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August 11, 2004



After a month's delay, the legislature sent the budget bill, SB 1113, to the Governor.  With cuts of $116 million in line item vetoes (none in child care and development programs), he signed the $105 billion state budget.  Some of his key features include: no tax increases, a tax cut of $4.1 billion in vehicle license fees, and direct negotiations with higher education institutions, the K-12 education coalition and local governments. His Economic Recovery Bonds Act (Proposition 57) worth $15 billion to pay for part of the state's debt was passed in the primary election in March.  The Legislative Analyst estimates that there will be a reemerging deficit of about $6-8 billion for next year.  The final agreement included budget deficit borrowing, funding shifts, reductions in services and other agreed upon "program savings."

 Child Care and Development Programs

The Governor stated, “In January, the administration proposed reforms that would help reduce costs more in line with policies of other large states, including a system of tiered reimbursement rate limits to incentivize high quality and curb inequities among providers, a three-tiered income eligibility limit schedule to better reflect needs statewide based on housing costs, and a revised family fee schedule to reduce the "cliff effect" as families progress off subsidies toward full cost and to reinforce personal responsibility. These Reforms (see review of Governor’s proposed 2004-05 Reforms below) have been deferred for one year to allow for the Administration to work with the Legislature to develop refined strategies for achieving overall savings of $119.5 million between SDE-administrated programs and Stage 1 administrated through counties by DSS."

 The current system in the California Department of Education is funded at $2.7 billion with $2.2 billion for child care and development programs serving approximately 375,200 children.

 The Child Development Reforms as mentioned in the Governor’s California State Budget 2004-05 Highlights actually surfaced after Governor Gray Davis’ 2001 study, Child Care Fiscal Policy Analysis prepared by the Results Group compared other states and their level of delivery of Child Development services to California's services.  The Child Development Reforms include the following proposals:

 #1.Proposed Tiered Reimbursement System/Reduced Reimbursement Rates - Estimated "Savings" (cuts) of $57.7 million

#2.Proposed Elimination of Eligibility of 11- & 12-year-olds - Estimated "Savings" (cuts) of $75.5 million (Cost reduced in May Revise)

#3. Proposed Family Fee Increase - Estimated "Savings" (cuts) of $22.3 million

#4.Proposed Reduced Family Income Eligibility/Counties - Estimated “Savings” (cuts) of $9.3 million

#5.Proposed increase in Child Care Facility Licensing - Estimated "Savings" (cuts) of $10 million over 3 years.

#6.Proposed One-Year Limit for CalWORKs Stage 3 - No estimated "Savings" (cuts) until 2005-06

#7.Proposal to Limit Eligibility for Education and Training at Community Colleges to 2 years.  Governor's May Revise Changes: Allows parents to continue receiving child care services longer than 2 years if they are working 20 hours or more.

 Although the Senate and Assembly Budget Committees, the Legislative Women’s Caucus, and other key legislative leaders rejected the Governor’s proposed Child Development Reforms during the Budget process, they negotiated with the Governor regarding the 11 and 12 year old proposal as outlined.  For the past three years, these Result Group Reforms have resurfaced in various forms.

 Cost-of-Living Adjustment Increases (COLA)

Child Development Programs receive a 2.41% COLA for $29.5 million and growth of 1.37% for $15.8 million that allows “the maximum standard reimbursement rate to be $28.82 per day for General child care programs and $18.39 for State Preschool.”

 CARES Continued Funding

The retention and compensation program for early care and education teachers and staff will be continued at $15 million.

 11 and 12 year old Children to be cut from current Child Development Programs (Placed in the Governor's After School Programs -$5 per day per child and no licensing.)

The budget actually reduced (set aside) $36.2 million from various Child Development programs and will force programs to stop serving 11 and 12 year olds and make these children attend “After School Programs” (these are the programs that the Governor supported in his Proposition 149 passed in 2002 but the funding is not in place until the deficit is solved.) The trailer bill, SB 1104 states family rights and process:

1.Children who are 11 or 12 years of age and who are enrolled in an after school program are not eligible for other subsidized child care services if, and to the extent that, the after school program meets the child care needs of the family.  The needs of the family shall be considered to be met when a parent certifies in writing that the after school program meets the child care needs of that family. 

2.Unless the conditions are met, children who are eligible for and who are receiving subsidized child care services shall continue to receive subsidized child care services. 

3.If a child becomes ineligible for subsidized child care and is "disenrolled" from an after school program or if the after school program no longer meets the child care needs of the family, the child shall be able to receive subsidized child care.

 How these rules will be implemented for the 11 and 12 year olds in current programs remains a challenge for the Department of Education.  Will the $36.2 million be permanently cut or just for this year?

 New federal 21st Century funds, $60 million, have been earmarked to serve these children.  Another $20 million of one-time federal funds, and $5 million is also available for training, standards-aligned materials and other one-time costs.  Also, $5 million of the $60 million is to be available to expand high school programs.

 Administration Limit for Alternative Payment Programs

The budget limits the administrative support for families to 19%.

 Child Protective Services (CPS) Eligibility Reform 

Currently, CPS referrals (private or county welfare) have first priority for child development services. The new requirements will limit a private CPS referral to subsidized child care services to three months, unless the county welfare agency certifies the family and the services can be extended to 12 months.  Family fees for service are waived for three months (not more than 12 months) for private CPS referrals and for 12 months for county welfare referrals.

 Fiscal Integrity and Fraud Prevention Relating to Child Development Program/Alternative Payment Programs.

There is $1.5 million in federal funds and $530,000 plus 5.5 new positions to fund a Compliance Monitoring Unit within the Department of Education to perform annual audits of each alternative payment agency and $1 million for a consultant to study for error rate.  The Governor’s office held public hearings in the spring on Fraud Detection for Child Development Program and Senator Scott introduced SB 1657 which addresses the need to work on regulations that include a right to a hearing and appeal.

 Higher Education/Student Fees

Community College fee increases from $18 to $26 per unit for all students for the fall of 2004.

CSU and UC fee increases of 14% for undergraduates:

            CSU will increase from $2,046 to $2,332 per year.

            UC will increase from $4,984 to $5,682 per year.

 CSU and UC fee increases of 20% for graduate:

            CSU will increase from $2,256 to $2,707 for teachers per year.

            UC will increase from $5,219 to $6,263 per year.

CSU will increase to 25% for all other students from $2,256 to $2,820 per year.

 “Under the (Governor agreement or) Compact UC and CSU commit to phase-in progress toward a policy goal that graduate fees be 50 percent higher than undergraduate fees in the long run.”

 Licensing Fees for Family Child Care Homes and Center-Based Increased

There will be a new application fee and some increases for annual fees for the licensure of child care facilities. Other new fees will be established for orientation sessions, monitoring corrective action plans and late payments.

 New Fee Schedule:

*New Family Child Care Homes Fees:

For 1-8, fees increase from $50 to $60 for each application and annual fees are $60.

For 9-14, fees increase from $100 to $115 for each application and annual fees are $115.

 *New Child Care Centers Fees:

For 1-30, fees increase from $200 to $400 for each application & annual fees are $200.

For 31-60, fees increase from $400 to $800 for each application & annual fees are $400.

For 61-75, fees increase from $500 to $1,000 for each application & annual fees are $500.

For 76-90, fees increase from $600 to $1.200 for each application & annual fees are $600.

For 91-120, fees increase from $800 to $1,600 for each application & annual fees are $800.

For 121+ fees increase from $1,000 to $2,000 for each application & annual fees are $1,000.


Child Protective Services, Child Welfare/Department of Social Services

The budget includes cuts of $17 million to the Child Protective Services that counties have used to hire social workers to respond to the increase in reported child abuse cases.

 CalWORKS Grants

The budget suspends the 2.57% COLA for CalWORKs recipients for three months.

 Although the budget was signed, the legislative session does not end officially until August 31st.  Since the Republicans are planning to attend the Republican National Convention in New York starting August 31st, the legislative session may be recessed a few days early on August 27th.


Prepared by Pat Dorman, CAEYC Public Policy Consultant.


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