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The 2023-24 California Spending Plan: Child Care and State Preschool
The 2023-24 California Spending Plan: Child Care and State Preschool
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Update (12/20/23): Corrected total child care program costs in Figure 1.
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November 17, 2023
The 2023-24 California Spending Plan
Child Care and State Preschool
Overview
Provides $8 Billion for Child Care
Programs. Of this amount, $1.5 billion is for California
Work Opportunity and Responsibility to Kids (CalWORKs) child care
programs, $3.9 billion is for non-CalWORKs child care programs, and
$2.6 billion is for support programs. As shown in Figure 1, total child
care program costs increased by a total of $2.5 billion (45 percent)
relative to the revised 2022 23 level.
Figure 1
Child Care Budget
(Dollars in Millions)
2021 22
Revised a
2022 23
Revised b
2023 24
Proposed c
Change From 2022 23
Amount
Percent
Expenditures
CalWORKs Child Care
Stage 1
$381
$532
$604
$71
13%
Stage 2 d
402
270
315
44
16
Stage 3
705
550
575
25
5
Subtotals
($1,488)
($1,353)
($1,493)
($140)
(10%)
Non CalWORKs Child Care
Alternative Payment Program
$1,252
$1,834
$1,948
$114
6%
General Child Care e
750
1,013
1,772
759
75
Bridge program for foster children
54
97
115
18
19
Migrant Child Care
65
69
70
1
1
Care for Children With Severe Disabilities
2
2
2
1
22
Subtotals
($2,123)
($3,015)
($3,907)
($891)
(30%)
Support Programs
$1,443
$1,139 f
$2,574 g
$1,435
126%
Totals
$5,055
$5,507
$7,974
$2,467
45%
Funding
Proposition 98 General Fund h
$2
$2
$3
$1
56%
Non Proposition 98 General Fund
1,786
1,170
4,377
3,207
274
Proposition 64 Special Fund
292
292
246
46
16
Federal
2,975
4,043
3,346
696
17
a Reflects 2022 23 May Revision estimates with LAO adjustments.
b Reflects 2023 24 May Revision estimates with LAO adjustments.
c Reflects 2023 24 Budget Act estimates with LAO adjustments.
d Does not include $11.1 million provided to community colleges for certain child care services.
e Includes family child care home education networks.
f Includes cost estimates for quality programs; alternative payment program capacity grants; child care infrastructure; Child and Adult Care Food Program; CCPU Health and Retirement Benefit Trust; COVID 19 relief policies; and AB 110, AB 131, AB 185, SB 116 supplemental rates, minus $1.048 billion of estimated 2022 23 unspent funds that were transferred to 2023 24 to cover MOU related and parity actions.
g Includes cost estimates for quality programs, child care infrastructure, Child and Adult Care Food Program, temporary elimination of family fees, deposits in CCPU Health and Retirement Benefit Trust, plus $1.416 billion in estimated unspent funds from 2022 23 to 2024 25 that were transferred to 2023 24 to cover MOU related and parity actions.
h Reflects Proposition 98 funds for Child and Adult Care Food Program.
CCPU = Child Care Providers United and MOU = Memorandum of Understanding.
Provides $5 Billion for Preschool Programs.
Of this amount, $2.5 billion is for State Preschool, $2.3 billion is for
transitional kindergarten (TK), and $204 million is for other support.
As shown in Figure 2, the 2023 24 Budget Act increases these
programs by a total of $358 million (7.5 percent) from the revised
2022 23 level. More details on TK augmentations are described in our post, The
2023 24 California Spending Plan: Proposition 98 and K-12
Education .
Figure 2
Preschool Budget
(Dollars in Millions)
2021 22
Revised
2022 23
Revised
2023 24
Enacted
Change From 2022 23
Amount
Percent
Expenditures
Preschool Programs
State Preschool a
$1,720
$2,579
$2,548
$32
1.2%
Transitional Kindergarten b
824
1,430
2,309
879
61.4
Preschool QRIS Grant
50
50
50
—
—
Subtotals
($2,594)
($4,059)
($4,906)
($847)
(20.9%)
Other Support
$1,040
$694
$204
$489
70.5%
Totals
$3,634
$4,753
$5,111
$358
7.5%
Funding
Proposition 98 General Fund
$2,406
$3,698
$4,141
$443
12.0%
Non Proposition 98 General Fund
988
844
916
72
8.5
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 LAO estimates. The 2023 24 estimate includes Department of Finance’s estimates for add on and expansion policies.
QRIS = Quality Rating and Improvement System.
Child Care and Preschool Cost Drivers. The
net cost increase in child care programs is primarily due to costs
associated with a new collectively bargained agreement between the state
and Child Care Providers United (CCPU) for represented child care and
State Preschool providers and a parity agreement for non-represented,
center-based providers. The net increase in total child care program
costs is partially offset by the one-year pause of the slot expansion
plan, expiration of temporary COVID-19 federal relief funds, and lower
Proposition 64 (2016) fund levels in 2023 24. In preschool, increases
are primarily from expansion of TK, offset by the expiration of one-time
funds.
Child Care and State
Preschool Actions
In 2019 20, the state authorized licensed family home and
license-exempt providers participating in subsidized child care and
preschool programs to form and join a statewide provider union and
collectively bargain on matters, including, but not limited to,
reimbursement rates, benefits, and training. Currently, it is estimated
that 66 percent of total children enrolled in subsidized child care and
less than 1 percent of total children enrolled in State Preschool are
served by providers represented by the CCPU. The first collectively
bargained agreement was reached in July 2021. The state generally
extended the collectively bargained program changes to non-represented,
center-based child care and State Preschool providers to ensure parity
in compensation and program operations. The first collectively bargained
early education and parity agreement expired June 30, 2023.
Adopts New Two-Year, Collectively Bargained Early
Education and Parity Agreement. The spending plan adopts a
new two-year, collectively bargained early education and parity
agreement. In Figure 3, we summarize key provisions of the agreement,
including the monthly per-child cost of care plus supplemental rate
payments beginning January 1, 2024, one-time transitional payment, and
temporary extension of reimbursement flexibilities for both
voucher-based and direct contract providers. Similar to the first
agreement, the state extended the collectively bargained provisions to
non-represented, center-based child care and State Preschool providers
to ensure parity across all providers (with the exception of the health,
retirement, and training funds, which is limited to CCPU-represented
providers). The collectively bargained and parity agreement provisions
generally would expire on June 30, 2025. In total, the agreement is
estimated to cost up to $2 billion across 2023 24 and 2024 25.
Figure 3
Summary of Collectively Bargained Early Education and Parity Agreement
Across 2023 24 and 2024 25 (In Millions)
Total Costs
Monthly per child cost of care plus rate supplement a
$915
Administrative funds b
250
One time transitional payment
229
CCPU Health Benefit Trust c
200
CCPU Retirement Benefit Trust d
160
Reimbursement based on certified need extension
155
Change of part time definition
104
CCPU Training Fund e
15
Total
$2,028
a Monthly payments issued from January 1, 2024 through June 30, 2025.
b Includes administrative funds associated with monthly per child cost of care rate supplement payments, one time transitional payments, and other MOU related activities. Administrative funds are allocated to counties, Alternative Payment agencies, direct contract providers, and a third party contractor.
c Reflects maximum amount of potential annual deposits beginning April 1, 2024.
d Reflects initial $80 million deposit and maximum amount of potential annual deposit beginning July 1, 2024.
e Reflects maximum amount of potential annual deposit beginning July 1, 2024.
CCPU = Child Care Provider Union and MOU = Memorandum of Understanding.
Sets Aside $2.7 Billion to Support Two-Year, Collectively
Bargained Early Education and Parity Agreement. The budget
package includes $2.7 billion in one-time funds from various state and
federal fund sources to support the previously mentioned collectively
bargained early education and parity agreement. The set aside funds
reflect dollars that likely would have gone unspent in 2022 23 and
2023 24 due to slower slot take up and delayed allocation of contract
payments. (We provide more detail on slower slot take up and delayed
allocation of contract payments in The 2023 24 Budget: Child Care
Proposals report.) In State Preschool, the set aside funds came
from excess funds from prior reimbursement changes and delaying program
changes intended to go into effect in 2023 24 and 2024 25. The set aside
funds are intended to cover costs associated with the collectively
bargained early education and parity agreement, with the exception of
CCPU health, retirement, and training fund deposits (up to
$375 million). As shown in Figure 4, we estimate that $1 billion of the
total set aside funds ($281.4 million non-Proposition 98 General Fund
and $734.9 million Proposition 98 funds) remain unobligated.
Figure 4
Total Set Aside Funds Exceed Costs of Collectively Bargained
Early Education and Parity Agreement
Across 2023 24 and 2024 25 (In Millions)
Non Proposition 98 a
Proposition 98
Total
Total Set Aside Funds
$1,674
$995
$2,669
Minus Collectively Bargained and Parity Agreement Costs b
1,392
261
1,653
Unobligated Set Aside Funds
$281
$735
$1,016
a Includes General Fund, federal funds, and Proposition 64.
b Does not include CCPU Health Benefit Trust, Retirement Benefit Trust, and Training Fund deposits, which are not intended to be paid with set aside funds.
CCPU = Child Care Providers Union.
Forgoes Statutorily Required Cost-of-Living Adjustment
(COLA) in 2023 24 and 2024 25. Under current law, the
state provides a statutorily required annual COLA the same rate provided
to K-12 education programs to the Standard Reimbursement Rate, which is
one of the two reimbursement rates used to fund State Preschool and
direct contract child care providers. Historically, the state also
applies the same annual COLA to total funding levels in Alternative
Payment child care programs. The spending plan forgoes the COLAs in
2023 24 (8.22 percent) and 2024 25 in both child care and State
Preschool programs. Instead, the funds that would have been used to
implement the 2023 24 COLA over the next two years ($551 million total
funds) are included in the previously mentioned $2.7 billion set aside.
(The funds that would have been used to implement the 2024 25 COLA were
not redirected to the $2.7 billion set aside.)
Expiration of One-Time Federal COVID-19 Relief Activities
and Funding. As shown in Figure 5, the federal government
provided the state with over $5 billion in temporary COVID-19 relief
funds for child care and preschool programs. Of these funds, about
$4 billion expired at the end of September 2023. The spending plan
includes about $280 million in General Fund to fully backfill federal
relief funds used to cover ongoing slot and rate increases.
Additionally, the spending plan provides $10 million ongoing General
Fund to backfill most of the federal relief funds used to increase
funding for the resource and referral program. The spending plan does
not backfill the loss in federal relief funds for remaining temporary
COVID-19 relief activities, including, but not limited to, one-time
stipends and supplemental rates, infrastructure grants, paid
non-operational days, and licensing incentives.
Figure 5
Federal COVID 19 Relief Funds for Child Care and Preschool Programs
Fund Source
Use of Funds
Total Amount
(In Millions)
Expiration Date
American Rescue Plan Act (ARPA) Stabilization
Reimbursement based on maximum certified need, paid non operational days, stipends, supplemental rates, ongoing slot increase, ongoing rate increase, capacity grants, infrastructure grants, resource and referral, quality support activities, training fund, and licensing incentive.
$2,313 a
September 30, 2023
ARPA Child Care and Development Block Grant Discretionary
Reimbursement based on maximum certified need, ongoing slots, infrastructure grants, after school programs, and data system.
1,443
September 30, 2024
Coronavirus Response and Relief Supplemental Appropriations Act
Emergency child care slots, paid non operational days, stipends, family fee waiver, and ongoing slot increase.
964
September 30, 2023
Coronavirus Aid, Relief, and Economic Security Act
Emergency child care slots, reimbursement based on maximum certified need, paid non operational days, stipends, and family fee waiver.
442
September 30, 2023
Total
$5,163
a Includes $504 million for State Preschool.
Requires Development of Alternative Methodology for
Single Child Care and Preschool Rate Structure. Trailer
legislation requires the Department of Social Services (DSS), in
collaboration with the California Department of Education (CDE), to
develop and conduct an alternative methodology for a single rate
structure. The alternative methodology would be based on a new cost
study and cost estimation model. We understand that the cost study and
model would consider costs to comply with program requirements (such as
health and safety standards, staffing requirements, and licensing
requirements), provide high-quality care, and provide higher
compensation to staff relative to current levels. Trailer legislation
also requires DSS to submit the necessary information to support the use
of a single rate structure based on the alternative methodology to the
federal government no later than July 1, 2024. Within 60 days of
receiving federal approval, DSS is required to provide the Legislature
and CCPU an outline of the implementation components of the approved
single rate structure. Additionally, within 90 days of federal approval,
DSS and CCPU can reopen bargaining negotiations to restructure the
current subsidy rate reimbursement and associated funding.
Requires Reporting on Estimated Unspent Funds and
Expenditures in Child Care and State Preschool. The budget
package includes supplemental reporting language for DSS to provide, on
or before March 1, 2024, an estimate of child care program funds that
may go unspent by the end of 2023 24 and what amount of unspent funds
cannot be reappropriated and would revert back to the state or federal
government. Additionally, DSS and CDE are required to provide
point-in-time allocations and projected expenditure levels associated
with the collectively bargained early education and parity agreement.
(Refer to the Supplemental
Report of the 2023 24 Budget Act for more detail.)
Other Child Care Actions
Pauses Child Care Slot Expansion by One
Year. The 2021 22 budget agreement included a plan to add
200,000 child care slots by 2025 26. Since 2021 22, the state has added
about 146,000 new slots, which more than doubled the number of
subsidized child care slots in the state. As of April 2023, about
30 percent of the recently added slots have been filled. The spending
plan delays the planned child care slot increases by one year, resulting
in $134 million General Fund savings in 2023 24. The administration
intends to resume adding new slots in 2024 25, reaching the overall
200,000 new slots goal by 2026 27.
Reduces Proposition 64 Funding Levels. In
November 2016, California voters approved Proposition 64 ,
which legalized the nonmedical use of cannabis. Proposition 64 revenues
are allocated based on specific formulas. A portion of Proposition 64
revenues are used to fund Alternative Payment and General Child Care
(GCC) slots. As a result of recent declines in Proposition 64 revenue
levels, the spending plan reduces Proposition 64 funding levels for the
GCC program by $46 million in 2023 24. We understand that the
administration intends to backfill the $46 million GCC reduction in
2023 24 with Proposition 64 carryover funds from prior years.
Increases in CalWORKs Caseload and Cost Per
Case. The spending plan provides an additional
$140 million total funds for expected net cost increases in CalWORKs
child care programs. The net cost increase is due to increases in
caseload and cost per case.
Other State Preschool
Actions
Delays Requirement to Serve Additional Students With
Disabilities. The 2022 23 budget package required at least
5 percent of children enrolled in State Preschool programs be children
with disabilities in 2022 23. This requirement was set to increase to
7.5 percent in 2023 24 and 10 percent in 2024 25 and future years.
Trailer legislation delays the requirement by two years, as shown in
Figure 6. The $340 million in savings associated with this delay is used
for the $2.7 billion set aside.
Figure 6
Share of Children With Disabilities State
Preschool Providers Must Serve by Year
Year
Plan as of
June 2022
Plan as of
June 2023
2022 23
5.0%
5.0%
2023 24
7.5
5.0
2024 25
10.0
5.0
2025 26
10.0
7.5
2026 27
10.0
10.0
Funds Training for State Preschool. The
budget includes $764,000 Proposition 98 and $312,000 non-Proposition 98
General Fund to train and certify State Preschool providers in the
Classroom Assessment Scoring System (CLASS). CLASS is a tool intended to
strengthen teacher-child interactions and support quality
improvement.
Changes State Preschool Enrollment
Prioritization. Trailer legislation changes statute to
require that prioritization for enrollment is based on family income.
Generally, children from families with lower incomes must receive
enrollment priority over children from families with higher income.
Previously, income-eligible four-year olds were given priority over
income-eligible three-year olds.
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