State Spending Plan
July 9, 2018

The 2018-19 Budget

California Spending Plan

(Preliminary Version)


Early Education

$4.7 Billion Total Spending on Early Education Programs. Of this amount, $2.3 billion is for preschool programs, $2.3 billion is for other child development programs, and $144 million is for support programs. As Figure 6 shows, the 2018-19 Budget Act augments these programs by a total of $659 million (16 percent) from the revised 2017-18 level. Non-Proposition 98 General Fund covers about half of this increase ($326 million), with Proposition 98 General Fund ($148 million) and federal funds ($185 million) comprising the rest of the increase.

Figure 6

Early Education Budget

(Dollars in Millions)

2016‑17
Actual

2017‑18
Revised

2018‑19
Enacteda

Change From 2017‑18

Amount

Percent

Expenditures

CalWORKs Child Care

Stage 1

$418

$320

$331

$11

3.5%

Stage 2

445

508

560

52

10.2

Stage 3

284

348

399

51

14.7

Subtotals

($1,147)

($1,175)

($1,289)

($114)

(9.7%)

Non‑CalWORKs Child Care

Alternative Payment Program

$283

$292

$530

$237

81.2%

General Child Care

308

340

412

72

21.0

Bridge program for foster children

20

41

21

103.3

Migrant Child Care

31

35

40

6

15.9

Care for Children With Severe Disabilities

2

2

2

b

5.3

Subtotals

($623)

($689)

($1,024)

($335)

(48.6%)

Preschool Programs

Transitional Kindergarten

$789

$811

$865

$55

6.8%

State Preschool—full day

627

738

804

66

9.0

State Preschool—part day

447

503

538

35

7.0

Preschool QRIS Grant

50

50

50

Subtotals

($1,913)

($2,101)

($2,257)

($156)

(7.4%)

Support Programs

$89

$91

$144

$53

58.3%

Totals

$3,772

$4,057

$4,715

$659

16.2%

Funding

Proposition 98 General Fund

$1,764

$1,933

$2,081

$148

7.6%

Non‑Proposition 98 General Fund

984

1,094

1,420

326

29.8

Federal CCDF

639

635

857

222

35.0

Federal TANF

385

390

347

‑42

‑10.9

Federal Title IV‑E

5

10

5

104.0

aThe 2018‑19 budget plan also funds Inclusive Early Education Expansion Program ($167 million) using 2017‑18 Proposition 98 General Fund. Funding for this proposal is not included in this table.

bLess than $500,000.

QRIS = Quality Rating and Improvement System; CCDF = Child Care and Development Fund; and TANF = Temporary Assistance for Needy Families.

Higher Spending Due to Slot and Rate Increases. As Figure 7 shows, more slots and higher reimbursement rates account for the vast majority of the year-over-year funding increase, with various other adjustments comprising the remainder of the increase. We discuss these augmentations in greater detail below.

Figure 7

2018‑19 Early Education Changes

(In Millions)

Change

General Fund

Federal Funds

Total

Prop. 98a

Non‑Prop. 98

Slots

Provides 11,307 Alternative Payment slots available until June 30, 2020

$205

$205

Annualizes cost of State Preschool slots initiated April 1, 2018

$19

19

Provides 2,100 Alternative Payment slots starting September 1, 2018

$16

16

Provides 2,959 full‑day State Preschool slots at LEAs starting April 1, 2019

8

8

Subtotals

($28)

($16)

($205)

($248)

Reimbursement Rates

Provides 2.71 percent COLA to certain child care and preschool programs

$30

$24

$54

Increases Standard Reimbursement Rates 2.8 percent starting July 1, 2018

32

16

48

Provides increase to certain adjustment factors starting January 1, 2019

40

40

Annualizes Regional Market Rate (RMR) increase initiated January 1, 2018

20

$4

24

Permanently extends RMR hold harmless provisionb

13

1

14

Subtotals

($62)

($113)

($5)

($180)

Other

Makes CalWORKs caseload and average cost of care adjustments

$111

‑$6

$105

Adjusts Transitional Kindergarten for increases in attendance and LCFF funding rate

$55

55

Provides one‑time increase to quality support programs

26

26

Provides funds to annually inspect licensed child care providers

26

26

Annualizes funding for bridge program for foster children initiated January 1, 2018

16

5

21

Reduces non‑CalWORKs slots by 0.48 percentc

‑5

‑4

‑9

Makes other technical adjustments

9

‑2

7

Replaces federal funds with state funds (accounting adjustment)

77

‑77

Subtotals

($59)

($197)

(‑$25)

($230)

Totals

$148

$326

$185

$659

aEnacted budget also funds Inclusive Early Education Expansion Program ($167 million one time) using 2017‑18 Proposition 98 General Fund.

bThe RMR hold harmless provision was set to expire December 31, 2018.

cReflects statutory adjustment based on the projected decrease in the birth‑through‑four population.

COLA = cost‑of‑living‑adjustment; LEA = local education agency; and LCFF = Local Control Funding Formula.

Slots

Funds Additional Alternative Payment Slots. The budget provides $205 million federal funds for 11,307 new Alternative Payment slots starting July 1, 2018. This funding is tied to an increase in the amount of available federal funds. To address some uncertainty regarding whether the increase in the federal grant will be ongoing, the funds are to be spent over a two-year period (through June 30, 2020). Despite some uncertainty, the state expects to receive the same increase in federal funds in 2019-20. If California receives this additional federal funding, the Legislature and Governor intend to use it to sustain the 11,307 slots for another two years (2020-21 and 2021-22). The budget also provides $16 million ongoing non-Proposition 98 General Fund for 2,100 new Alternative Payment slots starting September 1, 2018.

Funds Additional State Preschool Slots. The budget provides $19 million to annualize the cost of 2,959 preschool slots added April 1, 2017. The budget also provides $8 million for 2,959 new full-day State Preschool slots at LEAs starting April 1, 2018. This increase represents the third of three equal batches of State Preschool slots that the Legislature and Governor agreed to add as part of a 2016-17 multiyear budget agreement.

Reimbursement Rates

Increases Standard Reimbursement Rates (SRR). The state funds State Preschool, General Child Care, a portion of Migrant Child Care, and Care for Children with Severe Disabilities based on the SRR. The 2018-19 budget provides $48 million General Fund ($32 million Proposition 98 and $16 million non-Proposition 98) to increase the SRR by 2.8 percent. The new rate for a full-day, center-based State Preschool slot is $12,070 per year, whereas the new rate for a full-day, center-based General Child Care slot for a preschool-aged child is $11,995 per year. The 2.8 percent increase applies to rates for centers, family child care homes, and all age groups.

Increases Adjustment Factors Used to Determine Certain Rates. The budget provides $40 million non-Proposition 98 General Fund to increase the adjustment factors for infants, toddlers, children with exceptional needs, and children with severe disabilities beginning January 1, 2019. These adjustment factors give providers higher reimbursement rates for these groups of children. An adjustment factor of 1.5, for example, reimburses providers at 1.5 times the rate for other children. Chapter 32 changes the adjustment factors in the following ways:

  • Infants: from 1.7 to 2.44.
  • Toddlers: from 1.4 to 1.8.
  • Children with exceptional needs: from 1.2 to 1.54.
  • Children with severe disabilities: from 1.5 to 1.93.

The infant and toddler adjustment factors apply to the General Child Care and Migrant Child Care programs, while the adjustment factors for children with exceptional needs and children with severe disabilities also apply to full-day State Preschool, the Alternative Payment Program, and CalWORKs child care.

Permanently Extends Regional Market Rate (RMR) Hold Harmless Provision. The budget provides $14 million ($13 million non-Proposition 98 General Fund and $1 million federal funds) to permanently extend the RMR hold harmless provision so that no provider moving forward receives less than it received on January 1, 2018. (The hold harmless provision was set to expire December 30, 2018.) The budget also includes $24 million to annualize the RMR rate increase initiated January 1, 2018.

Quality Support Programs

Funds Inclusive Early Education Expansion Grants. The budget provides $167 million Proposition 98 General Fund for one-time competitive grants to school districts and other child care and preschool providers for the purpose of increasing access to inclusive early education programs. Grants could be used for a variety of one-time expenses, including training, facility renovations, and equipment. Grant recipients must provide $1 in local funds for every $2 received through the grant. Grant recipients also must commit to provide program data and participate in an evaluation.

Funds Annual Inspections of Licensed Child Care Providers. The budget provides $26 million federal funds to inspect licensed child care providers more frequently. Currently, Community Care Licensing, a division of the Department of Social Services, typically inspects licensed child care providers once every three years. Federal law requires states to inspect licensed child care providers annually. California currently has a waiver from this requirement that is set to expire October 2018.

Funds Other Quality Improvement Activities. The budget provides $26 million one-time federal funds for various quality improvement initiatives:

  • $10 million for a three-year pilot program focused on including children with special needs in mainstream early care and education settings. One or more COEs would be chosen through a competitive process to run the pilot program. Funds could be used for a variety of purposes, including assisting families in finding care for children with exceptional needs, offering training, and providing access to behavioral and mental health specialists.
  • $5 million for the Child Care Initiative Project, which recruits and trains existing license-exempt providers to help them become licensed providers.
  • $5 million for professional development for licensed child care teachers.
  • $6 million to be spent at the discretion of CDE, with first call for ensuring state compliance with consumer education federal requirements, which require states to make basic information on child care providers available for parents.

Other Changes

Makes Adjustments to CalWORKs Child Care. The budget adjusts CalWORKs child care spending up by $105 million compared to the revised 2017-18 level. The bulk of the year-over-year increase is due to major policy changes enacted last year costing much more than anticipated. Specifically, the 2017-18 budget substantially increased the exit income threshold and allowed families to demonstrate eligibility only once a year (rather than having to maintain eligibility throughout the year). These eligibility changes allow families to remain in the program longer and reduce the rates of fluctuation in and out of the program. The budget also accounts for changes in average cost of care based on families using different types of providers, serving children of different ages, or providing more average hours of care per day.

Makes Statutory Adjustments to Non-CalWORKs Child Care and Preschool Programs. The budget provides $54 million to fund a 2.71 percent COLA for non-CalWORKs child care programs and the State Preschool program. For the programs that receive the SRR, the COLA augments the rate that providers receive. In the Alternative Payment program, the COLA effectively creates extra child care slots. The budget also makes a $9 million downward adjustment to these programs reflecting an estimated 0.48 percent decrease in the birth-through-four population in California.

Augments Transitional Kindergarten (TK). The budget adds $55 million for TK. This increase is due to a 6.1 percent increase in LCFF funding, offset by a slight expected decrease in TK average daily attendance.

Clarifies Licensing Standards for LEA-Run State Preschool Programs. The 2017-18 budget plan exempts State Preschool programs run by LEAs from certain health and safety standards, known as Title 22 standards, beginning July 1, 2019. The 2018-19 budget includes several provisions to clarify rules for these programs once the exemption takes effect. Specifically, Chapter 32 clarifies that the exemption from Title 22 standards applies to any classroom serving at least one State Preschool student. The legislation also requires CDE to add certain health and safety requirements to Title 5 regulations, which govern all State Preschool programs. In addition, Chapter 32 requires an LEA-run State Preschool to use CDE’s uniform complaint procedures for addressing health and safety complaints and to use expedited response timelines that currently apply to school facility health and safety issues.

Clarifies That an LEA Can Serve Both State Preschool and TK Students in a Single Classroom. Chapter 32 also specifies the requirements that classrooms must meet when State Preschool and TK requirements conflict. Most notably, Chapter 32 requires mixed classrooms be taught by a teacher with a multiple subject teaching credential (the current TK requirement) and have a staffing ratio of one adult per 8 children (the current State Preschool requirement). In addition, Chapter 32 requires all students in a mixed classroom be evaluated with the Desired Results Developmental Profile (typically only required for State Preschool students).