes a total of $5.4 billion for child care and preschool programs. In this report, we analyze the Governor’s early education proposals and make associated recommendations. Below, we highlight key messages from the report. State Preschool Recommend Providing a More Modest Amount of Additional Slots. The Governor’s budget includes $32 million non-Proposition 98 General Fund to provide 10,000 additional full-day State Preschool slots for non-local education agencies (non-LEAs) starting April 1, 2021. We think the State Preschool program is unlikely to accommodate such a large increase, since more than half (about 5,400) of the additional 10,000 slots provided in 2019-20 will go unused. As such, we recommend the Legislature provide a more modest amount of additional slots. Specifically, we find that 1,000 additional slots, along with the slots available from 2019-20, are sufficient to fund demand for full-day State Preschool in 2020-21. Recommend Simpler Application Process for Current Providers. Although recent State Preschool slots have gone unused because of low demand, the California Department of Education’s application process also often results in experienced State Preschool providers being denied expansion funds. In 2018-19, 10 of 75 current providers that applied for additional full-day State Preschool slots were disqualified for not including more thorough descriptions of their program, even though the department already has these descriptions on file from prior applications. We recommend allowing current providers to expand their State Preschool program using a simpler application that does not require these descriptions. This change likely will decrease the share of current providers who are disqualified from receiving expansion funding. By making the application less burdensome, a greater number of current providers might also be willing to apply for State Preschool expansion slots. Department of Early Childhood Development Recommend Against Creating New Department to Administer State Child Care Programs. The Governor’s budget proposes to establish the Department of Early Childhood Development under the California Health and Human Services Agency. The budget includes $6.8 million non-Proposition 98 General Fund for 26 new positions in 2020-21 to support first-year transition efforts. This amount increases to $10.4 million ongoing for 52 new positions in 2021-22, when the department is set to begin administering the state’s child care programs and initiatives. We recommend the Legislature reject the proposal, as it lacks sufficient detail and does not provide any clarity on how the restructuring would lead to more effective or efficient services to children and families. While the proposed governance structure could eliminate some fragmentation that currently exists in the child care system, the proposed changes also could create new ones. Moreover, we think making significant changes to the administration of early childhood development programs prior to the release of the forthcoming master plan on early learning and care is premature. The master plan, set to be released by October 1, 2020, is expected to make several recommendations to improve the state’s early childhood development programs. The Legislature may want to consider a revised proposal from the administration www.lao.ca.gov 1 analysis full gutter 2020-21 BUDGET next year. This would allow the administration to fully develop a plan and to incorporate any recommendations from the master plan. Preschool Facilities for LEAs Recommend Rejecting Additional Funds for Inclusive Early Education Expansion Program. The Governor’s budget adds $75 million one-time Proposition 98 General Fund to the Inclusive Early Education Expansion Program, an existing program intended to increase access to child care and preschool programs for children with disabilities. We recommend the Legislature reject this augmentation. Since the original funding for the Inclusive Early Education Expansion Program still has not been allocated to providers, it is unclear whether the program design is an effective way to achieve the program’s goal of increasing access for children with disabilities. Recommend Creating Preschool Facility Grant for LEAs Using Different Fund Source. The Governor’s budget includes $150 million non-Proposition 98 General Fund for LEAs to construct or renovate preschool facilities on elementary school campuses. Funding for this proposal would come from reducing the amount provided last year for the Kindergarten Facility Grant Program. To the extent that facility issues are the key barrier for certain LEAs, the Governor’s proposal would help increase access to preschool programs. However, it is premature to redirect funds from the Kindergarten Facility Grant Program, as the state still does not have any information on interest in the program from school districts. (The next application round is currently scheduled to be in April 2020.) Instead of reducing the amount for kindergarten facility grants, we recommend the Legislature use the $75 million proposed for the Inclusive Early Education Expansion program towards the Governor’s proposed preschool facility grants. 2 LEGISLATIVE ANALYST’S OFFICE analysis full gutter 2020-21 BUDGET INTRODUCTION In this report, we provide an overview of the the number of full-day preschool slots, (2) create a Governor’s early education proposals, then new department to administer child care programs, analyze his three major early education proposals. and (3) fund facilities for more preschool programs. Specifically, we analyze his proposals to (1) expand OVERVIEW In this section, we provide an overview of the 2020-21. The budget reappropriates $75 million Governor’s early education budget proposals. in unspent State Preschool funds for the Governor’s Budget Includes $5.4 Billion Inclusive Early Education Expansion Program, for Child Care and Preschool Programs in which provides grants for facility construction, 2020-21. As Figure 1 (see next page) shows, renovations, equipment, or professional this is a decrease of $218 million (4 percent) from development to make early education programs the revised 2019-20 level. The budget includes more accessible for children with special needs. a $235 million decrease in non-Proposition 98 The Governor’s budget also provides $32 million General Fund and a $130 million net decrease to expand the number of full-day State Preschool in federal funding—both decreases largely due slots and $10 million to provide additional General to the expiration of one-time funds provided in Child Care slots. All other adjustments are either 2019-20. These decreases are partially offset by an statutorily required or made to annualize the $86 million increase in Proposition 98 General Fund cost to certain policies initiated in 2019-20. In and a $60 million increase in Proposition 64 funds. addition to the changes shown in Figure 2, the Under the Governor’s budget, proposed funding Governor proposes $6.8 million in General Fund would support 515,000 child care and preschool (increasing to $10.4 million ongoing) to create a slots—a 3 percent increase from 2019-20. new department to administer child care programs within the California Health and Human Services New Proposals Build on Augmentations From Agency. The budget also sets aside $150 million Previous Years. Figure 2 (see page 5) shows one time for preschool facilities from funds initially the various changes to child care and preschool provided for kindergarten facilities in 2019-20. spending included in the Governor’s budget for STATE PRESCHOOL In this section, we provide an overview of the either receive a part-day or full-day option. The State Preschool program, describe and assess part-day program provides at least 3 hours of the Governor’s preschool proposals, and offer developmentally appropriate activities per day for associated recommendations. 175 days per year. The full-day program offers between 6.5 and 10.5 hours of care per day Background for 250 days per year. In the full-day program, providers must give priority to children whose State Preschool Fosters Kindergarten Readiness for Participating Children. Children parents are working or in school. Providers choose are eligible for State Preschool if their family earns whether to operate part-day or full-day programs. less than 85 percent of the state median income We estimate that, in 2019-20, State Preschool is ($69,620 for a family of three). Participating children www.lao.ca.gov 3 analysis full gutter 2020-21 BUDGET serving 101,000 children in part-day programs and children from the lowest-income families getting 71,000 children in full-day programs. priority. If space remains available, providers State Preschool Serves Mostly Four-Year may serve three-year olds—also prioritizing the Olds. The total number of State Preschool slots lowest-income families. After enrolling all interested funded in any given year is determined by the state and eligible children, providers may enroll children as part of its annual budget process. Providers from families who are not income eligible (up to must first serve all eligible four-year olds, with 10 percent of slots). In addition, providers located Figure 1 Child Care and Preschool Budget (Dollars in Millions) Change From 2019-20 2018-19 2019-20 2020-21 Revised Reviseda Proposed Amount Percent Expenditures CalWORKs Child Care Stage 1 $291 $324b $333 $9 2.7% Stage 2c 563 615 588 -26 -4.3 Stage 3 441 503 583 80 16.0 Subtotals ($1,295) ($1,441) ($1,504) ($63) (4.3%) Non-CalWORKs Child Care General Child Care $412 $522 $533 $12 2.2% Alternative Payment Program 427 536 537 1 0.2 Bridge program for foster children 41 58 60 2 3.5 Migrant Child Care 40 45 45 —d 0.2 Care for Children With Severe Disabilities 2 2 2 —d 0.2 Subtotals ($922) ($1,162) ($1,177) ($15) (1.3%) Preschool Programse State Preschool—full day $804 $883 $1,013 $130 14.7% State Preschool—part dayf 538 548 549 1 0.2 Transitional Kindergarteng 847 874 893 19 2.2 Preschool QRIS Grant 50 50 50 — — Subtotals ($2,239) ($2,355) ($2,504) ($150) (6.4%) Support Programs $144 $642 $197 -$445 -69.4% Totals $4,600 $5,600 $5,382 -$218 -3.9% Fund Source Proposition 98 General Fund $2,063 $1,847 $1,933 $86 4.7% Non-Proposition 98 General Fund 1,496 2,382 2,147 -235 -9.9 Proposition 64 Special Fund — 80 141 60 74.9 Federal CCDF 755 931 794 -138 -14.8 Federal TANF 311 342 348 6 1.8 Federal Title IV-E 10 17 19 2 12.2 a Reflects Department of Social Services’ revised estimates for Stage 1 and bridge program for foster children. Reflects budget act appropriation for all other programs. b Includes one-time data sharing automation costs. c Does not include $9.2 million provided to community colleges for certain child care services. d Less than $500,000. e Some CalWORKs and non-CalWORKs child care providers use their funding to offer preschool. f Includes $1.6 million each year used for a family literacy program offered at certain State Preschool sites. g Reflects preliminary LAO estimates. Transitional Kindergarten enrollment data are not yet publicly available for any year of the period. QRIS = Quality Rating and Improvement System; CCDF = Child Care and Development Fund; and TANF = Temporary Assistance for Needy Families. 4 LEGISLATIVE ANALYST’S OFFICE analysis full gutter 2020-21 BUDGET Figure 2 State Contracts Directly With Local Providers Who Offer 2020-21 Changes in Child Care and Preschool Spendinga Program. State Preschool is (In Millions) offered by various local government Change and nonprofit agencies. Roughly Funds Inclusive Early Education Expansion Program $75 60 percent of State Preschool slots Makes CalWORKs caseload and average cost of care adjustments 66 are provided by school districts Provides 10,000 full-day State Preschool slots at non-LEAs starting April 1, 2021 32 and county offices of education Provides 621 General Child Care slots starting July 1, 2020b 10 (local education agencies or LEAs). Makes other statutory and technical adjustments -402 Nonprofit agencies, county welfare Totals -$218 departments, and cities (non-LEAs) a Does not reflect changes in state operations. The Governor also proposes $6.8 million to administer all child care also operate State Preschool, programs in a new department. Also does not reflect the Governor’s proposal for preschool facilities. b Increase associated with the administration’s projected increase in cannabis revenues (Proposition 64 funds). accounting for about 40 percent of LEA= local education agency. slots. State Has Increased Full-Day in low-income areas may enroll four-year olds Slots in Each of the Past Six Years. The state has who are otherwise ineligible if the family also significantly increased full-day State Preschool slots lives in a low-income area. Specifically, both the over the past six years. As Figure 3 shows, the provider and the family must reside within a public state added roughly 26,000 full-day slots over this school attendance boundary where 80 percent of period—an increase of 58 percent from 2013-14 to students enrolled are eligible for free or reduced 2019-20. priced meals. We estimate State Preschool in Expansion Funds Are Competitively 2019-20 is serving 123,000 four-year olds and Distributed to Interested and Eligible Providers. 49,000 three-year olds. State law authorizes the California Department Figure 3 State Has Significantly Increased Full-Day State Preschool Slots Number of Full-Day Slots by Year 80,000 70,000 60,000 50,000 40,000 30,000 20,000 10,000 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 2019-20 www.lao.ca.gov 5 analysis full gutter 2020-21 BUDGET of Education (CDE) to determine a process for to particular challenges in awarding funds to awarding additional State Preschool funds. providers. In some years when initial demand for CDE uses a competitive application process to expansion funding was limited, CDE ran a second determine who among interested applicants is to application collection period. For the 2019-20 receive additional funds. At the beginning of the application, CDE changed the program narrative fiscal year, CDE develops the application, reviews questions and provided more detail to applicants submitted applications, scores applications, regarding how the program narrative would be processes appeals, awards funds, and amends scored. The department also offered additional contracts to include awarded expansion funds. assistance to interested providers through several Final awards are typically announced in the spring. workshops and webinars. In certain circumstances, Existing providers that plan to deliver the same CDE also has simplified its application process level of services are only required to submit a brief to ensure State Preschool funding is not shifted continued funding application annually. Existing away from certain regions. For example, if a providers that are interested in expanding must provider notifies CDE that it plans to close its submit both the continued funding application and State Preschool program, CDE will contact nearby the expansion application. providers to see if they are interested in taking over CDE Evaluates Applications to Determine the closing provider’s existing contract. In these Eligibility and Qualification. The department’s cases, CDE typically does not require the identified application review process for expansion funds providers to go through the normal application consists of two components. First, CDE conducts process. Providers must submit some documents a preliminary screening to ensure applications to pass the preliminary screening but are not include all required information. As part of the required to submit a program narrative since they preliminary screening, providers must demonstrate already have one on file with CDE. they meet certain minimum eligibility requirements, Governor’s Proposal such as having a valid business license and, if they are an existing contractor, being in good standing Funds More Full-Day Slots for Non-LEAs. with CDE. Providers also must submit a variety of The Governor’s budget includes $32 million information related to the structure of the proposed non-Proposition 98 General Fund to provide program, such as a program calendar, an annual 10,000 additional full-day State Preschool slots for budget, and a list of expected staffing positions. non-LEAs starting April 1, 2021. The budget also In addition to the preliminary screening, CDE includes $96 million non-Proposition 98 General requires a program narrative, which is a written Fund to annualize the cost of 10,000 full-day State description of the program intended to demonstrate Preschool slots for non-LEAs that were initially the provider’s capacity to operate a preschool approved as part of the 2019-20 budget and set program under the state’s rules and regulations. to be initiated April 1, 2020. The additional slots The program narrative is scored by CDE based on proposed in the Governor’s budget are the second the thoroughness of an applicant’s responses. For of his three planned augmentations to provide example, a provider who describes their program additional State Preschool slots for non-LEAs quality using three examples merits a higher score (10,000 slots in each year). The Governor’s intent is than a provider who uses two examples. Applicants for all low-income four-year olds to have access to must meet a minimum score on their program a preschool program by 2021-22. narrative to qualify for expansion funds. If a provider Assessment is awarded funding, the program narrative remains on file with CDE and is used by the department as Program Unlikely to Accommodate Such part of its ongoing program monitoring. a Large Increase. In recent years, a significant Application Process Varies by Year and amount of State Preschool funding has gone Circumstance. Over the years, CDE has made unused. This is primarily due to a lack of interest changes to its application process to respond in expansion funding and reductions in provider 6 LEGISLATIVE ANALYST’S OFFICE analysis full gutter 2020-21 BUDGET contracts. For example, in 2019-20, CDE has preliminary screening, as this ensures providers $100 million in unused Proposition 98 funds to have developed a concrete implementation award to LEAs. Similarly, a large portion of new plan. The value of the program narrative for slots provided for non-LEAs in 2019-20 will go existing providers is less clear, as these providers unused. Of the 10,000 full-day slots available for already have a program narrative on file with the expansion in 2019-20, CDE reports non-LEAs department and have demonstrated they are requested the equivalent of 4,600 full-day slots. capable of running a preschool program under the The department has not yet determined how many state’s existing rules. The 10 existing providers of these requested slots meet the eligibility criteria disqualified because of the program narrative had and qualify for additional funding. Given this level requested to serve an additional 211 full-day slots of interest in the current year, we think funding and 502 part-day slots. all interested, eligible, and qualifying non-LEA Program Structure Makes Meeting Governor’s applicants in 2020-21 is unlikely to require all Goal Challenging. The augmentations included 10,000 additional slots included in the Governor’s in the Governor’s three-year plan are based budget. on his estimate of the number of unserved Various Reasons for Lack of Interest in income-eligible four-year olds. The state, however, Expansion Funds. The state currently lacks is unlikely to meet the Governor’s goal after the data to identify the reasons for limited interest three-year plan is fully funded. This is because in State Preschool expansion funding. Based the programmatic flexibility in State Preschool on our conversations with providers, acquiring makes it unlikely all additional slots will be used facilities is one key challenge. Providers also exclusively for income-eligible four-year olds. Since expressed concerns with recruiting and retaining State Preschool serves three- and four-year olds, staff. The state took several actions as part of some newly added slots are likely to be used for the 2019-20 budget to address these issues. For three-year olds. As previously mentioned, the state example, the state provided a total of $458 million also allows some children who are not income in one-time funding for non-LEAs to acquire or eligible to be enrolled in the program. In addition, renovate facilities and improve the supply and providers have flexibility to shift between offering training of child care and preschool workers. These full-day and part-day programs. Any shifts change funds are expected to be awarded to providers the number of children that a provider can serve. in 2020-21. In addition, the state funded the For example, funding for 2.3 part-day slots can development of a master plan for early learning instead be used to fund one full-day slot. and care. The master plan is to include research Recommendations on a wide variety of child care and preschool issues, including a study of statewide facility needs. Expand by a More Modest Amount of Slots. Although these actions might address facility and Given that more than half of the expansion funding workforce issues in the long term, their effects on added in 2019-20 will be available to distribute provider interest for 2020-21 are unclear. in the budget year (about 5,400 slots), we think Current Providers Often Disqualified From an additional 1,000 slots is sufficient to fund Expanding. In addition to slots going unused demand for full-day slots. Adding 1,000 full-day because of low demand, the department’s State Preschool slots still leaves funding for at application process also often results in least 6,400 new slots in 2020-21—more than was experienced State Preschool providers being requested by providers in 2019-20. denied expansion funds. In 2018-19, of the Allow Simpler Application for Current 75 existing providers who applied for expansion Providers in Good Standing. We recommend funding, 10 did not pass the preliminary screening exempting current State Preschool providers from and another 10 were disqualified due to the the program narrative component of the application program narrative. We have no concerns with for expansion funds. (Providers would still be CDE denying funds to those that do not pass the required to pass the preliminary screening.) This www.lao.ca.gov 7 analysis full gutter 2020-21 BUDGET change likely will decrease the share of current four-year olds, it may want greater certainty that providers who are disqualified from receiving new State Preschool slots are used to meet this expansion funding. By making the application less goal. For example, the Legislature could consider burdensome, a greater number of current providers restricting the use of new slots to providers that might also be willing to apply for State Preschool agree to run full-day programs for four-year olds. expansion slots. We do not recommend making any Such actions would ensure funds are used to application changes for new providers. meet the stated goal, but would likely make finding Consider Whether Legislature’s Goals interested providers more difficult. Alternatively, the Aligns With Governor’s Plan. If the Legislature Legislature could consider leaving current program is interested in pursuing the Governor’s plan to flexibility in place to maximize use of additional provide access to preschool for all income-eligible slots, even if this results in a smaller share of new slots being used for four-year olds. DEPARTMENT OF EARLY CHILDHOOD DEVELOPMENT In this section, we provide an overview of the for considering the administration’s various child care and preschool programs administered 2020-21 reorganization proposals.) by the state. We then describe the Governor’s Background proposal to create the Department of Early Childhood Development—a new department State Subsidizes Child Care and Preschool, to administer child care programs. We end by Primarily for Low-Income Children. The state providing our assessment of the Governor’s subsidizes child care and preschool through several proposal and making associated recommendations. programs, serving an estimated 413,000 children. (In our recent report, The 2020-21 Budget: As Figure 4 shows, these programs have Assessing the Governor’s Reorganization somewhat different eligibility requirements. In Proposals, we outline a broad framework 2019-20, these programs are receiving $4.7 billion in state and federal funding. Figure 4 State Child Care and Preschool Programs Program Description CalWORKs Child Care Stage 1 Child care becomes available when a participant enters the CalWORKs program. Stage 2 Families transition to Stage 2 child care when the county welfare department deems them stable. Stage 3 Families transition to Stage 3 child care two years after they stop receiving cash aid. Families remain in Stage 3 until the child ages out (at 13 years old) or they exceed the income-eligibility cap. Non-CalWORKs Child Care General Child Care Program for other low-income, working families. Alternative Payment Another program for low-income, working families. Bridge Program for Foster Children Temporary access to child care for foster children. Migrant Child Care Program for migrant children from low-income, working families. Care for Children With Severe Program for children with severe disabilities living in the Bay Area. Disabilities Preschool State Preschool Program for three- and four-year olds from low-income families. 8 LEGISLATIVE ANALYST’S OFFICE analysis full gutter 2020-21 BUDGET Two Departments Administer Child Care experienced historic disparities in health Programs. The Department of Social Services outcomes, including the Black Infant Health (DSS) administers California Work Opportunity and Program administered by CDPH and various Responsibility to Kids (CalWORKs) Stage 1 child tribal children’s programs supported by DSS, care and the bridge program for foster children. CDE, and other departments. CDE administers all other child care and preschool • The Women, Infants, and Children (WIC) programs. program, which provides nutritional assistance State Works With a Variety of Local Entities and education for low-income pregnant to Provide Child Care and Preschool. The women, postpartum mothers, and infants and administration of child care and preschool children up to age 5. CDPH administers this programs differs based on the type of program and federally funded program. the state level entity administering the program. Last Year, California Health and Human For example, DSS provides funding for CalWORKs Services Agency (CHHSA) Authorized to Stage 1 child care to county welfare departments Administer Two Child Development Initiatives. that, in turn, use this funding to determine The 2019-20 budget provided $5 million one-time eligibility and issue voucher payments to the child General Fund for CHHSA to develop an early care provider of the family’s choice. CDE also learning and care master plan. In developing the administers voucher programs such as CalWORKs master plan, CHHSA contracted with research Stages 2 and 3, and the Alternative Payment (AP) entities to produce at least one report by program. For these programs, CDE provides funds October 1, 2020. The report will study several directly to AP agencies to make child care voucher specified areas, including revenue options for payments, with a specified share set aside to expanding existing programs, statewide facility cover the AP agencies’ operational costs. General needs, and the need for early learning and care Child Care and State Preschool are direct contract among eligible families. The 2019-20 budget also programs. For these programs, CDE directly provided CHHSA $2.2 million annually for three contracts with child care and preschool providers years to run an Early Childhood Policy Council. to serve a specified number of eligible children. The council consists of stakeholders, including State Also Administers Other Programs parents and child care providers, and is to provide for Children and Families. A variety of recommendations to the Governor, Legislature, state-administered programs provide specific and Superintendent of Public Instruction on early services to targeted populations of children. Among education issues. these are: Governor’s Proposal • Programs providing early intervention services to children under age 3 who have Establishes New Department of Early disabilities or developmental delays, which Childhood Development. The Governor’s budget are administered by both the Department of proposes to establish the Department of Early Developmental Services (DDS)—which serves Childhood Development (DECD) under the CHHSA. the vast majority of children—and CDE. The budget includes $6.8 million non-Proposition 98 • Home-visiting programs pairing new and General Fund for 26 new positions in 2020-21 to expecting parents with a nurse or other support first-year transition efforts. This amount trained professional to support healthy increases to $10.4 million ongoing for 52 new early childhood development, which are positions in 2021-22, when the department is administered by both DSS (through the set to begin administering programs. The entire CalWORKs program) and the California $10.4 million is associated with the overhead Department of Public Health (CDPH). costs of creating a new department, such as hiring separate executive, legal, and human resources • Programs to support children of specific staff. ethnic or racial backgrounds that have www.lao.ca.gov 9 analysis full gutter 2020-21 BUDGET Shifts Child Care Administration to implement the reorganization indicates that one New Department. The budget proposes potential benefit of greater collaboration would be DECD administer the various state child care improved eligibility processes across various health programs and initiatives beginning July 1, and human services programs. It also notes that 2021. Figure 5 provides a detailed list of these data from child care and development programs programs and initiatives. This change transfers the would be folded into the agency’s overall data administrative responsibility of all state child care integration efforts and that the new department programs from DSS and CDE. The CDE, however, would support a comprehensive strategy related to would continue to administer State Preschool. prevention and early intervention. The DECD also would administer other early Assessment education initiatives such as the Early Childhood Policy Council. The Governor plans to shift some Unclear if Proposal Addresses Stated of the current staff at DSS and CDE to DECD, but Problems. Although some opportunities exist has yet to determine the number of positions that to better administer child care programs, the will transfer and the total level of staff the new Governor’s proposal lacks key details that department will require. make it difficult for the Legislature to assess. Proposal Intended to Improve Coordination While the administration believes the proposal of Health and Human Services Programs. would improve program coordination, service According to the administration, having all child delivery, and connections to other health and care programs administered within CHHSA would human services programs, it has not been able allow for greater collaboration across the various to provide at this time detailed information departments and programs within the agency in explaining how the reorganization would actually supporting the needs of young children and their lead to improvements in these areas. Moreover, families. The proposed budget trailer legislation to the proposed budget trailer legislation states that the new organization would Figure 5 “strengthen a comprehensive strategy on prevention and early Programs and Initiatives Proposed to Shift to intervention.” The administration, New Department of Early Childhood Development however, has not specified Current Department what barriers currently exist to Programs developing such a comprehensive strategy and how the proposal CalWORKs Stage 1 DSS CalWORKs Stage 2 CDE would effectively alleviate these CalWORKs Stage 3 CDE barriers. Without this information, General Child Care CDE the Legislature is unable to Alternative Payment CDE determine if the Governor’s Bridge Program for Foster Children DSS proposal is the best option or if Migrant Child Care CDE other options are available to more Care for Children With Severe Disabilities CDE effectively address the stated Early Head Start CDE problems, including options that Initiatives may not require a change in the Quality improvement activities CDE organization of the state’s child Early Childhood Data System CDE care programs. Head Start State Collaboration Office CDE Master Plan for Early Learning and Care (one-time initiative) CHHSA Proposal Could Eliminate Early Childhood Policy Councila CHHSA Some Fragmentation in Child a Funded through 2021-22. Care System. The administration DSS = Department of Social Services; CDE = California Department of Education; and claims its proposal could CHHSA = California Health and Human Services Agency. improve coordination and reduce 10 LEGISLATIVE ANALYST’S OFFICE analysis full gutter 2020-21 BUDGET fragmentation of child care programs. However, at they were administered by different departments as the time of this analysis, it has not identified the proposed by the Governor. specific fragmentations that the proposal would Proposal Precedes Forthcoming Master Plan. address. We can see some potential for better The forthcoming master plan for early learning and coordination. For example, having all child care care is expected to make several recommendations programs administered by the same agency could to improve the state’s child care and preschool ensure that local agencies administering multiple programs. The expectation is that the report child care programs receive consistent direction will study several specified areas, including the from the state. In particular, housing state level appropriate role of government. The report will also administration for CalWORKs Stages 1 and 2 within include actionable plans to improve the quality of a single department (as opposed to its current split child care programs and provide universal access between DSS and CDE) could ensure local entities to preschool. In addition, it is possible that the are receiving the same guidance from the state. work of the new Early Childhood Policy Council Importantly, however, the Governor’s proposal would could inform potential changes to the state’s child not necessarily reduce fragmentation for families care system. Making significant changes to the participating in these programs. These programs administration of early childhood development could still be delivered locally by separate agencies. programs before the state considers major reforms For example, a CalWORKs family transitioning from to these programs would be premature. Stage 1 to 2 may have to transition from receiving In the Near Term, New Department Less services at their county welfare department to Efficient Than Current Structure. We find that receiving services through an AP agency. the state’s current structure for administering child Proposal Could Also Create Greater care programs is more cost-effective than the new Fragmentation. Although the Governor’s proposal structure proposed by the Governor. Currently, could reduce the fragmentation resulting from the state is able to benefit from economies of the existing structure of child care programs, the scale by using systems within larger departments proposal could actually create new fragmentations to administer child care programs. For example, between General Child Care and State Preschool. CDE is able to use its legal and human resources Currently, CDE’s administration for these programs teams for employees that work on child care is very similar. The programs use the same contract and other K-12 education issues. Under the processes, have similar program standards, and Governor’s proposal, the new DECD would require are monitored by CDE in the same manner. At the additional staff and other resources to perform local level, providers commonly have both a State these functions. In fact, all of the additional funding Preschool and a General Child Care contract. In requested for the new department in 2020-21 is 2018-19, virtually all General Child Care providers associated with this increased overhead—meaning also had State Preschool contracts. If the programs not for increased or improved services to children are offered on the same site, children will regularly and families. move seamlessly between General Child Care as Proposal Excludes Several Child Development an infant and toddler to State Preschool. Providers Programs. Although the Governor’s proposal that have both contracts can also transfer funds is intended to improve coordination of early between programs to address unanticipated childhood development services, it does not shift changes in enrollment. For example, a provider other programs that serve similarly aged children could shift some General Child Care funding to to the new DECD. For example, early intervention State Preschool if they had unexpectedly high services—currently administered by DDS and demand from four-year olds. This flexibility allows CDE—would remain under those departments. providers to more effectively meet the enrollment Similarly, the WIC program and several maternal needs of their communities. It is unclear if the and infant health and home visiting programs programs would continue to have these benefits if would not shift to the new department. As currently proposed, the new department would include only www.lao.ca.gov 11 analysis full gutter 2020-21 BUDGET child care programs. This limits the potential to plan to smoothly transition programs to another reduce fragmentation and improve coordination department. between related programs. Revised Proposal Should Answer Key Questions. If the administration proposes a new Recommendations child care governance structure for 2021-22 as part Reject Proposal. We recommend the of next year’s budget deliberations, we recommend Legislature reject the Governor’s proposal to the Legislature request that the administration consolidate various child care programs into a new answer the following key questions as part of its state department. The proposal lacks sufficient revised proposal. detail and does not provide any clarity on how • What is the underlying problem the new the restructuring would lead to more effective or governance structure will address, and efficient services to children and families. Moreover, how does the new governance structure we think making large governance changes this specifically address that problem? year is premature given the administration’s • How does the reorganization result in better forthcoming master plan on early learning and care. services for children and families? Perhaps Revisit a More Detailed Proposal • How does the new governance structure Next Year. The administration may wish to propose eliminate duplication or overlap of government a new governance structure in 2021-22 based on services? recommendations from the master plan. Revisiting the proposal in a year allows the Legislature to • How does the new governance structure align assess whether (1) the stated priorities in the with recommendations of the master plan? master plan align with those of the Legislature, • What is the total implementation and ongoing (2) the proposed changes in the master plan merit cost of the new governance structure? How a new governance structure, and (3) the creation of would the benefits of this new department a new department is the best option for addressing outweigh those costs? Why is the proposed the stated problems. Delaying a year also allows additional spending an effective way to the administration to fully develop and share a address the problem? PRESCHOOL FACILITIES FOR LOCAL EDUCATION AGENCIES Background shares. In certain cases, the SFP allows districts completing projects below the budgeted cost to State’s School Facility Program (SFP) use project savings for other facility priorities. (The Provides Funding to Build and Renovate exception is for districts that receive state funding Facilities. The state and school districts share in excess of the standard cost shares. These the cost of building new school facilities and districts are required to return any unspent funds to modernizing old ones. The state generally covers the state.) The enrollment calculation to determine 50 percent of the cost of new construction for eligibility for the SFP does not consider a district’s districts unable to accommodate all existing or need for facilities to serve preschool aged children. projected K-12 enrollment and 60 percent of State Created Kindergarten Facility Grant the cost of renovating facilities that are at least Program in 2018-19. The 2018-19 budget 25 years old. For both types of projects, the state package provided $100 million in one-time can contribute up to 100 percent of project costs non-Proposition 98 General Fund to help if districts face challenges in raising their local districts cover the facility costs associated with 12 LEGISLATIVE ANALYST’S OFFICE analysis full gutter 2020-21 BUDGET converting part-day kindergarten programs into kindergarten or other elementary classrooms. For full-day programs. The program is administered example, while state regulations require State by the Office of Public School Construction Preschool and kindergarten restroom facilities be (OPSC). Virtually all of the initial $100 million has self-contained in the classroom or separate from been allocated. The 2019-20 budget package those of older students, State Preschool programs included an additional $300 million one-time also must have at least one toilet and sink for every non-Proposition 98 General Fund for the program 15 preschool children. Due to these more stringent and made several programmatic changes. Most requirements, LEAs often incur renovation costs notably, the new funding was limited in the first to convert an elementary school classroom into a two years to school sites that currently do not State Preschool classroom. offer full-day kindergarten. Beginning in 2021-22, Funds Available for LEA State Preschool school sites that already offer full-day kindergarten Providers to Expand Slots. The state currently also can apply for funds. The OPSC developed has $100 million in Proposition 98 funding available new regulations in the summer and fall of 2019 to to award to interested LEAs. Most of these funds incorporate the changes made to the program. The ($66 million) are from recent expansions to the next application round is currently scheduled to be program made between 2016-17 and 2018-19. in April 2020. If funds remain available, OPSC plans The remaining funds are available due to reductions to conduct additional rounds of applications in in provider contracts. CDE annually requests January 2021 and July 2021. applications for providers interested in expanding. State Funded Inclusive Early Education In 2019-20, LEA providers requested roughly Expansion Program for Facilities. In 2018-19 the one-quarter of the funds available. state created this grant program with the intent Governor’s Proposals to increase access to child care and preschool programs for children with disabilities. The state Redirects $150 Million in Kindergarten has provided a total of $177 million one-time Facility Grant Program Funds to Preschool Proposition 98 General Fund for this grant program Facilities. The Governor’s budget includes ($167 million in 2018-19 and $10 million in $150 million non-Proposition 98 General Fund for 2019-20). All LEAs who administer state funded LEAs to construct or renovate preschool facilities child care or preschool programs are eligible to on elementary school campuses. Funding for apply for grants. Although only LEAs may apply, this proposal would come from the $300 million they may pass through funds to non-LEAs within provided last year to the Kindergarten Facility their attendance area that offer state child care Grant Program. Facilities must be used to operate and preschool programs. Funds may be used for full-day State Preschool or Head Start. Under the facilities, professional development, or equipment. proposal, LEAs would receive up to $450,000 to Regarding facilities, while both LEAs and non-LEAs construct a preschool classroom and $250,000 to may use funds to renovate or repair facilities, only renovate an existing classroom. Similar to the LEAs can use funds for new construction. The SFP and kindergarten facility grants, these funds department is currently reviewing applications and are intended to cover 50 percent of the cost of plans to announce awards in February 2020. During constructing a new classroom and 60 percent the application collection period, CDE received of the cost of renovating an existing classroom, 107 applications requesting a total of $308 million. with LEAs expected to cover the remaining costs. Most applicants specified they plan to use the Those LEAs unable to raise their local share could funds for all three purposes (facilities, equipment, qualify for additional state funding. As with the and professional development). Kindergarten Facility Grant Program, districts Preschool Facilities Have Different could use savings for professional development or Requirements Compared to Other Classrooms. instructional materials to support full-day preschool State Preschool classrooms must meet more programs. stringent facility requirements compared with www.lao.ca.gov 13 analysis full gutter 2020-21 BUDGET Provides Additional Funds for the Inclusive program for LEAs, deciding on the right amount Early Education Expansion Program. The of funding could be challenging. One option is to Governor’s budget includes $75 million one-time estimate the amount of additional capacity needed Proposition 98 intended to increase access to child for LEAs to use the $100 million in Proposition 98 care and preschool programs for children with funding currently available for operating State disabilities. As with the original allocation to the Preschool. Assuming LEAs build classrooms for 24 program, funds would be available for equipment, students, we estimate the state would need to build professional development, and facility construction 333 classrooms to create this additional capacity. and renovation. The $75 million reflects the The cost of building 333 additional classrooms administration’s estimate of unspent Proposition 98 could range from about $80 million to more than funds for State Preschool in 2019-20. The $150 million, depending on the share of projects administration typically updates this estimate in that are for new construction and the number of May, with the amount of unspent funds available LEAs that are unable to raise their local match. likely increasing. Preschool Facility Funds May Be Available to LEAs That Will Not Be Awarded Slots Down Assessment the Line. The Governor’s preschool facility Too Soon to Know Interest in the proposal is disconnected from the process that Kindergarten Facility Grant Program. Given awards LEAs additional State Preschool slots. OPSC will not accept applications for the new To be eligible for a preschool facility grant under version of the Kindergarten Facility Grant Program the Governor’s proposal, LEAs must either (1) be until April 2020, the state has little information an existing preschool provider or (2) have their regarding the demand from LEAs for this purpose. governing board pass a resolution stating their The state will have more information after the first intent to apply for State Preschool slots. Under application collection period. both these scenarios, however, an LEA could apply Access to Preschool Facility Funding Might for slots to provide or expand its State Preschool Address a Key Barrier to Expansion for Some program, but have their request denied. Providers LEAs. Although the state lacks data to clearly commonly have their applications rejected. In explain why demand for full-day slots from LEAs 2018-19, for example, 35 percent of LEAs who has been limited, the lack of available facilities is applied for slots were denied their request during one barrier that is commonly mentioned in our CDE’s application review. The bulk of the rejected conversations with providers. In addition to facility requests (80 percent of those denied) were from issues, providers have mentioned other concerns. existing providers. Some providers have a strong preference for Too Soon to Know if Inclusive Early Education operating part-day State Preschool because it can Expansion Program Is Effective. The program be more efficient to administer (LEAs can run two provides broad flexibility for recipients to increase part-day programs in one classroom with the same access to child care and preschool programs staff) and has a calendar that is aligned with the for children with disabilities by constructing or school year. Providers also mention challenges in renovating facilities, purchasing equipment, or retaining preschool staff and navigating the state providing professional development. However, since contracting process. It is not clear which of these CDE has yet to allocate any previously appropriated issues is the main reason for the slow take-up of funds for the program, it is unclear whether the additional slots provided in recent years. To the program design is an effective way to achieve this extent that facility issues are the key barrier for goal. certain LEAs, the Governor’s proposal would help Recommendations increase access to preschool programs. Difficult to Determine Appropriate Amount Wait Until Next Year to Assess Interest for Preschool Facility Grant Program. If the in the Kindergarten Facility Grant Program. Legislature were to adopt a preschool facility Since it is too early to know the level of interest 14 LEGISLATIVE ANALYST’S OFFICE analysis full gutter 2020-21 BUDGET in the Kindergarten Facility Grant Program, we in counties with the highest shares of unserved recommend the Legislature reject the Governor’s eligible preschool aged children. Prioritizing funds proposal to reduce funding for the program in in this way ensures both the preschool facility 2020-21. If the Legislature is interested in reducing grant and State Preschool expansion funding is funding for the program in the future, it could being directed to areas with the greatest need for monitor interest from LEAs over the coming year preschool programs. and redirect funds to another priority in 2021-22 if Require Facilities Be Used for State demand is low. Preschool for Ten Years. We recommend the Fund Preschool Facility Grants Using Legislature require grant recipients to use the Unspent Proposition 98 Funds. We recommend grant-funded facility for State Preschool or the Legislature reject the Governor’s proposal to Headstart for at least ten years after the facility is increase funding for the Inclusive Early Education operational. If the LEA cannot continue offering Expansion Program. Instead, we recommend using the State Preschool or Headstart program, the the $75 million to fund the preschool facility grant Legislature could require the LEA to seek out program proposed by the Governor. This approach another provider (either the county office of allows the state to more directly address preschool education or a non-LEA) to operate the State facility issues. To the extent that these funds are Preschool or Headstart program in the facility. This insufficient to address the demand for preschool would ensure that the facility continues to be used facility grants, the Legislature could consider for preschool. The Legislature could also require providing additional funds in the future. the LEA to pay back a portion of the facility grant Prioritize Grantees in Areas With Highest funds if preschool is not offered in the facility for a Need. In awarding preschool facility grants, we minimum of ten years. recommend giving priority to LEAs who reside www.lao.ca.gov 15 analysis full gutter 2020-21 BUDGET 16 LEGISLATIVE ANALYST’S OFFICE analysis full gutter 2020-21 BUDGET www.lao.ca.gov 17 analysis full gutter 2020-21 BUDGET LAO PUBLICATIONS This report was prepared by Sara Cortez, and reviewed by Edgar Cabral and Anthony Simbol. The Legislative Analyst’s Office (LAO) is a nonpartisan office that provides fiscal and policy information and advice to the Legislature. To request publications call (916) 445-4656. This report and others, as well as an e-mail subscription service, are available on the LAO’s website at www.lao.ca.gov. The LAO is located at 925 L Street, Suite 1000, Sacramento, CA 95814. 18 LEGISLATIVE ANALYST’S OFFICE