Looking Ahead, State Must Go Much Further in Boosting Payments to Child Care Providers

October 31, 2014

The Senate Select Committee on Women and Inequality convened last week in Los Angeles to explore strategies for promoting economic opportunity for women in California. Throughout this hearing, the importance of child care was a recurring theme. As Senator Holly Mitchell discussed, the state’s 2014-15 spending plan includes some reinvestment in the state’s child care and development system, including an increase in child care provider payment rates.

Provider payment rates are a key issue in helping women and their families to advance. Adequately reimbursing child care providers increases families’ access to providers. When women have access to affordable child care, they are more likely to find and keep jobs and to have money to pay for other necessities such as rent and groceries. This is critical for their own economic success and for the well-being of their children, too. Policymakers had not raised provider payment rates since 2006, and the recently approved increase is long overdue.

However, policymakers have more work to do, especially for families who use vouchers to pay for child care (as opposed to going to child care providers that contract directly with the state). Even with the rate increase included in the budget agreement, scheduled to go into effect on January 1, 2015, voucher-based providers offering care in licensed family child care homes (LFCH) will not see an increase in their payment rates for infant care in more than half of California counties. Similarly, these providers will not see an increase in rates for preschool-age children in 19 counties. In fact, across the state so few counties will see an increase that the median percent increase for LFCHs for infant care is 0 percent. For preschool-age children the median percent increase is just 1.2 percent.

In addition, even while it might appear that licensed child care centers (LCCs) fared well in the budget agreement, the median increase in the provider payment rates for infant care at LCCs translates to just $131 a month — and this after nearly a decade without any rate increase. Likewise, the median rate increase for preschool-age children in LCCs is $103 per month. The table below displays how both kinds of licensed providers fared in the 2014-15 budget cycle. (You can also view a PDF of this table here. )

103014 childcare-reimbursement-blog

As we discussed in a recent blog post, California has far to go in restoring funding to the child care and development system in the aftermath of the Great Recession. Access to subsidized child care and preschool programs is a key component in helping families achieve economic security, and it is critical that policymakers continue to take steps to reinvest in California’s child care and development system.

— Kristin Schumacher

How Should California Spend Nearly $2 Billion?

August 25, 2014

The state of California is poised to direct an estimated $1.8 billion over the next four years to new and expanded tax breaks for specific industries and businesses based on actions recently taken by state lawmakers, or actions pending and likely to be approved by state lawmakers in the coming days. These include:

  • Nearly $420 million in tax breaks for aerospace companies — specifically targeted to Lockheed Martin and Northrop Grumman — that are competing to build the next generation of stealth bombers, an incentive package approved by the state Legislature and signed into law by Governor Brown earlier this month;
  • Expansion of a state tax credit for film and TV production — from $100 million to $400 million annually — that is currently working its way through the Legislature; and
  • Efforts to lure Tesla Motors to build a new “gigafactory” in California, which are likely to include tax credits to help meet Tesla’s demands that state and local governments help pay for 10 percent (estimated at $500 million) of the cost of construction. The legislation, expected to emerge in the coming days, is also likely to exempt Tesla from some environmental (CEQA) requirements.

All told, these actions stand to commit the state to nearly $2 billion over the next four years in targeted tax breaks for business and industry.

We think that California would benefit more from investing this money in vital public systems and services. While we don’t question that state leaders should place a high priority on boosting employment and expanding opportunity, we do question whether these new and expanded credits and incentives are the best strategy for meeting those objectives. Consider just a few alternatives for the state’s $2 billion:

  • Phasing in a refundable state Earned Income Tax Credit (EITC) to further leverage the federal EITC, which would boost the incomes of working families most in need of assistance, raising thousands Californians out of poverty each year;
  • Continuing to restore the 110,000 subsidized child care and preschool slots (nearly one-quarter of the total) cut since 2007-08 that help working parents find and keep jobs and build a foundation for children’s success; and
  • Making a down payment on reinvesting in the economic engines that are the state’s higher education systems, for which state General Fund spending per student has declined significantly over the last three decades.

All of these alternatives, among others, are proven winners at helping working families to prosper, while the evidence on targeted tax breaks for businesses is mixed at best.

As state leaders clamor to give away tax credits to high-profile businesses and projects, we should all be asking the question “How should California spend nearly $2 billion?”

— Chris Hoene

Resolving Child Care and Work Schedules Proves Problematic for Many Low-Income Mothers

August 18, 2014

Last week, The New York Times reported on single parents’ difficulties juggling multiple responsibilities — including securing child care — while holding down jobs with erratic and unpredictable hours. The article included a profile of one such parent, a 22-year-old single mother in San Diego:

But Ms. Navarro’s fluctuating hours, combined with her limited resources, had also turned their lives into a chronic crisis over the clock. She rarely learned her schedule more than three days before the start of a workweek, plunging her into urgent logistical puzzles over who would watch the boy. Months after starting the job she moved out of her aunt’s home, in part because of mounting friction over the erratic schedule, which the aunt felt was also holding her family captive.

Unstable employer scheduling practices disproportionately affect women, who are often subject to inconsistent work schedules yet also the primary caregivers for children. In California, low-income mothers utilizing subsidized child care frequently rely on license-exempt providers — typically relatives and friends — to watch their children on short notice or during non-traditional work hours such as weeknights and weekends in order to work irregular hours. Unfortunately, during the Great Recession policymakers reduced the reimbursement ceilings — the maximum payment that a license-exempt provider can receive — from 90 percent to 60 percent of the maximum licensed rate, potentially limiting low-income families’ access to care

As we highlighted in a recent report, access to subsidized child care and development programs can be vital to the economic security of low- and moderate-income Californians, and has been shown to increase parents’ employment and earnings while reducing the chance that parents miss work or cut back on their hours due to child care responsibilities. However, California’s current provider payment policies may constrain access to care for many families. In the absence of federal or state policy regulating employer-scheduling practices, low-income parents’ access to license-exempt providers is critical.

— Kristin Schumacher

How Did Child Care and Preschool Really Fare in the State Budget?

July 15, 2014

The 2014-15 budget agreement (read our initial analysis here) made changes to California’s subsidized child care and state preschool program that one legislator described as “the largest investment in those two areas in a decade.” This reinvestment is a positive step forward in restoring funding for the state’s child care and development system, but it is only the first step of many necessary to fully reinvest in these critical programs. A closer look at the numbers illustrates how much further California still has to go.

The budget agreement restores funding for 13,000 child care and preschool slots in 2014-15. Of these, 7,500 full-day, full-year preschool slots, 500 Alternative Payment Program slots, and 1,000 General Child Care slots were added on July 1, and an additional 4,000 full-day, full-year preschool slots will be added on June 15, 2015. However, even with the new slots the total number is still more than 20 percent below the number funded in 2007-08, and total state funding is still 31 percent lower than in 2007-08, after adjusting for inflation. The spending plan also does not restore funding for the Centralized Eligibility List (CEL), thus making it impossible to determine just how many children are waiting for a child care or preschool slot. Before funding for the CEL was cut in 2011, close to 200,000 children were waiting for a slot, and this number has likely grown since then.

The 2014-15 spending plan updates provider payment rates, but in many cases these rates still lag behind the rates paid in 2007-08. For example, providers that contract directly with the state will see a 5 percent increase in their payment rates, but will still be reimbursed at a value that is nearly 7 percent lower than the 2007-08 rate, after adjusting for inflation. Likewise, payments for providers that are reimbursed with vouchers will now be based on a 2009 market rate survey — an update from the 2005 survey used previously — but only after the 2009 regional market rates are reduced by 13 percent in making them the basis for payment. As a result, many providers won’t see an increase at all. In fact, in 46 out of 58 counties, providers categorized as licensed child care homes will not see an increase in their payment rate for infant care.

Further, providers that contract with the state have to meet more stringent licensing requirements that include a developmental component. This is in addition to meeting the health and safety standards that voucher-based providers are held to. Due to the more stringent licensing requirements, contract-based providers should be paid at a greater rate for the higher-quality standards that they are required to meet. However, in 17 counties — representing a third of all counties — voucher-based centers caring for preschool-age children will be paid at a rate that actually exceeds that for contracted providers, even though the quality standards may not be as high. In addition, in eight counties voucher-based licensed child care centers will be paid at a rate for infant care that exceeds contract-based providers.

Lastly, state policymakers did not update the income eligibility limit, which is the highest income at which a family qualifies for subsidized child care and preschool. Yet, as we noted in a recent report, state policymakers have not adjusted the income eligibility limit in years, and it is currently set at just 70 percent of the 2005 state median income (SMI). This means that families lose eligibility at a lower income than they would if the income limit were updated to reflect the most recent SMI for which data are available. In fact, the income limit would increase by more than 10 percent if based on the most recent SMI — a difference of over $400 a month for a family of three.

The 2014-15 budget agreement represents a missed opportunity to more significantly invest in one of California’s most vulnerable populations: children living in poverty. Access to subsidized child care and high-quality preschool programs helps to mitigate the effects of poverty and helps families achieve economic security. This boosts local economies and reduces future state costs for remedial education, corrections, and safety net programs, to name a few. Increasing support for California’s child care and development system doesn’t just boost support for low- income families, it is an effective way to invest in California’s economic future as well.

— Kristin Schumacher


Statement from Chris Hoene on the Newly Announced Budget Agreement: “Only a Very Small Step Toward Much-Needed Reinvestment”

June 13, 2014

The California Budget Project (CBP), a nonpartisan public policy research group, released the following statement from Executive Director Chris Hoene on the budget deal announced by Governor Jerry Brown and legislative leaders today:

“The budget agreement announced by the Governor and legislative leaders today moves our state only a very small step toward much-needed reinvestment in California’s families and communities.

“The increased funding for state preschool is important and will help expand early learning opportunities for low-income children and mitigate the harmful effects of poverty. But beyond this, the budget deal includes no significant new support for many core public services and systems that were hit hard by years of cuts, such as child care slots, higher education, and safety-net services for low-income seniors and people with disabilities. The budget deal also leaves in place deep cuts to health services for low-income Californians, such as a sharp reduction in payments for doctors and other providers who participate in Medi-Cal.

“Providing sufficient funding for key state services is always critical, but it’s especially so with poverty and long-term unemployment still so high. Given the need to help more individuals and families share in California’s economic recovery, it’s disappointing that this budget agreement fails to strike the right balance among paying down debt, saving for a rainy day, and boosting support for core public systems and services, and that it also falls short of laying out a clear vision for investing in our state’s future.”


The CBP will release additional commentary and analysis on the budget agreement in the coming days and weeks.