4.3 Adequate Payment Rates

The Lead Agency must set CCDF subsidy payment rates in accordance with the results of the current MRS or ACF pre-approved alternative methodology and at a level to ensure equal access for eligible families to child care services comparable with those provided to families not receiving CCDF assistance. Lead Agencies are also required to provide a summary of data and facts to demonstrate how payment rates ensure equal access, which means the Lead Agency must also consider the costs of base level care and higher quality care as part of its rate setting. Finally, the Lead Agency must re-evaluate its payment rates at least every 3 years. The ages and types of care listed in the base payment rate tables are meant to provide a snapshot of the categories of rates and are not intended to be comprehensive of all categories that might exist or to reflect the terms used by the Lead Agency for particular ages. If rates are not statewide, please provide all variations of payment rates when reporting base payment rates below. Base rates are the lowest, foundational rates before any differentials are added (e.g., for higher quality or other purposes) and must be sufficient to ensure that minimum health, safety, quality, and staffing requirements are covered. These are the rates that will be used to determine compliance with equal access requirements. 4.3.1 Payment rates a. Are the payment rates that the Lead Agency is reporting in 4.3.2 set statewide by the Lead Agency? ☐ X Yes. i. If yes, check if the Lead Agency: ☐ Sets the same payment rates for the entire State or Territory. Not applicable. ☐ X Sets different payment rates for different regions in the State or Territory. Statewide payment rates are determined in the annual budget act, as passed by the legislature and approved by the Governor. State law permits the City and County of San Francisco and the County of San Mateo to develop and implement individualized county childcare subsidy plans to address local needs, conditions, and priorities of working families in the community. ☐ No. ii. If no, identify how many jurisdictions set their own payment rates: Not applicable b. Provide the date the current payment rates became effective (i.e., date of last payment rate update based on most recent MRS or ACF pre-approved alternative methodology as reported in 4.2.1). January 1, 2022. c. If the Lead Agency does not publish weekly rates, then how were the rates reported in 4.3.2 or 4.3.3 calculated (e.g., were daily rates multiplied by 5 or monthly rates divided by 4.3)? The Lead Agency publishes weekly rates. 4.3.2 Base payment rates a. Provide the base payment rates in the tables below. If the Lead Agency completed a market rate survey (MRS), provide the percentiles based on the most recent MRS for the identified categories. If the Lead Agency sets different payment rates for different regions in the State or Territory (and checked 4.3.1aii), provide the rates for the most populous region as well as the region with payment rates set at the lowest percentile. Percentiles are not required if the Lead Agency also conducted an ACF pre-approved alternative methodology but must be reported if the Lead Agency conducted an MRS only. The preamble to the 2016 final rule states that a benchmark for adequate payment rates is the 75th percentile of the most recent MRS. The 75th percentile benchmark applies to the base rates. The 75th percentile is the number separating the lowest 75 percent of rates from the highest 25 percent. Setting rates at the 75th percentile, while not a requirement, would ensure that eligible families can afford three out of four child care providers. In addition to reporting the 75th percentile in the tables below, the Lead Agency must also report the 50th percentile and 60th percentile for each identified category. If the Lead Agency conducted an ACF pre-approved alternative methodology, provide the estimated cost of care for the identified categories, as well as the percentage of the cost of care covered by the established payment rate. If the Lead Agency sets different payment rates for different regions in the State or Territory (and checked 4.3.1aii), provide the estimated cost of care and the percentage of the cost of care covered by the established payment rate for the most populous region as well as the region with rates established at the lowest percent of the cost of care. For each identified category below, provide the percentage of providers who are receiving the base rate without any add-ons or differential payments. Provide the full-time weekly base payment rates in the table below. If weekly payment rates are not published, then the Lead Agency will need to calculate its equivalent. i. Table 1. Complete if rates are set statewide. If rates are not set statewide, provide rates for the most populous region. Percentiles are not required if the Lead Agency also conducted an ACF pre-approved methodology but must be reported if the Lead Agency conducted an MRS only. Care Type Base payment rate (specify unit, e.g., per day, per week, per month) % of providers receiving Base rate Full-Time Weekly Base Payment Rate What is the percentile of the rate? (MRS) What is the 50th percentile of the rate? (MRS) What is the 60th percentile of the rate? (MRS) What is the 75th percentile of the rate? (MRS) What is the estimate d cost of care? (Alterna tive Method ology) What percent of the estimated cost of care is the rate? Center Care for Infants (6 months) $456.19 weekly 24% $456.19 weekly 75th $398.98 weekly $421.86 weekly $456.19 weekly n/a n/a Family Child Care for Infants (6 months) $319.69 weekly 23% $319.69 weekly 75th $249.54 weekly $277.60 weekly $319.69 weekly n/a n/a Center Care for Toddlers (18 months) $456.19 weekly 25% $456.19 weekly 75th $398.98 weekly $421.86 weekly $456.19 weekly n/a n/a Family Child Care for Toddlers (18 months) $319.69 weekly 24% $319.69 weekly 75th $249.54 weekly $277.60 weekly $319.69 weekly n/a n/a Center Care for Preschoolers (4 years) $370.29 weekly 24% $370.29 weekly 75th $288.08 weekly $320.96 weekly $370.29 weekly n/a n/a Family Child Care for Preschoolers (4 years) $287.28 weekly 24% $287.28 weekly 75th $220.93 weekly $247.47 weekly $287.28 weekly n/a n/a Center Care for School- Age (6 years) $274.55 weekly 23% $274.55 weekly 75th $225.11 weekly $244.89 weekly $274.55 weekly n/a n/a Family Child Care for School- Age(6 years) $215.56 weekly 26% $215.56 weekly 75th $176.17 weekly $191.92 weekly $215.56 weekly n/a n/a ii. Table 2: Do not complete if rates are set statewide. If rates are not set statewide, provide the rate for the region with payment rates set at the lowest percentile. Percentiles are not required if the Lead Agency also conducted an ACF pre-approved alternative methodology but must be reported if the Lead Agency conducted an MRS only. Care Type Base payment rate (specify unit, e.g., per day, per week, per month) % of providers receiving Base rate Full-Time Weekly Base Payment Rate What is the percentil e of the rate? (MRS) What is the 50th percentile of the rate? (MRS) What is the 60th percentile of the rate? (MRS) What is the 75th percentile of the rate? (MRS) What is the estimated cost ofcare? (Alternative Methodolog y) What percent of the estimated costofcare is the rate? Center Care for Infants (6 months) $324.63 weekly 0.1% $324.63 weekly 75th $272.49 weekly $275.52 Weekly $324.63 weekly n/a n/a Family Child Care for Infants (6 months) $248.83 weekly 0.3% $248.83 weekly 75th $202.26 weekly $220.89 Weekly $248.83 weekly n/a n/a Center Care for Toddlers (18 months) $324.63 weekly 0.1% $324.63 weekly 75th $272.49 weekly $275.52 Weekly $324.63 weekly n/a n/a Family Child Care for Toddlers (18 months) $248.83 weekly 0.4% $248.83 weekly 75th $202.26 weekly $220.89 Weekly $248.83 weekly n/a n/a Center Care for Preschoolers (4 years) $240.69 weekly 0.1% $240.69 weekly 75th $189.50 weekly $209.98 weekly $240.69 weekly n/a n/a Family Child Care for Preschoolers (4 years) $223.12 weekly 0.4% $223.12 weekly 75th $184.14 weekly $199.75 weekly $223.12 weekly n/a n/a Center Care for School- Age (6 years) $209.00 weekly 0.2% $209.00 weekly 75th $175.74 weekly $189.04 weekly $209.00 weekly n/a n/a Family Child Care for School- Age(6 years) $180.77 weekly 0.4% $180.77 weekly 75th $157.55 weekly $166.84 weekly $180.77 weekly n/a n/a b. Does the Lead Agency certify that the percentiles reported in the table above are calculated based on their most recent MRS or ACF pre-approved Alternative Methodology? ☐ Yes. ☐ X No. If no, what is the year of the MRS or ACF pre-approved alternative methodology that the Lead Agency used? What was the reason for not using the most recent MRS or ACF pre-approved alternative methodology? Describe: Current base payment rates, prior to more recent rate add-ons above the base payment rate (see section 4.3.3.a), were established pursuant to negotiated agreement between the State and the Child Care Providers United union (CCPU) for represented home-based providers and through parity legislation in the form of Assembly Bill (AB) 131 (Chapter 116 of the Statutes of 2021), which was signed into law on July 23, 2021. At that time, the most recent MRS had been completed in 2018. The percentiles reported in the table are therefore based on the MRS completed in 2018. The most recent MRS was completed in 2022 based on 2021 data. The successor Agreement negotiated between the State and CCPU in 2023 established the one-time transitional and monthly “cost of care plus” rate add-ons described below in section 4.3.3.a, and a structured timeline for transitioning to a cost-based Alternative Methodology, rather than changing the base payment rates. The Administration for Children and Families (ACF) pre-approved California moving to an Alternative Methodology in August 2023. California collected data pursuant to this pre-approval in 2023 and is in the process of completing the Alternative Methodology, based on the collected data. California will set new base rates based on the Alternative Methodology by July 1, 2025. Once the new base rates are finalized, the State Plan will be amended to update this response. 4.3.3 Tiered rates, differential rates, and add-ons Lead Agencies may establish tiered rates, differential rates, or add-ons on top of their base rates as a way to increase payment rates for targeted needs (e.g., a higher rate for serving children with special needs). a. Does the Lead Agency provide any rate add-ons above the base rate? ☐ X Yes. If yes, describe the add-ons, including what they are, who is eligible to receive the add-ons, and how often are they paid: Through July 1, 2025, all providers who participate in state funded child care and development programs are eligible to receive add-ons on top of their base rates. The add-ons were negotiated pursuant to an Agreement between the State and Child Care Providers United (CCPU), and to Senate Bill (SB) 140, which ratified the Agreement and added parity provisions for center-based providers, which are not represented by CCPU. The Agreement and SB 140 allocated funds to provide family childcare providers, which include both licensed and license- exempt (so-called “family, friend, and neighbor”) home-based providers, and childcare centers with a cost of care plus rate and a flat-rate, one-time payment intended to supplement the subsidized childcare and development and state preschool program reimbursement rates. The one-time payment was due no later than November 30, 2023, to all family child care providers who were reimbursed for subsidized childcare and development or state preschool program services in the month of April 2023. The payment amounts were based on provider type: five hundred dollars ($500) per each license-exempt family childcare provider; two thousand five hundred dollars ($2,500) per each family childcare provider licensed to operate a small, licensed family daycare home, as defined in subdivision (c) of Section 1596.78 of the Health and Safety Code; and three thousand dollars ($3,000) per each family childcare provider licensed to operate a large, licensed family daycare home, as defined in subdivision (b) of Section 1596.78 of the Health and Safety Code and for each center. While centers, like large, licensed family child care home, received a one-time payment of three thousand dollars ($3,000) it was due to them in the 2023-24 state fiscal year(by June 30, 2024), rather than by November 30, 2023. The amount per child ranges between ninety-eight dollars ($98) and two-hundred and eleven dollars ($211) per month, determined based on the provider type and the region in which the provider is located. The Agreement between the State and CCPU, and SB 140, defined the regions as follows: Central Region to include the Counties of Fresno, Inyo, Kern, Kings, Madera, Mariposa, Merced, Monterey, Sacramento, San Benito, San Joaquin, San Luis Obispo, Stanislaus, and Tulare. The Northern Region includes the Counties of Alpine, Amador, Butte, Calaveras, Colusa, Del Norte, El Dorado, Glenn, Humboldt, Lake, Lassen, Mendocino, Modoc, Mono, Nevada, Placer, Plumas, Shasta, Sierra, Siskiyou, Sutter, Tehama, Trinity, Tuolumne, Yolo, and Yuba. The Southern Region includes the Counties of Imperial, Orange, Riverside, San Bernardino, San Diego, Santa Barbara, and Ventura. The Los Angeles Region includes the County of Los Angeles only. The Bay Area Region includes the Counties of Alameda, Contra Costa, Marin, Napa, San Francisco, San Mateo, Santa Clara, Santa Cruz, Solano, and Sonoma. Providers in the Central region receive ninety-eight dollars ($98) per each license-exempt family childcare provider, and one hundred forty dollars ($140) per each licensed family childcare provider or center. Providers in the Northern region, ninety-nine dollars ($99) per each license-exempt family childcare provider, and one hundred forty-one dollars ($141) per each licensed family childcare provider or center. For providers in the Southern region, one hundred twelve dollars ($112) per each license-exempt family childcare provider, and one hundred sixty dollars ($160) per each licensed family childcare provider or center. For providers in the Los Angeles region, one hundred nineteen dollars ($119) per each license- exempt family childcare provider, and one hundred seventy-one dollars ($171) per each licensed family childcare provider or center. For family childcare providers in the Bay Area region, monthly per-child rate supplements shall be made in the amount of one hundred forty- eight dollars ($148) per each license-exempt family childcare provider, and two hundred eleven dollars ($211) per each licensed family childcare provider or center. All providers receive monthly cost of care plus rates for a period of 18 months, but for administrative reasons some begin to receive the 18 months of payments on a schedule that begins a few months later than other providers. Family child care providers except for those participating in Emergency Child Care Bridge or CalWORKs Stage One programs administered by Counties, themselves, received monthly cost of care plus rates, commencing January 1, 2024, and through June 30, 2025, inclusive. All providers, whether family child care providers or centers, participating in Emergency Child Care Bridge or CalWORKs Stage One programs administered by Counties, themselves rather than through contractors, and all centers participating in any of the State’s child care and development programs, began to receive monthly cost of care plus rates beginning in April 2024. ☐ No. b. Has the Lead Agency chosen to implement tiered reimbursement or differential rates? ☐ X Yes. ☐ No. Tiered or differential rates are not implemented. If yes, identify below any tiered or differential rates, and, at a minimum, indicate the process and basis used for determining the tiered rates, including if the rates were based on the MRS or an ACF pre-approved alternative methodology. Check and describe all that apply: i. ☐ X Differential rate for non-traditional hours. Describe: California Code of Regulations, Title 5, (5CCR) Section 18075.1. Adjustment for Evenings and/or Weekends for Licensed Providers: When a licensed provider is meeting the certified need for child care that includes hours during the period from 6:00 p.m. to 6:00 a.m. on any day of the week or from 6 a.m. Saturday to 6:00 a.m. Monday, the contractor shall multiply the regional market rate ceiling for the applicable rate category by the appropriate adjustment factor as follows: By 1.25 when 50 percent or more of the certified need for child care occurs during this period. By 1.125 when at least ten percent, but less than 50 percent of the certified need for child care occurs during this period. ii. ☐ X Differential rate for children with special needs, as defined by the Lead Agency. Describe: For programs reimbursed at the Standard Reimbursement Rate (SRR), children with exceptional needs are provided an SRR-related adjustment factor of 1.54 and severely disabled children are reimbursed by the adjustment factor of 1.93. For voucher-based programs reimbursed at the Regional Market Rate, 5 CCR Section 10875.2. stipulates: When child care and development services are provided to a child with exceptional needs, the contractor shall multiply the lesser of the regional market rate ceiling or the rate determined pursuant to Section 18074.3 or 18074.4, whichever is lower, by only one of the following: By 1.2, when the child has exceptional needs as defined in Welfare and Institutions Code Section 10213.5(l). Or by 1.5, when the child is severely disabled as defined in Welfare and Institutions Code Section 10213.5(y). Contractors shall apply this adjustment only when there is documentation that additional services and/or accommodations for that particular child are being provided, and such services and/or accommodations result in an on-going financial impact on the provider. iii. ☐ X Differential rate for infants and toddlers. Note: Do not check if the Lead Agency has a different base rate for infants/toddlers with no separate bonus or add-on. Describe: For programs reimbursed at the SRR, infants 0 to 18 months of age receive an SRR-related adjustment factor of 2.44 and toddlers 18 to 36 months of age receive an adjustment factor of 1.8. iv. ☐ Differential rate for school-age programs. Note: Do not check if the Lead Agency has a different base rate for school-age children with no separate bonus or add-on. Describe: Not applicable. v. ☐ Differential rate for higher quality, as defined by the Lead Agency. Describe: Not applicable. vi. ☐ X Other differential rates or tiered rates. For example, differential rates for geographic area or for type of provider. Describe: All programs receive differential rates based on geographic area as of January 1, 2022. Starting January 1, 2022, programs reimbursed at the SRR are required to receive the greater of the 75th percentile of the 2018 regional market rate survey or the contract per-child reimbursement amount as of December 31, 2021. Further, as noted in the response to 4.3.3a., base rate add-ons are adjusted by geographic region to account for differences in the cost of living. Additionally, for programs reimbursed at the SRR, children at risk of neglect, abuse, or exploitation 0 to 13 years of age receive an adjustment factor of 1.1; limited and non-English- speaking children 2 years to Kindergarten receive an adjustment factor of 1.1; provision of Early Mental Health Consultation Services (MHCS) justifies an adjustment factor of 1.1 that applies to all children in the classroom or home. A contractor may only claim one adjustment factor; however, MHCS can be added to an existing factor. vii. If applicable, describe any additional add-on rates that you have besides those identified above. Not applicable. c. Does the Lead Agency reduce provider payments if the price the provider charges to private- pay families not participating in CCDF is below the Lead Agency’s established payment rate? X Yes. If yes, describe: Per WIC 10228, no agency may make payments in excess of the rate charged to full-cost families. ☐ No. 4.3.4 Establishing payment rates Describe how the Lead Agency established payment rates: a. What was the Lead Agency’s methodology or process for setting the rates or how did the Lead Agency use their data to set rates? Current base rates were established in pursuant to a negotiated agreement between the State and the CCPU for represented home-based providers and through parity legislation in the form of Assembly Bill (AB) 131 (Chapter 116 of the Statutes of 2021), which was signed into law on July 23, 2021. Effective January 1, 2022, the new Regional Market Rate ceilings for licensed providers were established at the 75th percentile of the 2018 Regional Market Rate survey (which was the most recent market rate survey conducted at the time of the agreement) or the Regional Market Rate ceilings as they existed on December 31, 2021, whichever is greater. Also commencing January 1, 2022, reimbursement to licensed-exempt care was set to 70% of the commensurate Family Child Care Home Rate. In addition to the rate increases, the 2021 agreement and AB 131 allocated $289 million over two years to supplement provider rates in the form of monthly rate adjustments or lump sum bonuses on a short term basis to help alleviate the negative effects of the pandemic on the child care workforce. In 2023, a successor agreement between the State and CCPU, and related legislation, SB 140, provided for movement to an ACF pre-approved alternative methodology, and $1.4 billion to support the child care workforce pending transition to rates based on the ACF pre-approved alternative methodology. (Reference: 'Other Child Care Supports, SB 140; 2024 May Revision). This $1.4 billion in support included add-ons above the base rate, which began in FY 23-24, and are detailed in the response to 4.3.3.a. In FY 24-25, the State will reopen negotiations with CCPU to set rates informed by the pre-approved alternative methodology cost study. Rate setting will occur for unrepresented providers through the budget process, concurrent with and informed by rate negotiations for home-based providers. The CDSS is in the process of conducting the ACF pre-approved alternative methodology and will submit an amendment to the State Plan once completed. b. How did the Lead Agency determine that the rates are adequate to meet health, safety, quality, and staffing requirements under CCDF? The last Market Rate Survey (MRS) was conducted 2021. The study surveyed mixed-delivery providers across the State to collect rates. New rates to be set next fiscal year using alternative methodology will be informed by 2023 data collection and driven by a cost model that accounts for what it takes for providers to meet all health and safety requirements and mandated staffing ratios. Currently, California is in the process of conducting the ACF pre-approved alternative methodology. Upon completion, the State will submit an amendment to the State Plan to update this section. c. How did the Lead Agency use the cost of care, either from the narrow cost analysis or the ACF pre-approved alternative methodology to inform rate setting, including how using the cost of care promotes the stabilization of child care providers? Although California is currently utilizing the MRS conducted in 2018, the State is in the process of conducting the ACF pre-approved alternative methodology. Rate setting to occur in FY 24-25 will be informed by the outputs of the cost model developed for California using the alternative methodology process, which was informed by extensive data collection on the cost to provide care across all provider and program types and regions of the state. Upon completion, the lead agency will submit an amendment to the State Plan to update this section. d. How did the Lead Agency account for the cost of higher quality while setting payment rates? California is currently utilizing the MRS conducted in 2018 the State is in the process of conducting the ACF pre-approved alternative methodology. It is anticipated that the new rate structure informed by alternative methodology will include: (i) differential rates for Title 22 and Title 5 programs to reflect that Title 5 has additional program standards, and (ii) enhanced rates to account for costs associated with program components that contribute to higher quality care. Upon completion of the alternative methodology process, the lead agency will submit an update to this portion of the State Plan. e. Identify and describe any additional facts (not covered in responses to 4.3.1 – 4.3.3) that the Lead Agency considered in determining its payment rates to ensure equal access. In response to August 2023 guidance from the Office of Child Care (OCC) regarding Flexibilities on Alternative Methodology Timing, CDSS engaged in an analysis of inflation rates for California. The period of this inflation analysis was set to start with the date that the last subsidy payment rate increase was effective: January 1, 2022. These rate increases were established with the 2021 Child Care Development Fund (CCDF) plan submission. California’s current base rates were established utilizing the MRS conducted in 2018, but as described above, additional monthly add-on payments are also being made to providers to ensure equal access. In order to address the requirement in the August 2023 OCC Flexibilities letter, CDSS engaged in an analysis of inflation rates for the state. The period of this inflation analysis was set to start with the date that the last subsidy payment rate increase was effective: January 1, 2022. These rate increases were established with the 2021 CCDF plan submission. Statewide annual inflation in California for the period January 1, 2022 - December 31, 2023, is 11%. In the same period of time, the amounts paid to child care providers when considering the base payment rate and add-on payments, has sought to address the inflation providers experience. While the base payment rates were not increased, the following two additional payments were made to providers: the Cost of Care Plus Rate (per child, per month payments beginning January 2024 and slated to sunset June 30, 2025, absent further action by the Legislature) and the Transitional Payment (one time payments, per provider, issued in November 2023). These add-on payments for FY 2023-2024 and 2024-2025 were made pursuant to Article 7.2 of the labor agreement between the State and CCPU and parity payments to non-represented providers. No payments funded through the American Rescue Plan Act were included. Below is an analysis of these additional payment amounts, to understand the percentage increase these additional payments were, on top of the base subsidy payment rates. The percentages reflected are by provider type, and age of child, reflecting the statewide average increase these payments were on top of the base payment rate. Family Child Care providers: Birth to 24 Months: 18% 2 through 5 Years: 19% School Age: 23% Family, Friend and Neighbor providers: Birth to 24 Months: 17% 2 through 5 Years: 19% School Age: 22% Center based providers: Birth to 24 Months: 11% 2 through 5 Years: 15% School Age: 19% The analysis found that State-funded payments made to providers (i.e., the base rate plus the cost of care plus rate plus one-time transitional payments) met or exceeded the statewide inflation for this period. The State is in the process of conducting the ACF pre-approved alternative methodology and upon completion, the lead agency will submit an amendment to the State Plan to update this section.