We recommend the State Department of Education report at budget hearings on whether the High School Exit Exam will be administered in the budget year.
Chapter 1x, Statutes of 1999 (O'Connell, SB2x), requires students to pass the High School Exit Exam (HSEE) as a condition of receiving a high school diploma, commencing with the Class of 2004. The test development has been on the "fast track" since the adoption of SB 2x. The State Department of Education (SDE), assisted by the HSEE Standards Panel, is currently addressing two main issues: (1) the test's content and format and (2) ensuring that the test will be legally defensible.
On October 27, 1999, the department released a request for proposals (RFP) for designing and administering the HSEE. The RFP noted that the content to be assessed by the HSEE was still a topic of ongoing discussion. Although five companies had expressed interest in the project, none submitted proposals. Generally, the companies had concerns about the lingering uncertainty over the design. In January 2000, SDE used an alternative bidding process and was able to attract two bids. At the time of this writing, the department had selected the American Institutes of Research to develop the test, but was still negotiating a contract with them.
Test Questions Must Be Designed by This Spring. Questions used on a standardized test must first be "field tested" at the same time of year that the test will eventually be administered. In order to administer the HSEE for the first time in the spring of 2001, as called for by the implementing legislation, potential questions must be field tested by this May. To do this, the contractor must develop and field test 800 multiple-choice questions and 20 essay questions aligned with the state academic content standards. Over the ensuing 12 months, the contractor must develop three more forms of the test which will require developing and field testing an additional 2,400 multiple-choice questions and 60 essay questions. Test questions can be used from existing state-owned tests, including the Standardized Testing and Reporting (STAR) Augmentation, the Golden State Exam, the California Assessment Programs, or developed by the test contractor. Since three months is an extremely short time period for the development of a major test, we have concerns that the quality of the test could suffer because of the short time line. This is especially the case given the litigious nature of state exit exams.
Legal Issues Surrounding High School Exit Exam. Most states that have implemented a high school exit exam have had to defend against lawsuits challenging the exam. The Legislature will want to continue to evaluate four questions which could affect the state's ability to defend against such lawsuits.
We recommend that SDE report to the Legislature at budget hearings on the status of the development of HSEE. If the contractor will not be able to conduct field tests this spring, we recommend that the Legislature delay the initial administration of the test by a year, which would result in a one-time savings of $15.4 million (Proposition 98) in test administration costs.
In order to increase the effectiveness of the state's various supplemental instructional programs, we recommend that the Legislature (1) expand the Governor's consolidation proposal to include the Elementary School Intensive Reading Program and (2) increase the combined enrollment cap for these programs accordingly. We further recommend that the Legislature redirect (1) the $18 million budgeted for proposed Intensive Algebra Academies to increase the funding base of these consolidated programs and (2) the $3.2 million proposed for teacher training institutes in pre-algebra and algebra to school districts as part of a larger staff development block grant.
The 2000-01 Governor's Budget proposes to consolidate the existing remedial and core summer school programs in an effort to simplify the administration of these programs. The budget provides a total of $379 million for these programs under Item 6110-104-0001. In addition, the budget allocates $86 million for the Elementary School Intensive Reading Program under Item 6110-205-0001. The above totals include a proposed augmentation of $61.9 million to increase the reimbursement rate given to school districts for these supplemental instructional programs from $2.53 to $3 per-pupil hour.
The budget also includes $21.2 million--$19.5 million of Proposition 98 funds and $1.7 million from the General Fund for the University of California (UC)--to establish "Intensive Algebra Academies" at local school sites for 50,000 pupils in grades 7 and 8. This proposal includes the establishment of UC training institutes for 1,000 algebra teachers who would subsequently instruct an estimated 15,000 of these pupils.
Therefore, altogether the Governor's budget proposes to increase funding for supplemental instructional programs reimbursed by the state from $385 million in the current year to $486 million in the budget year, as shown in Figure 1 (see next page).
|Major Supplemental Instructional Programs
Reimbursed by the State
|1999-00 and 2000-01
|Remedial supplemental instruction, grades 2-6||$77.6||--|
|Remedial supplemental instruction, grades 7-9||30.0||--|
|Remedial summer school, grades 7-12||80.1||--|
|Core academic summer school, grades K-12||122.2||--|
|Remedial and core summer school consolidation||--||$378.7|
|Elementary School Intensive Reading Program, grades K-4||75.0||86.2|
|Intensive Algebra Academies, grades 7-8||--||21.2a|
|a Includes $1.7 million appropriated to University of California.|
School districts offer a variety of instructional programs outside the "regular" classroom day to improve the academic skills of students. Some of these supplemental instructional programs provide remedial assistance to students lacking the skills for successful academic performance, others enhance the learning of all students. Some of the programs are funded through federal funding or competitive grants. Others are funded by state reimbursements. Figure 2 outlines the supplemental instructional programs reimbursed by the state. This analysis focuses on these state-funded programs.
As the figure shows, school districts are required to provide remedial instruction to pupils (1) in grades 2 through 9 who have been retained (not promoted to the next grade) and (2) in grades 7 through 12 who are at risk of not passing the high school exit exam. The figure also shows that some of the programs overlap in terms of their content and target populations.
|Existing Supplemental Instructional Programs Reimbursed by the State|
|Remedial Supplemental Instruction, Grades 2-6|
|Remedial Supplemental Instruction, Grades 7-9|
|Remedial Summer School, Grades 7-12|
|Core Academic Summer School, Grades K-12|
|Elementary School Intensive Reading Program, Grades K-4|
The budget proposes to change the funding basis for existing supplemental instructional programs, as well as provide supplemental instruction in pre-algebra and algebra to 50,000 pupils in grades 7 and 8. Figure 3 outlines the Governor's proposals for supplemental instructional programs. We summarize the key components of the proposals below.
|Governor's Proposals for Supplemental Instruction|
|Remedial and Core Summer School Consolidation|
|Elementary School Intensive Reading Program|
|Intensive Algebra Academies|
Increase State Reimbursement Rate. The budget includes $61.9 million to increase the reimbursement rate for the supplemental instructional programs listed in Figure 2 from $2.53 to $3 per-pupil hour, in order to more closely approximate the full costs for districts to offer these programs.
Consolidate Remedial and Core Summer School Programs. The budget proposes to combine the remedial and core academic summer school programs into a single funding allocation. (This would consolidate the funding for the first four programs listed in Figure 2.) The programs would be funded based on a combined cap of 18 percent of prior fiscal-year enrollment for unified school districts (16 percent for elementary school districts and charter schools and 22 percent for high school districts). The proposal requires districts to use the funds first for pupils in grades 2 through 9 who have been retained and in grades 7 through 12 who are not making sufficient progress toward passing the high school exit exam. Remaining funds would be available first for assistance to students in grades 2 through 6 who are at risk of retention and then for core academic summer school to students in all grade levels.
The Governor's consolidation proposal keeps the funding allocation for the Elementary School Intensive Reading Program separate from the remedial and core summer school programs. The reading program, however, would be funded at the same proposed rate of $3 per-pupil hour for up to 10 percent of prior fiscal-year enrollment in kindergarten and grades 1 through 4. Districts with fewer than 500 units of average daily attendance would continue to be reimbursed by the state at a higher funding rate. For the current year, that rate is $4.51 per-pupil hour. For the budget year, the rate will be $4.64, based on the budget's 2.84 percent cost-of-living-adjustment.
Establish Intensive Algebra Academies. The budget includes $18 million under Item 6110-204-0001 to establish "Intensive Algebra Academies" for pupils in grades 7 and 8 experiencing difficulty learning pre-algebra and algebra. The budget proposes providing 50,000 pupils with pre-algebra and algebra instruction during the summer or intersession, for six weeks, four hours per day. Participating districts would be reimbursed at the proposed rate of $3 per-pupil hour for 120 hours for up to 6 percent of prior year enrollment in grades 7 and 8.
The budget also includes a $1.7 million appropriation (General Fund, non-Proposition 98) to UC (Item 6440-001-0001) for it to sponsor one-week algebra and pre-algebra training institutes for 1,000 teachers prior to the start of the student academies. The budget proposes an additional $1.5 million (Proposition 98) under Item 6110-135-0001 for stipends of $1,500 each to compensate these teachers for the time and expenses of attending the training institutes. The Governor's initiative assumes that 15,000 of the 50,000 pupils in the algebra academies would be taught by teachers who attend the training institutes. The remaining 35,000 pupils would receive instruction from teachers not participating in UC's training institutes. At the time this analysis was prepared, neither the administration nor UC could specify where the training institutes would be located, how teachers would be selected to participate in the institutes, and how the nonparticipating teachers would prepare themselves to teach in the academies.
Last fall, we surveyed 46 school districts of varying sizes for information on the implementation of supplemental instructional programs for pupils retained/at risk of retention and pupils not demonstrating sufficient progress toward passing the high school exit exam. A total of 33 districts responded to our survey, of which 21 answered additional questions in an attachment distributed in December. As of this writing, we continue to receive completed surveys from the other districts. We summarize below the initial findings from our survey on supplemental instruction.
General Implementation Problems. In the survey, we asked school districts to indicate the degree to which different factors presented problems in implementing their supplemental instructional programs. The five most significant factors reported were (1) transportation, (2) space shortage/scheduling conflicts, (3) ability to serve all identified students, (4) adequacy of funding, and (5) state funding/programmatic restrictions. Some districts indicated that transporting students to schools for supplemental instruction is expensive to the point of inhibiting program delivery. This was particularly the case for districts located in rural areas. About 70 percent of the large school districts surveyed indicated that lack of classroom space is a significant obstacle in providing supplemental instruction. (Most of these districts are operating their regular school program on a year-round schedule.)
Pupils Who Need Supplemental Instruction. Districts reported widely varying percentages of their enrollments as retained/at risk of retention, or not demonstrating sufficient progress toward passing the high school exit exam. For example, estimates of pupils retained in grades 2 through 9 ranged from less than 1 percent to over 20 percent of enrollments. The survey responses revealed no clear relationship between a district's size and the percent of its students who require supplemental instruction. However, districts with a disproportionate number of students in poverty reported a relatively higher percentage needing supplemental instruction. For example, all districts reporting more than 3 percent of their pupils in grades 2 through 9 retained in 1999 also had more than 60 percent of their enrollment in a free or reduced-price meal program.
Districts reported relatively higher percentages of students either at risk of retention or of not passing the high school exit exam. For instance, estimates of pupils not demonstrating sufficient progress toward passing the high school exit exam ranged up to 65 percent of enrollments (grades 7 through 12). The survey data show strong correlations between the percent of students not demonstrating sufficient progress and the percent of students (1) in families receiving cash grant assistance, (2) in a free and reduced-price lunch program, and (3) identified as English language learners. For example, all but one district reporting 30 percent or more of their pupils in grades 7 through 12 not on track of passing the high school exit exam also had more than 60 percent of their enrollments in a free or reduced-price meal program and also had 28 percent or more identified as English language learners.
Ability to Serve All Identified Students. More than 80 percent of the districts responding to our survey reported that "adequacy of funding" is a significant problem in implementing their supplemental instructional programs. Some districts noted that the state reimbursement of $2.53 per- pupil hour was not enough to provide supplemental instruction to all students needing assistance. Lack of funding appeared to be most problematic with regard to serving all students in kindergarten and grades 1 through 9 who are retained or at risk of retention. Several districts reported that the level of state reimbursement did not allow them to provide supplemental instruction for all eligible pupils in kindergarten and grades 1 through 9. Most of these districts reported that 25 percent or more of these students did not receive supplemental instruction due to lack of funding.
Lack of funding has also made it difficult for many districts to recruit qualified teachers for the supplemental instructional programs. About 40 percent of the districts rated the average skill level of staff teaching supplemental instruction as lower than their regular classroom teachers. Many districts also report that inadequate funding forces them to provide instruction with very high student to teacher ratios. For example, most of these districts reported student to teacher ratios ranging from 20:1 to 35:1 and requested additional funding to decrease their ratios to about 5:1. Many of the districts surveyed pointed out that supplemental instructional programs are most effective when students receive individual assistance in small group settings.
State Funding/Programmatic Restrictions. The survey results underscore the programmatic and financial challenges districts face in implementing supplemental instructional programs. About 70 percent of the districts identified "state funding/programmatic restrictions" as a significant problem in providing supplemental instruction. Most districts noted that the state does not allow them to maximize their resources because of its administrative and instructional requirements. Many districts suggested that all supplemental instructional programs be funded through one block grant. These districts stated that a block grant would provide them greater flexibility in hiring teachers and less administrative work in tracking student attendance and funding allocations. In addition, several districts requested greater flexibility in determining how to best meet the needs of their students.
In view of the challenges districts face in providing supplemental instruction to their pupils, we make the following recommendations regarding the Governor's proposals on supplemental instructional programs.
We recommend that the Legislature approve the Governor's program consolidation proposal, but that it be expanded to include the Elementary School Intensive Reading Program in order to provide even greater flexibility to local districts. We further recommend that the combined enrollment cap for these programs be increased to 24 percent of enrollment for all school districts, due to the additional funding available to reimburse districts for more pupil enrollments.
The budget proposes to consolidate the remedial and core summer school programs in an effort to simplify the local administration of these programs. It is evident from the survey discussed above and from many other indicators that districts need greater flexibility in using funds to improve the academic skills of students. We believe that the administration's proposal for program consolidation is an important step in the right direction in providing greater local flexibility. The proposal would allow school districts to select a locally appropriate mix of remedial and summer school programs and determine the necessary amount of resources needed for each program.
We believe the proposal would be improved, however, by including the Elementary School Intensive Reading Program in the consolidation. According to staff at the Office of the Secretary for Education, the administration excludes the reading program because the reading program provides instruction in a specific subject area to a select group of pupils. In unsolicited comments appended to our survey, two districts reported that the reading program has been very difficult to implement at the local level, primarily because its funding restrictions do not allow districts to provide the most effective assistance to students. For example, one of these districts complained that it had to hire a teacher who, under the program rules, could provide only reading instruction. In order to afford to pay the teacher, the district filled its intensive reading class with students who did not need assistance in reading. To make matters worse, because the teacher could only be paid to teach reading, the district was hampered in providing necessary assistance in other subjects.
We recommend that the Legislature consolidate the Elementary School Intensive Reading Program with the remedial and core summer school programs in order to give districts a wider range of choices over program models, funding allocations, when to offer instruction, and the subjects in which instruction would be offered. To accommodate this change--as well as our proposed recommendation discussed below on the Intensive Algebra Academies--we further recommend increasing the combined program enrollment cap to 24 percent of enrollment for all districts (whether unified, elementary, or high school). This is a blended enrollment cap based on the Governor's proposed caps for the consolidated programs, the reading program, and the Intensive Algebra Academies, and factors in the relative enrollments of different grade levels targeted by the Governor's proposals.
We recommend that the Legislature redirect the $18 million proposed for Intensive Algebra Academies to increase the funding base of the consolidated programs, because the need for improved algebra can be met better through locally determined supplemental instructional programs. We further recommend redirection of the $3.2 million ($1.7 million from the University of California and $1.5 million of Proposition 98 funds) for teacher training institutes in pre-algebra and algebra to school districts as part of a larger staff development block grant.
The need for supplemental instructional programs in specific subject areas varies widely among districts. Although well intended, the Governor's proposal for a new, state-directed program of algebra academies overlooks this variation in needs. The budget's allocation formula for the academies illustrates the point. Specifically, the budget proposes to serve 50,000 pupils (nearly 6 percent of statewide enrollment in grades 7 and 8) in the algebra academies. It also proposes a 6 percent enrollment cap for each district, thereby implicitly assuming that the pupils in need of help in algebra are evenly distributed across districts. Because it ignores the wide variation of need among school districts, the proposed budgeting formula will make it impossible to allocate the entire $18 million or to reach the desired number of 50,000 pupils.
Our analysis indicates that districts can provide specialized instruction to students who are experiencing difficulty learning pre-algebra and algebra through existing programs, if given the resources. Rather than create yet another state categorical program, school districts should be given flexibility to meet the particular needs of their students in the manner that best works for them. Indeed, districts responding to our survey expressed concern about the establishment of additional categorical programs that restrict funding to targeted populations and subjects.
In view of the above, we recommend that the Legislature redirect the $18 million proposed for Intensive Algebra Academies to increase the funding base of the consolidated programs. Under our recommendation for program consolidation, school districts could still offer algebra academies, but they would be able to do so on a basis that better meets their local needs.
The same principles of local discretion apply with regard to teacher training institutes in pre-algebra and algebra. School districts should be able to choose the type of staff development training that best meets the needs of their teachers and pupils. For this reason, we recommend redirection of the $1.7 million for teacher training institutes in algebra from UC to school districts as part of a larger staff development block grant. We also recommend redirection to this block grant of the $1.5 million of Proposition 98 funds for teacher stipends proposed in Item 6110-135-0001. (Please see our recommendations for a staff development block grant in our earlier discussion of teacher quality and supply issues.)
We recommend that the Legislature consider upward adjustments to the enrollment caps for the consolidated programs, based on measures of socioeconomic disadvantage, in order to recognize extraordinary areas of need.
Many factors affect the needs that different districts have for supplemental instructional programs. For example, the characteristics of the pupil population (such as the number of English language learners) can influence the needs of local districts. As our survey indicated, many districts with a high percentage of students receiving cash assistance, or in a free or reduced-price lunch program, reported relatively high percentages of their students as retained or at risk of retention. These percentages ranged as high as 50 percent of students in grades 2 through 9 in some cases.
In order to recognize extraordinary areas of need, we recommend that the Legislature consider adjusting the enrollment caps of the consolidated programs upward, based on measures of socioeconomic disadvantage. We will advise the fiscal committees at budget hearings regarding different cap adjustment and funding options.
We recommend that the Legislature enact legislation allowing school districts to provide supplemental instruction to students before school, in order to give them the flexibility to best use available resources.
Under existing laws, districts cannot provide supplemental instruction before school to students in grades 2 through 6 who are retained or at risk of retention, grades 7 through 9 who are retained, and grades 7 through 12 who are at risk of not passing the high school exit exam. In our view, districts should be allowed to operate their supplemental instructional programs during times that best match community needs and best use available resources. Accordingly, we recommend that the Legislature enact legislation to make it permissible for school districts to provide supplemental instruction to these students before school.
We recommend the State Department of Education report to the Legislature prior to budget hearings on its time line for the evaluation of the Elementary School Intensive Reading Program for which the Legislature approved $500,000 in the 1999-00 Budget Act.
Chapter 2x, Statutes of 1999 (AB 2x, Mazzoni and Cunneen), as amended by Chapter 78, Statutes of 1999 (AB 1115, Strom-Martin), required the Superintendent of Public Instruction, with input from an advisory committee, to evaluate the Elementary School Intensive Reading Program on or before November 1, 2001. The 1999-00 Budget Act provided the State Department of Education (SDE) $500,000 in federal funds to collect baseline data and evaluate the program. At the time this analysis was prepared, SDE had not collected data because it was waiting for the Office of the Secretary for Education to provide a list of performance measurements that would be used in the evaluation. Therefore, we recommend that SDE report prior to budget hearings on the status of its efforts and its plan for completing the evaluation in a timely manner.
In 2000-01, the budget proposal for child care is $2.6 billion and about half of this amount will be spent on child care for current or former California Work Opportunity and Responsibility to Kids (CalWORKs) recipients with the other half provided to non-CalWORKs working poor families. In contrast to the non-CalWORKs working poor (where waiting lists for child care are common), the budget fully funds the estimated need for child care for both former and current CalWORKs recipients.
Compared to California, the Wisconsin child care system (1) provides child care to more families, (2) treats welfare and nonwelfare families more equitably, and (3) requires higher copayments from the participating families. In order to determine the impacts of a Wisconsin-style subsidized child care system on families and on public costs, we recommend enactment of legislation to conduct a pilot test of the Wisconsin system in up to four California counties.
The State Department of Education (SDE) and the Department of Social Services (DSS) provide state supervision over most of the state's child care programs. Figure 1 summarizes the various child care programs in California. As the figure shows, California provides full-time child care slots (on an average monthly basis) for approximately 383,000 children and part-time preschool or after school programs for an additional 198,000. Of the full-time slots, about 250,000 (65 percent) are for CalWORKs recipients. (For a description of the CalWORKs three-stage delivery system for child care, please see the inset box on page E-96.)
|California Child Care Programs|
(Dollars in Millions)
|Program||State Control a||Estimated Enrollment||Governor's Budget|
|Community Colleges (Stage 2)||CCC||3,000||15.0|
|Reserve for Stage 1 and 2||DSS & SDE||28,000||150.4|
|Stage 3 set-aside||SDE||20,500||115.7|
|General child care||SDE||70,000||$463.5|
|Alternative payment programs||SDE||35,500||194.3|
|Stage 3 for working poor||SDE||10,000||56.9|
|Migrant and latch key programs||SDE||13,000||140.8|
|Totals, Full-Time Programs||383,000||$2,207.6|
|After school programs||SDE||97,500||87.8|
|Totals, Part-Time Programs||198,000||$341.5|
|Grand Totals--All Programs||581,000||$2,549.1|
|a Department of Social Services (DSS); State Department of Education (SDE); California Community Colleges (CCC).|
|b Some of these programs are full-time.|
CalWORKs Child Care Is Fully Funded. For 2000-01, the estimated need for child care for current and former recipients is proposed to be fully funded. CalWORKs recipients on aid will receive necessary child care to meet their participation mandate (through a combination of work and/or training for 32 to 35 hours per week). If child care is not available, then the recipient does not have to participate in CalWORKs activities for the required hours, until child care becomes available.
|CalWORKs Child Care Is
Delivered in Three Stages
Stage 1. Stage 1 begins when a participant enters the CalWORKs program. In Stage 1, county welfare departments (CWDs) refer families to resource and referral agencies to assist them with finding child care providers.
Stage 2. Families transfer to Stage 2 when the county determines that the families' situations become "stable"--that is, they develop a welfare-to-work plan and find a child care arrangement. Stage 2 is administered by the State Department of Education (SDE) through its voucher-based Alternative Payment (AP) programs. Participants can stay in Stage 2 while they are on CalWORKs and for up to two years after the family stops receiving a CalWORKs grant. Although Stage 1 and Stage 2 are administered by different agencies, families do not need to switch child care providers upon moving to Stage 2.
Stage 3. Stage 3 refers to the broader subsidized child care system administered by SDE that is open to both former CalWORKs recipients and the non-CalWORKs working poor. Once CalWORKs recipients leave aid, they have two years of eligibility in Stage 2. During this time, they are expected to apply for "regular" Stage 3 child care. We note, however, that typically there are waiting lists for such child care.
Stage 3 "Set-Aside." In order to provide continuing child care for former CalWORKs recipients who reach the end of their two-year time limit, the Legislature created the Stage 3 set-aside in 1997. Recipients timing out of Stage 2 are eligible for the Stage 3 set-aside if they have been unable to find "regular" Stage 3 child care. Assuming funding is available (and the practice has been to fully fund the estimated need), former CalWORKs recipients may receive Stage 3 set-aside child care as long as their income remains below 75 percent of the state median and their children are below age 14.
After leaving aid, former CalWORKs recipients receive up to two years of Stage 2 child care. Although funding for this child care is capped by the budget appropriation, current practice suggests that it is highly unlikely that a former CalWORKs Stage 2 family would lose its child care. Specifically, these recipients in Stage 2 would have the highest priority for funds. Consequently, if there were not sufficient funds for the Stage 2 former CalWORKs recipients, the Alternative Payment programs (APs) that administer Stage 2 would either draw on the child care reserve and/or transfer aided Stage 2 recipients back to Stage 1, thus freeing-up funding for nonaided Stage 2 child care recipients.
Former CalWORKs families who have exceeded their two years of Stage 2 child care will move into either "regular" Stage 3 child care or Stage 3 "set-aside." Regular Stage 3 child care is the broader system of subsidized child care operated by SDE. The Stage 3 set-aside was specifically established for former recipients who have reached their two-year time limit. Like Stage 2, funding for Stage 3 set-aside is capped by the appropriation. Nevertheless, the Legislature's and the administration's practice has been to fully fund this program on a year-by-year basis. In the current year, the administration has notified the Legislature that it will address a shortfall of about $10 million mostly through a transfer of prior-year savings. For 2000-01, the budget proposes $115 million for the Stage 3 set-aside, an increase of almost $90 million compared to the current year.
Non-CalWORKs Child Care Has Waiting Lists. In contrast to the CalWORKs child care system, child care for the non-CalWORKs working poor is not fully funded. Typically, there are waiting lists for non-CalWORKs subsidized child care because there are significantly more eligible families than available slots. Families with incomes up to 75 percent of the state median are eligible for regular SDE child care, but priority is given to families with the lowest income. Most of the available slots go to families with incomes at or below 50 percent of the state median. Although a family may retain its subsidized child care slot as its income rises up to 75 percent of the state median, it is very unusual to initially obtain a subsidized slot with an income above 50 percent of state median.
As we mentioned in our Analysis of the 1999-00 Budget Bill, there are no reliable data to predict how many eligible families are not receiving child care. Since many families sign up on a waiting list with more than one child care agency, the waiting lists likely double-count some families. We note that the budget for SDE proposes $1.5 million for a pilot project to analyze waiting lists and begin to collect data on the unmet demand for subsidized child care.
As described above, families on CalWORKs receive child care if they need it. Families that leave CalWORKs are eligible for two years of post-assistance child care, and on a year-by-year basis may continue to receive child care in the Stage 3 set-aside. Conversely, working poor families that have never been on CalWORKs receive subsidized child care only if space is available. The incomes of these families may be quite similar. During 1999-00, a family of three becomes ineligible for a CalWORKs grant when its income reaches $1,477 per month (about 44 percent of state median income). A working poor (never-CalWORKs) family with an identical income would only receive child care if slots are available and preference goes to families with the lowest incomes. In all likelihood, such a family would end up on a waiting list, rather than receive a slot.
The current system ensures that CalWORKs recipients have uninterrupted child care. The policy rationale for this practice is that former CalWORKs recipients--having received aid in the past--may be more likely to go back on CalWORKs if they lose their child care than would a non-CalWORKs working poor family, even though the incomes of the two respective families may be very similar. We know that some persons who leave CalWORKs later go back on aid, but we are aware of no data to assess the validity of the rationale that former CalWORKs recipients are more likely to return to aid if their child care is terminated than are persons with similar incomes but who have never been on aid.
The administration expects to complete a comprehensive review of child care policies for CalWORKs recipients and the working poor during the spring of 2000. The review will cover eligibility standards, family fees, state and federal subsidy levels, and how existing resources may be more efficiently focused to serve more equitably the state's low-income families. In addition, the SDE will hold hearings on revisions to the family fee schedule that are proposed by a legislative and staff working group.
To assist the administration and the Legislature in considering the future of California's subsidized child care system, we examine different policy options. Below we discuss (1) options for treating welfare/former welfare families and nonwelfare families more similarly, and (2) modifying eligibility and copayment amounts (sliding scale fees paid by the families) for both populations so as to treat CalWORKs and the non-CalWORKs working poor more equitably.
Increasing or Decreasing Child Care Funding. A decision on whether to increase or decrease spending on child care is a policy choice for the Legislature. If the Legislature elects to increase funding for the non-CalWORKs working poor, this would increase equity between the two populations. Due to data limitations, we cannot estimate the cost of fully funding the child care needs for non-CalWORKs working poor families. In addition, we note that expenditures for CalWORKs child care have been increasing more rapidly than for the working poor. In 2000-01, the budget for the Stage 3 set-aside (exclusively for former CalWORKs recipients) is $116 million. Preliminary estimates from the DSS indicate the cost for the Stage 3 set-aside will increase to about $200 million in 2001-02 and $265 million in 2002-03 because more former CalWORKs recipients are expected to reach their two-year post-assistance time limit.
Another way to increase equity, of course, would be to reduce funding for child care for former CalWORKs recipients. This would achieve more equity but could lead to more former recipients returning to assistance.
Modifying the Copayment Structure. An alternative approach to providing child care for more families without increasing state expenditures is to increase copayments (the sliding scale fees paid by families that receive subsidized child care). Currently, families with incomes below 50 percent of state median income have no copayment obligation. Families at 50 percent of the state median ($1,669 per month for a family of three) pay a monthly fee ($44) which is 2.6 percent of their income. As family income rises, the copayment amounts increase. At 75 percent of the state median (the highest level of income at which a family is eligible for subsidized child care), the monthly copayment is $200, which is about 8 percent of the family's income. The fees are the same regardless of the cost of child care or the number of children in the family receiving the child care. Because most families receiving subsidized child care have incomes below 50 percent of the state median, total copayments in California are relatively low. In 1998-99, total parent copayments were $12.7 million, which was less than 1 percent of the state budget for subsidized child care.
Decisions on copayment amounts involve trade-offs between the conflicting goals of (1) cost-effectiveness to government and (2) not overburdening poor families. Higher copayments increase the amount of child care that can be purchased within existing resources (or reduce state costs if the amount of child care purchased statewide remains constant), but also increase the financial burden on low-income families. Varying copayment amounts by the type or cost of child care raises similar issues. Higher copayments for more costly child care arrangements will tend to lead to more cost-effective allocation of resources because parents will have a financial incentive to choose less costly child care options. On the other hand, this may lead parents to select lower quality child care arrangements.
Modifying Eligibility Rules. Another policy option is to change eligibility rules. Currently families with incomes up to 75 percent of the state median income are eligible for subsidized child care. Because there are no reliable data indicating the distribution of subsidized child care benefits by family income, it is difficult to predict the impact of changing financial eligibility rules. If the Legislature were to reduce the maximum income limit for program eligibility, it would result in savings that could be used to reduce the waiting lists for the families with lower incomes. As with copayments, changes in eligibility present difficult trade-offs between applying resources to the most needy families and serving more families.
In the above discussion, we have (1) explained how the existing child care system favors former CalWORKs recipients over the working poor and (2) examined the advantages and disadvantages of different policies with respect to resource allocation, modifying copayments, and changing financial eligibility rules. Below we describe how the State of Wisconsin has addressed these issues in its child care system.
The Wisconsin System. In Wisconsin, eligibility for child care is independent of welfare status. Since the program is fully funded, it serves all eligible families. Effective March 2000, a family's income must be below 185 percent of the federal poverty guideline ($2,082 for a family of three) to enter the state's program for subsidized child care. Once enrolled, families remain eligible as long as their income remains at or below 200 percent of the federal poverty guideline. All Wisconsin families make monthly copayments even if they are also receiving a welfare grant. The copayments vary depending on family income, the type of child care purchased, and the number of children receiving child care. For families on assistance and for families with earned incomes up to 70 percent of the federal poverty guideline, the copayment for one child in "licensed" care is $17 per month (up to 2.7 percent for a family of three). For a family at 200 percent of the federal poverty level, the monthly copayment for one child in licensed care is $216 per month (about 11.8 percent of the family's income). Copayments are generally higher for more children and lower if the family elects lower-cost "certified" child care instead of the higher-cost "licensed" child care. Regardless of the number of children, the maximum copayment for a family is about 11.8 percent of income. As a point of reference, we note that 200 percent of the federal poverty level is about 70 percent of the California state median income for a family of three and 75 percent of state median income for a family of four. (Eligibility for subsidized child care in California, as noted above, is set at 75 percent of the median income for a family of three, although few families above 50 percent actually receive services because of funding limitations.)
In general, Wisconsin's copayments are higher than California's, ranging up to 12 percent of family income. Total annual copayments are estimated to be about $20 million, which is about 10 percent of the state's total program budget. Figure 2 compares copayments in California and Wisconsin, at selected income levels.
Although there is significant uncertainty, we estimate that a Wisconsin-style program in California would cost roughly the same as California's existing subsidized child care program ($2.6 billion). This is because the cost of providing child care to more persons generally would be offset by additional reimbursements from changes in the copayment structure.
Analyst's Recommendation. With respect to subsidized child care, the Legislature has many options. The current system treats families with similar incomes differently, depending on whether or not they have received public assistance in the CalWORKs program. Although the current system is not completely equitable, it does tend to ensure that former CalWORKs recipients do not return to aid because of a lack of subsidized child care.
Compared to California, the Wisconsin system provides proportionately more child care to more families and treats welfare and nonwelfare families more equitably. It achieves these objectives by collecting higher copayments from the participating families. We think this is a trade-off worth considering.
|Monthly Child Care Copayments
Comparison of Wisconsin and California
Family of Three--Licensed Child Care
|Monthly Income||Wisconsin Copayment for||California Copayment for|
|1 Child||2 Children||1 Child||2 Children|
|Equivalent of CalWORKs grant||$626||$17||$30||--||--|
|Working full-time at California minimum wage||998||39||56||--||--|
|Federal poverty guideline||1,157||61||91||--||--|
|50 percent of California
|185 percent of poverty||2,140||199||251||128||128|
In deciding whether to adopt the changes contained in the Wisconsin program, the Legislature would want to have some knowledge of the system's effects on families and on public costs. Accordingly, we recommend enactment of legislation to conduct a pilot test of the Wisconsin-style child care program in up to four counties in California. The pilot project would include an evaluation that would assess the impact on public costs and identify the effects on families. We estimate that the evaluation would cost about $1.5 million over a three-year period. Although we anticipate that child care costs in the pilot counties would be similar to costs under current law, there should be some provision for funding potential additional costs. This could be accomplished by setting aside funds in a child care reserve that could be used to pay for any child care cost increases in the pilot counties, with authorization for a deficiency request if necessary.
With the exception of a technical issue of the appropriate rate of growth for new students, we recommend approval of all the budget proposals for special education for the current year and 2000-01.
The Governor's budget includes $2.4 billion in General Fund support for special education in 2000-01. This is an increase of $160.2 million, or 7.1 percent. The budget reflects the following changes:
Increases in federal funds of $60.8 million offset the amounts for equalization and the incidence multiplier, while local property tax increases of $24.6 million also partially offset the above increases. The budget also includes $16.8 million in both 1999-00 (funded from redirected savings) and 2000-01 (General Fund) to adjust for a higher than budgeted increase in students in 1999-00.
In 1998-99 approximately 650,000 pupils age 22 and under were enrolled in public-funded special education throughout the state. Federal law defines the disabilities that qualify a child for special education and mandates school responsibilities and parental rights. Federal law sets out three basic principles that apply to children with disabilities: (1) all children with disabilities must be provided a free, appropriate public education; (2) each child's education must be determined on an individualized basis and designed to meet his or her unique needs in the "least restrictive environment;" and (3) the rights of children and their families must be ensured and protected through procedural safeguards.
Consistent with these federal requirements, California's Master Plan for Special Education (MPSE) requires schools to assess each child's unique education needs and to develop an individualized educational plan. The MPSE, implemented statewide in 1980 with the enactment of Chapter 797, Statutes of 1980 (SB 1870, Rodda), established an area-wide approach to the delivery of special education services. The current areas are called SELPAs.
The intent of the SELPA structure is to deliver special education services in an efficient and cost-effective manner. Differing population densities around the state have resulted in SELPAs of differing geographical size, ranging from multiple-county SELPAs to single-school district SELPAs. In 1998-99 there were 116 SELPAs. Of these, 3 were multicounty, 33 were countywide, 48 were multidistrict, and 32 were single district SELPAs.
We recommend that the rate of growth for new special education students be equal to the rate of change in average daily attendance for general education (for a General Fund savings of $1.5 million). We further recommend that this savings be used to provide additional funding for equalization and the incidence multiplier.
The budget proposes an increase of 1.31 percent for new special education students versus an increase of 1.26 percent for new ADA. A new funding framework for special education was recently adopted with the enactment of Chapter 854. With respect to funding for new special education students, our analysis indicates that Chapter 854 provides for the same rate of growth for special education as that provided for general education. The Department of Finance (DOF) reading of Chapter 854 led them to use slightly different figures to calculate growth from those we would select. We are conferring with them on the differences in our interpretations. However, one of the underlying principles of this funding reform legislation was to make the special education funding system more straightforward and understandable. Given this context, there is no reason to use a slightly different method to count ADA for general and special education. Accordingly, we recommend that the Legislature reduce the growth rate for special education to 1.26 percent for a General Fund savings of $1.5 million. We further recommend that this savings be redirected to augment equalization and incidence multiplier funding to bring amounts for these purposes closer to full funding.
We recommend that the Legislature direct the State Department of Education to testify during budget hearings on progress toward
(1) resolution with the U.S. Office of Education on California's compliance with federal laws for special education and (2) development of its Quality Assurance and Focused Monitoring Pilot Program.
For the past several months there have been a series of letters between the U.S. Department of Education's Office of Special Education and the State Department of Education (SDE) regarding the state's compliance with federal special education requirements. Most recently, the U.S. Department of Education requested answers to 79 specific questions on California's compliance monitoring system. The SDE responded to each of these questions. Federal funds totaling $513 million are contingent upon the SDE and the U.S. Office of Education reaching agreement on the compliance issues raised by the federal agency.
On a related matter, the budget includes $1.4 million for local assistance grants for the SDE's Quality Assurance and Focused Monitoring Pilot Program. Budget bill language requires the SDE to report to the Legislature by December 1, 2000 and April 15, 2001 on the progress and results of this pilot program and on any statutory or fiscal adjustments needed.
We recommend that SDE provide an update during budget hearings on: (1) its progress toward resolution of issues raised by the U.S. Department of Education, and (2) its progress with the pilot program. It may also be desirable to invite the U.S. Department of Education to this budget hearing to allow the Legislature to hear their viewpoint and to question them on the issues they have raised on California's compliance efforts.
The budget does not mention pending action by the Commission on State Mandates (COSM) on a special education test claim that could result in significant claims for reimbursement by eligible school districts. The claimants (a number of school districts) alleged that state lawenacted in 1980required 19 programs and services for special education students that exceeded the requirements set forth in federal law.
The COSM issued a Statement of Decision in November 1998 identifying eight of these activities as state mandates. These eight activities represent relatively modest elements of the overall special education program. However, given the 20 years since the initial special education claim, and the nearly 1,000 school districts potentially eligible for reimbursement, there is a potentially large state liability if the claimants' position as to mandates and costs are upheld, even in part. It is important to note that any state funds ultimately received by school districts under this claim would be general discretionary revenues and would most likely have no impact on special education.
In October 1999 our office provided two analyses to COSM and to the Legislature on this mandate. Our analysis found that while the state did create new mandated programs, it also provided funds sufficient to offset any state-mandated costs.
In December 1999, at the request of the COSM, the claimants and the DOF agreed to negotiate a possible resolution to this mandate claim. The claimants and the DOF will provide a progress report on their negotiations to the COSM by March 15, 2000.
We discuss this issue in more detail in the 2000-01 Budget: Perspectives and Issues ("Three Legal Challenges: What is the State's Fiscal Threat"). In addition, we will provide the Legislature with updates on this issue during budget hearings.
The 1999-00 Budget Act directed the DOF, the SDE, and the Legislative Analyst's Office to convene a working group to review funding for Licensed Children's Institutions (LCIs), including nonpublic school/agency (NPS) services for the LCI population. The three agencies were to report to the Legislature on any recommended changes in status or funding for LCIs or NPSs by November 1, 1999. The budget act language calling for this study was requested by the DOF.
Due to key staffing changes within the DOF, the three agencies were unable to issue a report by the due date. The agencies will provide the Legislature with a status report on this study during budget hearings.