State Payment Rates Are Not Keeping Pace with Rising Costs of Caring for Children
By Erik Saucedo
California’s subsidized child care providers offer vital early learning and care options for families struggling to make ends meet. These early educators — who are primarily women and disproportionately women of color — deserve fair and just wages for essential work that helps children learn and grow while parents are working or going to school to support their families.
Despite providers’ critical role in nurturing children and assisting families, state leaders have failed to consistently and adequately increase provider payment rates in recent years. Without sufficient payments, child care providers are unable to offer early educators fair wages, struggle to keep pace with the rising statewide minimum wage, and can’t afford the increasing price of food and supplies. Ultimately, California providers and families suffer when affordable child care is limited in their communities because of policymakers’ lack of investment.
How Are Subsidized Child Care Providers Paid in California?
Subsidized child care providers are paid in one of two ways in California: 1) by accepting vouchers from families or 2) by contracting directly with the state. Providers who accept vouchers are reimbursed by the state based on the Regional Market Rate (RMR) Survey. The RMR survey — administered every two to three years — provides “rate ceilings” based on provider setting and the age of the child for all 58 California counties. The rate ceiling is the highest payment a provider can receive from the state for the care of a child. Providers who contract directly with the state are paid based on a Standard Reimbursement Rate (SRR). The SRR is adjusted to reflect the additional cost of serving certain children.1 Moreover, beginning in 2022-23, state law requires an annual cost-of-living adjustment to the SRR, although the Legislature may suspend it for a given fiscal year.
Payment Rates for Voucher-Based Child Care Providers Are Not Keeping Pace Across 58 Counties
ate leaders have updated voucher-based payment rates for child care providers just twice since the 2016-17 state fiscal year. During this same period, the state law requiring annual increases to the statewide minimum wage went into effect, raising the wage by 55% from 2016-17 to 2022-23 and increasing costs for providers.2
The rate ceilings for child care providers across all 58 counties generally have not kept pace with the rising minimum wage even after the most recent increase to payment rates enacted in 2021-22. In the state’s most populous county — Los Angeles — payment rates for licensed centers caring for preschool-age children increased by less than half as much as the statewide minimum wage. Providers in some counties, such as Riverside County, saw miniscule rate increases of less than 5%. And in 27 counties, due to weaknesses in the rate-setting methodology, licensed centers have not received a single rate increase for care for preschool-age children since 2016-17.3
Read the full report at calbudgetcenter.org.
