Legislature presses for 'true cost' child-care rate reform as July 1 federal deadline nears

A joint informational hearing of California Assembly budget subcommittees on human services and education held public testimony and a policy briefing focused on implementing an "alternative methodology" to set child‑care reimbursement rates by the federal and state deadline of July 1, 2025.

The hearing brought together legislators, the Legislative Analyst's Office, Department of Social Services staff, the Department of Finance, providers and union negotiators to review where the state stands in moving from market‑based rates to a cost‑estimation model that would set a single, statewide reimbursement structure. Officials and advocates said the policy aims to pay providers the true cost to deliver care, but they disagreed about whether the state has an adequate funding plan and whether collective bargaining has advanced enough to meet the deadline.

The Legislative Analyst's Office presented the current baseline: two existing rate systems (a fixed statewide standard reimbursement rate and a regional market rate set at a 2018 market survey percentile), temporary monthly cost‑of‑care‑plus payments and a multi‑step federal approval process. "The state currently has two rates," Dylan Hoxworth Lehi of the LAO said, noting the standard reimbursement rate is roughly $54.93 per child per day and that regional market rates were funded at the 70th percentile of the 2018 survey. He added that temporary per‑child monthly payments of roughly $140 to $211 are scheduled to expire June 30, 2025.

Panelists representing providers and county and nonprofit programs described daily operating conditions they said would not survive without higher rates and a clear funding timetable. "The health care fund became my lifeline," said Carmen Figueroa, an early educator who described using a union health fund for cancer treatment and urged continued funding of provider benefits. Max Arias, chief negotiator for Child Care Providers United (CCPU), said the union had submitted a comprehensive cost proposal to the state but ‘‘have received absolutely no response’’ in bargaining and warned the process had become stalled.

Department of Social Services officials briefed members on technical work completed and steps that remain. CDSS staff said they have developed a cost estimation tool, established definitions for base and enhanced rates, and obtained federal preapproval of the alternative methodology. CDSS also said some rate selection decisions for family child‑care homes remain subject to collective bargaining with CCPU, while selection choices for centers will be set by state agencies and presented for public comment.

CDSS leadership told the committee it intends to "meet the 07/01/2025 deadline." Director Troia, Department of Social Services, said the state has completed several required milestones, including federal preapproval received in November 2024, and is working on the remaining selection points that will determine final dollar levels. Tamar Webber and Lourdes Morales of the Department of Finance confirmed the administration is committed to meeting the July 1 rate‑setting deadline but said the governor's January budget did not include final funding for rates because negotiations and rate decisions are not complete.

Legislators and advocates pressed for greater transparency and a near‑term fiscal plan. Assemblymember Rob Bonta and other members of the Legislative Women's Caucus emphasized urgency and equity, calling the situation a long‑running injustice against a workforce that is predominantly women of color. Several members urged the administration to provide a transition schedule so providers do not face a sudden funding cliff when temporary protections expire. Public commenters — including nonprofit operators and large licensed home providers — echoed those requests and asked the Legislature to lock in a multi‑year funding path rather than year‑to‑year appropriations.

The hearing did not produce a vote or final action; it served as oversight and a public check on bargaining and administrative timelines. Committee chairs and members requested more frequent updates and said they will press for specific budget language in the May Revision and in trailer‑bill discussions to ensure interim protections or phased increases if final rate funding is not in place for July.

Looking ahead, CDSS and the administration said they will continue public engagement through the Rate and Quality Advisory Panel and quarterly legislative reports. Negotiators for family child‑care homes and the administration will continue collective bargaining, and the Department of Finance said any funding to implement rates informed by the alternative methodology will be negotiated with the Legislature and reflected in the May Revision or the Budget Act as agreed.

The hearing made clear that technical completion of a cost model does not, on its own, guarantee immediate payment changes — bargaining, selection points for rate elements and legislative‑budget decisions remain. Committee members signaled they will pursue a transition plan and potentially targeted budget solutions to stabilize providers while rate setting is finalized.