Estimated Two-year Net Impact to General Revenue Related Funds for HB2607, As Engrossed : an impact of $0 through the biennium ending August 31, 2023.

The bill would amend Section 2308.3155, Government Code to remove the word “voluntary” from the description of the Texas Rising Star Program, a quality-based child care rating system of child care providers participating in the Texas Workforce Commission's (TWC) subsidized child care program. The bill would require that the Texas Rising Star rules include an entry level rating for child care providers and a maximum length of time a provider may participate at the entry level rating. The bill specifies a provider participating at the entry level rating is not eligible for increased reimbursement rates. The bill would require that TWC establish a maximum length of time that a provider may participate at the entry level rating. 

The bill would amend Chapter 302, Labor Code regarding the “Evaluation of Allocation Formulas for Child Care Development Funds” to clarify that the number of reserved places in the evaluation be based on the number of places reserved in local workforce development board (Board) Child Care Provider Contract Agreements. The bill would require Boards inform local school districts and open-enrollment charter schools of opportunities to partner with child care providers to provide facilities for prekindergarten programs, based on data provided by the Texas Education Agency. The bill would change the frequency of the Board update report on contracted slots to every 12 months from the date the Board submits its initial report to TWC.

The bill would authorize Boards to allow a child care provider with a contract for slots agreement to identify and refer to the Board children who could be eligible for subsidized child care services. In making a referral, the child care provider would have to consider the child's TWC priority group status, including the priority of service for active duty military, veteran, or spouse and for foster children and former foster children.

The bill states that provisions of the bill can only be implemented if the state receives federal money for that purpose. 

The bill would remove the voluntary nature of the Texas Rising Star (TRS) program and add an entry-level rating for child care providers. This analysis assumes this change would require all subsidy providers to participate in the TRS program, at least at the new entry-level rating. The bill would also require that the entry-level rating be time-limited based on TWC rule. According to TWC, it is assumed this time limitation means that once the time limit has passed and the provider has not progressed to at least a 2-Star rating, then the provider will no longer be eligible to provide care to subsidized children. 

TWC reports that current rules contain an entry-level rating for regulated child care programs participating in the subsidy program called “Pre-Star”. Per TWC rule, this Pre-Star designation is implemented on a rolling timeline and is determined by screening the child care program for licensing compliance. The current timeline for achieving the Pre-Star level is currently set at 5 years. However, there is no current requirement that once the Pre-Star level is attained, the provider must progress to a higher TRS certification level. TWC reports this was done to acknowledge that there might be issues of compliance in areas with a limited number of child care providers; thus, potentially impacting parent choice requirements required by the federal Child Care and Development Fund (CCDF) funds. 

According to TWC, federal regulations do allow states to place requirements on providers to meet higher standards of quality, such as those identified in a quality rating and improvement system, as long as the parental choice requirements are met. 

In implementing the time-limited requirement for the entry level, TWC reports the agency must ensure that a significant number of entry level providers are able to move to at least a 2-Star level in order to remain in compliance with the federal parent choice requirements. To ensure this, TWC will require additional TRS staff (assessors, mentors, and support staff) to assist programs in achieving and maintaining higher levels of certification beyond the entry level rating. 

According to TWC, there were 5,279 non-TRS providers in fiscal year 2020. TWC reports that 85 percent of these providers, or 4,487, would meet the entry level qualifications. TWC estimates that 85 new non-TRS providers would meet the entry level qualifications each year. According to TWC, current non-TRS providers would be provided mentoring and assessed in a phased in-approach over the next five years in the following way: 1,122 providers each fiscal year from 2022 through 2024, 673 providers in fiscal year 2025, and 448 providers in fiscal year 2026. Each provider would receive services from an assessor ($1,155 per provider) and a mentor ($7,580 per provider) resulting in a total cost of $10,543,145 each fiscal year from 2022 to 2024, $6,621,130 in fiscal year 2025, and $4,655,755 in fiscal year 2026 from the Workforce Commission Federal Account 5026.

According to TWC, this bill will also impact the cost per child for subsidized child care due to the anticipated increase in the providers reimbursed at the higher reimbursement of at least the 2-Star level. TWC reports that any increase in the cost per child will impact the total number of children that can be served. Based on information provided by TWC, this analysis assumes an increased cost in reimbursements for direct care totaling $10,957,626 in fiscal year 2022, $21,914,990 in fiscal year 2023, $32,872,616 in fiscal year 2024, $39,753,784 in fiscal year 2025, and $44,592,662 in fiscal year 2026. TWC reports it would plan to absorb this cost with anticipated increases in Child Care and Development Block Grant (CCDBG) funds, so that there would be no reduction in the average number of children served per day through TWC's At-Risk and Transitional Child Care for Families Working or Training for Work program. However, the agency notes that if these additional CCDBG funds are not made available to the state, the number of children served would decrease unless the additional costs were funded with another method of finance.

TWC reports it will work with the Children's Learning Institute (CLI) to include any changes required by this bill into their online Engage system which tracks TRS providers during the assessment and mentoring process. TWC does not anticipate additional information technology costs related to implementing the provisions of the bill.

The activities and funding are allowable through the Child Care and Development Block Grant. If TWC does not receive federal money to implement this legislation, then TWC may choose to not implement and would have no cost.

This analysis assumes there would be a minimal cost associated with implementing some provisions of the bill that could be absorbed within current resources at the Texas Education Agency.