California State Budget

Reducing Overall Child Care Funding

• Reduces funding for CDSS child care programs by approximately $61.2 million ongoing.

Abandoning Prospective Pay

• In response to a federal ruling on “Restoring Flexibility in the Child Care and Development Fund" the May Revision proposes to remove funding that would support administrative changes to pay providers prospectively. This includes:
  • Elimination of $43.8 million for local agency prospective pay start-up in 2026-27
  • Reversion of $30.5 million for start-up in 2025-26
  • Reduction of $1.11 million and 6.0 Full Time Equivalent (FTE) for CDSS staff capacity

No Progress Toward Fair Provider Pay

• The May Revision includes no new funding for the implementation of an Alternative Methodology to pay providers fair and equitable wages.

Reducing Child Care Spaces

• Reduces ongoing child care funding by 6,798 slots which includes a reduction of $69.3 million in California Alternative Payment Program funding for 5,798 slots and $2.3 million in General Child Care Program funding for 1,000 slots.

Reducing Child Care COLAs

• Includes a 30% reduction to the revised 2026-27 cost-of-living adjustment (COLA), resulting in a 2.01 percent COLA for DSS administered child care programs, including CACFP and R&Rs.

Altering Alternative Payment Program Funding

• Increases the allowable in-contract administration costs of Alternative Payment Programs by 1.5 percent and eliminates the prior $70 million AP admin rate add-on.

Increasing Disaster Recovery Funding

• Child care infrastructure grants: The May Revision reflects a one-time $28 million award to support child care facilities impacted by disasters in 2023 and 2024 which CDSS applied for in 2025 through the Federal American Relief Act. Funding must be obligated by September 30, 2029.

• Low-Income Investment Fund: The May Revision proposes reappropriating $1.5 million in New Construction and Major Renovation funds from FY 2025-26 to FY 2027-28 to support close-out activities for remaining projects administered through CDSS’s contract with Low-Income Investment Fund. This re-appropriation will allow the agreement with Low-Income Investment Fund to be extended to provide continued technical assistance and oversight required beyond the current June 30, 2026, funding deadline.

• May Revise Increase: Proposes an additional $308m in Prop 64 funds, in addition to the Governor’s January budget proposal for $11.5 million in Prop 64 funds for disasters in 2025.

Increasing CAlWorks Maximum Aid Payment

• Includes a 1.8% increase to CalWORKS Maximum Aid Payment levels (effective October 1, 2026), which is estimated to cost $59.5 million in 2026-27.

Increasing Investments in QRIS

• Includes a $20 million increase in ongoing Proposition 98 General Funds for the state’s QRIS system.

TRAILER BILL PROPOSALS

Alternative Methodology: This bill would further specify the age groupings the Legislature intends the rate structure to include. The bill would state the intent of the Legislature for the rate structure to include enhanced inclusion rates, to be administered as a per-child amount, and that programs be able to claim reimbursement for enhanced services that they deliver.

Alternative Payment Program Administration: This bill would revise the total cost for administration and support services for alternative payment programs from 17.5 percent to 19 percent of the total contract amount, and the total cost for administration and support services for the Migrant Alternative Payment Program pursuant to the market rate survey from 21 percent to 22.5 percent of the total contract amount. According to CDSS, this increased percentage will cover new administrative responsibilities consistent with the Childcare Providers United California bargaining agreements.

CalWORKS Child Care Eligibility: This bill would amend Welfare and Intuitions Code (WIC) Section 10271 to broadly include participation in CalWORKs program activities as an eligible need category for these families. Expanding this definition will improve alignment across the CalWORKs child care stages and support the program changes envisioned in Transforming CalWORKs through SB 119. Additionally, proposed amendments in WIC Section 10370.5 and Section 10371 will clarify that families cannot receive child care subsidies through more than one stage of CalWORKs child care at the same time. Lastly, to facilitate a seamless transition between the CalWORKs stages with minimal administrative burden on families and contractors, WIC Section 11323.4(f)(2)(A) requires the inclusion of additional data elements to be shared with CalWORKs Stage Two administrators. This data is necessary for both transfers between stages and at recertification.

Child Care Program Oversight: This bill would initiate a collaboration between the Department of Education and Department of Social Services to perform an error rate survey to estimate the percentage of errors, including but not limited to, overpayments and fraud, determinations of eligibility, child care needs, family feels, and provider reimbursements. The Department of Education shall report findings and recommendations to the Governor, Chair of the Joint Legislative Budget Committee, chairs of the fiscal committees for both houses of the Legislature, and the Department of Finance.

Disaster Recovery and Restoration: This bill would create and implement disaster-related infrastructure grans to support child care facilities impacted by a state or federally declared disaster.

Child Care Cost of Living Adjustment: This bill would provide a once-per-month, per child served cost of care plus rate for providers serving children enrolled in the following subsidized child care programs: Alternative Payment Programs, Migrant Child Care, General Child care, Family Child Care Home Education Networks, Child Care and Development services, CalWORKS stages 1, 2, and 3, and Emergency Child Care Bridge.

Modernization of Information Technology Services and Systems: This bill would allow the use of electronic signatures that comply with state and federal standards.

"Child Care is infrastructure. It is something that unlocks the economy. It is one of the few things in the state budget that you can point to that affects and helps virtually everything." - Assemblymember Patrick Ahrens

SAN FRANCISCO, CA (May 19, 2026) - Last week Governor Newsom released a revised state budget proposal, also known as the May Revision or May Revise. This proposal boasts historic investments in TK-12 education and significantly higher revenues than assumed in January, while creating a path to achieve a balanced budget in both FY2026-27 and FY2027-28. However, the proposal does little to support the backbone of our economy: child care providers and the families, children, and businesses who rely on them.

While we appreciate the importance of a balanced budget, the May Revise ultimately fails to make any significant progress toward strengthening or expanding our vital child care infrastructure.

“Child care providers are still struggling to stay in business and families are still struggling to find and afford child care. While this budget does include some measures that will support our communities such as increased disaster aid, it’s far from what child care providers and families need in California. This proposal ultimately backslides on key promises to increase subsidized child care spaces and pay providers based on enrollment. Child care providers cannot continue to operate on thin margins - we need to pay providers equitable wages and we need to ensure that parents receive child care when they need it. We also need to create a well funded infrastructure that supports both of them." - Kelly Graesch, Interim Executive Director

Child care is a basic need. We urge the Governor and Legislature to support families and providers by:

• Funding the Governor's promise to add 200k new child care spaces by 2028.

• Paying child care providers equitable wages that reflect the true cost of care.

• Backfilling nearly $90m in federal CCDF reductions, including $10m for Quality Improvement Programs which fund local child care resource and referral agencies and the Child Care Initiative Project (CCIP).

Our state’s strength comes from its people and its communities. As we collectively face the impacts of H.R.1 which threaten millions of people's access to basic needs like health care and nutrition, our state cannot continue to operate under the status quo. Parents and providers rely on a patchwork of social services including child care in order to survive and support their families. However, rising costs of living and continued underfunding creates the perfect storm that leaves families struggling to afford child care and leaves providers unable to keep their doors open. As the fourth largest economy in the world, we call on the Governor and Legislature to put our children and families first by investing in the programs and services that help families thrive.

The Network remains steadfast in its commitment to work alongside our dedicated members and partners to continue advocating boldly for policies and budgets that meet our families’ needs.

In Partnership,

Kelly Graesch
Interim Executive Director
California Child Care Resource & Referral Network (Network)
kgraesch@rrnetwork.org

Network Response to The Governor's Proposed 2026-27 Budget

SAN FRANCISCO, CA (January 26, 2026) – Earlier in the month, Governor Newsom released his final proposed 2026-27 state budget, largely protecting previous investments and commitments in Early Care and Education (ECE). The January budget comes in stronger than the Legislative Analysts Office’s (LAO) November outlook with a modest deficit of $2.9 billion, largely driven by higher than expected state revenues as the result of a booming artificial intelligence (AI) technology sector and strong stock market.

With continued fiscal uncertainty, it is unsurprising that the state January budget reflects an air of caution, leaving little room for new state investments. While child care funding received a slight increase of $.2 billion for a total of $7.5 billion ($5.1 billion General Fund), it does not include funding for the remaining 200,000 new child care spaces promised in 2021 nor does it include any plans for continuing expansion. The proposal also fails to make any progress towards implementing or funding new provider rates, which ensure providers' ability to keep their doors open.

While we appreciate the state’s efforts to ensure California moves forward with a strong budget, we cannot ignore the reality that providers and families will continue to struggle without sustained and meaningful investments. As Governor Newsom affirmed in his State of the State speech, child care is ‘economic development.’ Without it, families are forced to make the impossible decision between going to work or taking care of their children. We also cannot afford to lose child care providers - the backbone of our economy - who work tirelessly, often without recognition, due to consistent low wages and workforce instability that make it impossible to run a business in this economy.

As we gear up for another difficult budget season, the Network remains committed to working alongside our members and partners to advocate for child care as a universal public good for all. We will continue to speak up boldly so that our child care providers can be paid fairly and our families served with dignity and equity because we know child care keeps California working!

Governor's 2026-27 Proposed Budget Summary

Budget Overview

• Deficit: $2.9 billion
• Project Deficit: $22 billion in 2027-28 and shortfalls in the two years following.
• Projected Revenue across the ‘budget window’, including FY 2024-25-FY2026-27): $42.3 billion
• General Fund: $248.3 billion
• Rainy Day Funds: Will increase to $23 billion at the end of 2026-27, primarily driven by constitutionally required Proposition 2 deposits, as a result of increasing revenues.

Projected State Costs Due to H.R.1

• Changes to federal policy for Health and Human Services are projected to cost $1.4 billion (General Fund) in 2026-27.
• $1.1 billion in additional costs of Medi-Cal serving 14 million Californians
• $300 million in costs to CalFresh, serving 3 million Californians

PK-12 Public Education Highlights

• Estimates Proposition 98 funding at $123.8 billion in 2024-25, $121.4 billion in 2025-26, and $125.5 billion in 2026-27
• Per-pupil funding grows in the Governor’s Budget to a funding rate of $27,418 per student. Proposition 98 TK-12 funding per student is proposed to grow to $20,427 in 2026-27.
• Provides $228.2 million for a 2.41% COLA to statutorily-required TK-12 programs, including preschool.
• Increases the Expanded Learning Opportunities Program by $62.4 million ongoing, for the projected cost of a new $1,800 per unduplicated pupil rate for local education agencies with less than 55% total unduplicated pupils.
• Proposes to restructure state education governance, to move authority for the administration of the California Department of Education programs, school funding, and education regulatory authority from the State Superintendent of Public Instruction to the State Board of Education.
• Read the full summaries here.

Early Care and Education Summary

• Continues the state’s ongoing $7.5 billion commitment in funding to state-subsidized child care programs, including a total of $5.1 billion in general fund, serving an estimated 487,000 children across all child care programs.
• Maintains the prior year commitments to 146,000 new child care slots, compared to the 2021-22 Budget Act, but does not propose any new child care services outside CalWORKS caseload adjustments, in the 2026-27 Budget Year.
• Provides child care, state preschool, and child care nutrition programs a 2.41 percent COLA.
• Proposes a $11.5 million one-time Proposition 64 funding infusion in the child care infrastructure grant program, for child care providers impacted by wildfires.

Child Care Slot Expansion:

• The 2021-22 Budget included plans to expand child care access by adding over 145,000 new child care spaces over the next two years, which would grow to 200,000 new spaces by 2025-26.
• In 2023-24 and 2024-25, the Governor and Legislature delayed adding new spaces to 2028 due to budget deficits.
• The 24-25 Budget Act codified into law a commitment to continue space expansion, promising to add 44,000 new spaces in 2026-27 and 33,000 new spaces in 2027-28 (subject to funding in the budget). The breakdown of these spaces are:
  • 26-27: 12,000 CCTR, 32,000 CAPP
  • 27-28: 17,000 CCTR, 16,000 CAPP
  • Read more here.
• To date, the state has funded approximately 125,000 new spaces according to the Governor’s January budget summary.
• However, the Governor’s 2026-27 proposed budget does not include funding for the remaining promised spaces, nor does it include a plan for when these promised spaces will be funded. (CalBudgetCenter Summary)

Alternative Methodology or Rate Reform

• In April 2023, the state initiated the process to change the way it calculated child care provider reimbursements, moving away from a market-based regional rate to a ‘single rate structure’ with the goal of more accurately capturing the “true cost of care.”
• Between Winter 2023 and Spring 2024 the state developed a proposed cost model to define the elements of the base rate and enhanced rates to inform the single rate methodology. Read here.
• The State is currently in its final phase of setting rates and implementing a new rate structure.
• Per contract, rate setting for family child care providers will occur through the bargaining process between Child Care Providers United (CCPU) and the State, and would be subject to ratification by the Legislature.
• Rate setting for center-based programs will be finalized in partnership with the State and Legislature through the budget process.
• The 2025-26 budget appropriated $21.8 million for rate reform support costs.
• The 2026-27 proposed budget does not include any additional funding for rate reform. Given ongoing negotiations between CCPU and the state, it remains unclear when rate reform will be implemented or how much it will ultimately cost.

Proposed January Budget Links & Resources

• Administration summary of Governor’s proposed budget, including links to departmental detail: https://ebudget.ca.gov/home
• Assembly Budget Committee overview document (including summary I helped prepare at the beginning of the document):https://abgt.assembly.ca.gov/system/files/2026-01/highlights-of-governor-s-proposed-2026-27-budget.pdf
• Senate Budget and Fiscal Review Committee overview document: https://sbud.senate.ca.gov/med...
• Department of Social Services local assistance estimates: https://www.cdss.ca.gov/inforesources/fiscal-financial/local-assistance-estimates
• LAO Report: The 2026-27 Budget: Overview of the Governor's Budget: https://sbud.senate.ca.gov/sys...

SAN FRANCISCO, CA (July 1, 2025) - Last week, Governor Newsom and the Legislature reached a final budget agreement with key investments in child care and early education. The agreement moves us closer to establishing and implementing alternative child care provider rates that more accurately reflect the true cost of care. It ensures that subsidized providers continue receiving a monthly cost of care plus through June 30, 2026, and that beginning July 2026, they will receive payments prospectively and based on enrollment versus attendance. It also makes significant investments in Transitional Kindergarten (TK) for all 4-year-olds.

Key Highlights:

• Invests in the implementation of rate reform:
  • Provides $70 million for Alternative Payment Programs for administration and support of CCPU MOU provisions.
  • Provides $21.7 million to CDSS for administrative costs associated with the implementation of an alternative rate methodology.
• Modifies the Emergency Child Care Bridge program which offers temporary child care slots for children in foster care, navigation and trauma informed training, to approximately $63.7 million from General Funds (an ongoing reduction of $30 million.)
• Suspends the statutory COLA for child care and development programs in 2025-26 and repurposes $70 million for a rate increase to all subsidized child care and preschool providers.
• Extends cost of care plus payments through June 30, 2026.
• Extends enrollment-based prospective pay through June 30, 2026.
• Makes significant investment in TK-12 and Before/After School Programming:
  • Appropriates $2.1 billion for full implementation of Universal Transitional Kindergarten (UTK).
  • Reduces the TK classroom ratio size teacher to student from 1:12 to 1:10.
  • Expands before-after school programs as well as summer Learning programs for TK- sixth grade students.
  • Expands the Learning Opportunities Program (ELOP) by appropriating $435 million in Prop 98 funds to expand access to before, after and summer programs for TK through 6th grade students.

Despite unprecedented events at the federal level, we acknowledge the Governor and the Legislature for maintaining critical investments in child care. In particular, we recognize the Legislative Women’s Caucus for their leadership and partnership in standing with our child care providers, children, and families who fiercely advocated for fair pay and expanded child care services.

However, our providers are still struggling to keep their doors open and families continue to find it more and more difficult to secure affordable child care options that suit their unique needs. Without deeper investments from the state, many providers will be forced to close their doors and many families will be left with difficult decisions.

Part of the problem lies in the reality that the national median wage for child care workers has remained a meager $13.43/hr, leading to an average poverty rate of 17 percent for ECE workers in California, “much higher than for California workers in general (8.7 percent) and 6.7 times as high as for K-8 teachers (2.5 percent).” Low wages also mean that nearly "43 percent of early educator families nationwide must rely on public safety net programs like Medicaid and food stamps in order to get by.” This is both unsustainable and unacceptable for those who have dedicated their lives to care for our next generation, providing love and stability during the most critical period of development, while at the same time, acting as the backbone of our economy by providing vital workforce support.

Our families and child care providers cannot wait another 4-5 years for higher wages and increased child care spaces. We have a long way to go before achieving our vision of an adequately funded and valued child care field. We therefore remain as committed as ever to working alongside our members and partners to continue sharing the stories, data, and impact that exemplify why child care and early education is essential for California’s growth and stability.

- Linda Asato, Executive Director at the California Child Care Resource & Referral Network (Network)

SB 101 Budget Act of 2025 - Signed

Child Care & Early Education

• Spaces: $1.6 billion for Alternative Payment Program, General Child Care and Migrant Child Care slots to expand childcare access, with a priority for General Child Care slots serving children who are 0 to 3 years of age.
• COLA: Includes a decrease of $60.7 million General Fund to reflect the one-year suspension of the child care cost-of-living adjustment.
• Bridge Program: Reverts up to $30 million General Fund in unspent Emergency Child Care Bridge funding from 2024-25 and authorizes a $30 million reduction to the Emergency Child Care Bridge program in 2025-26.
• Prospective Pay: Provides $8.2 million General Fund for system costs associated with the implementation of prospective pay for child care programs and $21.9 million General Fund for local administration costs. Additionally, authorizes $582,000 for the department to implement prospective pay.
• APs & CCPU: Provides an increase of $70 million General Fund for Alternative Payment Program agencies for administration and support costs associated with implementing ongoing provisions of the memorandum of understanding with Child Care Providers United.
• Cost of Care Plus: Provides $44.8 million General Fund for child care contractors to continue distributing “cost of care plus” monthly rate supplements for child care providers pursuant to the 2023 and 2024 Budget Acts.
• Rate Reform: Provides $21.8 million one-time federal funds for automation costs to implement a single rate structure for child care based on an alternative methodology. Makes the use of these funds subject to approval by the Joint Legislative Budget Committee, based on a spending plan including how the department will set rates pursuant to the single rate structure.
• Direct Deposit: Re-appropriates $1.1 million General Fund from the 2022 Budget Act and increases $944,000 General Fund to extend direct deposit for child care program payments.

K-12 Education

• Reverts $177.5 million General Fund in unexpended funds from a one-time
  appropriation from the 2023 Budget Act for the School Facility Program.
• Ensures that schools and community colleges have a safety net in the future by
  authorizing a discretionary deposit into the Public School System Stabilization
  Account of up to $650 million, upon the recalculation of the 2024-25 Proposition
  98 minimum guarantee.
• Aligns federal fund authority with updated grant awards and available carryover
  funds for federally funded TK-12 education programs, including Title I programs,
  public charter schools, Perkins programs, McKinney-Vento programs, and others.
• Appropriates $4.3 billion Proposition 98 General Fund for the Expanded Learning
  Opportunities Program, an increase of $263 million.
• Provides a cost-of-living adjustment of $174 million Proposition 98 General Fund,
  reflecting 2.3 percent, for the Foster Youth, American Indian Early Education
  Childhood Education, American Indian Education Centers, Special Education,
  Child Nutrition, Adults in Correctional Facilities, and K-12 Mandate Block Grant
  programs.
• Appropriates $500,000 Proposition 98 General Fund for the California Association
  of Student Councils.
• Appropriates $43.9 million in Proposition 98 General Fund and federal funds to
  support the administration of the Summer Electronic Benefits Transfer Program
  (SUN Bucks) by local educational agencies.
• Appropriates a total of $1.9 billion Proposition 98 General Fund and
  approximately $3 billion in federal funds for universal school meals.
• Appropriates $5.5 billion Proposition 98 General Fund and $1.5 billion in federal
  funds for special education.
• Suspends the cost-of-living adjustment for California State Preschool Programs in
  2025-26, which results in savings of $19.3 million Proposition 98 General Fund
  and $10.2 million General Fund.
• AB 121 Education Finance: Education Omnibus Budget Trailer Bill provides for statutory changes necessary to enact the TK-12 related statutory provisions of the Budget Act of 2025.

AB 102 Budget Act of 2025 - Signed

• Spaces: $1.6 million for Alternative Payment Program, General Child Care and Migrant Child Care slots to expand childcare access, with a priority for General Child Care slots serving children who are 0 to 3 years of age.
• COLA: Appropriates $59.36 million general fund to CDSS for a cost of living adjustment (COLA) to the Cost of Care Plus rates in all CDSS child care programs, and appropriates $10.17 million general fund and $19.3 million Proposition 98 for California Department (CDE) of Education child care and preschool programs.
• Bridge Program: Alters the reversion amounts from specific purposes as specified in the 2024 Budget Act for the Emergency Child Care Bridge Program, while maintaining the overall reversion amount.
• Prospective Pay: Appropriates $30.1 million general fund to CDSS, for state and local agency administration costs to pay child care providers prospectively, based on enrollment.
• APs & CCPU: Provides $70 million General Fund for Alternative Payment Program agencies for administration and support costs associated with implementing ongoing provisions of the memorandum of understanding with Child Care Providers United.
• Rate Reform: Appropriates $21.7 million federal funds to CDSS for state administration costs for implementation rates, based on the alternative methodology and the single rate structure, subject to Joint Legislative Budget Committee notification.
• CDE New Positions: Provides funding and position authority to the CDE, for 8.0 positions for the California State Preschool Program, to support trailer bill policy workload.

AB 120 Early Childhood Education and Childcare - Signed

• Suspends the statutory cost-of-living adjustment for child care and preschool programs in 2025-26. Commencing July 1, 2026, requires all subsidized child care and preschool programs to receive a cost-of-living adjustment as a minimum annual rate increase.
• For direct contract and voucher-based subsidized child care and preschool
  programs, establishes reimbursement based on enrollment and families’
  certified need, as specified.
• Extends quarterly updates to the Legislature on the implementation of child
  care rate reform through July 1, 2027.
• Requires, beginning October 1, 2025, and through July 1, 2027, inclusive,
  the California Department of Social Services (CDSS) to update the
  Legislature quarterly regarding progress on implementation of prospective
  payment and paying based on enrollment.
• Establishes legislative intent to cease using a regional market rate for setting child care rates, and instead use an alternative methodology for setting future child care rates, pursuant to the following criteria:
  
  
  • a) Rates are set pursuant to statute and informed by the alternative
    methodology.
  • b) All subsidized child care and preschool programs are reimbursed under a single rate structure that takes into account a common set of rate elements.
  • c) Rate levels are informed by the costs associated with meeting health and safety requirements and program requirements.
  • d) Base rates are administered as a per-child amount, with programs able to receive enhancements.
  • e) Rates vary by geography, type of care setting, regulatory requirements, time categories, and child age.
• Clarifies that if a family receiving subsidized child care adds an additional
  child to the family size, the family’s eligibility period shall be extended for
  at least 12 months.
• Extends and expands once-per-month, per-child-served monthly rate
  increases for all subsidized providers, known as cost of care plus, and
  establishes a formula, based on the statutory cost-of-living adjustment, for
  increasing these monthly rates in 2025-26.
• Establishes that if various provisions of this bill are in conflict with a
  collectively bargained agreement between the state and Child Care Providers United, the collectively bargained agreement shall be controlling, as specified.
• Makes various technical and conforming changes.