§ 10227.6

(a) It is the intent of the Legislature to use an alternative methodology, as defined in subdivision (ak) of Section 10213.5, to inform the setting of reimbursement rates for subsidized childcare.

(b) Reimbursement rates are subject to agreement and codification by the Legislature.

(c) The department, in collaboration with the State Department of Education, shall develop and conduct an alternative methodology. The department shall begin the process of data collection and analysis pursuant to developing an alternative methodology by July 1, 2023, and consult with the State Department of Education on data collection, analysis, and methodology for preschool programs. The alternative methodology shall build on the recommendations of the working group established pursuant to Section 10280.2 and shall be aligned with the recommendations of the Joint Labor Management Committee established pursuant to subdivision (a) of Section 10280.2.

(d) No later than February 15, 2024, the department, in collaboration with the State Department of Education and the Joint Labor Management Committee established pursuant to subdivision (a) of Section 10280.2, using information from the cost estimation model, shall define elements of the base rate and any enhanced rates to inform the state’s proposed single rate structure and rates. These elements shall be subject to the mandated public engagement state plan process and legislative review. The department shall report to the Senate Health and Human Services budget subcommittees, Assembly and Senate Education budget subcommittees, and the Legislative Analyst’s Office on progress made to conduct an alternative methodology and cost estimate model.

(e) No later than May 15, 2024, the department shall report on the status of the draft Child Care and Development Fund state plan to the Senate Health and Human Services budget subcommittees, Assembly and Senate Education budget subcommittees, and the Legislative Analyst’s Office on the state’s proposed single rate structure to be submitted to the United States Department of Health and Human Services, Administration for Children and Families.

(f) No later than July 1, 2024, the department shall submit necessary information to support use of a single rate structure using the alternative methodology to the United States Department of Health and Human Services, Administration for Children and Families in the Child Care and Development Fund state plan or an amendment to the state plan. The department shall provide a copy of the Child Care and Development Fund state plan or amendment to the state plan submitted to the United States Department of Health and Human Services, Administration for Children and Families to the Senate Health and Human Services budget subcommittees, Assembly and Senate Education budget subcommittees, and the Legislative Analyst’s Office no later than July 10, 2024.

(g) (1) Within 60 days of federal approval of the single rate structure utilizing the alternative methodology in the state plan, the department, in collaboration with the State Department of Education, shall provide the Assembly Committee on Budget, the Senate Committee on Budget and Fiscal Review, and the Legislative Analyst’s Office with a report that outlines the implementation components for the approved single rate structure. For a period of 30 days, the Legislature shall have the opportunity to review and provide feedback regarding draft guidance for implementation of policies. The report shall include all of the following:

(A) The department’s plan to set new reimbursement rates under the alternative methodology by no later than July 1, 2025.

(B) The estimated costs and estimated timelines associated with the implementation components of the approved single rate structure, including, but not limited to, state operations resources, technology and infrastructure changes, and any regulatory or statutory changes necessary to implement the approved single rate structure.

(2) (A) The department shall, from October 1, 2024, to July 1, 2028, inclusive, provide the Assembly Committee on Budget, the Senate Committee on Budget and Fiscal Review, and the Legislative Analyst’s Office with quarterly updates on the implementation of the new reimbursement rates set under the alternative methodology. The quarterly updates shall include any changes to the information provided in the report described in paragraph (1).

(B) (i) The quarterly report issued in July 2027, pursuant to subparagraph (A) shall consist of the considerations required to add monthly cost of care plus rates made pursuant to Sections 10277.1, 10277.2, and 10277.6 to existing reimbursement rates that are funded within existing childcare and development contracts for alternative payment programs, including, but not limited to, migrant alternative payment programs pursuant to Chapter 3 (commencing with Section 10225), migrant childcare and development programs pursuant to Chapter 6 (commencing with Section 10235), general childcare and development programs pursuant to Chapter 7 (commencing with Section 10240), family childcare home education networks pursuant to Chapter 8 (commencing with Section 10250), childcare and development services for children with special needs pursuant to Chapter 9 (commencing with Section 10260), childcare for recipients of the CalWORKs program pursuant to Chapter 21 (commencing with Section 10370), and the emergency childcare bridge program for foster children pursuant to Section 11461.6.

(ii) Considerations presented by the department pursuant to clause (i) shall include, but not be limited to, all of the following:

(I) Updates to data systems required to add monthly cost of care plus payments to existing contract rates.

(II) Necessary statutory and regulatory changes to add monthly cost of care plus payments to existing contract rates.

(III) Activities needed to be performed by the department and contractors to ensure contractors can pay childcare providers through a contract rate that includes the monthly cost of care plus payments.

(iii) The department shall present, where practicable, an estimated timeframe for each consideration described pursuant to clause (ii).

(h) Beginning October 1, 2025, and through July 1, 2027, inclusive, the department shall update the Legislature not more frequently than quarterly, to the extent information is available or reported to the department by contractors, regarding progress on implementation of paying based on enrollment.

(i) The Governor and the Legislature shall, by no later than July 1, 2025, establish reimbursement rates based on the alternative methodology. Provider reimbursement rates shall not be reduced from the reimbursement rates that were in effect on June 30, 2024, pursuant to Sections 10280 and 10374.5 of this code and Section 8242 of the Education Code, inclusive of the cost of care plus rates established pursuant to subdivision (b) of Section 10277.1 and subdivision (b) of Section 10277.2.

(j) (1) If the new reimbursement rates established pursuant to subdivision(i) do not take effect on July 1, 2025, the department shall provide the Legislature with a timeline for transitioning from the rates that are in effect on July 1, 2025, to the new rates established pursuant to subdivision (i).

(2) Any temporary reimbursement rates established as part of the transition timeline required by paragraph (1) shall be, at minimum, equivalent to the reimbursement rates established pursuant to Sections 10280 and 10374.5 of this code and Section 8242 of the Education Code, inclusive of the cost of care plus rates established pursuant to subdivision (b) of Section 10277.1 and subdivision (b) of Section 10277.2.

(k) The single rate structure shall apply to all programs funded by the State Department of Social Services under Chapter 3 (commencing with Section 10225), Chapter 6 (commencing with Section 10235), Chapter 7 (commencing with Section 10240), Chapter 8 (commencing with Section 10250), Chapter 9 (commencing with Section 10260), Chapter 21 (commencing with Section 10370), and Chapter 2 (commencing with Section 11461.6) of Part 2, and the State Department of Education under Chapter 2 (commencing with Section 8200) of Part 6 of Division 1 of Title 1 of the Education Code.

(l) The department, after collaborating with the State Department of Education, shall identify the remaining foundational policy frameworks of the single rate structure by January 10, 2028.

(m) (1) Except as required by subdivision (n), it is the intent of the Legislature, beginning July 1, 2025, to cease using a regional market rate survey pursuant to Section 10436, and instead use an alternative methodology, as defined in subdivision (ak) of Section 10213.5, for the purpose of informing the setting of future childcare rates and California state preschool program rates.

(2) It is the intent of the Legislature that:

(A) Reimbursement rates are set pursuant to statute and informed by the alternative methodology, as defined in subdivision (ak) of Section 10213.5.

(B) Under the single rate structure, all programs described in subdivision (k) shall be reimbursed under a unified structure that takes into account a common set of rate elements.

(C) Rate levels shall be informed by the costs associated with meeting health and safety requirements and program requirements.

(D) Base rates shall be administered as a per-child amount, and programs shall be able to claim reimbursement for services they deliver consistent with enhanced rates, if any.

(E) Rates shall vary based on all of the following:

(i) Geography.

(ii) Type of care setting.

(iii) Regulatory and statutory requirements applicable to each type of care setting.

(iv) Time categories.

(v) Child age groupings, consisting of all of the following:

(I) Children under two years of age, the care of whom will be reimbursed at the infant rate.

(II) Children who are two years of age, the care of whom will be reimbursed at the toddler rate.

(III) Children who are three years of age to six years of age, inclusive, who are not yet enrolled in first grade, the care of whom will be reimbursed at the preschool rate.

(IV) Children five years of age and older, who are enrolled in first grade or higher, the care of whom will be reimbursed at the schoolage rate.

(F) (i) Enhanced inclusion rates shall be administered as a per-child amount, and programs shall be able to claim reimbursement, consistent with the rules and regulations developed by the department and the State Department of Education, respectively. To receive an enhanced inclusion rate for a child, the family data file shall include documentation of at least one of the following:

(I) A current individualized family service plan.

(II) A current individualized education program.

(III) A current individual program plan.

(IV) An active plan pursuant to Section 504 of the federal Rehabilitation Act of 1973 (29 U.S.C. Sec. 794).

(V) An active incidental medical services plan, as described in Section 1596.802 of the Health and Safety Code.

(ii) The documentation described in clause (i) may be unsigned if the family did not consent to the services, despite the child being deemed eligible.

(3) It is further the intent of the Legislature that the alternative methodology shall be based on a cost study and cost estimation model conducted by the department for the measurement of the costs of care in California for all childcare and preschool programs described in subdivision (k), and shall include, but not be limited to, all of the following costs:

(A) Salaries and wages.

(B) Geography.

(C) Type of care setting.

(D) Regulatory and statutory requirements applicable to each type of care setting.

(E) Time categories, including, but not limited to, non-traditional hours.

(F) Child age.

(G) Cost for delivering inclusion supports.

(n) Commencing July 1, 2026, rates for all programs described in subdivision (k) shall receive the cost-of-living adjustment granted by the Legislature annually pursuant to Section 42238.15 of the Education Code as a minimum annual rate increase for all subsidized childcare providers.

(o) If the United States Department of Health and Human Services, Administration for Children and Families does not approve the alternative methodology developed pursuant to this section, the department shall develop and conduct a survey of the market rates for childcare services.

(p) If the provisions of this section are in conflict with the provisions of a memorandum of understanding reached pursuant to Section 10426, the memorandum of understanding shall be controlling without further legislative action, except that if such provisions of a memorandum of understanding require the expenditure of funds, the provisions shall not become effective unless approved by the Legislature in the annual Budget Act.

(Amended by Stats. 2026, Ch. 257, Sec. 18. (AB 190) Effective September 18, 2026.)