A substantial and increasing body of research has established the link between high quality early education programs and long-term positive child outcomes. [2] High quality child care significantly increases children’s cognitive development, improves later school attendance and performance, and reduces grade retention. [3] California has done more than any other state to require high standards of the child care centers it contracts with directly. [4] However, the state has not taken steps to measure the quality of child care provided through its voucher program or to tailor its reimbursement rates accordingly. By being inconsistent in its requirements and reimbursements for child care, state government is missing an opportunity to improve the school readiness of its most at-risk children.
- Licensed centers;
- Licensed family child care homes;
- Licensed centers that also meet Title 5 standards;
- Licensed family child care homes that also meet Title 5 standards; and
- License-exempt home-based providers.
The Title 22 child care licensing regulations issued by the California Department of Social Services (DSS) provide minimum health and safety standards for centers and family child care homes, but high quality child care requires far more than that. Licensed centers and family child care home networks that directly contract with CDE must also meet standards under CDE’s Title 5 regulations. These impose higher standards such as low child/adult ratios and increased education and training requirements for staff and managers. License-exempt providers do not have to meet any requirements except for criminal background checks and self-certification that they meet some health and safety standards.
A recent California study found that the centers (primarily those contracted with CDE) were generally of the highest quality, followed by licensed family child care, and finally licenseexempt care. [5] The exempt care setting raised serious concerns about a lack of oversight and the variability and instability of the environment. For instance, 69 percent of the license-exempt providers were no longer providing subsidized care after one year. [6] This difference in quality has a socioeconomic impact because higher income children are most likely to be placed in centers by their parents while the lowest income children are more likely to be placed in exempt care with relatives. [7]
Similarly, a study of low income families in three locations, including two California cities, found that participation in centers had a “strong, significant and positive effect . . . on almost all cognitive outcomes, relative to children who remained with [friends or relatives]". [8]
Despite these problems, license-exempt child care is here to stay. Half of California’s voucherfunded child care is license-exempt care, and fully 62 percent of CalWORKs families choose exempt care in the initial stages of CalWORKs. [9] Many parents choose these arrangements because of irregular work hours that do not fit the schedule of a center or licensed care providers. There may be a lack of licensed care in the area. And many parents prefer a relative, often for cultural reasons. So a key issue is how to encourage these providers to develop the skills and capabilities to provide higher quality care.
Licensing is not enough to create high quality child care. Research in California has shown that even among licensed providers there is a great deal of variation in quality. Centers were of relatively high quality, with two-thirds rated “good” or higher, while family child care homes fell within the barely adequate to mediocre range. [10]
California’s subsidized child care system does not create incentives for service providers to offer high quality child care. There is no extra reimbursement for those that provide high quality care. In fact, the system often has the opposite effect because license-exempt providers are automatically reimbursed at 90 percent of the maximum rate for family care homes, while many family care homes are reimbursed at rates less than that. In 21 counties, including Los Angeles, San Diego, most Bay Area counties, and Sacramento, Title 5 contracted center care for preschool age children is reimbursed at a lower rate (often substantially lower) than the regional market rate ceiling for licensed centers. [12] And in eight Bay Area counties, the current reimbursement rate for an exempt provider for a preschool child exceeds the rate for a Title 5 contracted center. [13] One contracting child development provider in the Bay Area quipped that California does indeed have tiered reimbursement rates—“they’re just upside down.” [14]
Low reimbursement rates for contracted child care centers meeting higher standards results in some not being able to stay in business, especially local education agencies and community colleges. When they are not adequately compensated for the costs to meet high standards and lose supplemental funding, they may be forced to close classrooms, cancel contracts, or reduce the number of children served. [15]
The Governor’s Budget for Fiscal Year 2004–2005, as amended by the May Revise, attempts to create a statewide reimbursement system that encourages high quality child care by reducing the reimbursement rates of lower quality care. It would establish a tiered reimbursement system for voucher child care, ranging from exempt care, exempt care with training, to accreditation/high quality. Reimbursement rates would be lowered for all child care providers except for the estimated fewer than 5 percent of providers that are accredited and those that are rated as high quality using “accepted environmental rating scales.” [18] The proposal also reduces reimbursement rates for license-exempt care to the 40th percentile of the regional market rate unless specified health and safety training and use of child development principles are demonstrated, in which case it would be reimbursed at the 50th percentile. [19]
The Early Childhood Environment Rating Scale (ECERS), which is now used by several states, has been linked by numerous research projects to program quality and child outcome measures. [22] Thirty-four states (including the District of Columbia) have embraced systemic reimbursement structures that reward improved quality as measured by outcomes and standards that the state supports. Twenty states use two levels of reimbursement, four use three, eight use four, and two use five. [23] Many use accreditation and/or ECERS to measure quality. [24] The California Department of Education uses ECERS in assessing its Title 5 child care centers but does not tie reimbursements to higher ratings.
- The Governor should work with the Legislature to change the reimbursement rate for exempt care to 50 percent of the appropriate family child care home regional market rate ceiling. When the budgetary situation permits it, savings should be used to help providers improve the quality of care they provide and increase reimbursement rates for higher quality care.
- The Governor should work with the Legislature to require health and safety training for exempt providers within the first three months of providing subsidized care. The reimbursement rate would be increased to 60 percent of the appropriate family child care home regional market rate ceiling for the first full month following training. Eliminate the current self-certification process, which costs the state $1.2 million to administer. [25]
- The Governor should work with the Legislature to increase levels of child care quality that licensed providers can reasonably attain over time. The standards should be based on research linking the standards to measured outcomes. This voluntary system should publicly recognize providers of high quality child care.
- The Governor should direct the Health and Human Services Agency, or its successor, to work with the Superintendent of Public Instruction to convene a task force with representatives from California Department of Education (CDE), California Department of Social Services (DSS), First 5 Commissions (state and county), the Legislature, the research community, the child care community (private and public sector), and the business community to develop the legislation and implementation plan, focusing first on child care for children ages 0–5.
This would reduce the incentives to stay unlicensed, and would more appropriately reimburse child care that has the lowest quality, oversight, and costs in the subsidized system.
This proposal would help ensure that license-exempt providers can adequately address the health and safety of the children in their care and would be a new requirement for license-exempt providers wishing to continue to provide subsidized child care.
When the budget permits, increased reimbursements should be tied to the higher quality levels. The system should ensure that centers which meet the higher standards required to contract with the California Department of Education (CDE) are reimbursed above the comparable market rate ceiling. The highest rating (and reimbursement) should apply to accredited providers and providers that meet the highest standards.
This recommendation enhances the Governor’s Budget proposal and follows in the footsteps of many states that have established tiered reimbursement systems that reward improved quality. The recognition, increased supports, and increased reimbursements will help child care providers meet higher standards. Higher quality will benefit children whose parents pay for child care themselves because some of these will be served by the same providers. Efforts should be coordinated with First 5 Commission programs that provide support and funding for providers to increase their quality of care.
(dollars in thousands)
| Fiscal Year | Savings | Costs | Net Savings (Costs) | Change in PYs |
|---|---|---|---|---|
| 2004–05 | $0 | $0 | $0 | 0 |
| 2005–06 | $42,572 | $1,555 | $41,017 | .5 |
| 2006–07 | $67,886 | $410 | $67,476 | 1 |
| 2007–08 | $67,886 | $67,886 | $0 | 1 |
| 2008–09 | $67,886 | $67,886 | $0 | 1 |
(dollars in thousands)
| Fiscal Year | Savings | Costs | Net Savings (Costs) | Change in PYs |
|---|---|---|---|---|
| 2004–05 | $0 | $0 | $0 | 0 |
| 2005–06 | $42,572 | $1,555 | $41,017 | .5 |
| 2006–07 | $67,886 | $410 | $67,476 | 1 |
| 2007–08 | $67,886 | $67,886 | $0 | 1 |
| 2008–09 | $67,886 | $67,886 | $0 | 1 |
[2] Rachel Schumacher, Kate Irish, and Joan Lombardi, “Meeting Great Expectations: Integrating Early Education Program Standards in Child Care,” August 2003, The Foundation for Child Development Working Paper Series, http://www.clasp.org/DMS/Documents/1061231790.62/meeting_rpt.pdf, pp. 3–5 (last visited June 8, 2004).
[3] Undated summary prepared by the Child Development Division, California Department of Education, titled “Research on the Effects of Quality Child Care on Young Children.”
[4] Rachel Schumacher, Kate Irish, and Joan Lombardi, “Meeting Great Expectations: Integrating Early Education Program Standards in Child Care,” The Foundation for Child Development Working Paper Series, Center for Law and Social Policy, August 2003, http://www.clasp.org/DMS/Documents/1061231790.62/meeting_rpt.pdf, pp. 13, 28. (last visited June 8, 2004).
[5] Marcy Whitebook, Ph.D., Deborah Phillips, Ph.D., Dan Bellm, Nancy Crowell, Mirella Almaraz and Joon Yong Jo, “Executive Summary: Two Years in Early Care and Education: A Community Portrait of Quality and Workforce Stability,” Alameda County, California, Center for the Study of Child Care Employment, Institute of Industrial Relations, University of California at Berkeley, Department of Psychology, Georgetown University, 2004, http://www.iir.berkeley.edu/cscce/pdf/twoyears_exec.pdf, p. 14 (last visited June 8, 2004).
[6] Marcy Whitebook, Ph.D., Deborah Phillips, Ph.D., Dan Bellm, Joon Yong Jo, Nancy Crowell, Mirella Almaraz, “Two Years in Early Care and Education, A Community Portrait of Quality and Workforce Stability,” Center for the Study of Child Care Employment, Institute of Industrial Relations, University of California at Berkeley, Department of Psychology, Georgetown University, 2004, http://www.iir.berkeley.edu/cscce/pdf/twoyears_final.pdf, p. 89 (last visited June 8, 2004).
[7] Jeffrey Capizzano and Gina Adams, “Children in Low-Income Families Are Less Likely to Be in Center-Based Child Care,” SNAPSHOTS 3 of America’s Families, No. 16, Urban Institute, November 2003, p. 1.
[8] Susanna Loeb, Bruce Fuller, Sharon Lynn Kagan, and Bidemi Carrol, “Child Care in Poor Communities: Early Learning Effects of Type, Quality, and Stability,” Child Development, January/February 2004, Volume 75, Number 1, pp. 55–56, 63.
[9] Based on CDD-801A Child Care Monthly Reports (July 2002–June 2003), Child Development Division, California Department of Education, dated November 19, 2003; CW 115 and CW 115A data (SFY 2001–2002), Research and Development Division, California Department of Social Services, dated August 26, 2003; and Legislative Analyst Office caseload estimates, FY 2004–05 Budget Analysis. CalWORKs is the California Work Opportunity and Responsibility to Kids program established by state law in August 1997 under the federal Personal Responsibility and Work Opportunities Reconciliation Act of 1996 (PRWORA), which replaced the Aid to Families with Dependent Children (AFDC) with the Temporary Assistance for Needy Families (TANF) program. “Welfare Reform in California, Early Results from the Impact Analysis, Executive Summary,” http://www.rand.org/publications/MR/MR1358.1/MR1358.1.pdf, p. 1 (last visited June 8, 2004).
[10] Marcy Whitebook, Ph.D., Deborah Phillips, Ph.D., Dan Bellm, Nancy Crowell, Mirella Almaraz and Joon Yong Jo, Executive Summary: Two Years in Early Care and Education: A Community Portrait of Quality and Workforce Stability, 2004, http://www.iir.berkeley.edu/cscce/pdf/twoyears_exec.pdf, pp. 10–11 (last visited June 8, 2004).
[11] The Results Group, Michael Wright, M.A., Ellen Moratti, M.P.P., Susan Bassein, Ph.D., Steven Moss, M.P.P., “Child Care Fiscal Policy Analysis,” A Report to the State of California State and Consumer Services Agency, May 22, 2001, p. 20. The annual regional market rate survey looks at rates for different types of care (centers and family child care homes), different time periods (hourly, weekly, monthly), and different age groups (infant-toddler, preschool, school-age). The regional market rate survey (RMR) is the average cost of care in each region of the state for different types of care. Under state law, a ceiling is established relative to the market rate, and providers are reimbursed at the rates they charge private pay clients up to the ceiling, except that license exempt providers are reimbursed at 90 percent of the family child care home ceiling. The current maximum reimbursement rate for voucher child care is the 85th percentile of the regional market rate, which means that the state provides fully subsidized access to approximately 85 percent of all child care in the region.
[12] “Comparison of 2003–04 RMR Full-time Center-based Monthly Preschool Ceilings to SRR as Monthly Amount,” Chart prepared by Cecelia Fisher-Dahms, consultant, Child Development Division, California Department of Education, March 10, 2004.
[13] “Comparison of 2003–04 RMR Full-time License-Exempt Monthly Preschool Ceilings to SRR as Monthly Amount,” Chart prepared by Cecelia Fisher-Dahms, consultant, Child Development Division, California Department of Education, March 10, 2004.
[14] Telephone interview with Paul Miller, executive director, Kidango, Fremont, California (May 8, 2004).
[15] E-mail from Lucy Berger, coordinator, Foster & Kinship Care Education/Child Development, Chancellor’s Office, California Community Colleges (May 27, 2004), and e-mail from Greg Hudson, education administrator, Child Development Division, California Department of Education (May 27, 2004).
[16] California Children & Families Commission website, http://www.ccfc.ca.gov/stateinfo.htm (last visited June 2, 2004) and Proposition 10 Statutes, Health & S.C. Section 130100. The State and County Children and Families Commissions were 322 Issues and Recommendations created by a 1998 statewide initiative to enhance early childhood development and ensure children are ready for school.
[17] Telephone interview with Karen Hill-Scott, Ed.D., president, Karen Hill-Scott & Company, Los Angeles, California (May 23, 2004). Ms. Hill-Scott is author of the Universal Preschool Master Plan for the Los Angeles First 5 Commission.
[18] Child Care at the Cross-Roads, An Analysis of the Governor’s FY 2004–2005 Budget Proposals, Child Development Policy Institute, Sacramento, California, March 2004, http://www.cdpi.net/crossroads.pdf, p. 31 (last visited June 10, 2004) and Governor’s Budget May Revision 2004–2005, “Child Care Reform Revisions,” p. 26, http://www.dof.ca.gov/html/BUD_DOCS/May_Revision_04_www.pdf (last visited June 10, 2004).
[19] In addition, providers who serve only subsidized children would receive reimbursement up to the 50th percentile unless they are accredited/high quality; then they would receive reimbursement up to the 75th percentile. All other licensed providers would receive reimbursement up to the 75th percentile unless they are accredited/high quality, in which case, reimbursement would be up to the current ceiling (85th percentile). Source: “Child Care at the Cross-Roads, An Analysis of the Governor’s FY 2004–2005 Budget Proposals,” http://www.cdpi.net/crossroads.pdf, p. 31 (last visited June 10, 2004).
[20] Wisconsin reimburses county-certified license-exempt providers at 50 percent of the licensed family child care home rate (or 75 percent with health and safety training), Florida at 50 percent, Ohio at 60 percent, Illinois at less than 50 percent, Minnesota at 80 percent (and only hourly) and Pennsylvania at 65 percent (or 75 percent if a background check is completed). E-mail from Laura Saterfield, director, Bureau of Workforce Solutions, Wisconsin Department of Workforce Development (May 5, 2004), and telephone interview (May 5, 2004). In addition, Wisconsin allows unregulated care for up to two weeks if the authorized provider is unable to provide care due to illness, vacation, etc. Florida Child Care and Development Fund Plan for FFY 2004–2005, Draft, http://www.schoolreadiness.org/files/ccdf-_final_version1.pdf (last visited June 8, 2004); Ohio Child Care and Development Fund Plan for 2004–2005, http://jfs.ohio.gov/ocf/fund_plan/fund_plan2004.pdf (last visited June 8, 2004); telephone interview with Terrie Hare, bureau chief, Bureau of Child Care Services, Ohio Department of Job and Family Services (April 19, 2004); telephone interview with Linda Saterfield, bureau chief, Office of Child Care and Family Services, Illinois Department of Human Services, Springfield, Illinois (April 21, 2004); telephone interview with Cherie Kotilinek, manager, Child Care Assistance, Minnesota Department of Human Services, St. Paul, Minnesota (April 12, 2004); telephone interview with Kathryn J. Holod, child care administrator, Pennsylvania Department of Public Welfare, Harrisburg, Pennsylvania (April 6, 2004).
[21] North Carolina Child Care and Development Fund Plan for FFY 2004–2005, http://149.168.194.28:8000/pdf_forms/2003_CCDF_final.pdf, p. 17 (last visited June 8, 2004).
[22] “Development of the ECERS-R,” FPG Child Development Institute, the University of North Carolina at Chapel Hill, http://www.fpg.unc.edu/~ecers/ (last visited June 8, 2004).
[23] National Child Care Information Center, “Tiered Strategies: Quality Rating, Reimbursement, Licensing,” November 2002, http://www.nccic.org/poptopics/tieredstrategiestable.html (last visited June 8, 2004).
[24] Tiered Reimbursement Systems: States with Systems to Pay Higher Reimbursement Rates to Programs that are Accredited and/or Meet Other Quality Standards, Updated April 2003, http://www.naeyc.org/childrens_champions/criticalissues/accred-reimburse/chart1.asp (last visited June 8, 2004).
[25] Self-Certification, Local Assistance Estimates—May Revise of the 2004–2005 Governor’s Budget, Estimate Methodologies, Fiscal Policy & Estimates Branch, California Department of Social Services, http://www.dss.cahwnet.gov/localassistanceest/may04/EstimateMethodologies.pdf, p. 128 (last visited June 8, 2004).