The 2026-27 Budget: Child Care and State Preschool

analysis full 2026-27 BUDGET The 2026-27 Budget: Child Care and State Preschool GABRIEL PETEK | LEGISLATIVE ANALYST | MARCH 2026 SUMMARY In this brief, we analyze the Governor’s child care and State Preschool budget proposals and provide associated recommendations. Below, we provide a summary of our major recommendations. Recommend Aligning Child Care and State Preschool Increases. The Governor’s budget proposes suspending the statutory cost-of-living adjustment (COLA) for child care and State Preschool reimbursement rates and redirecting the savings associated with this suspension for an increase to the monthly cost of care plus payments. These payments supplement the existing reimbursement rates for all providers of subsidized child care and State Preschool. Under the Governor’s proposal, the state would calculate the increases separately for child care programs administered by the Department of Social Services (DSS), State Preschool programs operated by local education agencies (LEAs), and State Preschool programs operated by non-LEAs. This approach would result in different monthly cost of care plus payments for these three groups of providers. Providing different rates by program runs counter to the state’s overall goal of transitioning to a single reimbursement rate structure that provides the same rates across programs. We recommend that any rate increases for child care and State Preschool be provided consistently for all programs. Recommend Requesting More Information on Child Care Infrastructure Funding. The Governor proposes $11.5 million one-time Proposition 64 funding to provide child care infrastructure grants to licensed child care providers impacted by recent wildfires. The administration has yet to provide key details, such as grant amounts, the allowable uses of funding, and time lines for when funding would be awarded. We recommend the Legislature request additional information from the administration regarding key elements of the infrastructure grant proposal. This information would allow the Legislature to determine whether the proposal is addressing key challenges with child care access in regions affected by wildfires. Recommend Adopting General Child Care Reduction. The Governor’s budget proposes to reduce funding for General Child Care slots by $98 million relative to the 2025-26 budget package. These reductions are mainly due to a decline in federal and Proposition 64 funding in 2025-26 and 2026-27 and would eliminate funding for approximately 4,200 slots. Given the state’s fiscal condition, we think this proposal is reasonable and recommend the Legislature adopt it. Based on current information, this reduction would not impact families currently receiving subsidized child care because the state has had unspent General Child Care funding in recent years. Recommend Monitoring Unspent Program Funding. As we discuss in The 2026-27 Budget: Overview of the Governor’s Budget, both our office and the administration project multiyear budget shortfalls beginning in 2027-28, which will require the Legislature to make difficult spending decisions next year. We recommend the Legislature monitor the amount of unspent funding within the General Child Care program over the next few years. If additional unspent funds remain in the program, the Legislature could consider further reducing funding for General Child Care. Although reducing funding would run counter to the Legislature’s stated goal of increasing child care slots over the long term, this could help the state avoid reductions to other programs that would result in a reduction in the level of services provided to Californians. www.lao.ca.gov 1 analysis full 2026-27 BUDGET BACKGROUND State Subsidizes Child Care, Primarily for State Also Provides State Preschool for Low-Income Families. The state provides families Certain Children. State Preschool is administered with subsidized child care through various child by the California Department of Education and care and development programs (Figure 1). Most of provided by a variety of local agencies and the state’s subsidized child care is administered community-based organizations. Three- and by DSS through three programs: (1) California four-year old children are generally eligible for State Work Opportunity and Responsibility to Kids Preschool if their family earns at or below the state (CalWORKs) child care, (2) the California Alternative median income ($109,904 annual income for a Payment Program (CAPP), and (3) the General Child family of three and $127,338 annual income for a Care program. CalWORKs child care programs family of four). State law includes various enrollment focus on families enrolled in or transitioning flexibilities that allow providers to serve families with out of CalWORKs welfare-to-work activities. higher incomes, and some providers may choose The remaining programs are primarily designed to serve eligible two-year olds. Based on data from for low-income, working families that have not October 2024, the state serves 100,705 children participated in CalWORKs. Families are generally in State Preschool. eligible for subsidized child care if they have a Child Care and State Preschool Programs family income of less than 85 percent of the state Supported With Multiple Funding Sources. median income ($93,418 annual income for a family The 2025-26 budget package provided a total of of three and $108,237 annual income for a family $10.3 billion for subsidized child care and State of four in 2025-26) and have a demonstrated need Preschool ($7.8 billion from the General Fund). for child care. Figure 1 Overview of Child Care Programs Program Descriptiona Funded Slots CalWORKs Child Care Provides subsidized child care services to current and former CalWORKs 160,414 families. Slots are available for all eligible children. California Alternative Provides subsidized child care vouchers to eligible working families. Slots are 170,495 Payment Program limited to budget appropriation. General Child Care Directly contracts with center-based and licensed family child care providers to 61,048 serve working families eligible for subsidized care. Slots are limited to budget appropriation. Family Child Care Directly contracts with consortia of licensed family child care providers to 3,400 serve working families eligible for subsidized care. Slots are limited to budget appropriation. Migrant Child Care Provides subsidized child care services to migrant families working in 5,054 agriculturally related industries.b Services are provided throughout the Central Valley. Slots are limited to budget appropriation. Care for Children With Provides additional access to child care services for children under the age of 80 Severe Disabilities 21 years and with exceptional needs.c Program is located in the San Francisco Bay Area. Slots are limited to budget appropriation. Emergency Child Care Provides temporary child care services to children in foster care system and 3,245 Bridge under age 13. Child care services are temporary until family finds longer-term child care solution.d a Unless otherwise specified, child must be under age 13 and families must earn at or below 85 percent of the state median income to be eligible for subsidized child care programs. For example, a family of three must earn less than $93,418 annually in 2025-26 to be eligible for programs. b Family earned at least 50 percent of their total gross income from employment in fishing, agriculture, or agriculturally related work during the 12 months immediately preceding the date of application for services. c Child must have an individualized education program or an individualized family service plan issued through a special education program. d Child care services provided up to 12 months, but may be extended for a compelling reason. 2 LEGISLATIVE ANALYST’S OFFICE analysis full 2026-27 BUDGET Of the total, the state provided $7.5 billion in funding the transition to paying providers prospectively. for child care programs. The majority of child care (Currently, the state pays providers after they have funding ($4.9 billion) was from non-Proposition 98 submitted timesheets demonstrating they have General Fund. The state also used roughly provided care.) Additionally, starting in July 2026, $2.3 billion in federal funding to partially cover the state will begin reimbursing providers who program costs. In addition, the state partially contract directly with the state (primarily General covered program costs with $195 million from the Child Care and State Preschool providers) based on Proposition 64 Youth Account, which is funded by enrollment rather than attendance. the cannabis retail excise tax established in 2016. State Has Significantly Expanded Child Care State Preschool programs are funded entirely with Access and Funding Since 2021. As part of the $2.9 billion in General Fund (including $1.9 billion 2021-22 budget package, the Legislature and in Proposition 98 General Fund). State Preschool Governor agreed to add 206,800 non-CalWORKs programs offered by LEAs—school districts, county child care slots over a multiyear period. To date, offices of education, community college districts, the state has funded 129,800 additional slots—a and certain charter schools—are funded with 113.8 percent increase in non-CalWORKs slots Proposition 98 General Fund. Those programs compared to 2020-21 levels. CalWORKs caseload offered by non-LEA providers (community-based has also grown by over 31,000 (23.9 percent) organizations, county welfare departments, over this period. Figure 2 shows the total number and cities) are funded with non-Proposition 98 of subsidized child care slots, as well as total General Fund. funding, since 2018-19. Statutory intent language Child Care Programs Must Comply With associated with the multiyear agreement would Certain Federal Requirements. Most of the require an additional 44,000 slots in 2026-27 and federal funding the state appropriates for child care 33,000 in 2027-28. programs is provided through the Child Care and Development Fund Figure 2 (CCDF). States receiving CCDF Child Care Access and Funding funding must submit plans for approval to the federal Office of Child Care within the Administration Child Care Slots Total Child Care Funding (In Billions) for Children and Families. As a 450,000 $8 condition of receiving CCDF, the 400,000 7 350,000 state must comply with a number 6 300,000 of requirements, such as providing 5 250,000 some matching funding as well 4 200,000 as spending at least 12 percent 3 150,000 of CCDF funds on quality 100,000 2 improvement activities. In recent 50,000 1 years, California made several changes intended to comply with 2018-19 2019-20 2020-21 2021-22 2022-23 2023-24 2024-25 2025-26 2026-27 changes to federal rules. For Non-CalWORKs Child Care example, the 2025-26 budget CalWORKs Child Care provided $30 million to support www.lao.ca.gov 3 analysis full 2026-27 BUDGET State Preschool Enrollment Below The state provides $1.1 billion in cost of care plus Pre-Pandemic Levels as Funding Continued to payments in the 2025-26 budget, representing Grow. As a result of the pandemic, State Preschool a 12.2 percent increase in total child care and enrollment experienced a significant decline State Preschool spending. The cost of care plus of roughly 65,000 students in 2020 (Figure 3). payments are allocated to providers based on their While enrollment has increased since 2020, it enrollment of children receiving subsidized child remains significantly below pre-pandemic levels. care. The rates per child are consistent across In October 2024, State Preschool enrollment was programs, but vary by region of the state and roughly 40,000 students lower than October 2019 whether the provider is licensed. Funding for cost enrollment. Since the pandemic, the state has of care plus payments is intended to supplement held providers harmless from enrollment declines. existing reimbursement rates and be used to cover The hold harmless is set to expire June 30, 2026. providers’ baseline operating costs as the state Funding increases for State Preschool in 2021-22 transitions to a new reimbursement rate structure. and 2022-23 were primarily due to rate increases. State Has Statutory COLA for Child Care and In 2023-24 and 2024-25, the state made one-time State Preschool Providers. The state provides reductions to the program in recognition that a statutorily required annual COLA—the same funding provided exceeded the amount necessary rate provided to K-12 education programs—to to fund all State Preschool contracts. child care providers funded on the SRR (mainly Child Care and State Preschool General Child Care and State Preschool providers). Reimbursement Rates in Transition. The state For voucher-based programs that are funded has historically used two different reimbursement based on the RMR (primarily CAPP), the state rates for child care providers—the Standard increases total program funding based on the Reimbursement Rate (SRR) and the Regional statutory COLA, but does not automatically adjust Market Rate (RMR). In 2021, the state increased provider rates. The increase in funding effectively rates and shifted most providers to the RMR, then allows CAPP to increase access to child care. In began the process of developing a new child care 2023-24, the state redirected funding associated reimbursement rate structure for all child care with the statutory COLA for all programs to cover and State Preschool providers. From 2023-24 costs of the monthly cost of care plus payments. In through 2025-26, the state provided rate increases 2025-26, the state used the estimated cost of the through monthly cost of care plus payments that statutory COLA to provide a uniform increase in supplement reimbursement rates for all providers. monthly cost of care plus payments to all providers. Trailer legislation associated with the 2025-26 budget package Figure 3 also modified the way the state State Preschool Access and Funding is to apply the statutory COLA. Starting July 1, 2026, all child care 160,000 $3.0 and State Preschool providers Preschool Budgeted Amount (In Billions) October Enrollment are required to receive a minimum 140,000 2.5 annual rate increase equivalent to 120,000 2.0 the statutory COLA. 100,000 80,000 1.5 60,000 1.0 40,000 0.5 20,000 2018-19 2019-20 2020-21 2021-22 2022-23 2023-24 2024-25 4 LEGISLATIVE ANALYST’S OFFICE analysis full 2026-27 BUDGET California Previously Enacted the Child Care to five states due to concerns about improper use Infrastructure Grant Program. The state provided of federal funds. The freeze affected Temporary $351 million in the 2021-22 budget package for Assistance for Needy Families (TANF), CCDF, and infrastructure grants to child care providers. These the Social Services Block grant. The 2025-26 grants included $201 million for minor repairs and budget provides $1.1 billion from CCDF and renovations to child care facilities and $150 million $329 million from TANF for child care programs. for the construction of new facilities. The last of On January 8, 2026, California and the other states these funds are expected to be fully expended sued to prevent the freeze. A federal court initially in 2025-26. granted a temporary restraining order that was Federal Government Attempted to Freeze followed by a preliminary injunction, ordering that Funding Used for Child Care. On January 6, funds continue to be available pending resolution 2026, the federal administration announced that of the case. it would freeze $10 billion in grant funding going www.lao.ca.gov 5 analysis full 2026-27 BUDGET CHILD CARE AND STATE PRESCHOOL PROPOSALS Governor’s Budget $175 million increase in non-Proposition 98 General Fund, which is partially offset by a $14 million Proposes $7.5 Billion for Child Care Programs decrease in Proposition 64 funds and a $10 million in 2026-27. The Governor’s budget includes decrease in federal funding. The latter reductions $7.5 billion for child care programs in 2026-27— are primarily due to lower Proposition 64 revenues an increase of $150 million relative to the revised and the use of one-time federal carryover funds in 2025-26 levels (Figure 4). This change includes a 2025-26 (Figure 5). Figure 4 Child Care Budget (Dollars in Millions) Change From 2025-26 2024-25 2025-26 2026-27 Reviseda Revisedb Proposedc Amount Percent Expenditures CalWORKs Child Care Stage 1 $614 $615 $630 $15 2% Stage 2d 549 598 620 22 4 Stage 3 537 581 609 27 5 Subtotals ($1,700) ($1,794) ($1,859) ($65) (4%) Non-CalWORKs Child Care Alternative Payment Program $1,990 $2,058 $2,058 — — General Child Caree 1,495 1,510 1,487 -$23 -2% Bridge program for foster children 107 62 62 — — Migrant Child Care 79 79 79 — — Care for Children With Severe Disabilities 2 2 2 — — Subtotals ($3,672) ($3,711) ($3,688) ($23) (-1%) Support Programs $2,161f $1,825g $1,934h $109 6% Totals $7,533 $7,330 $7,481 $150 2% Funding Proposition 98 General Fundi $2 $1 $1 $0.04 4% Non-Proposition 98 General Fund 4,450 4901 5,075.50 175 4 Proposition 64 Special Fund 639 $199 184 -14 -7 Federal 2,442 2,230 2,220 -10 — a Reflects 2025-26 May Revision estimates with LAO adjustments. b Reflects 2026-27 Governor’s Budget estimates with LAO adjustments. c Reflects 2026-27 Governor’s Budget with LAO adjustments. d Does not include $4.4 million provided to community colleges for certain child care services. e Includes funding for family child care home education networks. f Includes cost estimates for quality programs, child care infrastructure, Child and Adult Care Food Program, CCPU Training Fund, CCPU Retirement Benefit Trust, CCPU Health Benefit Fund, accounts payable, whole child community equity, court cases and costs associated with 2023-24 MOU and parity agreement. g Includes cost estimates for quality programs, child care infrastructure, Child and Adult Care Food Program, accounts payable, prospective pay, reimbursement based on certified need, rate reform support, administrative support, and whole child community equity. The budget authorizes the Department of Finance to increase spending by up to $195 million on CCPU funds for retirement, health, and training. h Includes cost estimates for quality programs, child care infrastructure, Child and Adult Care Food Program, accounts payable, prospective pay, reimbursement based on certified need, administrative support, low income investment fund, whole child community equity, and the child care COLA. The budget authorizes the Department of Finance to increase spending by up to $195 million on CCPU funds for retirement, health, and training. i Reflects Proposition 98 funds for Child and Adult Care Food Program. CCPU = Child Care Providers United; MOU = memorandum of understanding; and COLA = cost-of-living adjustment. 6 LEGISLATIVE ANALYST’S OFFICE analysis full 2026-27 BUDGET Includes Spending Increases for Two proposes to reduce total General Child Care Proposals. The Governor’s budget proposes funding by an additional $23 million ongoing. suspending the statutory COLA for child This reduction consists of a $26 million decrease care providers and redirecting the savings associated with lower Proposition 64 revenues and associated with this suspension ($87.8 million a $2 million decrease in federal funding, partially non-Proposition 98 General Fund) to increase the offset by a $5 million increase in non-Proposition 98 monthly cost of care plus payments for all child care General Fund. These reductions would effectively and State Preschool providers. We estimate this eliminate funding for roughly 4,200 General Child increase equates to a nearly 11 percent increase to Care slots that were added to the budget in recent monthly cost of care plus payments. In addition, the years. Funding for these slots has not yet been budget includes $11.5 million from Proposition 64 contracted to providers. funds to provide child care infrastructure grants that No New Child Care Slots for Implementation would target current licensed centers and family of Multiyear Expansion Plan. The Governor’s child care homes that reported operational impacts budget does not include additional child care slots associated with recent wildfires. to continue the multiyear slot expansion plan. Under Reduces General Child Care Slots by the statutory intent language, the state would be $98 Million Relative to 2025-26 Budget Package. required to add 12,000 General Child Care slots The Governor’s budget includes a $75 million and 32,000 CAPP slots in 2026-27. Not adding ongoing reduction to General Child Care in these slots saves approximately $336 million 2025-26, which is due to a decrease in California’s non-Proposition 98 General Fund in 2026-27. CCDF award. For 2026-27, the Governor’s budget Figure 5 Changes in Child Care Spending (In Millions) General Fund Prop. 98 Non-Prop. 98 Prop. 64 Federal Total Policy Changes Cost of care plus increase in lieu of COLA — $88 — — $88 Infrastructure grants for wildfire affected areas — — $12 — 12 General Child Care reductiona — 5 -26 -$2 -23 Subtotals (—) ($93) (-$14) (-$2) ($77) Technical Adjustments Annualization of monthly cost of care plus payments — $197 — — $197 CalWORKs caseload and cost of care — 55 — $10 65 Child and Adult Care Food Program caseload and COLA $0.04 0.2 — 24 25 Annualization of prospective pay costs — 14 — — 14 One-time adjustmentsb — -21 — -42 -63 Expiration of one-time stabilization payment — -163 — — -163 Subtotals (—) ($81) (—) (-$8) ($74) Totals $0.04 $175 -$14 -$10 $150 a The Governor’s budget also includes a $75 million reduction in federal funding beginning in 2025-26. b Includes prior year one-time costs associated with quality carryover, child care infrastructure carryover, court cases, and the whole child community equity program as well as the COLAs for Resource and Referral and Local Planning Councils. COLA = cost-of-living adjustment and CCPU = Child Care Providers United. www.lao.ca.gov 7 analysis full 2026-27 BUDGET Provides $3 Billion for State Preschool. Of As Figure 7 shows, this approach would result in this amount, $2 billion is Proposition 98 General different monthly cost of care plus payments for Fund for programs offered by LEAs and $1 billion these three groups of providers. These differences is for programs offered by non-LEAs. Overall, as are primarily driven by differences in per-child Figure 6 shows, the Governor’s budget increases funding rates across programs. This approach runs State Preschool funding by $136 million compared counter to the state’s overall goal of transitioning to to 2025-26. Similar to the proposal for child care, a single reimbursement rate structure that provides the Governor’s budget proposes suspending the the same rates based on specific criteria, such statutory COLA for State Preschool providers as child age groupings and regional costs. It is and redirecting the savings associated with this also counter to the approach taken in 2025-26 to suspension ($46 million Proposition 98 General provide a uniform increase to monthly cost of care Fund and $24 million non-Proposition 98 General plus payments for all providers. Fund) for an increase to the monthly cost of care Few Details on Child Care Infrastructure plus payments. The specific increase would Grant Proposal. The administration has indicated be calculated separately for LEA and non-LEA the infrastructure grant proposal is intended to providers. The remaining changes are technical support current licensed centers and family child adjustments related to one-time savings and care homes that reported operational impacts spending in 2025-26. associated with recent fires. However, the administration has yet to provide other key details, Assessment such as grant amounts, the allowable uses of Increases in Lieu of COLA Will Be Higher at funding, and time lines for when funding would be May Revision. Based on conversations with DSS, awarded. This lack of detail makes it difficult for the our understanding is that the cost of providing Legislature to evaluate the merits of the proposal. funding in lieu of the COLA will be higher at May Revision. Figure 6 This is because the estimates 2026-27 Changes in Preschool Spending included in the Governor’s budget (In Millions) inadvertently did not account for the costs of providing a COLA General Fund to CalWORKs child care and the Change Prop. 98 Non-Prop. 98 Total Emergency Child Care Bridge Restoration of one-time State Preschool $81 — $81 program. We estimate addressing reduction this issue would increase the costs Cost of care plus increase in lieu of 46 $24 70 of the Governor’s proposal by cost-of-living adjustment Removal of one-time 2025-26 spending — -16 -16 about $45 million. Totals $127 $9 $136 COLA Approach Would Provide Different Increases to Child Care and State Figure 7 Preschool Providers. Under Governor’s Proposal Creates Disparities in Cost of the administration’s proposal Care Plus Payments to redirect COLA funding to Rates for Licensed Providers an increase in monthly cost of care plus payments, the state LAO Estimates of would calculate the increases Provider Type 2025-26 Rates Proposal separately for child care programs Child Care $152-$230 $177-$268 administered by DSS, LEA State State Preschool (LEA) 152-230 181-274 Preschool providers, and non-LEA State Preschool (Non-LEA) 152-230 184-278 Notes: Cost of Care Plus rates vary by region. State Preschool providers. LEA = local education agency. 8 LEGISLATIVE ANALYST’S OFFICE analysis full 2026-27 BUDGET New General Child Care Slots Still in Process statutory intent language. Adding these slots would of Being Filled. Compared with voucher-based cost the state $336 million non-Proposition 98 slots, General Child Care slots take time to award, General Fund in 2026-27 and add to the state’s contract, and fill. The state typically takes several projected structural deficit in future years. months to develop a request for applications, Proposition 64 Revenue Likely Higher Than review applications, and award funding. In addition, Governor Projects. In our recent post, Cannabis it typically takes DSS several months to finalize Tax Revenue Update (2025 Q4), we project and execute a contract once new General Child Proposition 64 revenues for 2025-26 will be Care expansion funds are awarded to providers. 5.9 percent higher than estimates included in the The length of time to execute a contract can be Governor’s budget. These higher revenue estimates delayed for several reasons, including delays at would result in an additional $17 million that would DSS and challenges providers have in completing be available for child care. The administration will the requirements to be fully licensed to serve update its Proposition 64 revenue estimates at children. As a result of these delays, the state has May Revision. had unspent General Child Care funding in recent Federal Government May Modify Prospective years. In 2024-25, $446 million in General Child Pay Requirements. The federal government is Care funding went unspent. Although total unspent currently considering a proposed rule change funding for 2025-26 is not yet available, as of that would remove the requirement to pay child January 2026, approximately $170 million in funding care providers prospectively. Under the proposed from the most recent slot expansion has not yet rule change, states would be allowed, but not been contracted. Some of these slots will likely be required, to pay providers prospectively. If the contracted by July, but the state is likely to have federal government approved the rule change and additional unspent funds for 2025-26. the state chose to maintain its existing practices Reasonable Not to Add Slots or Backfill and no longer shift to prospective pay, it could General Child Care Given State Budget save $43.8 million in ongoing non-Proposition 98 Condition. The Governor’s budget would reduce General Fund (the amount currently budgeted to the amount of funding available for General Child increase staffing to make payments prospectively Care slots to align with lower Proposition 64 and “true-up” payments after receiving actual revenues and CCDF. This approach differs from enrollment data). recent years, when the state has used General Fund to backfill for lower Proposition 64 revenues. Recommendations Given the budget challenges facing the state, Align Child Care and State Preschool we think the Governor’s proposal is reasonable. Increases. To avoid creating more discrepancies As we discuss in The 2026-27 Budget: Overview in funding, we recommend that any rate increases of the Governor’s Budget, both our office and the for child care and State Preschool be provided administration project multiyear budget shortfalls consistently for all programs. For example, if the beginning in 2027-28, which will require the Legislature adopts the Governor’s proposal to Legislature to make difficult spending decisions increase monthly cost of care plus payments, we next year. Making ongoing reductions to General recommend applying the same increase to all Child Care funding would help reduce the structural providers. Mirroring the approach taken in previous deficit moving forward. In the coming months the years, which pooled COLA funding across all state will have additional information regarding the programs, would be a cost neutral change. amount of funding that has not yet been contracted Request More Information on Child Care to providers. This will help the Legislature determine Infrastructure Funding. We recommend the whether the proposed reduction could be Legislature request additional information from implemented now without directly affecting families. the administration regarding key elements of Additionally, we think it is reasonable for the state the infrastructure grant proposal, such as the to pause the slot expansion plan specified in the process for receiving funding, award amounts, and www.lao.ca.gov 9 analysis full 2026-27 BUDGET allowable uses. This information would allow the Monitor Unspent Program Funding. We Legislature to determine whether the proposal is recommend the Legislature monitor the amount addressing key challenges with child care access in of unspent funding within the General Child Care regions affected by wildfires. program over the next few years. If additional Adopt General Child Care Reduction. We unspent funds remain in the program, the recommend the Legislature adopt the proposal Legislature could consider further reducing funding. to reduce General Child Care funding to align Although reducing funding would run counter to the with lower Proposition 64 revenues and CCDF. Legislature’s stated goal of increasing child care The exact amount of this reduction will depend slots over the long term, this could put the state in on final Proposition 64 revenues. Based on a better fiscal position over the next few years and current information, this would not impact families help the state avoid reductions to other programs currently receiving subsidized child care. To help that would result in a reduction in the level of the Legislature determine how much the state services provided to Californians. could reduce without directly affecting families, we recommend requiring DSS to report at May Revision hearings on the amount of funding they estimate is necessary to serve families currently receiving subsidized child care for 2025-26 and 2026-27. 10 LEGISLATIVE ANALYST’S OFFICE analysis full 2026-27 BUDGET www.lao.ca.gov 11 analysis full 2026-27 BUDGET LAO PUBLICATIONS This report was prepared by Dylan Hawksworth-Lutzow, with contributions from Sara Cortez, and reviewed by Edgar Cabral and Ross Brown. 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