Child Care and Preschool

Budget Provides $12 Billion for Child Care and Preschool Programs. Of this amount, $4.6 billion is for preschool and transitional kindergarten (TK) programs, $5.2 billion is for other child development programs, and $2.2 billion is for support programs. As Figure 1 shows, the 2022-23 Budget Act increases these programs by a total of $4.1 billion (52 percent) from the revised 2021-22 level. Below, we describe the major changes in Child Care and State Preschool. More details on TK augmentations are described in The 2022-23 California Spending Plan: Proposition 98.

Figure 1

Child Care and Preschool Budget

(Dollars in Millions)

	2020‑21 Reviseda	2021‑22 Reviseda	2022‑23 Enacted	Change From 2021‑22
	2020‑21 Reviseda	2021‑22 Reviseda	2022‑23 Enacted	Amount	Percent
Expenditures
CalWORKs Child Care
Stage 1	$486	$381	$450	$69	18.1%
Stage 2b	558	402	309	‑92	‑23.0
Stage 3	656	705	686	‑20	‑2.8
Subtotals	($1,700)	($1,488)	($1,445)	(‑$43)	(‑2.9%)
Non‑CalWORKs Child Care
Alternative Payment Program	$780	$1,252	$1,778	$526	42.0%
General Child Carec	522	750	1,783	1,033	137.6
Bridge program for foster children	58	54	97	42	78.5
Migrant Child Care	45	65	70	5	7.6
Care for Children With Severe Disabilities	2	2	2	—d	6.8
Subtotals	($1,407)	($2,123)	($3,729)	($1,606)	(75.6%)
Preschool Programs
State Preschoole	$1,270	$1,720	$2,579	$859	49.9%
Transitional Kindergartenf	807	864	1,992	1,128	130.5
Preschool QRIS Grant	50	50	50	—	—
Subtotals	($2,127)	($2,634)	($4,621)	($1,986)	(75.4%)
Support Programs	$255	$1,616	$2,159	$543	33.6%
Totals	$5,489	$7,861	$11,954	$4,092	52.1%
Funding
Proposition 98 General Fund	$1,645	$2,388	$4,260	$1871	78.4%
Non‑Proposition 98 General Fund	1,945	2833	3720	887	31.3
Proposition 64 Special Fund	146	295	292	‑2	‑0.8
Federal	1753	2345	3682	1337	57.0
aReflects administration’s revised estimates for CalWORKs Child Care and budget appropriation for all other programs. bDoes not include $9.6 million provided to community colleges for certain child care services. cIncludes family child care home education networks. dLess than $500,000. eIncludes $1.2 million each year used for a family literacy program offered at certain State Preschool sites. fReflects preliminary LAO estimates as enrollment data are not yet publicly available. The 2022‑23 estimate includes Department of Finance’s estimates for add‑on and expansion policies.
QRIS = Quality Rating Improvement System.

State Preschool

Budget Includes $1.7 Billion Increase for Preschool. As Figure 2 shows, the 2022-23 budget package adds $2 billion ongoing for State Preschool and TK programs. Proposition 98 covers the bulk of the increase, followed by non-Proposition 98 General Fund and federal funds. The increase is offset by a net decline of $297 million in one-time funds from 2021-22 for support programs for preschool.

Figure 2

2022‑23 Changes in Preschool Spending

(In Millions)

Change	General Fund		Federal	Total
Change	Proposition 98	Non‑Proposition 98	Federal	Total
Ongoing
TK attendance and rate changes	$1,128	—	—	$1,128
State Preschool rate increase for three‑year olds	240	$130	—	369
Annualization of State Preschool rate increases initiated January 1, 2022	166	—	$107	274
State Preschool rate increase for students with disabilities and dual language learners	73	43	—	116
State Preschool COLA (6.56 percent)	67	33	—	100
Subtotals	($1,674)	($206)	($107)	($1,986)
One‑time
Prior year one‑time funds	‑$363	‑$524	‑$99	‑$986
TK planning grants	300	—	—	300
Inclusive Early Education Expansion Grants	250	—	—	250
Preschool, TK, and Full‑day Kindergarten Facility Grants	—	100	—	100
State Preschool family fee waivers	11	11	—	21
Preschool planning grants	—	18	—	18
Subtotals	($198)	(‑$395)	(‑$99)	(‑$297)
Totals	$1,871	‑$190	$8	$1,689
TK = Transitional Kindergarten and COLA = cost‑of‑living adjustment.

Increases Rates for Providers Serving Certain Children. The budget provides $313 million Proposition 98 General Fund and $172 million non-Proposition 98 General Fund to increase rates for certain groups of children in the State Preschool program. These increased rates are provided through adjustment factors applied to the rate the provider would typically receive. For example, an adjustment factor of 1.8 reimburses providers at 1.8 times the rate for four-year olds. Figure 3 shows these adjustments in more detail.

Figure 3

Changes in Preschool
Adjustment Factors

	Previous Adjustment	New Adjustment
Exceptional needs	1.54	2.40
Severe disabilities	1.94	2.40
Three‑year olds	1.00	1.80
Dual language learner	1.10	1.20
Receiving mental health consultation services	1.05	1.10

Requires State Preschool Providers Serve Children With Disabilities. In addition to increasing rates, the budget package includes several new requirements for State Preschool programs to serve children with disabilities. The budget package requires at least 5 percent of children enrolled in State Preschool programs be children with disabilities in 2022-23. This increases to 7.5 percent in 2023-24 and 10 percent in 2024-25 and future years. The California Department of Education (CDE) is required to (1) provide technical assistance to providers in meeting the targets, and (2) create a waiver process for providers not able to meet the targets. Any agency not meeting the targets without an approved waiver by July 1, 2026 may be put on a conditional contract.

Makes Changes to Eligibility Criteria and Enrollment Priorities. Budget trailer legislation increases the income eligibility threshold for State Preschool from 75 percent of the state median income to 100 percent. In addition, the budget package exempts children with disabilities from the income criteria if they are enrolled within the provider’s target percentage (5 percent of enrollment for 2022-23, increasing to 10 percent by 2024-25). Income-eligible children with disabilities enrolled above these targets would receive priority before other four-year olds.

Provides Additional Funds for Inclusive Early Education Expansion Grants. The budget provides $250 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.

Funds Preschool Planning Grants. The budget provides $18.3 million non-Proposition 98 General Fund to award grants to a lead agency in each county to plan for preschool for all three- and four-year olds. The budget also includes language specifying intent to provide $18.3 million in 2023-24 and 2024-25, totaling $54.9 million for planning grants over the three years. The Superintendent of Public Instruction is to develop a methodology to determine grant awards to each county based on the number of three- and four-year olds in the county. Funds can be used for a variety of purposes including assessing parental preferences for preschool and engaging in community-level coordination to implement preschool options.

Extends Family Fee Waivers and Reimbursement Flexibilities for an Additional Year. The budget provides $10.8 million Proposition 98 General Fund and $10.5 million non-Proposition 98 General Fund to waive family fees for the 2022-23 fiscal year. The budget further extends reimbursement flexibilities for an additional year.

Establishes Preschool Work Group. Trailer legislation requires the Superintendent to convene a work group of stakeholders that will provide recommendations for increasing access to high-quality preschool programs and updating preschool standards. The Superintendent is to provide a report with recommendations from the work group by January 15, 2023.

Provides State Operations Increases. The budget includes $8 million non-Proposition 98 General Fund for administrative work associated with State Preschool. Of this amount, $4 million is one-time funding to implement the preschool planning grant and work group and $1 million is associated with implementing the Inclusive Early Education Expansion grant. Further detail is provided in our New Workload and Funding for CDE EdBudget table.

Child Care

Budget Includes $2.4 Billion Increase for Child Care. As Figure 4 shows, the 2022-23 budget package adds $1.7 billion ongoing for child care programs. Non-Proposition 98 General Fund covers the bulk of the increase, followed by federal funds. The package also includes $738 million one-time funds for child care programs.

Figure 4

2022‑23 Changes in Child Care Spending

(In Millions)

Change	Non‑Proposition 98 General Fund	Federal	Proposition 64	Total
Ongoing
Annualization of General Child Care slots initiated April 1, 2022	$542	$355	‑$2	$895
Alternative Payment slots starting October 1, 2022	99	148	—	247
Annualization of rate increases initiated January 1, 2022	2	182	—	184
Child Care COLA (6.56 percent)	137	—	—	137
Healthcare benefits	100	—	—	100
Annualization of Alternative Payment slots initiated October 1, 2021	40	55	—	95
CalWORKs caseload and average cost of care adjustments	‑103	44	—	‑59
Bridge program for foster children slots	35	—	—	35
General Child Care slots starting April 1, 2023	13	9	—	22
Bridge program for foster children administrative funds	8	—	—	8
Subtotals	($873)	($794)	(‑$2)	($1,664)
One‑time
Child care facilitiesa	$150	$201	—	350
Stipends for subsidized child care providers	32	320	—	352
Prior year one‑time funds	—	‑220	—	‑220
Reimbursement flexibility for voucher providers	—	108	—	108
Family fee waivers	—	136	—	136
Alternative Payment capacity grant	20	—	—	20
Paid non‑operation days	2	—	—	2
Quality projects	—	‑10	—	‑10
Subtotals	($204)	($535)	(—)	($738)
Totals	$1,077	$1,329	‑$2	$2,403
aIncludes reappropriated funds.
COLA = cost‑of‑living adjustment.

Provides Funds for Slots and Rates, Primarily to Implement Prior Budget Deal. The budget includes $1.3 billion to add slots to the Alternative Payment and General Child Care programs. Of this amount, $990 million is to annualize slots funded in the 2021-22 budget and $270 million is for slots starting in 2022-23. The budget also includes $184 million to annualize rate increases initiated January 1, 2022. These increases are consistent with the multiyear agreement established in the 2021-22 budget to increase slots and rates. In addition, the budget includes $35 million to increase slots for the bridge program for foster children.

Includes One-Time Funds for Additional Stipends. The budget includes up to $320 million one-time federal funds to allocate stipends for child care providers and up to $32 million one-time General Fund to administer the stipends. Stipends will be distributed based on the number of subsidized children enrolled. The exact amount available for stipends will depend on final estimates of unexpended COVID-19 federal relief funding provided in 2021-22.

Provides Funds for Health Care Benefits. The budget includes $100 million ongoing General Fund to support the health care benefits for providers represented by Child Care Providers United (CCPU), the union representing family child care and license-exempt providers. Funds are intended to provide financial assistance with the premium or out-of-pocket health care costs for CCPU providers enrolled in health care plans through Covered California, Medicare, Medi-Cal, or an employer-based plan. These funds are also intended to cover administrative costs and outreach. Funds will be deposited into to a health care benefit trust administered by CCPU. The budget also provides several one-time augmentations related to health care and retirement benefits, including $100,000 to establish the health care benefits trust, up to $100,000 to hire a consultant to provide recommendations on retirement benefit models, up to $100,000 to establish a retirement benefits trust, and up to $40,000 to conduct a survey on retirement needs.

Funds One-time Initiatives. The budget includes $100.5 million one-time federal funds for minor renovation and repair of child care facilities. This augmentation provides additional funds for minor renovation and repair of child care facilities funded in the 2021-22 budget. The budget also provides $20 million one-time General Fund for Alternative Payment Agencies to develop administrative capacity to enroll families in newly added slots.

Extends Several Activities for an Additional Year. The budget package includes funds to extend several policies enacted in response to COVID-19 through 2022-23. These include:

$136 million one-time federal funds to waive family fees.
$108 million one-time federal funds to pay voucher-based providers for a child’s authorized hours of care instead of the amount of care used.
$2 million one-time General Fund to provide up to 16 paid nonoperational days.
Allowing direct contract providers to be reimbursed at their full contract amount instead of enrollment and state-determined rate.

Provides State Operations Increases. The budget includes an additional 6.5 permanent positions, 3 temporary positions, and $3.5 million General Fund for Department of Social Services (DSS) staff working on child care programs. The budget further includes $6 million per year through 2024-25 for DSS to contract for the implementation of a direct deposit system for payments to child care and preschool contractors.