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New report calls for massive overhaul of California's childcare system

Serving 300,000 children, California spends approximately $2 billion each year on subsidized childcare and development programs.
Serving 300,000 children, California spends approximately $2 billion each year on subsidized childcare and development programs.
Mae Ryan/KPCC

California’s childcare and development system has “serious flaws” and is in need of “comprehensive restructuring,” according to a new report from the state’s Legislative Analyst’s Office (LAO.) Examining the complicated public subsidy which provides low-income families with assistance for early childcare, the report lays out a road map for the state legislature to move towards a “simplified and rational system.”

Serving 300,000 children, California spends approximately $2 billion each year on subsidized childcare and development programs, according to the LAO. 60 percent of this funding comes from the state and the remaining 40 percent from federal monies. The report does not consider Head Start programs as that is a separate federal program.

In evaluating California’s system, the LAO compared it to childcare systems in other states. California, the report finds, has one of the highest income thresholds of all states for families to qualify for subsidized care, based on the federal poverty level (FPL). Whereas the majority of states require an income at or below 200 percent of the FPL to qualify, California requires 228 percent of the FPL.

On the other hand, California is more generous than many states in allowing childcare subsidies to continue for families who qualified based on the federal welfare grant, known as TANF.  Once the time limit for the TANF is up, most states stop childcare benefits. As long as former TANF recipients in California continue to meet work and income requirements, the state continues the childcare subsidy. California also has relatively high health and safety standards for childcare providers, exceeding the basic federal requirement.

Yet the LAO still found California’s system to be in need of an overhaul. The report lays out disparities in the delivery of services in what it calls the state’s “four major shortcomings.”

Disparities in access to childcare assistance

  • Similar Families Have Different Levels of Access. In the current system, California Work Opportunity and Responsibility to Kids (CalWORKs) families and certain former CalWORKs families are guaranteed services, whereas other low–income working families that have never accessed CalWORKs are prioritized based on income. As a result, a long waiting list exists for non–CalWORKs families, with many eligible families never receiving care. Moreover, some former CalWORKs families that are now effectively guaranteed child care benefits for as long as they remain under the income cap and their children remain under the age cap, have higher incomes than other eligible low–income families that never receive even a single year’s worth of child care benefits.
  • Similar Families Have Different Amount of Choice in Selecting Care. CalWORKs families (and some other non–CalWORKs families receiving vouchers) can choose from a variety of providers - selecting care that best fits their needs. Other non–CalWORKs families, however, can only access child care at specific locations that contract directly with the California Department of Education (CDE).
  • Similar Families Provided Different Standards of Care. The standard of care also varies, based upon the type of subsidy a family receives. Those families receiving vouchers generally have access to providers that meet only health and safety standards, whereas those families receiving direct–contracted services have access to providers that meet health, safety, and developmental standards.
  • State Has Higher Reimbursement Rate for Lower Standard of Care. In 19 counties, the state pays more to providers that are subject only to health and safety standards than to providers subject to health, safety, and developmental standards.

To solve these issues, the LAO has designed a road map for the state legislature to follow in the coming years - while recognizing that change cannot happen instantly. Aimed at simplifying the system, the new report proposes three major changes.

Restructuring California’s Child Care and Development System

  • Provide Similar Levels of Access to Most Low–Income Families. We recommend the Legislature continue to prioritize families new to CalWORKs for child care subsidies, as these families are likely to be among the most vulnerable families eligible for care. In order to provide greater access to eligible families, however, we recommend setting time limits on subsidized child care for all families. Providing eligible families six to eight years of child care would give them time to become more economically stable, while expanding services to approximately 35,000 additional families.
  • Provide Similar Levels of Choice. We recommend the Legislature provide all eligible families similar levels of choice by providing subsidies primarily through vouchers. As a result, families currently limited to care in specific locations could choose the provider that best fits their needs. (Because of the manner in which local educational agencies [LEAs] generally are funded and the benefits of connecting families to the broader K–12 system, we recommend the Legislature make an exception to the voucher–based system and continue to have CDE contract directly with LEAs for preschool.)
  • Require Developmentally Appropriate Care for Children Birth Through Age Four. We recommend requiring all child care providers serving children birth through age four to provide developmentally appropriate care. We recommend the Legislature direct CDE to develop standards that are similar to existing requirements for direct–contracted programs but modified to reduce some programmatic and administrative burden. In addition, we recommend the Legislature direct CDE to develop a monitoring system to ensure programs meet the new standards. Lastly, we recommend the Legislature update reimbursement rates to reflect the new standards.