Child Care and State Preschool

Overview

Provides $6.7 Billion for Child Care Programs. As shown in in Figure 1, total child care program costs increased by $106 million (2 percent) relative to the revised 2023-24 levels. This increase includes an additional $73 million for California Work Opportunity and Responsibility to Kids (CalWORKs) child care programs and $156 million for non-CalWORKs child care programs, offset by a $123 million reduction for support activities.

Figure 1

Child Care Budget

(Dollars in Millions)

	2022‑23 Revised^a	2023‑24 Revised^b	2024‑25 Enacted^b	Change from 2023‑24
	2022‑23 Revised^a	2023‑24 Revised^b	2024‑25 Enacted^b	Amount	Percent
Expenditures
CalWORKs Child Care
Stage 1	$532	$550	$568	$18	3%
Stage 2^c	310	423	532	109	26
Stage 3	608	576	522	‑54	‑9
Subtotals	($1,450)	($1,549)	($1,622)	($73)	(5%)
Non‑CalWORKs Child Care
Alternative Payment Program	$1,834	$2,054	$2,058	$5	0.2%
General Child Care^d	1,013	1,266	1,397	131	10
Bridge program for foster children	97	94	106^e	12	13
Migrant Child Care	69	71	79	8	12
Care for Children With Severe Disabilities	2	2	2	—^f	2
Subtotals	($3,015)	($3,486)	($3,642)	($156)	(4%)
Support Programs^g	$2,187	$1,578	$1,455	‑$123	‑8%
Totals	$6,653	$6,613	$6,719	$106	2%
Funding
Proposition 98 General Fund^h	$2	$3	$2	‑$2	‑48%
Non‑Proposition 98 General Fund	2,275	3,229	3,832	603	19
Proposition 64 Special Fund	292	270	625	355	132
Federal	4,084	3,111	2,260	‑851	‑27
^aReflects 2023‑24 May Revision estimates with LAO adjustments. ^bReflects 2024‑25 May Revision. ^cDoes not include $11.2 million provided to community colleges for certain child care services. ^dIncludes family child care home education networks. ^eConsists of $58.8 million in 2024‑25 funds and $47.1 million in unspent, reappropriated funds from 2023‑24. ^fReflects $28,000. ^gIncludes funding for quality programs, child care infrastructure, Child and Adult Care Food Program, CCPU Retirement Benefit Trust, accounts payable, whole child community equity, court cases, and costs associated with 2023‑24 collectively bargained early education and parity agreement. ^hReflects Proposition 98 funds for Child and Adult Care Food Program.
CCPU = Child Care Providers United.

Provides $5 Billion for Preschool Programs. Of this amount, $2.8 billion is for transitional kindergarten, $2.2 billion is for State Preschool, and $42 million is for other support activities. As shown in Figure 2, the 2024-25 Budget Act increases these programs by a total of $247 million (5.2 percent) from the revised 2023-24 level.

Figure 2

Preschool Budget

(Dollars in Millions)

	2022‑23 Revised	2023‑24 Revised	2024‑25 Enacted	Change from 2023‑24
	2022‑23 Revised	2023‑24 Revised	2024‑25 Enacted	Amount	Percent
Expenditures
Preschool Programs
State Preschool^a	$2,579	$2,545	$2,151	‑$394	‑15.5%
Transitional Kindergarten^b	1,430	2,106	2,759	653	31.0
Preschool QRIS Grant	50	50	50	—	—
Subtotals	($4,059)	($4,700)	($4,960)	($259)	(5.5%)
Other Support	$531	$54	$42	‑$13	‑23.3%
Totals	$4,590	$4,755	$5,001	$247	5.2%
Funding
Proposition 98 General Fund	$3,536	$3,785	$4,136	$351	9.3%
Non‑Proposition 98 General Fund	844	916	865	‑51	‑5.6
Federal One‑Time COVID‑19 Relief	210	54	—	‑54	‑100.0
^aIncludes up to $5 million each year used for a family literacy program offered at certain State Preschool sites. ^bReflects LAO estimates.
QRIS = Quality Rating and Improvement System.

Major Spending Changes

Funds New General Child Care Slots and Modifies Multiyear Expansion Plan. The budget package includes $229 million ($117 million General Fund and $111 million federal funds) for 11,000 new General Child Care slots beginning October 1, 2024. (The full-year ongoing costs of the slots is $305 million.) This amount would increase the overall number of subsidized child care slots by about 3 percent and reflects new awards issued this spring from a request for applications process administered by the Department of Social Services (DSS). The budget also modifies and adds into statute details related to the multiyear slot expansion plan. (In 2021-22, the Legislature and Governor agreed to add 206,500 child care slots by 2025-26. The 2023-24 budget package delayed full implementation to 2026-27.) Specifically, trailer legislation indicates intent to add 44,000 slots in 2026-27 and 33,000 slots in 2027-28 to fully meet the goals of the expansion plan.

Makes One-Time Reductions to State Preschool. The budget reduces funding for State Preschool by $406 million on a one-time basis. Of this amount, $302 million is Proposition 98 General Fund and $105 million non-Proposition 98 General Fund. This reduction reflects the estimate of State Preschool funds that would otherwise go unused. The proposal is not intended to reduce rates or services.

Reduces Funding for Inclusive Early Education Expansion Program. The budget reduces one-time funds for the Inclusive Early Education Expansion Program by $150 million. A total of $100 million remains available for the program.

Other Actions

Makes Statutory Changes Related to Alternative Reimbursement Rate Structure. The state is in the process of obtaining approval from the federal government to use an alternative reimbursement rate structure that is not based on regional market rates. This new rate structure is intended to apply to all child care and State Preschool providers. Trailer legislation adds several requirements related to the planned shift to new rates:

Requires the state to establish reimbursement rates using an alternative methodology by July 1, 2025. If the new rates do not take effect by this date, DSS must provide the Legislature with a time line for transition.
Specifies that the new reimbursement rates shall not be reduced from the rates previously in effect, including the one-time cost of care plus rates that were part of the most recent collectively bargained and parity agreement.
Adds specific requirements related to a report DSS must submit to the Legislature within 60 days of receiving approval from the federal government to use an alternative reimbursement rate. The report must include the department’s plan to set new rates by July 1, 2025 and the estimated state operations, technology, and infrastructure costs associated with implementing the new rates. The report must also identify regulatory or statutory changes that may be necessary to implement the new rates as intended.
From October 1, 2024 through January 1, 2026, requires DSS to provide quarterly updates to the Legislature on the implementation of the new reimbursement rates.

Requires Streamlined Expansion Award Process. Trailer legislation requires DSS and the California Department of Education to develop a streamlined application process for existing providers to be awarded new slots. Existing providers would be eligible for the streamlined application process if they meet certain conditions, such as complying with current fiscal and programmatic requirements of their specific program.

Expands State Preschool to Two-Year Olds. The budget gives State Preschool providers the option to serve two-year olds. (Previously, State Preschool providers could only serve three- and four-year olds.) If providers want to serve two-year olds, they must begin to do so before July 1, 2027.

Suspends Requirement to Serve Additional Students With Disabilities in State Preschool. The budget also suspends the planned requirement for State Preschool providers to serve a higher share of students with disabilities. The previous plan would have required providers have at least 10 percent of children enrolled in the State Preschool program be children with disabilities by 2026-27. The budget package maintains the 5 percent requirement moving forward.

Requires DSS Provide Legislature a Draft of Quality Improvement Expenditures. As a condition of receiving federal child care funding, the state must spend a certain amount annually on activities that improve the quality of child care. The state also must submit a plan to the federal government describing how these funds will be spent. Budget trailer legislation requires DSS, beginning 2025, to provide the Joint Legislative Budget Committee and the Senate and Assembly budget committees with a proposed list of quality improvement activities that will be funded in the next fiscal year. The proposed list must be submitted on May 14 of every year.