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Page 4 Children and Families -- TANF and Economic Support Programs (Paper #211) Reimbursement Rate Increase 12. Federal regulations recommend, and state statutes specify, that the maximum reimbursement rates should be set to the 75th percentile of the market rate. This means that maximum reimbursement rates would fully pay the price of at least 75 percent of the slots for children within the licensed capacity of all child care providers (the 75th percentile). Family copayments are subtracted from the maximum to calculate the subsidy amount paid to the provider. 13. Provisions of 2021 Act 58 provided funding for DCF to set maximum reimbursement rates to the 80th percentile in January, 2022. However. the next market rate survey in 2022 showed that the enhanced rates were equal to the 74th percentile of the market rate after price increases that year. 14. According to DCF, child care prices continued to rise in 2023, 2024, and 2025. The 2024 market rate survey indicated that the statewide maximum rates as of the fall of 2023 were at the 50th percentile. The most recent market rate survey conducted by DCF in March, 2025, indicates that the statewide the maximum rates in 2025 are at the 41st percentile. This means that the 2025 maximum reimbursement rates, before adjusting downward for copays, are sufficiently high enough to pay for the entire cost of 41% of the child care slots available in the statewide survey 15. SB 45/AB 50 would provide $32,917,000 FED annually to increase payment rates for direct child care subsidies under the Wisconsin Shares program [Alternative B1]. Increasing the maximum reimbursement rates to more closely match the cost of child care in the marketplace could support increased participation in Wisconsin Shares and assist working families maintain employment across the state. 16. In preparing estimates for SB 45/AB 50, DCF originally determined that this funding would fully pay the price of at least 75 percent of the slots for children within the licensed capacity of all child care providers. However, as discussed in Paper LFB Paper 210, because caseloads under current law are expected to increase compared to the original forecast, the cost of increasing reimbursement rates in Wisconsin Shares is relatively higher. It is now estimated that the funding increase in SB 45/AB 50 [Alternative C1] would increase rates to approximately the 63rd percentile of the prices measured under the 2025 market rate survey. 17. Because both prices for child care and caseloads in Wisconsin Shares are forecast to increase over time, the Committee could accept the proposed increase and also increase funding for 2026-27, for a total increase of $32,917,000 FED in 2026-26 and $61,600,000 in 2026-27 [Alternative B2]. As discussed, market rates rose sharply after the previous funding increase for reimbursement rates such that the maximum rates fell below the 75th percentile. The additional funding under this Alternative is estimated to be sufficient to set rates in 2026-27 to the 75th percentile of the 2025 market rate survey. 18. Alternatively, the Committee could choose to provide a different level of funding so that all maximum reimbursement rates exceed one of the following target percentiles as measured by the 2025 market rate survey: (a) $23,900,000 FED in 2025-26 and $24,900,000 in 2026-27 to raise rates to the 60th percentile; (b) $18,900,000 FED in 2025-26 and $19,600,000 FED in 2026-27 to raise rates