The 2023-24 Budget: Transitional Kindergarten and State Preschool Proposals

2023-24 BUDGET The 2023-24 Budget: Transitional Kindergarten and State Preschool Proposals GABRIEL PETEK | LEGISLATIVE ANALYST | FEBRUARY 2023 SUMMARY This brief provides an overview and analysis of the Governor’s proposals for transitional kindergarten (TK) and State Preschool. Delaying Facilities Funding and Maintaining Current TK Staffing Ratios Seems Reasonable Given State Budget Problem. The Governor’s budget delays $550 million one-time non-Proposition 98 General Fund for early education facilities from 2023-24 to 2024-25. The Governor’s budget also maintains staffing ratios at 1 adult for every 12 students rather than moving to 1 adult for every 10 students. Both of these actions help to address the state’s budget issues. With regard to facilities, most school districts report having adequate classroom space to meet projected TK enrollment. However, past augmentations for early education facilities were oversubscribed and funding provided would likely be used. The Legislature can provide some amount of funds for facilities this year or reevaluate whether to provide additional funding next year, based on the state’s budget condition. With regard to staffing ratios, keeping these ratios at existing levels also helps ensure that schools do not experience even greater staffing shortages. Recommend Rejecting Additional TK Staffing Requirements. The Governor’s budget proposes additional requirements for adults assigned to TK classrooms starting in the 2028-29 school year. In practice, these would be additional requirements for instructional aides. In light of staffing challenges, we recommend rejecting this proposal. These requirements would make hiring instructional aides for TK classrooms more difficult. Several Opportunities for Savings in State Preschool. We find the Legislature could reduce costs in State Preschool by $196 million and maintain the program as it currently operates. These savings are associated with the Governor overbudgeting the cost-of-living adjustment (COLA), lower-than expected costs for recent rate increases, and unallocated funding for recent slots. If the Legislature reduces costs, the “freed up” funds could be used (1) as a budget solution, (2) to increase funding in other areas of the State Preschool program (such as to increase rates or eliminate family fees for full-day State Preschool), or (3) to increase funding for other priorities outside of the State Preschool program. Legislature Could Consider Action on Temporary Policies. The Governor’s budget allows two temporary policies to lapse—reimbursement flexibility for State Preschool providers and family fee waivers. We recommend allowing the reimbursement flexibility to sunset, which would require State Preschool providers to serve a certain number of children to fully earn their contracts. If funding priorities allow, the Legislature may want to consider eliminating family fees for full-day State Preschool. (The state does not charge family fees for part-day State Preschool or TK.) This action would eliminate the fiscal incentive for families to enroll in TK rather than State Preschool, even when State Preschool would better meet a family’s needs. www.lao.ca.gov 1 2023-24 BUDGET INTRODUCTION In this brief, we analyze the Governor’s budget proposed spending for preschool programs. In the proposals related to the state’s two main preschool second section, we cover the Governor’s major programs—TK and State Preschool. The first TK proposals, while in the third section we cover section provides an overview of the Governor’s the Governor’s major State Preschool proposals. OVERVIEW Governor’s Budget Includes $5.9 Billion for Majority of New Funding Associated With TK. Preschool Programs in 2023-24. The Governor’s Figure 2 shows the various changes to preschool budget proposes providing $3 billion for TK and spending included in the Governor’s budget for $2.9 billion for State Preschool. As Figure 1 shows, 2023-24. The budget provides a $939 million this is an increase of $553 million (10 percent) increase for TK. This is associated with TK from the revised 2022-23 level. The budget expansion and COLA for the Local Control Funding includes a $556 million increase in Proposition 98 Formula (LCFF). For State Preschool programs, the General Fund and a $154 million increase in budget provides $176 million for an 8.13 percent non-Proposition 98 General Fund. These increases COLA and $112 million to increase the enrollment are offset by a $157 million decrease in temporary of students with disabilities. These increases are federal funds. offset by a $675 million decrease associated with the expiration of one-time funds, primarily for TK planning and facilities. Figure 1 Preschool Budget (Dollars in Millions) Change From 2022-23 2021-22 2022-23 2023-24 Revised Revised Proposed Amount Percent Expenditures Preschool Programs State Preschoola $1,720 $2,579 $2,867 $288 11.2% Transitional Kindergartenb 965 2,069 3,008 939 45.4 Preschool QRIS Grant 50 50 50 — — Subtotals ($2,736) ($4,698) ($5,925) ($1,227) (26.1%) Other Support $1,040 $694 $19 -$674 -97.2% Totals $3,775 $5,391 $5,944 $553 10.3% Funding Proposition 98 General Fund $2,547 $4,337 $4,892 $556 12.8% Non-Proposition 98 General Fund 988 844 998 154 18.3 Federal One-Time COVID-19 Relief 240 210 54 -157 -74.5 a Includes $1.2 million each year used for a family literacy program offered at certain State Preschool sites. b Reflects preliminary LAO estimates as enrollment data are not yet publicly available. The 2022-23 and 2023-24 estimate includes Department of Finance’s estimates for add-on and expansion policies. QRIS = Quality Rating and Improvement System. 2 LEGISLATIVE ANALYST’S OFFICE 2023-24 BUDGET Figure 2 2022-23 Changes in Preschool Spending (In Millions) General Fund Change Proposition 98 Non-Proposition 98 Federal Total Transitional kindergarten attendance and COLA $939 — — $939 State Preschool COLA (8.13%) 112 $64 — 176 State Preschool for students with disabilities 64 48 — 112 Classroom Assessment Scoring System support 1 —a — 1 Replace expiring federal funds — 157 -$157 — Remove one-time funding -561 -114 — -675 Totals $556 $154 -$157 $553 a Less than $500,000. COLA = cost-of-living adjustment. TRANSITIONAL KINDERGARTEN In this section, we provide background on TK, State Implementing Multiyear Plan to Expand describe the Governor’s proposals related to TK, TK Eligibility to All Four-Year Olds. As part of the and offer our associated comments. 2021-22 budget agreement, the state established a plan to gradually expand TK eligibility to all students Background from 2022-23 through 2025-26. Figure 4 on the Certain Students Eligible for TK. Under state next page shows the expansion schedule. At full law, TK is the first year of a two-year kindergarten implementation in 2025-26, a child who has their program offered by public elementary schools. fourth birthday by September 1 will be eligible for In 2021-22, students were eligible for TK if they TK, making the grade available to all four-year olds. had their fifth birthday between September 2 and December 2. Similar to all other K-12 students, Figure 3 TK students generate attendance-based funding through LCFF. School districts have the option Number of Children Served in to provide TK to students who are born after the Transitional Kindergarten cutoff date (December 2 in 2021), but have their fifth October Enrollment birthday during the school year. School districts only receive attendance-based funding for these 100,000 students after the student turns five. 90,000 80,000 TK Enrollment Declined During the 70,000 Pandemic. As Figure 3 shows, in October 2019, 60,000 89,000 students were enrolled in TK. The following 50,000 year, 69,000 children were enrolled (a 23 percent 40,000 30,000 decline). By October 2021, 75,000 students were 20,000 enrolled in TK. While this enrollment reflects a 10,000 10 percent increase from the previous year, it is 2019 2020 2021 13,000 students short of pre-pandemic enrollment. www.lao.ca.gov 3 2023-24 BUDGET State Also Made Recent Programmatic • Facility Support. In 2021-22, $490 million in Changes to TK. The 2021-22 budget agreement one-time non-Proposition 98 General Fund also included a new class size requirement for funding was provided to construct or retrofit TK—specifically, requiring that school districts early education facilities. Projects could maintain an average TK classroom enrollment be used to support full-day kindergarten, of no more than 24 students at each school site. transitional kindergarten, or school district (Previously, districts could have a higher average operated State Preschool facilities. In class size if it was collectively bargained.) The state 2022-23, an additional $100 million was also set minimum requirements for the number of provided, with statute specifying intent adults required in a TK classroom. Beginning in to provide an additional $550 million to 2022-23, TK classrooms must, on average, have in 2023-24. 1 adult for every 12 students and school districts • Planning Support. In 2021-22, $200 million will receive $2,813 per TK average daily attendance Proposition 98 General Fund was provided to to cover the associated costs. In practice, this all local education agencies (LEAs)—school means TK classrooms have 24 students or fewer, districts, charter schools, and county offices with one credentialed teacher and one instructional of education—that operate kindergarten aide. State law also specifies that ratios would be programs. Funds could be used for a variety reduced to one adult for every ten students starting of purposes such as recruitment, training, in 2023-24, contingent on additional funding and materials. In 2022-23, an additional being provided. $300 million was provided for these purposes. Additional Requirements for TK Teachers • Teacher Support. In 2021-22, $100 million Scheduled to Take Effect Next year. In addition Proposition 98 General Fund was provided as to an elementary teaching credential, TK teachers a competitive grant for LEAs to increase the will be required—starting August 2023—to have number of highly qualified State Preschool either 24 units in early childhood education and/ and TK teachers. or child development, a child development permit, School District Reports Give Snapshot of TK an early childhood education specialist credential, Expansion Plans. Based on reports submitted or comparable experience in a classroom setting to the California Department of Education (CDE) with preschool-aged children. These additional by 829 school districts as part of the one-time requirements were initially set to start August of planning grants funded in 2021-22, approaches 2020, but have been delayed several times. to TK implementation vary across the state. For State Provided One-Time Funding to Support example, districts differ as to whether they plan to TK Expansion. Between 2021-22 and 2022-23, ramp up TK implementation faster than required in the state provided a total of $1.2 billion in one-time the 2022-23 school year. Specifically, 43 percent General Fund to support TK expansion. These of school districts report they plan to offer TK to augmentations include: four-year olds with birthdays after February 3, whereas 35 percent report Figure 4 they do not plan to offer TK to this population. (The remaining Transitional Kindergarten Expansion Schedule 22 percent were not sure.) The Year Eligibility majority of districts (67 percent) 2021-22 Must have fifth birthday between September 2 and December 2. report they are offering full-day 2022-23 Must have fifth birthday between September 2 and February 2. TK (exceeds four hours) and 2023-24 Must have fifth birthday between September 2 and April 2. 61 percent report that TK is offered 2024-25 Must have fifth birthday between September 2 and June 2. 2025-26 Must have fourth birthday by September 1. at all elementary school sites. Note: Some school districts may allow younger students who do not meet the criteria above to (The reports for charter schools enroll in transitional kindergarten. These students do not generate state funding until their fifth were similar.) birthday and must turn five before the end of the school year. 4 LEGISLATIVE ANALYST’S OFFICE 2023-24 BUDGET Workforce Challenges Appear to Be More through any program that requires a clinical Prevalent Compared to Facility Challenges. practicum experience, (3) hold a child development Workforce issues appear to be a key barrier to permit or be a candidate for supervised practicum TK implementation. Only 23 percent of school experience for a child development permit, or districts report having enough multiple subject (4)participate in certain specialized programs teaching credential holders to meet the need for such as regional occupational programs with TK expansion. Facility challenges appear to be supervision. (A child development permit is required less of an issue, with 75 percent of school districts for teachers in a State Preschool program.) reporting they have adequate space to meet the LAO Comments projected enrollment of TK students. Some school districts report planning to make facility updates, TK Estimates Will Be Updated as such as paving an area. However, 41 percent of Current-Year Data Become Available. The school districts and charter schools report they do state will have a better sense of TK attendance for not intend to make updates to facilities. 2022-23 when CDE releases preliminary attendance data in the coming weeks (based on attendance Governor’s Proposal data through December). This data will help inform Increases Funding by $690 Million to estimates that will be included in the final budget. Implement TK Expansion. The Governor’s budget Delaying Facilities Funding and Maintaining includes $690 million in additional LCFF funding to Current Staffing Ratios Seems Reasonable account for the approximately 46,000 additional Given State Budget Problem. The Governor’s children estimated will be enrolled in TK in 2023-24. proposed actions help to address the state’s These costs are associated with an additional two budget issues. Delaying the facilities funding months of eligibility specified in the multiyear plan. provides non-Proposition 98 General Fund savings (In 2023-24, a child must have their fifth birthday by in 2023-24 to address a projected budget problem. April 2 instead of February 2 to be eligible.) In addition, as we discuss in a recent brief, the Delays Planned Facilities Augmentation. Governor’s Proposition 98 proposals would create The Governor’s budget delays $550 million a deficit in 2024-25, as the state is using about one-time non-Proposition 98 General Fund for $1.4 billion in one-time Proposition 98 funding to facilities from 2023-24 to 2024-25. Funds could cover 2023-24 LCFF costs. Maintaining the staffing be used for TK, full-day kindergarten or State ratio at current levels avoids additional ongoing Preschool facilities. Proposition 98 General Fund costs that would make Maintains Staffing Ratios at 1 Adult for Every the problem worse. 12 Students. The budget also includes an increase Facility Issues Do Not Appear as Prevalent a of $165 million to reflect higher costs of maintaining Barrier to Implementation. Given most submitted an average of 1 adult for every 12 students in TK reports indicated school districts have adequate classrooms. These costs are associated with classroom space to meet projected TK enrollment, maintaining these ratios for a growing number of facility issues do not appear as prevalent a TK students and providing a COLA. Notably, the barrier to TK expansion. However, given past Governor’s budget does not include funding to augmentations for early education facilities were require that TK classrooms, on average, have one oversubscribed, any funding provided would likely adult for every ten students. be used. The Legislature can provide some amount Creates Additional Requirements for TK of funds for facilities this year or reevaluate whether Staff. The Governor’s budget proposes additional to provide additional funding next year, based on requirements for adults assigned to TK classrooms. the state’s budget condition. In practice, these would be additional requirements Keeping the TK Staffing Ratio at Current for instructional aides. Starting in the 2028-29 Levels Helps Avoid Further Workforce Issues. school year, adults assigned to TK classrooms In addition to helping address existing budget must either (1) be a credentialed teacher, issues, the Governor’s proposal to keep TK staffing (2)be working towards a teaching credential ratios at existing levels also helps ensure that www.lao.ca.gov 5 2023-24 BUDGET schools do not experience even greater staffing teachers, dropping to the lower ratio likely will make shortages. Requiring that TK classrooms have, implementation more challenging. on average, 1 adult for every 10 students, instead Recommend Rejecting Additional Staffing of 1 adult for every 12 students, means districts Requirements. In light of staffing challenges, need to hire more instructional aides. In some we recommend rejecting the additional staffing cases, the lower staffing ratio would also mean requirements for adults assigned to TK classrooms. a school district would need to hire additional These requirements would make hiring instructional credentialed teachers to move from classrooms of aides for TK classrooms more difficult. 24 to classrooms of 20. Given that only 23 percent of school districts reported having enough TK STATE PRESCHOOL In this section, we provide an overview of State Proposition 98 funding, while non-LEA providers Preschool, describe the Governor’s proposals, and are funded with non-Proposition 98 General Fund. offer our associated comments. State Preschool Enrollment Has Not Rebounded From Large Pandemic-Related Background Decline. As Figure 6 shows, State Preschool State Preschool Is Provided to Certain enrollment experienced a significant decline in 2020 Children. The number of children served in State as a result of the pandemic. While enrollment has Preschool in any given year is determined by increased since 2020, it remains significantly below the state as part of its annual budget process. pre-pandemic levels. According to data collected by Three- and four-year old children are eligible for the National Institute for Early Education Research, State Preschool if their family earns at or below the California experienced the fourth largest decline state median income ($96,590 for a family of three). nationwide in state funded preschool enrollment If the number of interested eligible children exceeds (inclusive of State Preschool and TK) as measured the number of available spaces within a program, by the percent change between 2019-20 and providers enroll families based on prioritization 2020-21. The enrollment decline associated with specified in law. This prioritization is shown in State Preschool accounts for the majority of this Figure 5. We estimate in 2022-23, State Preschool is funded to serve 211,000 children (69,000 in full-day and 142,000 in Figure 5 part-day). State Preschool Prioritization State Contracts Directly With Local Providers to Offer Program. State Preschool is Children meeting Income eligible offered by various local government certain criteria children with Income eligible Income eligible (for example, disabilities not four-year olds three-year olds and nonprofit agencies. In recipients of child enrolled in the (lowest income first) (lowest income first) 2022-23, 64 percent of State protective services) set aside Preschool funds are provided to LEAs and community colleges. Other non-LEA entities, such as Families with Expanded learning Families not meeting Four-year olds nonprofit agencies, county welfare incomes no more the work requirement residing in certain program for TK than 15 percent students departments, and cities, receive above the income (only applies to school attendance (only applies to full-day) boundaries the remaining 36 percent of funds. threshold part-day) LEA providers and community Note: Does not include children enrolled using the set aside that requires providers serve a certain colleges are funded with number of children with disabilities. TK = transitional kindergarten. 6 LEGISLATIVE ANALYST’S OFFICE 2023-24 BUDGET decline. Two of the three states that experienced a The 2022-23 budget temporarily extended the larger decrease than California also had reduced pandemic-related reimbursement flexibility spending in preschool programs between 2019-20 until June 30, 2023. and 2020-21, while California preschool programs • Family Fee Waivers. Beginning in April 2020, received stable funding. State Preschool providers the state temporarily waived fees for families cite the impact of the pandemic, workforce participating in the full-day program. The challenges, and TK expansion as reasons why 2022-23 budget temporarily extended these enrollment has not returned to pre-pandemic levels. family fee waivers until June 30, 2023. State Took Several Temporary Actions to (Some families are not subject to fees Support Providers and Families During the regardless of the temporary waiver, such Pandemic. The state provided programmatic as families participating in part-day State flexibility and fiscal support aimed and providing Preschool and families with income below stability for both providers and families. Notable 40 percent of the state median income.) temporary actions include: • Stipends and Supplemental Payments. • Reimbursement Flexibility. Since 2020-21, State Preschool providers also received the state has allowed State Preschool several rounds of one-time stipends and providers to receive the lesser of reimbursable supplemental payments, totaling several program costs or the contract amount, but did hundreds of millions of dollars. not take attendance into consideration. This State Also Made Several Ongoing Changes allows providers to receive their full contract Within the Past Few Years. Recent budgets amount regardless of how many children are have also included several ongoing changes. enrolled in the program. Prior to the pandemic, These include: reimbursement for direct contract programs • Rate Increases. Starting January 1, 2022, was based on the lesser of reimbursable State Preschool providers moved to the program costs, the contract amount, and the 75th percentile of the 2018 regional market rate reimbursement rate multiplied by attendance. (RMR) survey or stayed at their current rate if it With this approach, providers had to serve is higher. (Voucher-based child care providers a specified number of children to fully earn have historically received reimbursement the contract. If a provider did not earn a using the RMR, which is based on regional contract, funds would be returned to the state. market surveys of a sample of licensed child care providers.) Prior to this change, State Figure 6 Preschool providers received the standard Number of Children reimbursement rate (SRR). With the enactment Served in State Preschool of this rate increase, providers either receive the RMR or the SRR. Consistent with existing October Enrollment law, the 2022-23 budget provided a COLA for providers receiving the SRR, while providers 160,000 140,000 receiving the RMR were not provided a COLA. 120,000 (The COLA for State Preschool is the same 100,000 rate provided to K-12 education.) For LEA 80,000 providers and community colleges, this rate 60,000 increase was funded with Proposition 98 40,000 General Fund. For non-LEA providers, the 20,000 rate increase was funded with one-time 2019 2020 2021 2022 (preliminary) federal funds. www.lao.ca.gov 7 2023-24 BUDGET • Rate Increases for Providers Serving Governor’s Proposal Certain Children. The 2022-23 budget Increases Funding for COLA. The Governor’s package increased rates for certain groups budget provides $176 million ($112 million of children in the State Preschool program. Proposition 98 and $64 million non-Proposition 98 These increased rates are provided through General Fund) to provide an 8.13 percent COLA adjustment factors applied to the rate the for State Preschool. The Governor’s budget does provider would typically receive. For example, not make changes to current law where the COLA an adjustment factor of 1.8 reimburses is provided only to State Preschool providers with providers at 1.8 times the rate for four-year rates based on the SRR. Providers with rates based olds. Figure 7 shows these adjustments in on the RMR would not receive an increase in rates. more detail. Increases General Fund for Non-LEA • Requirement to Serve Additional Students Providers to Account for Expiring Federal With Disabilities. The 2022-23 budget Funds. The Governor’s budget includes package required at least 5 percent of $157 million non-Proposition 98 General Fund to children enrolled in State Preschool programs account for expiring one-time federal funds. This be children with disabilities in 2022-23. action sustains the rate increase consistent with This requirement increases to 7.5 percent the 2021-22 budget agreement. As previously in 2023-24 and 10 percent in 2024-25 and mentioned, the 2022-23 budget funded the costs of future years. The share of children with the rate increase with one-time federal funds. disabilities a provider needs to serve is often Increases Funds for Planned Ramp-Up referred to as the “set aside,” as the state of Requirement That Providers Serve More requires providers to reserve a certain share Students With Disabilities. The Governor’s budget of spots in their programs for these children. provides $112 million ($64 million Proposition 98 • Increased Income Eligibility. The 2022-23 General Fund and $48 million Non-Proposition 98 budget package increased the income General Fund) for State Preschool providers to eligibility threshold from 85 percent of serve more children with disabilities. Specifically, the state median income to 100 percent. the Governor funds the requirement that 7.5 percent (Students with disabilities served within of children enrolled be children with disabilities the set aside do not need to meet the (an increase from 5 percent in the 2022-23 school income criteria). year). Providing these additional funds is consistent with the 2022-23 budget agreement. Allows Temporary Reimbursement Flexibility Figure 7 and Fee Waivers to Lapse. The Governor’s budget Changes in Preschool does not extend temporary provisions to provide Adjustment Factors reimbursement flexibility and family fee waivers. Previous Adjustment Without any additional action, these provisions Adjustment as of 2022-23 will expire. Exceptional needs 1.54 2.40 LAO Comments Severe disabilities 1.94 2.40 Three-year olds 1.00 1.80 Under Governor’s Budget, Several Dual language learner 1.10 1.20 Opportunities for Savings. Based on our Receiving mental health 1.05 1.10 consultation services review of the Governor’s proposals, we find the Legislature could reduce costs in State Preschool by $196 million and maintain the program as it currently operates. These savings are associated with the Governor overbudgeting the COLA, lower-than-expected costs for recent rate increases, and unallocated funding for 8 LEGISLATIVE ANALYST’S OFFICE 2023-24 BUDGET recent slots. If the Legislature reduces costs, Funds Available From Unawarded Slots. the freed up funds could be used (1) as a budget CDE reports $29 million Proposition 98 General solution, (2) to increase funding in other areas of Fund is available in 2022-23 from unawarded slots the State Preschool program (such as to increase to LEAs and community colleges. The Legislature rates or eliminate family fees for full-day State could reduce the State Preschool program by this Preschool), or (3) to increase funding for other amount either on a one-time or ongoing basis. This priorities outside of the State Preschool program. reduction would align total budgeted amounts with The following paragraphs describe how these funds the costs to continue providing existing services. were identified in more detail. We then provide We would note that there could be demand to comments associated with the two temporary expand services among LEAs. Based on reports policies scheduled to lapse. submitted to CDE, 255 school districts and charter Budget Overestimates Cost of COLA. The schools responded they will apply or plan to apply Governor’s estimated cost of the State Preschool for additional State Preschool funds. This excludes COLA reflects the costs associated with providing school districts and charter schools that recently an 8.13 percent increase to all providers. Under applied for expansion funding. current law, however, only providers with rates Considerations Regarding Temporary based on the SRR would receive a COLA. CDE Policies. Below, we describe our comments and reports it only needs $68 million of the $176 million recommendations on these polices in more detail. proposed in the Governor’s budget to implement the • Recommend Allowing Reimbursement COLA. The Legislature could continue implementing Flexibility to Sunset. Current law sunsets the the COLA as current law specifies and use the policy allowing providers to receive funding remaining $108 million as a budget solution. This for the number of children they served prior approach, however, would not address inflationary to the pandemic—regardless of how many pressure for providers receiving the RMR. The children they currently serve. Ending this Legislature has several alternative options for using policy would align State Preschool with LCFF, this funding to address inflationary pressures, such for which pre-pandemic attendance funding is as providing an across-the-board rate increase to all already phasing out. We think this would help providers or providing a rate increase based on the incentivize providers to return to pre-pandemic RMR. Alternatively, the Legislature could redirect enrollment levels. If a provider can no longer funds to use for another purpose within State serve its pre-pandemic enrollment levels (due Preschool, or forgo action to address inflationary to local demand from families or workforce pressure and score the entire amount provided for issues), ending the reimbursement flexibility COLA ($176 million in General Fund) as savings to allows the state to either (1) redistribute address the budget problem. The Legislature faces funds to other State Preschool providers similar trade-offs within the Governor’s proposal that have the demand to expand, (2) redirect for child care. We describe the trade-offs for these the funding to other priorities, or (3) achieve options in more detail in our recent brief. budget savings. Estimated Cost of Rate Increase Lower • Eliminating Family Fees for Full-day State Than Anticipated. CDE has indicated the costs Preschool Has Merit. If funding priorities to implement recent rate increases—which allow, the Legislature may want to consider were funded with one-time federal funds—were eliminating family fees for full-day State lower than budgeted in 2022-23. This means Preschool. (The state does not charge family the state could provide a lower General Fund fees for part-day State Preschool or TK.) amount to account for expiring federal funds in This action would eliminate the fiscal incentive 2023-24. We estimate the state could continue for families to enroll in TK rather than State rate augmentations with $98 million instead of Preschool, even when State Preschool would $157 million the Governor proposes, freeing better meet a family’s needs. Families instead up $59 million the Legislature could use for could focus on other aspects of preschool other purposes. www.lao.ca.gov 9 2023-24 BUDGET programs when choosing to enroll, such as non-Proposition 98 and $11 million the time the program starts and ends, the Proposition 98 General Fund. The exact costs distance the school is from home or work, would depend on the number of children or any other aspect of the program. Since enrolled and the incomes of the families ongoing funding for State Preschool comes enrolled in the program. If the Legislature frees entirely from the state, the program does up other funds within the State Preschool not have to comply with the federal child program, it may want to consider using some care and development fund requirements to of those funds to eliminate fees for families assess family fees. We estimate eliminating enrolled in a full-day program. family fees would cost roughly $11 million 10 LEGISLATIVE ANALYST’S OFFICE 2023-24 BUDGET www.lao.ca.gov 11 2023-24 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, California 95814. 12 LEGISLATIVE ANALYST’S OFFICE