End the Freeze! -- Consensus Opportunity Missed

End the Freeze! -- Consensus Opportunity Missed

An opportunity to reach consensus on the key issue to End the Freeze! on the SMI/parent income eligibility level issue was missed Thursday, May 4, when some early care and education advocates opposed a modest adjustment in the family fee schedule.  The Department of Finance (DOF) has signaled that it is willing to reach an agreement to End the Freeze! by the end of this fiscal year (June 30), if agreement can also be reached on adjusting the family fee schedule so that statewide income from parent fees remains at the current level.  The Governor's budget had originally proposed that the Freeze continue for another year while a "work group" developed a solution to the problem of a major drop in parent fee income. 

CCDAA has long supported a modest adjustment in the family fee schedule to resolve concerns about the schedule -- as long as any increased fees are used to serve additional families, and are not returned to the State's General Fund.  CCDAA has championed ending the freeze this year, including the modest adjustment in the fee schedule.

CCDAA and other groups participating in the meeting were willing to support the modest adjustment in the family fee schedule.   At least two organizations opposed an adjustment along the lines that DOF sought. 

Committee staff are taking the views of organizations attending the meeting back to the Assembly Budget Subcommittees.  The Budget Committee will decide whether to recommend ending the freeze on the SMI to the full Assembly, and whether to recommend adjusting the fee schedule.  Ending the freeze would mean that for a family of four, the income ceiling would increase from $3250 to $4031.

Details below for those who want more specific information:

All participants in the meeting were supportive of ending the freeze on the SMI this year.  There are two money problems to resolve in order to end the freeze, however.

The first problem is that if the SMI is "unfrozen" without adjusting the family fee schedule, parent fee income could immediately drop by a very large amount [Cliff Marcussen subsequently conducted a study on 100 fee paying families and found the loss would be 75% of parent fee income, or about $24 million statewide].  If the bottom of the fee schedule were moved to 50% of the new SMI figure, then the bottom half of the current fee schedule would be eliminated and all parents in the bottom 7 fee levels would cease paying any fee.  Parents in the top half of the current fee schedule would see drastic reductions in their fees.  And there would immediately be no parents in the new fee levels above the current ceiling.  Consequently the estimated very large drop in parent fees.  Parent fees were estimated to be $30 million to $35 million a year at the meeting.   This could be a loss of $24 million.  The Legislature would either have to find $24 million in new Prop. 98 funds (extremely unlikely to impossible), or the number of children being served would drop by over  3,200. 

In the past the Legislature has been absolutely unwilling to consider any changes that would lead to a reduction in the number of children being served.  Therefore CCDAA believes that the modest adjustment in the parent fee schedule must occur before the Legislature or DOF will agree to end the freeze. 

DOF staff have also been clear that keeping parent fees at the current $30 to $35 million must occur for the Administration to agree to ending the freeze.

The second problem is that raising the income ceilings will make more parents eligible for CalWORKs Stage 3 child care and a few more eligible for Stage 2 (parents who would "income out" under the current income ceiling).  The cost of serving these additional families in CalWORKs is not known, but is thought to be far less then the loss of parent fee income.  The budget committee would need to find additional money to fund Stages 2 and 3 -- but this was not the focus of the meeting, and the parent fee schedule issue appears to be the significant obstacle to ending the freeze.

CCDAA supported moving the bottom of the fee scale up from where it is now, but not all the way to 50%, starting the bottom of the fee schedule at about 2% of income (like the current schedule), keeping the current top income level at around the current fee, adding new fee levels above the current top income level, but keeping the highest fee within the maximum 10% of income recommended by the federal government.   Many of the lowest income families now paying fees would either pay no fees or see their fees reduced.  Parents who are now losing subsidized child care would be far better off by keeping subsidized child care and paying a somewhat higher parent fee, which would soon offset the parents paying lower fees.