Child Care and State Preschool

Overview

Budget Provides $7.8 Billion for Child Care Programs. As shown in Figure 1, the total child care budget in 2026-27 is $7.8 billion—a $293 million (4 percent) increase relative to the revised 2025-26 levels. This increase includes $51 million for California Work Opportunity and Responsibility to Kids (CalWORKs) child care programs, $221 million for non-CalWORKs child care programs, and $21 million for support activities.

Figure 1

Child Care Budget

(Dollars in Millions)

	2024‑25 Revised^a	2025‑26 Revised^b	2026‑27 Proposed^c	Change From 2025‑26
	2024‑25 Revised^a	2025‑26 Revised^b	2026‑27 Proposed^c	Amount	Percent
CalWORKs Child Care
Stage 1	$614	$648	$668	$21	3%
Stage 2^d	549	602	613	11	2
Stage 3	537	567	586	19	3
Subtotals	($1,700)	($1,817)	($1,868)	($51)	(3%)
Non‑CalWORKs Child Care
Alternative Payment Program	$1,990	$2,058	$2,216	$158	8%
General Child Care^e	1,495	1,510	1,573	64	4
Bridge program for foster children	107	62	62	—	—
Migrant Child Care	79	79	79	—	—
Care for Children With Severe Disabilities	2	2	2	—	—
Subtotals	($3,672)	($3,711)	($3,932)	($221)	(6%)
Support Programs	$2,161^f	$1,964^g	$1,985^h	$21	1%
Totals	$7,533	$7,492	$7,785	$293	4%
Funding
Proposition 98 General Fundⁱ	$2	$1	$1	‑$0.05	‑4%
Non‑Proposition 98 General Fund	4,450	5,080	5,352	272	5
Proposition 64 Special Fund	639	199	188	‑11	‑5
Federal	2,442	2,212	2,244	32	1
^aReflects 2025‑26 May Revision estimates with LAO adjustments. ^bReflects 2026‑27 Budget Act with LAO adjustments. ^cReflects 2026‑27 Budget Act with LAO adjustments. ^dDoes not include $16.3 million provided to community colleges for certain child care services. ^eIncludes funding for family child care home education networks. ^fIncludes cost estimates for quality programs, child care infrastructure, Child and Adult Care Food Program, CCPU Training Fund, CCPU Retirement Benefit Trust, CCPU Health Benefit Fund, accounts payable, whole child community equity, court cases, and costs associated with the 2023‑24 MOU and parity agreement including monthly cost of care plus payments. ^gIncludes cost estimates for quality programs, child care infrastructure, Child and Adult Care Food Program, CCPU Health Benefit Fund, accounts payable, reimbursement based on certified need, rate reform support, administrative support, whole child community equity, and monthly cost of care plus payments. ^hIncludes cost estimates for quality programs, child care infrastructure, Child and Adult Care Food Program, CCPU Training Fund, CCPU Retirement Benefit Trust, CCPU Health Benefit Fund, accounts payable, prospective pay, administrative support, infrastructure grant administration, whole child community equity, and monthly cost of care plus payments. ⁱReflects Proposition 98 funds for Child and Adult Care Food Program.
CCPU = Child Care Providers United and MOU = memorandum of understanding.

Provides $7.5 Billion for Preschool Programs. The budget provides a total of $7.5 billion for preschool programs. Of this amount, $4.5 billion is for transitional kindergarten, $2.8 billion is for State Preschool, and $321 million is for support programs. As shown in Figure 2, the 2026-27 Budget Act increases these programs by a total of $831 million (12.4 percent) from the revised 2025-26 level. These increases are primarily driven by increased attendance assumptions and higher per-student rates in transitional kindergarten that are largely associated with cost-of-living adjustments provided to schools.

Figure 2

Preschool Budget

(Dollars in Millions)

	2024‑25 Revised	2025‑26 Revised	2026‑27 Enacted	Change From 2025‑26
	2024‑25 Revised	2025‑26 Revised	2026‑27 Enacted	Amount	Percent
Preschool Programs
Transitional Kindergarten^a	$2,615	$3,856	$4,456	$600	15.6%
State Preschool^b	2,173	2,806	2,767	‑39	‑1.4
Preschool QRIS Grant	50	50	70	20	40.0
Subtotals	($4,838)	($6,712)	($7,293)	($581)	(8.7%)
Other Support	$19	$1	$251	$250	23,255.8%
Totals	$4,857	$6,713	$7,544	$831	12.4%
^aReflects LAO estimates. ^bIncludes up to $5 million each year used for a family literacy program offered at certain State Preschool sites.
QRIS = Quality Rating and Improvement System.

Major Child Care Spending Changes

Includes a Net Increase of 18,440 Child Care Slots. As shown in Figure 3, the budget package includes $228 million for 20,700 new California Alternative Payment Program (CAPP) slots beginning October 1, 2026 and 2,070 new General Child Care slots beginning April 1, 2027. Of the total amount, $30 million covers the cost of care plus payments associated with the new slots. The total annualized cost of these slots, including cost of care plus payments, will be $350 million beginning in 2027-28. The budget package reflects a $75 million decrease in federal funding from California’s federal Child Care and Development Fund award. The budget includes $23 million General Fund in 2026-27 to backfill the reduction, resulting in an overall reduction of $52 million relative to the enacted 2025-26 budget. (The May Revision proposed increasing the slot reduction from $75 million in 2025-26 to $93 million in 2026-27. The final budget provided an additional $41 million to offset the proposed reduction.) This reduction effectively eliminates 4,330 CAPP slots. These reductions will be absorbed by reducing funding for certain Alternative Payment (AP) agencies that have not fully spent their contracts.

Figure 3

Changes in Child Care Spending

(In Millions)

	General Fund		Prop. 64	Federal	Total
	Prop. 98	Non‑Prop. 98	Prop. 64	Federal	Total
Policy Changes
Child care slot increase	—	$228	—	—	$228
Cost of care plus increase in lieu of COLA	—	111	—	—	111
Infrastructure grants for wildfire affected areas	—	0.2	$11	$26	37
Backfill of 2025‑26 slot reduction^a	—	47	‑21	‑2	23
COLA for Resource and Referral and Local Planning Councils	—	0.9	—	—	0.9
Subtotals	(—)	($387)	(‑$11)	($23)	($399)
Technical Adjustments
CalWORKs caseload and cost of care	—	$36	—	$14	$51
Child and Adult Care Food Program caseload	‑$0.05	0.3	—	36	36
Increase in MOU‑related costs	—	11	—	—	11
One‑time adjustments^b	—	‑4	—	‑42	‑46
Expiration of one‑time stabilization payment	—	‑158	—	—	‑158
Subtotals	(—)	(‑$115)	(—)	($8)	(‑$106)
Totals	‑$0.05	$272	‑$11	$32	$293
^aThe 2026‑27 Budget Act includes a $75 million reduction beginning in 2025‑26 due to a decrease in federal funding. ^bIncludes prior year one‑time costs associated with quality carryover, child care infrastructure carryover, court cases, and the whole child community equity program.
COLA = cost‑of‑living adjustment and MOU = memorandum of understanding.

Increases Monthly Cost of Care Plus Payments for Child Care and State Preschool. The budget package provides $1 billion in non-Proposition 98 General Fund for monthly per-child cost of care plus payments for child care and State Preschool providers. These payments supplement the existing reimbursement rates for all providers of subsidized child care and State Preschool. As Figure 3 shows, the budget provides $111 million non-Proposition 98 General Fund to increase the per-child rates for child care providers. For State Preschool, the budget provides an additional $52 million Proposition 98 General Fund to cover the increased rates, bringing the program’s total funding for cost of care plus payments to $313 million. These increases were calculated by applying a 2.01 percent increase to base program funding. They result in slightly different increases to cost of care plus payments for child care and State Preschool providers.

Provides One-Time Infrastructure Grants to Providers Impacted by Disasters. The budget package includes $25.7 million in federal funding and $11 million in Proposition 64 funding to provide child care infrastructure grants for current licensed centers and family child care homes that reported operational impacts associated with recent wildfires. Grants will be provided to providers impacted by disasters in 2023-24 and 2024-25 using federal funding, and providers impacted by disasters in 2025-26 using Proposition 64 funds.

Reverts 2025-26 Funding Increase for Prospective Pay. The 2025-26 budget package provided $30 million non-Proposition 98 General Fund to transition state and local child care systems to begin paying providers prospectively, with the intent to increase the amount to $43.8 million ongoing in 2026-27. This shift was motivated by new federal regulations requiring states to pay providers in advance of providing services, rather than the past requirement to pay providers within 21 days of submitting attendance records. In May 2026, the federal government rescinded the prospective pay requirement and returned to the previous regulations. To align with the federal rule change, the 2026-27 budget package reverts 2025-26 funding for prospective pay and provides no funding for this purpose in 2026-27.

Major State Preschool Spending Changes

Funds All State Preschool With Proposition 98. The budget package shifts funding for State Preschool programs operated by certain entities (primarily community-based organizations) to the Proposition 98 side of the budget. Previously, these entities were funded with non-Proposition 98 General Fund, while programs operated by local educational agencies (LEAs) were funded within Proposition 98. More details of this shift are discussed in The 2026-27 California Spending Plan: Proposition 98 and K-12 Education.

Aligns State Preschool Funding With Anticipated Spending. The budget reduces funding for State Preschool by $190 million General Fund on an ongoing basis. This reduction reflects the estimate of out-of-contract State Preschool funds that would otherwise go unused.

Funds Additional Pre-Kindergarten Planning and Implementation Grants. The budget package provides $200 million in one-time Proposition 98 General Fund for grants that can be used for State Preschool or transitional kindergarten expansion costs, such as hiring, recruitment, professional development, classroom materials, and supplies. Funds must be spent by June 30, 2032. LEAs with up to 500 kindergarteners are to receive a $25,000 base grant and LEAs with more than 500 kindergartners are to receive a $50,000 base grant. County offices of education (COEs) are to receive $15,000 for every LEA in their county that operates a kindergarten program. Of the remaining funds, 60 percent will be distributed based on an LEA’s share of kindergarten enrollment. The remaining 40 percent will be distributed based on an LEA’s share of students who are English learners, low income, or foster youth. The state provided $200 million in 2021-22 and $300 million in 2022-23 for similar purposes.

Funds Additional Preschool Planning Grants. The budget provides $50 million one-time Proposition 98 General Fund to award grants for LEAs to plan for expanding preschool options for three- and four-year olds through a mixed delivery system. 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. State funds are available until June 30, 2032 and require a one-to-one match. Beginning in 2022-23, the state provided $18.3 million non-Proposition 98 General Fund for three years to fund similar activities.

Increases Professional Development Days. The budget provides $34 million ongoing to increase the number of professional development days a State Preschool program may schedule per year from two to five.

Increases Funds for Quality Rating Improvement Systems (QRIS). The budget provides an additional $20 million ongoing Proposition 98 General Fund ($70 million total) for grants mainly to COEs designed to improve the quality of State Preschool. The specific uses of additional funding would be determined locally by grantees.

Sets Aside State Preschool Funding for Three-Year Olds. The budget makes available $115 million Proposition 98 General Fund on an ongoing basis to increase contracts for growth in the number of three-year old children served in State Preschool. (The per-child rate for three-year olds is 80 percent higher than the rate for four-year olds.) The California Department of Education is to augment contracts based on programmatic data, including recent enrollment increases and projections of future growth of three-year olds served in State Preschool. The budget package does not include an increase in funding associated with this change. Instead, the costs associated with these increases will be covered with unallocated State Preschool funds.

Other Actions

Provides the California Department of Social Services (DSS) Authority to Transfer Unspent Contract Funding. Trailer legislation authorizes DSS to transfer unallocated or unspent funds across AP programs and Migrant AP programs, and across direct contract programs (such as General Child Care and Migrant Child Care Centers). The department must establish criteria for transferring funds that, among other things, prioritize maintaining funds within the same region and program for which the funds were initially issued. By October 1 of each year, DSS is required to update the Legislature on the amount of transfers made in the prior year.

Authorizes DSS to Use a Portion of General Child Care Expansion Funds for Facilities Repairs and Upgrades. Trailer legislation authorizes DSS to set aside up to 15 percent of General Child Care slot expansion funding for facilities upgrades and repairs, and other activities that will help providers prepare for serving children with expansion funds. The process and eligibility criteria for funding will be established by the department. The department may rescind awards if funds have been, or are expected to be, (1) spent past the established time frame, (2) used for projects or activities that have not been approved by the department, or (3) used in a way that is inconsistent with guidelines established by the department.

Modifies Quarterly Rate Reform Reporting Requirement. Trailer legislation extends by an additional year (through July 2028) the requirement for DSS to provide quarterly updates on progress toward implementing rates using the alternative methodology. In addition, trailer legislation requires the July 2027 report to include the considerations required to add monthly cost of care plus rates to existing reimbursement rates. These considerations shall include the required updates to data systems, statutory and regulatory changes, and department activities required to support contractors in making payments to providers. DSS shall provide an estimated time frame for each consideration.

Modifies Allocation Formula for Certain Administrative Funding. Since 2025-26, the state has provided $70 million annually to AP agencies and agencies administering family child care home education networks for administrative costs associated with collective bargaining. Administrative agencies received between $300,000 and $2 million, depending on the size of the agency. The budget package requires these funds to be distributed proportionally to agencies based on their total contract amounts (effectively eliminating the minimum and maximum amounts).

Requires Administrative Agencies to Directly Collect Family Fees. Beginning January 1, 2027, budget trailer legislation requires AP agencies and agencies administering family child care home education networks to directly collect family fees. Currently, family fees are typically collected by child care providers, and administrative agencies allocate to the child care provider the difference between its reimbursement rate and the family fee. Under the budget package, all administrative agencies are to collect family fees and pay child care providers their full reimbursement amount.

Expands State Preschool Eligibility to Children of LEA Employees. The budget expands State Preschool eligibility to children of parents or guardians employed by LEAs. Children eligible pursuant to this provision will be prioritized for enrollment based on income. Children from families with lower incomes must receive enrollment priority over children of LEA employees from families with higher income.

Expands State Preschool Neighborhood Eligibility. The budget makes changes to an eligibility provision that allows certain State Preschool providers to enroll four-year olds otherwise ineligible for the program (after serving all interested, eligible children)—known as neighborhood eligibility. Previously, providers operating within the attendance boundary of a public school where at least 80 percent of students are low income could enroll any child residing within the school attendance boundary. The budget package modifies these rules such that neighborhood eligibility applies to providers operating within the attendance boundary of a school district or public school where the share of students who are English learners, low income, or foster youth is at least 80 percent.