2024-25 Budget Summaries from The Legislative Analyst's Office (LAO)

Response to the Budget Act of 2024

SAN FRANCISCO, CA (July 03, 2024) - Last week, Governor Newsom signed the Budget Act of 2024, which went into effect July 1. The final budget addresses a shortfall of over $45 billion. The Governor and the Legislature arrived at a final agreement that acknowledges the importance of a stable child care system, but delays implementation deadlines beyond Newsom’s term.

Child Care Wins:

  • Slot Expansion: Intent to fulfill the 200,000 child care slot expansion but shifts responsibility to fulfill slots onto the next governor. We appreciate the commitment to increase access to quality, affordable child care and will continue advocating for the fulfillment of all slots by 2028.
  • Alternative Methodology: Requires Department of Social Services to report its rate reform implementation progress through January 2026, and creates a hold harmless policy to maintain 2024-25 child care and preschool rates through the current rate expiration date on July 1, 2025. However, more legislative accountability is needed to ensure completion before the next administration takes office.
  • General Child Care and Development Spaces (CCTR): Restores funding for the 11,038 slots awarded in Spring 2024. These slots fulfill prior commitments that were rescinded in the May Revision and that many providers already invested in.
  • Emergency Child Care Bridge Program: Total General Fund levels will remain at $83.4 million ongoing, removing barriers to families who cannot foster children due to a lack of child care access or affordability.

Missed Opportunity:

  • Child Care Reversion Account: The Budget did not include a child care reversion account to hold and maintain unspent early childhood and education (ECE) dollars for ECE purposes.

As we look to the future, we remain cautious of our wins. The Legislative Analyst’s Office estimates an ongoing $10 billion annual deficit through FY2028, which may trigger future cuts to child care funding. The R&R Network therefore urges policymakers to explore alternative budget solutions. Tax reform is a potential opportunity to protect and strengthen safety net programs which are lifelines for families struggling under rising inequality and costs of living. We will explore this together with other advocates in the coming year.

“We are relieved that the final budget avoided catastrophic cuts to children and family supports. The lack of childcare or destruction of this infrastructure costs all of us. Child care is an economic issue that makes our state and economy competitive and families strong. Child care funding needs to be growing, and not just maintained at current levels,” said California Child Care Resource and Referral Network Executive Director, Linda Asato.

We will continue to advocate alongside our members and coalition partners to ensure that the state keeps its promises to families and providers.

Budget Act of 2024

The Senate, Assembly, and Governor have arrived at a three-party Budget agreement which includes 19 budget-related bills. The Budget Act has been signed and is effective as of July 1.

The signed budget agreement includes:

  • A commitment to fund 200,000 child care spaces by 2028. ✅
  • Restored funding for 11,000 CCTR spaces in the FY24-25 budget. ✅
  • An alternative rate methodology that reflects the true costs of care, a timeline for its adoption, and a hold harmless policy. ✅

Read more about it here.

Click here to view the evolution of the 2024 State Budget.

Letter to CA's Democratic Congressional Delegation

On May 31, the Network sent a letter to the California Democratic delegation asking if they could pressure Governor Newsom to reconsider, and ultimately reject the harmful cuts proposed in the May Revision.

With state budget negotiations in full swing, pressure from the CA Democratic Congressional delegation may help protect child care funding.

Read our letter here.

Assembly & Senate Joint Budget Plan

(released 5/29)

Since the release of the May Revision, the Assembly and Senate have worked hard to craft a joint budget plan which must pass by Saturday, June 15, 2024. The Budget Plan was released on May 29, with budget hearings in both houses on May 30. The Budget Plan restores funding to a number of vital safety net programs.

Read more about it here.

Response to the Governor's May Revision

SAN FRANCISCO, CA (May 10, 2024) - Earlier today, Governor Gavin Newsom released a revised 2024-25 budget (aka “May Revision” or “May Revise”), proposing additional cuts as lower than expected tax collections worsen the projected revenue shortfall. The exact amount of the shortfall is still unclear: according to the Governor, the shortfall is $27.6B; the LAO will release its own estimate next week, which is expected to be higher than the Governor’s.

At present, the Governor’s position is that current levels of core services would remain stable overall. However, he proposes to freeze child care slots at the current level of 119,000. The plans for the remaining 81,000 slots are unclear, but reaching the promised 200,000 is not currently part of the Governor’s planning for the next two fiscal years. Furthermore, approximately $35 million will be cut from the Foster Care Bridge Program, which addresses a common barrier for families accepting children in foster care, the lack of affordable child care.

He also emphasized that California remains strong and resilient, pointing to an increasing population, record high tourism, and its status as the 5th largest economy in the world.

There is no question that adjustments are needed to achieve a balanced budget. However, child care access and affordability are foundations of a strong economy. Child care is essential for Californians to work, and already inaccessible or unaffordable to so many families in the state. Even the promised 200,000 slots responded to a fraction of the actual need.

The Governor remains firmly opposed to revenue solutions, promising “no new taxes” and rather, that the state become “more efficient and more effective.” We disagree with the resistance to revenue solutions, as budget shortfalls are expected over multiple fiscal years. Alongside advocates and researchers focused on equity and shared prosperity for all, we urge him to reconsider this position. Cuts that impact workforce participation further destabilize California households, which are already struggling to afford basic expenses such as child care.

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In response to proposed cuts to the Emergency Child Care Bridge Program for Foster Children ("Bridge Program"), the Network signed a response letter urging legislators to reject this harmful cut.

Click to View the Bridge Response Letter

More resources:

Governor's May Revision (aka "May Revise")

On May 10, Governor Gavin Newsom released an updated budget proposal known as the “May Revision” or “May Revise”. It includes up-to-date revenue figures from income, corporate, and sales taxes as well as early action items aimed at reducing the estimated $27.6 billion deficit (which the LAO estimates at $56 billion).

Read more about it here.

April 2024 California State Budget Updates

Click Here to Listen to Our State Budget Update

Summary: The Governor and Legislature have introduced a “budget bill jr.” in an attempt to reduce the growing budget deficit (forecasted as high as $73B) before the May Revise (due 5/14). The $17.3B package focuses on “easier” to cut programs, and includes $550M in cuts to a facilities grant program for PS, TK, and FDK. Our advocacy efforts focus on preserving key family supports and instead encouraging revenue solutions like an ultra wealthy tax.

Deficit Forecasts:

  • LAO: $73B (originally estimated at $58B; expanded to $73B on Feb 20, 2024)
  • Governor: $38B (Jan 10)

Revenue Estimates:

  • FYTD shortfall in PIT receipts at $4.1 billion (PIT March withholding $217M above projections), CIT FYTD $1.1B shortfall, SUT FYTD $347M shortfall (March DoF Bulletin; awaiting April Bulletin)
  • Governor rejects revenue solutions, including Lee’s AB 259 to tax the ultra wealthy, but advocates are pressing for revenue solutions over cuts to programs like CalWORKs (R&R Network is participating with Parent Voices and others).

Early Action: $17.3 billion package (details released 4/4/24; sent to Senate floor on 4/10; AB/SB 106 “budget bill jr.”)

  • Why do early action? “Easier choices” in early action; tougher cuts in May; ease public perceptions of deficit before it grows larger
  • What’s impacted? Expanded MCO tax ($4B); delay transit infrastructure ($1B) and preschool ($550M); shift cap-and-trade revenue ($1.8B) to backfill other programs; reduce state departments’ funding ($760M+); state employee pay deferral ($1.6B).

What’s next? Legislature to vote on $17B early action deal; awaiting May Revise; continuing advocacy efforts to press Newsom and the Legislature to preserve funding for family supports.

Resources:

Response to the Governor's January Budget Proposal

SAN FRANCISCO, CA (January 17, 2024) – Last Wednesday, Governor Gavin Newsom released a proposed 2024-25 state budget. In contrast to the Legislative Analyst’s Office’s (LAO’s) earlier projection of a $68 billion shortfall, the Governor estimated the deficit at approximately $38 billion. The delta is best explained by differences in opinion and optimism regarding future revenues, with the LAO offering a more cautious prediction.

We appreciate that the Governor’s budget does not cut subsidized child care slots and makes an effort to move toward the 200k additional slots by FY 25-26, as promised three years ago in FY 21-22. The Governor has reaffirmed his commitment to implementing the changes that were made last year to shore up the child care supply, including maintaining the rate adjustments to subsidized care as cost of care payment rates are developed and sustaining the health care and retirement benefit funds for home-based child care providers.

In what will certainly be a challenging state budget year with significant revenue shortfalls, it was encouraging that our child care support system did not suffer aggressive state cuts. However, we have lost crucial federal child care relief funding at a time when families and providers are struggling to make ends meet. We risk dire implications for families.

According to the California Budget & Policy Center, income inequality worsened dramatically during the COVID-19 pandemic. “The top 1% had 78 times the income of middle-income Californians, on average, in 2021, up from 49 times the income just two years earlier.” The Governor’s Budget Summary acknowledges rising inequality and other risks to the state’s economy, including an aging population, lower fertility rates, and high housing and living costs. Coupled with the loss of federal funding, we can expect more California families will need support in the coming year. “Merely maintaining the status quo of public expenditures on safety net programs is not enough. Raising a family in California has become less and less affordable. Current funding levels can’t counteract rapidly rising inequality and poverty levels,” said Linda Asato, Executive Director of the California Child Care Resource and Referral Network.

Therefore, while the fiscal situation will require making difficult choices to achieve a balanced budget, child care remains essential for Californians to earn income to support their families and participate in society and the economy.

We will continue to dialogue with our state leaders as the budget season progresses, to lift the voices of those that aren’t often heard, but who are affected by decisions made.

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Our policy team takes positions on legislation and budget decisions that impact children, families, and the child care system. We work collaboratively to inform policymakers of the impact of legislative and budget decisions on working families. Often, we will provide testimony and send letters of support or opposition.

Click to Download the Network's 2024 Policy Agenda

Budget Resources