AB1981 - Subsidized childcare: reimbursement rates: reporting.

Amended IN Senate August 27, 2026 Amended IN Senate August 21, 2026 Amended IN Senate June 10, 2026 Amended IN Assembly March 26, 2026 Amended IN Assembly March 20, 2026 CALIFORNIA LEGISLATURE— 2025–2026 REGULAR SESSION Assembly Bill No. 1981 Introduced by Assembly Member Aguiar-Curry (Coauthors: Assembly Members Bonta, Bryan, Haney, Lee, Nguyen, Quirk-Silva, and Soria) February 13, 2026 An act to amend Sections 10213.5 and 10227.6 of, and to add Section 10227.7 to, the Welfare and Institutions Code, relating to childcare, and declaring the urgency thereof, to take effect immediately. LEGISLATIVE COUNSEL'S DIGEST AB 1981, as amended, Aguiar-Curry. Subsidized childcare: reimbursement rates: reporting. Existing law requires the State Department of Social Services, in collaboration with the State Department of Education, to implement a reimbursement system plan that establishes reasonable standards and assigned reimbursement rates for subsidized childcare and development services, and to develop and conduct an alternative methodology for ratesetting, as specified. Existing law requires the Governor and the Legislature to, by no later than July 1, 2025, establish reimbursement rates based on the alternative methodology, as specified. Existing law requires the department to provide quarterly updates from October 1, 2024, to July 1, 2027, inclusive, on the implementation of the new reimbursement rates set under the alternative methodology. If the new reimbursement rates do not take effect on July 1, 2025, existing law also requires the department to provide the Legislature with a timeline for transitioning from the rates that are in effect on July 1, 2025, to the new established rates. This bill would instead, under those circumstances, require the department to provide the Chairperson of the Joint Legislative Budget Committee with the department’s anticipated timeline for the above-described rate transition. The bill would also require the quarterly reports described above to continue until July 1, 2028. Existing law states the intent of the Legislature that the reimbursement rates established under the alternative methodology satisfy certain parameters, including, among others, that the rates vary based on geography, type of care setting, regulatory requirements applicable to each type of care setting, time categories, and child age. This bill would impose various requirements on the department, in consultation with the State Department of Education, when establishing new reimbursement rates using a single-rate structure informed by the alternative methodology, to the extent those requirements are consistent with the approved Child Care and Development Fund state plan. Among other things, the bill would require the department to vary rates based on geographic regions and specific age groupings and to include in the rates an enhanced rate for nonstandard hours of care and enhanced inclusion rates for children with special needs. The bill would authorize the department to implement these provisions by means of all-county letters, childcare bulletins, or similar written instructions. This bill would incorporate additional changes to Section 10227.6 of the Welfare and Institutions Code proposed by AB 190 or SB 190 to be operative only if this bill and AB 190 or SB 190 are enacted and this bill is enacted last. This bill would declare that it is to take effect immediately as an urgency statute. Digest Key Vote: 2/3 Appropriation: NO Fiscal Committee: YES Local Program: NO Bill Text The people of the State of California do enact as follows: SECTION 1. This act shall be known, and may be cited, as the True Cost of Childcare Act. SEC. 2. (a) The Legislature finds and declares all of the following: (1) California is committed to advancing racial, economic, geographic, and gender equity across its publicly funded systems, including early learning and care. (2) Federal regulations allow states to use a cost estimation model. This model can replace a market-rate survey to better reflect the true cost of high-quality childcare. It includes adequate compensation for the workforce, investments in health and safety, and compliance with licensing requirements. (3) In a broken market where rates are set based on what families can pay as opposed to what it actually costs to provide quality, developmentally appropriate care reliance on regional market rates perpetuate historic inequities by embedding disparities in family income, neighborhood wealth, and access to private tuition into the state’s reimbursement structure. (4) The early care and education workforce is almost exclusively female and predominantly people of color, including many immigrants, first-generation college students, and working mothers. Many early educators turn to public safety-net support to meet the basic needs of their family. (5) Childcare deserts are most prevalent in low-income communities, rural areas, tribal communities, and communities of color, where the market fails to generate rates sufficient to sustain licensed and license-exempt providers serving subsidized families. (6) As part of developing a single rate structure the State Department of Social Services consulted with early childhood educator stakeholders. (7) Despite this statutory direction and extensive stakeholder engagement, a single rate structure is continuing to be developed. (8) Adopting a single rate structure informed by the alternative methodology is needed to support the childcare workforce, help families in the state’s subsidized childcare system, and protect the state’s economy. (b) Therefore, it is the intent of the Legislature to codify a single rate structure informed by the alternative methodology and to ensure its timely implementation. SEC. 3. Section 10213.5 of the Welfare and Institutions Code is amended to read: 10213.5. As used in this part: (a) “Alternative payments” includes payments that are made by one childcare agency to another agency or childcare provider for the provision of childcare and development services, and payments that are made by an agency to a parent for the parent’s purchase of childcare and development services. (b) “Alternative payment program” means a local government agency or nonprofit organization that has contracted with the department pursuant to Section 10225.5, or a migrant alternative payment program pursuant to Chapter 6 (commencing with Section 10235), to provide alternative payments and to provide support services to parents and providers. (c) “Applicant or contracting agency” means a school district, community college district, college or university, county superintendent of schools, county, city, public agency, private nontax-exempt agency, private tax-exempt agency, or other entity that is authorized to establish, maintain, or operate services pursuant to this chapter. Private agencies and parent cooperatives, duly licensed by law, shall receive the same consideration as any other authorized entity with no loss of parental decisionmaking prerogatives as consistent with the provisions of this chapter. (d) “Assigned reimbursement rate” is that rate established by the contract with the agency and is derived by dividing the total dollar amount of the contract by the minimum child day of average daily enrollment level of service required. (e) “Attendance” means the number of children present at a childcare and development facility. “Attendance,” for purposes of reimbursement, includes excused absences by children because of illness, quarantine, illness or quarantine of their parent, family emergency, medical and educational appointments, or to spend time with a parent or other relative as required by a court of law or that is clearly in the best interest of the child. For purposes of reimbursement, a contractor may claim attendance for days that the contractor or provider is required to hold a space for a child during the period that a family is assumed to have abandoned care or is engaging in the appeal process based on disenrollment for abandoning care. (f) “Capital outlay” means the amount paid for the renovation and repair of childcare and development and preschool facilities to comply with state and local health and safety standards, and the amount paid for the state purchase of relocatable childcare and development and preschool facilities for lease to qualifying contracting agencies. (g) “Caregiver” means a person who provides direct care, supervision, and guidance to children in a childcare and development facility. (h) “Childcare and development facility” means a residence or building or part thereof in which childcare and development services are provided. (i) “Childcare and development programs” means those programs that offer a full range of services for children from infancy to 13 years of age, for any part of a day, by a public or private agency, in centers and family childcare homes. These programs include, but are not limited to, all of the following: (1) General childcare and development. (2) Migrant childcare and development. (3) Childcare provided by the California School Age Families Education Program (Article 7.1 (commencing with Section 54740) of Chapter 9 of Part 29 of Division 4 of Title 2). (4) Resource and referral. (5) Childcare and development services for children with exceptional needs. (6) Family childcare home education network. (7) Alternative payment. (8) Schoolage community childcare. (j) “Childcare and development services” means those services designed to meet a wide variety of needs of children and their families, while their parents or guardians are working, in training, seeking employment, incapacitated, or in need of respite. These services may include direct care and supervision, instructional activities, resource and referral programs, and alternative payment arrangements. (k) “Children at risk of abuse, neglect, or exploitation” means children who are so identified in a written referral from a legal, medical, or social service agency, or emergency shelter. (l) “Children with exceptional needs” means either of the following: (1) Infants and toddlers under three years of age who have been determined to be eligible for early intervention services pursuant to the California Early Intervention Services Act (Title 14 (commencing with Section 95000) of the Government Code) and its implementing regulations. These children include an infant or toddler with a developmental delay or established risk condition, or who is at high risk of having a substantial developmental disability, as defined in subdivision (a) of Section 95014 of the Government Code. These children shall have active individualized family service plans, shall be receiving early intervention services, and shall be children who require the special attention of adults in a childcare setting. (2) Children 3 to 21 years of age, inclusive, who have been determined to be eligible for special education and related services by an individualized education program team according to the special education requirements contained in Part 30 (commencing with Section 56000) of Division 4 of Title 2 of the Education Code, and who meet eligibility criteria described in Section 56026 of the Education Code and, Article 2.5 (commencing with Section 56333) of Chapter 4 of Part 30 of Division 4 of Title 2 of the Education Code, and Sections 3030 and 3031 of Title 5 of the California Code of Regulations. These children shall have an active individualized education program, shall be receiving early intervention services or appropriate special education and related services, and shall be children who require the special attention of adults in a childcare setting. These children include children with intellectual disabilities, hearing impairments (including deafness), speech or language impairments, visual impairments (including blindness), serious emotional disturbance (also referred to as emotional disturbance), orthopedic impairments, autism, traumatic brain injury, other health impairments, or specific learning disabilities, who need special education and related services consistent with Section 1401(3)(A) of Title 20 of the United States Code. (m) “Closedown costs” means reimbursements for all approved activities associated with the closing of operations at the end of each growing season for migrant child development programs only. (n) “Cost” includes, but is not limited to, expenditures that are related to the operation of childcare and development programs. “Cost” may include a reasonable amount for state and local contributions to employee benefits, including approved retirement programs, agency administration, and any other reasonable program operational costs. “Cost” may also include amounts for licensable facilities in the community served by the program, including lease payments or depreciation, downpayments, and payments of principal and interest on loans incurred to acquire, rehabilitate, or construct licensable facilities, but these costs shall not exceed fair market rents existing in the community in which the facility is located. “Reasonable and necessary costs” are costs that, in nature and amount, do not exceed what an ordinary prudent person would incur in the conduct of a competitive business. (o) “Elementary school,” as contained in former Section 425 of Title 20 of the United States Code (the National Defense Education Act of 1958, Public Law 85-864, as amended), includes early childhood education programs and all child development programs, for the purpose of the cancellation provisions of loans to students in institutions of higher learning. (p) “Family childcare home education network” means an entity organized under law that contracts with the department pursuant to Section 10250 to make payments to licensed family childcare home providers and to provide educational and support services to those providers and to children and families eligible for state-subsidized childcare and development services. A family childcare home education network may also be referred to as a family childcare home system. (q) “Health services” include, but are not limited to, all of the following: (1) Referral, whenever possible, to appropriate health care providers able to provide continuity of medical care. (2) Health screening and health treatment, including a full range of immunization recorded on the appropriate state immunization form to the extent provided by the Medi-Cal Act (Chapter 7 (commencing with Section 14000) of Part 3) and the Child Health and Disability Prevention Program (Article 6 (commencing with Section 124025) of Chapter 3 of Part 2 of Division 106 of the Health and Safety Code), but only to the extent that ongoing care cannot be obtained utilizing community resources. (3) Health education and training for children, parents, staff, and providers. (4) Followup treatment through referral to appropriate health care agencies or individual health ca [Text truncated for display. Full text available on Congress.gov.]