Senate panel reviews May revision childcare changes including one-year COLA suspension and bridge reallocation

The Senate Budget Subcommittee No. 3 on Health and Human Services on May 20 reviewed the administration’s May Revision proposals for early learning and child care funding, which include a one-year suspension of the 2025–26 cost-of-living adjustment, changes to the Emergency Child Care Bridge program for children in foster care, and funding for rate reform and automation to implement a single rate structure.

"The May revision includes $6,800,000,000 total funds in 2024–25 for child care," Jennifer Troia, director of the Department of Social Services (CDSS), told the committee. She described a package of changes included in the May Revision and introduced Department of Finance and CDSS staff to answer follow-up questions.

Why it matters: the May Revision is the administration’s plan to close an estimated $12 billion budget shortfall; its child care proposals would preserve current provider reimbursement rates while cutting identified budgeted COLA funding and reallocating other child care resources. The changes would affect subsidized child care payments and programs targeted to foster children and other prioritized groups statewide.

Key proposals and figures presented to the committee

- COLA suspension: The administration proposes to suspend the childcare COLA for 2025–26, producing $60,700,000 in ongoing General Fund savings. The suspension would mean the state does not add the COLA to baseline funding in 2025–26; because COLA increases normally become part of the baseline, the administration counted the savings as ongoing.

- Emergency Child Care Bridge program: The May Revision would reduce General Fund support for the Bridge program by $42,700,000 in 2025–26 and ongoing, while maintaining $51,000,000 in annual ongoing funding for the program. Krishan Malhotra of the Department of Finance said the reduction "maintains $51,000,000 in annual ongoing funding" and is intended to align appropriations with recent expenditure patterns.

- Prospective payments and rate reform implementation costs: CDSS staff said the May Revision includes $52,000,000 General Fund to prepare for federal requirements to begin making prospective payments to child care providers and $91,800,000 in total funds to support development of a single rate structure based on the alternative methodology approved by the Administration for Children and Families (ACF). CDSS explained $21,800,000 in one-time federal CCDF (Child Care and Development Fund) funds is proposed for automation and system upgrades to implement the single rate structure.

Administration timeline and assumptions

CDSS staff told the committee that automation changes for the single rate structure are likely to take at least two years to complete, including system updates, program guidance, staff training and bargaining with family childcare provider unions. CDSS said the one-time federal funds have a liquidation deadline of Sept. 30, 2028, and the department’s preliminary view is that it would spend the funds within a roughly two-year window, subject to federal rules and the actual pace of implementation.

Usage and underspending data underlying the Bridge proposal

CDSS staff described county reporting that informed the Bridge reduction: counties’ spending reports from the 2023–24 fiscal year showed partial use of allocated funds. CDSS told the committee that about 48 percent of non‑voucher Bridge spending (navigator services, trauma‑informed coaching and county administration) and about 47 percent of voucher spending were expended in 2023–24, leaving roughly $30,000,000 unspent on the voucher side and about $12,900,000 unspent on the non‑voucher side. CDSS said it used those point-in-time budget-to-spend patterns to inform the May Revision proposal and is working with counties and the County Welfare Directors Association (CWDA) on redistribution opportunities for remaining balances.

Legislative Analyst Office and Department of Finance concerns

Dylan Hox with the LAO briefed the committee that the May Revision includes roughly $189,000,000 in new childcare proposals and $103,400,000 in new solutions overall for child care. The LAO raised specific concerns about the proposed exemption from Department of Technology review for the $21,800,000 automation project and recommended the legislature reject that exemption and consider additional oversight, saying the department review process can help prevent project delays and cost growth.

Tamar Webber and other Department of Finance staff told the committee the administration views the proposals as part of broader steps to address structural budget imbalance and said the COLA suspension was scored as ongoing savings because once a COLA is added it becomes part of the baseline for future budgets.

Public comments from providers and advocates

Multiple family child care providers and advocates testified during the public comment period that suspending the COLA and reducing bridge funding would harm providers already operating at thin margins. Providers from Fresno, Palmdale, and elsewhere described current daily reimbursement levels and operating costs, asking the committee to preserve provider pay and the bridge supports that help children in foster care access care.

What the committee asked for

Committee members pressed CDSS and the Department of Finance for county‑by‑county breakdowns of the Bridge reallocation and asked for clarification about federal penalties if California fails to implement federal rules (for example, the transition to enrollment‑based payments). CDSS agreed to follow up with additional details and quarterly reports the department is required to submit to the legislature on implementation progress.

What the proposals do not do

CDSS said the May Revision proposal does not reduce current reimbursement rates for providers in 2025–26; it suspends the statutory COLA increase that would otherwise become part of the baseline. CDSS emphasized that the Bridge program’s intent is to provide interim care while families secure permanent placements and that expansions of permanent subsidized slots remain a pathway for eligible families.

Next steps

The committee asked for trailer bill language and more detailed fiscal and county-level data. LAO and Department of Finance said they would continue to review automation and prospective payment cost estimates. The committee will consider the May Revision proposals as part of the budget process and may request additional accounting of expected costs, timelines and federal compliance risks.

Ending note

Committee members and stakeholders who testified said they recognize the state’s fiscal constraints but urged lawmakers to weigh immediate impacts on children, providers and foster families against longer-term budget goals. CDSS, DOF and the LAO said they would provide follow-up materials, including county breakdowns and more detailed project scopes, to inform legislative decisions.