Amended  IN  Senate  June 18, 2019
Amended  IN  Assembly  May 17, 2019
Amended  IN  Assembly  April 01, 2019
Amended  IN  Assembly  March 11, 2019

CALIFORNIA LEGISLATURE— 2019–2020 REGULAR SESSION

Assembly Bill No. 125

Introduced by Assembly Members McCarty, Berman, Bonta, Burke, Carrillo, Chiu, Chu, Friedman, Eduardo Garcia, Gonzalez, Limón, Mathis, Reyes, Robert Rivas, Blanca Rubio, Santiago, Ting, and Wicks
(Principal coauthors: Senators Dodd and Hill)

December 03, 2018

An act to amend Sections Section 8266.1 and 8447 of, and to amend, repeal, and add Sections 8265, 8265.5, and 8357 8265 and 8265.5 of, the Education Code, relating to early childhood education.


LEGISLATIVE COUNSEL'S DIGEST


AB 125, as amended, McCarty. Early childhood education: reimbursement rates.
(1) The Child Care and Development Services Act establishes a system of childcare and development services for children up to 13 years of age. Existing law requires the Superintendent of Public Instruction to implement a plan that establishes reasonable standards and assigned reimbursement rates, which vary with the length of the program year and the hours of service. Existing law requires the reimbursement system to be submitted to the Joint Legislative Budget Committee.
This bill would require the Superintendent to implement a reimbursement system plan that establishes reasonable standards and assigned reimbursement rates that would vary with additional factors, including a quality adjustment factor to address the cost of staffing ratios, as provided. The bill would require the reimbursement system plan, including methodology, standards, county rate targets as provided, and the total statewide funding amount necessary to reach annual rate targets for all agencies to be annually submitted to the Joint Legislative Budget Committee, on or before November 10. The bill would require the plan to include a formula for annually adjusting reimbursement rates, as provided.
The bill would require the department, by July 1, 2020, and annually thereafter, as provided, to establish a reimbursement rate target for each contracting agency that meets specific quality standards based on specified elements, including quality adjustment factors for the age range of children proposed to be served by the contracting agency, as a multiplier, which the bill would also require the department to establish.
(2) Existing law establishes adjustment factors for a provider agency’s reported child days of enrollment in order to reflect the additional expense of serving specified children, including an adjustment factor for infants and toddlers who are 0 to 36 months and are served in a child daycare center or family childcare home, as provided.
This bill would, as of July 1, 2020, delete the above adjustment factors and would make conforming changes.
(3) Existing law requires reimbursement rates to be adjusted by specified adjustment factors for childcare and development programs and, for childcare and development providers serving children for less than 4 hours per day, requires the reimbursement factor to be 55% of the standard reimbursement rate.
This bill would instead require the above-described reimbursement factor to be 50% of the standard reimbursement rate.

(4)Existing law requires the cost of childcare services to be governed by regional market rates, as provided. Existing law requires the regional market rate ceilings to be established at the 75th percentile of the 2016 regional market survey for that region or the regional market rate ceiling that existed in that region on December 31, 2017, whichever is greater. Existing law requires reimbursement to license-exempt childcare providers to not exceed 70% of the family childcare home rate, as provided.

This bill would instead require, until January 1, 2021, the regional market rate ceilings to be established at the 75th, and thereafter the 85th, percentile of the 2018 regional market survey for that region or the regional market rate ceiling that existed in that region on December 31, 2017, whichever is greater. The bill would require, on and after January 1, 2021, reimbursement to license-exempt childcare providers to instead not exceed 70% of the commensurate rate for both full-time and part-time care, as provided.

(5)The act requires the department to contract with local contracting agencies for alternative payment programs for services provided throughout the state. Existing law requires alternative payment childcare systems to be subject to the rates established in the regional market rate survey of childcare providers for provider payments. Existing law requires the department to contract to conduct and complete a regional market rate survey no more than once every 2 years, as provided.

This bill would require the department to update the regional market rate survey methodology to include specified factors, including age ranges and hours of service, as provided.

The bill would require the department to create the Quality Counts California Pilot Reimbursement Program upon an appropriation in the annual Budget Act, intended to allow childcare providers to receive higher reimbursement rates, as provided. The bill would require the department to select up to 5 alternative payment childcare systems to participate in the pilot program, as provided.

(4) The bill would make its operation contingent on the enactment of SB 174 of the 2019–20 Regular Session on or before January 1, 2020.
Vote: MAJORITY   Appropriation: NO   Fiscal Committee: YES   Local Program: NO  

The people of the State of California do enact as follows:


SECTION 1.

 Section 8265 of the Education Code is amended to read:

8265.
 (a) The Superintendent shall implement a reimbursement system plan that establishes reasonable standards and assigned reimbursement rates, which vary with the regional reimbursement ceiling adopted pursuant to Section 8357, a quality adjustment factor to address the cost of staffing ratios pursuant to Section 8264.8, the length of the program year, the hours of service, and any additional adjustment factors pursuant to paragraphs (3) to (7), inclusive, of subdivision (c) of Section 8265.5.
(1) Parent fees shall be used to pay reasonable and necessary costs for providing additional services.
(2) When establishing standards and assigned reimbursement rates, the Superintendent shall confer with applicant agencies.
(3) The reimbursement system plan, including methodology, standards, county rate targets as established by the Superintendent pursuant to subdivision (g), and the total statewide funding amount necessary to reach annual rate targets for all agencies shall be annually submitted to the Joint Legislative Budget Committee, on or before November 10.
(4) The Superintendent may establish any regulations the Superintendent deems advisable concerning conditions of service and hours of enrollment for children in the programs.
(b) Commencing July 1, 2018, the standard reimbursement rate shall be eleven thousand nine hundred ninety-five dollars ($11,995) and, commencing with the 2019–20 fiscal year, shall be increased by the cost-of-living adjustment granted by the Legislature annually pursuant to Section 42238.15. Commencing July 1, 2018, the full-day state preschool reimbursement rate shall be twelve thousand seventy dollars ($12,070) and, commencing with the 2019–20 fiscal year, shall be increased by the cost-of-living adjustment granted by the Legislature annually pursuant to Section 42238.15.
(c) The reimbursement system plan shall require agencies having an assigned reimbursement rate above the current year standard reimbursement rate to reduce costs on an incremental basis to achieve the standard reimbursement rate.
(d) (1) The reimbursement system plan shall provide for adjusting reimbursement on a case-by-case basis, in order to maintain service levels for agencies. Assigned reimbursement rates shall be increased only on the basis of one or more of the following:
(A) Loss of program resources from other sources.
(B) Need of an agency to pay the same childcare rates as those prevailing in the local community.
(C) Increased costs directly attributable to new or different regulations.
(D) Documented increased costs necessary to maintain the prior year’s level of service and ensure the continuation of threatened programs.
(2) Childcare agencies funded at the lowest rates shall be given first priority for increases.
(e) The reimbursement system plan shall provide for expansion of child development programs at no more than the standard reimbursement rate for that fiscal year.
(f) The Superintendent may reduce the percentage of reduction for a public agency that satisfies any of the following:
(1) Serves more than 400 children.
(2) Has in effect a collective bargaining agreement.
(3) Has other extenuating circumstances that apply, as determined by the Superintendent.
(g) (1) Notwithstanding subdivision (c) of Section 8265.5, on or before July 1, 2020, and annually thereafter, the department shall establish a reimbursement rate target for each contracting agency that meets quality standards pursuant to Sections 8203, 8208, 8244, 8261, 8264.7, 8360, and 8360.1, and any regulations adopted thereunder, based on all of the following elements:
(A) The regional market rate ceilings for the contracting agency’s county, as applicable, pursuant to paragraphs (1) and (2) of subdivision (b) of Section 8357.
(B) The quality adjustment factor for the age range of children proposed to be served by the contracting agency, as a multiplier, specified in paragraph (3).
(C) The program year and hours of service reimbursement factor pursuant to Section 8266.1, if applicable.
(D) Additional adjustment factors for special circumstances or services, pursuant to paragraphs (3) to (7), inclusive, of subdivision (c) of Section 8265.5, if applicable.
(2) A contracting agency’s rate target shall not be less than that agency’s 2018 rate, by age range, pursuant to Section 8265.5.
(3) The department, in order to meet the costs of providing quality standards pursuant to Sections 8203, 8208, 8244, 8261, 8264.7, 8360, and 8360.1, and any regulations adopted thereunder beyond those calculated in the regional market rate survey, shall establish quality adjustment factors for all of the following age ranges:
(A) For infants who are zero 0 to 18 months of age, the adjustment factor shall be 1.23.
(B) For toddlers who are 18 to 36 months of age, the adjustment factor shall be 1.23.
(C) For preschoolers who are 36 months to six years of age, the adjustment factor shall be 1.23.
(D) For schoolage children who are six years of age and older, the adjustment factor shall be 1.03.
(4) The reimbursement system plan shall include a formula for annually adjusting reimbursement rates for each agency, based on all of the following:
(A) The annual Budget Act funding allocated for standard reimbursement rate increases pursuant to this section.
(B) An equitable distribution of standard reimbursement rate increases to agencies, by county, as an equal percentage of the county outstanding rate target, for purposes of meeting the targets identified pursuant to this subdivision.
(C) Funding allocated for cost-of-living adjustments, if applicable.
(h) This section shall become inoperative on July 1, 2020, and, as of January 1, 2021, is repealed.

SEC. 2.

 Section 8265 is added to the Education Code, to read:

8265.
 (a) The Superintendent shall implement a reimbursement system plan that establishes reasonable standards and assigned reimbursement rates, which vary with the regional reimbursement ceiling adopted pursuant to Section 8357, a quality adjustment factor to address the cost of staffing ratios pursuant to Section 8264.8, the length of the program year, the hours of service, and any additional adjustment factors pursuant to paragraphs (1) to (5), inclusive, of subdivision (b) of Section 8265.5.
(1) Parent fees shall be used to pay reasonable and necessary costs for providing additional services.
(2) When establishing standards and assigned reimbursement rates, the Superintendent shall confer with applicant agencies.
(3) The reimbursement system plan, including methodology, standards, county rate targets as established by the Superintendent pursuant to subdivision (g), and the total statewide funding amount necessary to reach annual rate targets for all agencies shall be annually submitted to the Joint Legislative Budget Committee, on or before November 10.
(4) The Superintendent may establish any regulations the Superintendent deems advisable concerning conditions of service and hours of enrollment for children in the programs.
(b) Commencing July 1, 2018, the standard reimbursement rate shall be eleven thousand nine hundred ninety-five dollars ($11,995) and, commencing with the 2019–20 fiscal year, shall be increased by the cost-of-living adjustment granted by the Legislature annually pursuant to Section 42238.15. Commencing July 1, 2018, the full-day state preschool reimbursement rate shall be twelve thousand seventy dollars ($12,070) and, commencing with the 2019–20 fiscal year, shall be increased by the cost-of-living adjustment granted by the Legislature annually pursuant to Section 42238.15.
(c) The reimbursement system plan shall require agencies having an assigned reimbursement rate above the current year standard reimbursement rate to reduce costs on an incremental basis to achieve the standard reimbursement rate.
(d) (1) The reimbursement system plan shall provide for adjusting reimbursement on a case-by-case basis, in order to maintain service levels for agencies. Assigned reimbursement rates shall be increased only on the basis of one or more of the following:
(A) Loss of program resources from other sources.
(B) Need of an agency to pay the same childcare rates as those prevailing in the local community.
(C) Increased costs directly attributable to new or different regulations.
(D) Documented increased costs necessary to maintain the prior year’s level of service and ensure the continuation of threatened programs.
(2) Childcare agencies funded at the lowest rates shall be given first priority for increases.
(e) The reimbursement system plan shall provide for expansion of child development programs at no more than the standard reimbursement rate for that fiscal year.
(f) The Superintendent may reduce the percentage of reduction for a public agency that satisfies any of the following:
(1) Serves more than 400 children.
(2) Has in effect a collective bargaining agreement.
(3) Has other extenuating circumstances that apply, as determined by the Superintendent.
(g) (1) Notwithstanding subdivision (b) of Section 8265.5, on or before July 1, 2020, and annually thereafter, the department shall establish a reimbursement rate target for each contracting agency that meets quality standards pursuant to Sections 8203, 8208, 8244, 8261, 8264.7, 8360, and 8360.1, and any regulations adopted thereunder, based on all of the following elements:
(A) The regional market rate ceilings for the contracting agency’s county, as applicable, pursuant to paragraphs (1) and (2) of subdivision (b) of Section 8357.
(B) The quality adjustment factor for the age range of children proposed to be served by the contracting agency, as a multiplier, specified in paragraph (3).
(C) The program year and hours of service reimbursement factor pursuant to Section 8266.1, if applicable.
(D) Additional adjustment factors for special circumstances or services, pursuant to paragraphs (1) to (5), inclusive, of subdivision (b) of Section 8265.5, if applicable.
(2) A contracting agency’s rate target shall not be less than that agency’s 2018 rate, by age range, pursuant to 8265.5.
(3) The department, in order to meet the costs of providing quality standards pursuant to Sections 8203, 8208, 8244, 8261, 8264.7, 8360, and 8360.1, and any regulations adopted thereunder beyond those calculated in the regional market rate survey, shall establish quality adjustment factors for all of the following age ranges:
(A) For infants who are zero 0 to 18 months of age, the adjustment factor shall be 1.23.
(B) For toddlers who are 18 to 36 months of age, the adjustment factor shall be 1.23.
(C) For preschoolers who are 36 months to six years of age, the adjustment factor shall be 1.23.
(D) For schoolage children who are six years of age and older, the adjustment factor shall be 1.03.
(4) The reimbursement system plan shall include a formula for annually adjusting reimbursement rates for each agency, based on all of the following:
(A) The annual Budget Act funding allocated for standard reimbursement rate increases pursuant to this section.
(B) An equitable distribution of standard reimbursement rate increases to agencies, by county, as an equal percentage of the county outstanding rate target, for purposes of meeting the targets identified pursuant to this subdivision.
(C) Funding allocated for cost-of-living adjustments, if applicable.
(h) This section shall become operative on July 1, 2020.

SEC. 3.

 Section 8265.5 of the Education Code is amended to read:

8265.5.
 (a) In order to reflect the additional expense of serving children who meet any of the criteria outlined in subdivision (c), the provider agency’s reported child days of enrollment for these children shall be multiplied by the adjustment factors listed below.
(b) The adjustment factors shall apply to a full-day state preschool program and those programs for which assigned reimbursement rates are at or below the standard reimbursement rate. In addition, the adjustment factors shall apply to those programs for which assigned reimbursement rates are above the standard reimbursement rate, but the reimbursement rate, as adjusted, shall not exceed the adjusted standard reimbursement rate. The adjustment factors shall apply to those full-day state preschool programs for which assigned reimbursement rates are above the full-day state preschool reimbursement rate, but the reimbursement rate, as adjusted, shall not exceed the adjusted full-day state preschool reimbursement rate.
(c) Notwithstanding any other law, commencing January 1, 2019, the adjustment factors shall be as follows:
(1) For infants who are 0 to 18 months of age and are served in a child daycare center or a family childcare home, the adjustment factor shall be 2.44.
(2) For toddlers who are 18 to 36 months of age and are served in a child daycare center or a family childcare home, the adjustment factor shall be 1.8.
(3) For children with exceptional needs who are 0 to 21 years of age, the adjustment factor shall be 1.54.
(4) For severely disabled children who are 0 to 21 years of age, the adjustment factor shall be 1.93.
(5) For children at risk of neglect, abuse, or exploitation who are 0 to 14 years of age, the adjustment factor shall be 1.1.
(6) For limited-English-speaking and non-English-speaking children who are two years of age through kindergarten age, the adjustment factor shall be 1.1.
(7) For children who are served in a California state preschool program, infants and toddlers who are 0 to 36 months of age and are served in general childcare and development programs, or children who are 0 to 5 years of age and are served in a family childcare home education network setting funded by a general childcare and development program, where early childhood mental health consultation services are provided, pursuant to Section 8265.2, the adjustment factor shall be 1.05.
(d) Use of the adjustment factors shall not increase the provider agency’s total annual allocation.
(e) (1) Days of enrollment for children who meet more than one of the criteria outlined in paragraphs (1) to (6), inclusive, of subdivision (c) shall not be reported under more than one of the categories specified in those paragraphs.
(2) Notwithstanding paragraph (1), for children for whom an adjustment factor is applied pursuant to any of paragraphs (1) to (6), inclusive, of subdivision (c), and who are additionally eligible for the adjustment factor established in paragraph (7) of subdivision (c), reported child days of enrollment shall be multiplied by the sum of the applicable adjustment factor under paragraphs (1) to (6), inclusive, of subdivision (c) and 0.05.
(f) The difference between the reimbursement resulting from the use of the adjustment factors outlined in subdivision (c) and the reimbursement that would otherwise be received by a provider in the absence of the adjustment factors shall be used for special and appropriate services for each child for whom an adjustment factor is claimed.
(g) This section shall become inoperative on July 1, 2020, and, as of January 1, 2021, is repealed.

SEC. 4.

 Section 8265.5 is added to the Education Code, to read:

8265.5.
 (a) In order to reflect the additional expense of serving children who meet any of the criteria outlined in subdivision (b), the provider agency’s reported child days of enrollment for these children shall be multiplied by the adjustment factors listed below.
(b) Notwithstanding any other law, the adjustment factors shall be as follows:
(1) For children with exceptional needs who are 0 to 21 years of age, the adjustment factor shall be 1.54.
(2) For severely disabled children who are 0 to 21 years of age, the adjustment factor shall be 1.93.
(3) For children at risk of neglect, abuse, or exploitation who are 0 to 14 years of age, the adjustment factor shall be 1.1.
(4) For limited-English-speaking and non-English-speaking children who are two years of age through kindergarten age, the adjustment factor shall be 1.1.
(5) For children who are served in a California state preschool program, infants and toddlers who are 0 to 36 months of age and are served in general childcare and development programs, or children who are 0 to 5 years of age and are served in a family childcare home education network setting funded by a general childcare and development program, where early childhood mental health consultation services are provided, pursuant to Section 8265.2, the adjustment factor shall be 1.05.
(c) Use of the adjustment factors shall not increase the provider agency’s total annual allocation.
(d) (1) Days of enrollment for children who meet more than one of the criteria outlined in paragraphs (1) to (4), inclusive, of subdivision (b) shall not be reported under more than one of the categories specified in those paragraphs.
(2) Notwithstanding paragraph (1), for children for whom an adjustment factor is applied pursuant to any of paragraphs (1) to (4), inclusive, of subdivision (b), and who are additionally eligible for the adjustment factor established in paragraph (5) of subdivision (b), reported child days of enrollment shall be multiplied by the sum of the applicable adjustment factor under paragraphs (1) to (4), inclusive, of subdivision (b) and 0.05.
(e) The difference between the reimbursement resulting from the use of the adjustment factors outlined in subdivision (b) and the reimbursement that would otherwise be received by a provider in the absence of the adjustment factors shall be used for special and appropriate services for each child for whom an adjustment factor is claimed.
(f) This section shall become operative on July 1, 2020.

SEC. 5.

 Section 8266.1 of the Education Code is amended to read:

8266.1.
 Commencing with the 1995–96 fiscal year and each fiscal year thereafter, for purposes of this chapter, reimbursement rates shall be adjusted by the following reimbursement factors for childcare and development programs with a standard reimbursement rate, but shall not apply to the resource and referral programs set forth in Article 2 (commencing with Section 8210), the alternative payment programs set forth in Article 3 (commencing with Section 8220), the part-day California state preschool programs set forth in Article 7 (commencing with Section 8235), the schoolage community childcare services programs set forth in Article 22 (commencing with Section 8460), or to the schoolage parent and infant development programs:
(a) For childcare and development providers serving children for less than four hours per day, the reimbursement factor is 50 percent of the standard reimbursement rate.
(b) For childcare and development program providers serving children for not less than four hours per day, and less than six and one-half hours per day, the reimbursement factor is 75 percent of the standard reimbursement rate. For childcare and development program providers operating under the At Risk Child Care Program set forth in Article 15.5 (commencing with Section 8350) and serving children for not less than four hours per day, and less than seven hours per day, the reimbursement factor is 75 percent of the standard reimbursement rate.
(c) For childcare and development program providers serving children for not less than six 6 and one-half hours per day, and less than 10 and one-half hours per day, the reimbursement factor is 100 percent of the standard reimbursement rate. For childcare and development program providers operating under the At Risk Child Care Program set forth in Article 15.5 (commencing with Section 8350) and serving children for not less than seven 7 hours per day, and less than 10 hours per day, the reimbursement factor is 100 percent of the standard reimbursement rate.
(d) For childcare and development program providers serving children for 1012 10 and one-half hours or more per day, the reimbursement factor is 118 percent of the standard reimbursement rate.

SEC. 6.Section 8357 of the Education Code is amended to read:
8357.

(a)The cost of childcare services provided under this article shall be governed by regional market rates. Recipients of childcare services provided pursuant to this article shall be allowed to choose the childcare services of licensed childcare providers or childcare providers who are, by law, not required to be licensed, and the cost of that childcare shall be reimbursed by counties or agencies that contract with the department if the cost is within the regional market rate. For purposes of this section, “regional market rate” means care costing no more than 1.5 market standard deviations above the mean cost of care for that region. It is the intent of the Legislature to reimburse childcare providers at the 85th percentile of the most recent regional market rate survey.

(b)The regional market rate ceilings shall be established at the greater of either of the following:

(1)The 75th percentile of the 2018 regional market rate survey for that region.

(2)The regional market rate ceiling that existed in that region on December 31, 2017.

(c)Reimbursement to license-exempt childcare providers shall not exceed 70 percent of the family childcare home rate established pursuant to subdivision (b).

(d)Reimbursement to childcare providers shall not exceed the fee charged to private clients for the same service.

(e)Reimbursement shall not be made for childcare services when care is provided by parents, legal guardians, or members of the assistance unit.

(f)A childcare provider located on an Indian reservation or rancheria and exempted from state licensing requirements shall meet applicable tribal standards.

(g)For purposes of this section, “reimbursement” means a direct payment to the provider of childcare services, including license-exempt childcare providers. If care is provided in the home of the recipient, payment may be made to the parent as the employer, and the parent shall be informed of the parent’s concomitant legal and financial reporting requirements. To allow time for the development of the administrative systems necessary to issue direct payments to providers, for a period not to exceed six months from the effective date of this article, a county or an alternative payment agency contracting with the department may reimburse the cost of childcare services through a direct payment to a recipient of aid rather than to the childcare provider.

(h)Counties and alternative payment programs shall not be bound by the rate limits described in subdivisions (a) and (b), when there are, in the region, no more than two childcare providers of the type needed by the recipient of childcare services provided under this article.

(i)(1)Notwithstanding any other law, reimbursements to childcare providers based upon a daily rate may only be authorized under either of the following circumstances:

(A)A family has an unscheduled but documented need of six hours or more per occurrence, such as the parent’s need to work on a regularly scheduled day off, that exceeds the certified need for childcare.

(B)A family has a documented need of six hours or more per day that exceeds no more than 14 days per month. Reimbursements to a childcare provider based on the daily rate over one month’s time shall not exceed the childcare provider’s equivalent full-time monthly rate or applicable monthly ceiling.

(2)This subdivision does not limit providers from being reimbursed for services using a weekly or monthly rate, pursuant to subdivision (c) of Section 8222.

(j)This section shall remain in effect only until January 1, 2021, and as of that date is repealed.

SEC. 7.Section 8357 is added to the Education Code, to read:
8357.

(a)The cost of childcare services provided under this article shall be governed by regional market rates. Recipients of childcare services provided pursuant to this article shall be allowed to choose the childcare services of licensed childcare providers or childcare providers who are, by law, not required to be licensed, and the cost of that childcare shall be reimbursed by counties or agencies that contract with the department if the cost is within the regional market rate. For purposes of this section, “regional market rate” means care costing no more than 1.5 market standard deviations above the mean cost of care for that region. It is the intent of the Legislature to reimburse childcare providers at the 85th percentile of the most recent regional market rate survey.

(b)The regional market rate ceilings shall be established at the greater of either of the following:

(1)The 85th percentile of the 2018 regional market rate survey for that region.

(2)The regional market rate ceiling that existed in that region on December 31, 2017.

(c)Reimbursement to license-exempt childcare providers shall not exceed 70 percent of the commensurate rate, such as hourly, daily, weekly, and monthly, for both full-time and part-time care established pursuant to subdivision (b).

(d)Reimbursement to childcare providers shall not exceed the fee charged to private clients for the same service.

(e)Reimbursement shall not be made for childcare services when care is provided by parents, legal guardians, or members of the assistance unit.

(f)A childcare provider located on an Indian reservation or rancheria and exempted from state licensing requirements shall meet applicable tribal standards.

(g)For purposes of this section, “reimbursement” means a direct payment to the provider of childcare services, including license-exempt childcare providers. If care is provided in the home of the recipient, payment may be made to the parent as the employer, and the parent shall be informed of the parent’s concomitant legal and financial reporting requirements. To allow time for the development of the administrative systems necessary to issue direct payments to providers, for a period not to exceed six months from the effective date of this article, a county or an alternative payment agency contracting with the department may reimburse the cost of childcare services through a direct payment to a recipient of aid rather than to the childcare provider.

(h)Counties and alternative payment programs shall not be bound by the rate limits described in subdivisions (a) and (b) when there are, in the region, no more than two childcare providers of the type needed by the recipient of childcare services provided under this article.

(i)(1)Notwithstanding any other law, reimbursements to childcare providers based upon a daily rate may only be authorized under either of the following circumstances:

(A)A family has an unscheduled but documented need of six hours or more per occurrence, such as the parent’s need to work on a regularly scheduled day off, that exceeds the certified need for childcare.

(B)A family has a documented need of six hours or more per day that exceeds no more than 14 days per month. Reimbursements to a childcare provider based on the daily rate over one month’s time shall not exceed the childcare provider’s equivalent full-time monthly rate or applicable monthly ceiling.

(2)This subdivision does not limit providers from being reimbursed for services using a weekly or monthly rate, pursuant to subdivision (c) of Section 8222.

(j)This section shall become operative on January 1, 2021.

SEC. 8.Section 8447 of the Education Code is amended to read:
8447.

(a)The Legislature hereby finds and declares that greater efficiencies may be achieved in the execution of state subsidized childcare and development program contracts with public and private agencies by the timely approval of contract provisions by the Department of Finance, the Department of General Services, and the department and by authorizing the department to establish a multiyear application, contract expenditure, and service review as may be necessary to provide timely service while preserving audit and oversight functions to protect the public welfare.

(b)(1)The Department of Finance and the Department of General Services shall approve or disapprove annual contract funding terms and conditions, including both family fee schedules and regional market rate schedules that are required to be adhered to by contract, and contract face sheets submitted by the department not more than 30 working days from the date of submission, unless unresolved conflicts remain between the Department of Finance, the department, and the Department of General Services. The department shall resolve conflicts within an additional 30 working day time period. Contracts and funding terms and conditions shall be issued to childcare contractors no later than June 1. Applications for new childcare funding shall be issued not more than 45 working days after the effective date of authorized new allocations of childcare moneys.

(2)Notwithstanding paragraph (1), the department shall implement the regional market rate schedules based upon the county aggregates, as specified in Section 8357 and the annual Budget Act.

(3)It is the intent of the Legislature to fully fund the third stage of childcare for former CalWORKs recipients.

(c)With respect to subdivision (b), it is the intent of the Legislature that the Department of Finance annually review contract funding terms and conditions for the primary purpose of ensuring consistency between childcare contracts and the childcare budget. This review shall include evaluating any proposed changes to contract language or other fiscal documents to which the contractor is required to adhere, including those changes to terms or conditions that authorize higher reimbursement rates, modify related adjustment factors, modify administrative or other service allowances, or diminish fee revenues otherwise available for services, to determine if the change is necessary or has the potential effect of reducing the number of full-time equivalent children that may be served.

(d)Alternative payment childcare systems, as set forth in Article 3 (commencing with Section 8220), shall be subject to the rates established in the Regional Market Rate Survey of California Child Care Providers, pursuant to subdivision (g), for provider payments.

(e)By March 1 of each year, the Department of Finance shall provide to the department the state median income amount for a four-person household in California using the methodology provided in subdivision (c) of Section 8263.1. The department shall adjust its fee schedule for childcare providers to reflect this updated state median income; however, changes based on revisions to the state median income amount shall not be implemented midyear.

(f)Notwithstanding the June 1 date specified in subdivision (b), changes to the regional market rate schedules and fee schedules may be made at any other time to reflect the availability of accurate data necessary for their completion, provided these documents receive the approval of the Department of Finance. The Department of Finance shall review the changes within 30 working days of submission and the department shall resolve conflicts within an additional 30 working day period. Contractors shall be given adequate notice before the effective date of the approved schedules. It is the intent of the Legislature that contracts for services not be delayed by the timing of the availability of accurate data needed to update these schedules.

(g)(1)The department shall contract to conduct and complete a regional market rate survey no more frequently than once every two years, with a goal of completion by March 1.

(2)The department shall update the regional market rate survey methodology to include:

(A)Age ranges and hours of service ranges pursuant to Section 8265.

(B)Direction for the survey to mitigate the impact of contractors located in deep-poverty census tracts on the market profile or county rate.

(h)The department shall create a Quality Counts California Pilot Reimbursement Program upon an appropriation made for these purposes in the annual Budget Act. It is the intent of the Legislature that the pilot program allow childcare providers subject to rates under this section to receive higher reimbursement rates, consistent with Section 8265, and to meet higher quality standards for child development, consistent with Sections 8203, 8208, 8244, 8261, 8264.7, 8360, and 8360.1, and any regulations adopted thereunder.

(1)The department shall establish and measure quality standards consistent with Sections 8203, 8208, 8244, 8261, 8264.7, 8360, and 8360.1, and any regulations adopted thereunder for childcare providers participating in the pilot program. These quality standards shall be met for pilot participation.

(2)The department shall select up to five alternative payment program childcare systems, as set forth in Article 3 (commencing with Section 8220), to participate in the pilot program. The department shall select alternative payment program childcare systems to participate that represent the broad geographic diversity of the state.

(3)Each alternative payment program childcare system selected by the department to participate in the pilot program shall allow licenced childcare providers serving at least a majority of children receiving subsidized childcare services pursuant to Article 3 (commencing with Section 8220) and Article 15.5 (commencing with Section 8350) to participate.

SEC. 6.

 This act shall become operative only if Senate Bill 174 of the 2019–20 Regular Session is enacted and becomes effective on or before January 1, 2020.