BILL ANALYSIS

 

 

 

C.S.H.B. 3771

By: Johnson, Julie

International Relations & Economic Development

Committee Report (Substituted)

 

 

 

BACKGROUND AND PURPOSE

 

Currently, child-care services in Texas are prohibitively expensive for some working families and there is a limited pool of available child-care providers, leading to long waiting lists and further inflation of costs. C.S.H.B. 3771 seeks to address this issue by establishing a voluntary partnership program between the State of Texas and private employers under which the state will match employer contributions to their employees' child-care costs. The program would be administered by the Texas Workforce Commission, and the matching funds would be provided on a sliding scale, based on how much the employee earns in comparison to the median state household income in Texas.

 

CRIMINAL JUSTICE IMPACT

 

It is the committee's opinion that this bill does not expressly create a criminal offense, increase the punishment for an existing criminal offense or category of offenses, or change the eligibility of a person for community supervision, parole, or mandatory supervision.

 

RULEMAKING AUTHORITY

 

It is the committee's opinion that rulemaking authority is expressly granted to the Texas Workforce Commission in SECTION 1 of this bill.

 

ANALYSIS

 

C.S.H.B. 3771 amends the Labor Code to require the Texas Workforce Commission (TWC) to establish and administer the employer child-care contribution partnership program to support families in Texas in accessing high-quality child care by incentivizing eligible employers to contribute to eligible employee child-care costs and providing a state match for funds contributed by eligible employers.

 

Program Administration

 

C.S.H.B. 3771 requires TWC to adopt rules and establish procedures necessary to administer the program, including:

·         a standardized agreement for use by employers, employees, and child-care providers to apply for and enroll in the program;

·         eligibility and income verification procedures for employees;

·         eligibility criteria for child-care providers, including quality standards;

·         procedures for notifying each party to the agreement of the following:

o   the results of an eligibility determination; and

o   the party's enrollment in the program as soon as practicable after receiving and processing the agreement and determining each party's eligibility;

·         procedures for determining the amount of the state match and notifying the employee and the child-care provider regarding the amount;

·         procedures for prioritizing and approving agreements, including maintaining a waitlist;

·         procedures for notifying TWC and the parties to the agreement regarding termination of the agreement by any party or nonpayment by any party;

·         procedures for recouping state match money or a portion of state match money if there is an overpayment to a participating child-care provider;

·         criteria for disqualifying participants from the program;

·         procedures for hearing appeals from program participants;

·         procedures for issuing and logging payments to a participating child-care provider; and

·         criteria and procedures for modifying or terminating an agreement, including for the following situations:

o   if the relationship between the employee and employer is severed;

o   if an employer fails to make a contribution in accordance with the terms of the agreement; and

o   if a child-care provider ceases participation or otherwise becomes ineligible to participate in the program.

 

C.S.H.B. 3771 also requires TWC to do the following:

·         ensure confidentiality protocols to safeguard the personal information of participating employers, employees, and child-care providers, including ensuring that an employee's personal information is not disclosed without the employee's written consent;

·         maintain records regarding the balance of the program fund for each fiscal year and all payments made from the fund;

·         develop informational material regarding the program's objectives, benefits, and eligibility requirements and distribute the material to employers, employees, and child-care providers; and

·         maintain a waitlist if the money in the program fund is insufficient to approve all agreements received and provide a state match.

 

C.S.H.B. 3771 authorizes TWC to do the following:

·         delegate an administrative duty under the program to a division of TWC;

·         coordinate and share information with other state agencies; and

·         procure grants or contracts, in accordance with other law, with third parties to administer the program or parts of the program.

 

C.S.H.B. 3771 requires TWC to implement the program and issue a state match in a state fiscal year only if the legislature specifically appropriates money to TWC for that fiscal year for that purpose, but TWC may implement the program and issue a state match using other money available to TWC for that purpose.

 

Employer Duties

 

C.S.H.B. 3771 authorizes an employer who provides child-care assistance to an employee as a benefit of employment to participate in the program by entering into an applicable agreement with an eligible employee and child-care provider. The bill requires the employer to do the following:

·         provide at least 20 percent of the cost of the employee's child care as the employer contribution;

·         enter into a standardized agreement with an eligible employee and child-care provider;

·         submit the agreement to TWC for verification of eligibility and approval;

·         submit any additional information TWC considers necessary; and

·         on verification and approval of the agreement by TWC, make contributions to the employee's eligible child-care costs in accordance with TWC guidelines.

 

 

 

 

Employee Duties

 

C.S.H.B. 3771 requires an employee to complete an agreement with the employee's employer and a child-care provider and provide any additional information TWC considers necessary. The bill further requires the employee to pay the child-care provider the cost of child-care services not covered by the employer's contribution and the state match. The bill authorizes an employee, if the amount of the employee's employer contribution and state match are insufficient to pay all of the employee's child-care costs, to combine those amounts with the employer contribution and state match money provided under an agreement made under the program by a member of the employee's household or family to pay the total costs, provided that combining the amounts does not result in overpayment to the provider.

 

Provider Eligibility

 

C.S.H.B. 3771 conditions a child-care provider's eligibility to receive money under the program on the provider being a high-quality program as determined by TWC and the provider entering into the required agreement.

 

Program Agreements

 

C.S.H.B. 3771 requires TWC to create a standardized agreement for use by employers, employees, and providers participating in the program, to be completed and agreed to by each party. The agreement must include the following:

·         specified information about the employer, child-care provider, and employee;

·         the total amount of the employer contribution and state match to be paid to the provider, either directly or through a third-party vendor;

·         the duration of the agreement; and

·         the frequency of the contribution to be made directly to the provider.

 

Program Fund

 

C.S.H.B. 3771 requires TWC to establish and administer the program fund as a dedicated account in the general revenue fund. The bill requires the following amounts to be deposited to the fund:

·         any money appropriated by the legislature for the fund for purposes of the program;

·         interest earned on the investment of money in the fund;

·         funds resulting from civil penalties collected under the bill's provisions; and

·         gifts, grants, and donations received for the fund.

Money in the fund may be appropriated only to TWC for purposes of the program. The bill establishes that any money remaining in the program fund at the end of a fiscal year is carried forward to the next fiscal year.

 

C.S.H.B. 3771 requires that in each state fiscal year, to the greatest extent practicable, 25 percent of the total fund be distributed under agreements with employers with fewer than 50 full-time employees. The bill requires not more than 10 percent of the total fund to be distributed to TWC to establish the program during the 2024 fiscal year. In each subsequent fiscal year, TWC may use money in the fund to administer the program as follows:

·         if the total annual amount of the fund is more than $50 million, TWC may use not more than five percent of the total fund;

·         if the total annual amount of the fund is more than $10 million but not more than $50 million, TWC may use not more than 10 percent of the total fund; and

·         if the total annual amount of the fund is not more than $10 million, TWC may use not more than 15 percent of the total fund.

 

 

State Match

 

C.S.H.B. 3771 requires TWC, on verifying the eligibility of an employer, employee, and child-care provider and the agreement between the parties, to issue a state match from the program fund to a child-care provider in accordance with the terms of the agreement. TWC may distribute the state match money directly or through a third-party vendor, as applicable. However, TWC may approve an agreement and issue a state match only if there is sufficient money in the program fund to pay the costs under the agreement. The bill sets the amount of the state match as follows:

·         an amount equal to the contribution made by the employee's employer, if the employee has a median household income that does not exceed the median state household income;

·         if the employee's median household income does exceed the median state household income:

o   90 percent of the employer's contribution for an employee whose household income is not more than 120 percent of the median household income;

o   80 percent of the employer's contribution for an employee whose household income is greater than 120 percent but not more than 140 percent of the median household income;

o   70 percent of the employer's contribution for an employee whose household income is greater than 140 percent but not more than 160 percent of the median household income;

o   60 percent of the employer's contribution for an employee whose household income is greater than 160 percent but not more than 180 percent of the median household income; and

o   50 percent of the employer's contribution for an employee whose household income is more than 180 percent of the median household income.

The bill prohibits a state match from being considered compensation for an employee's services.

 

Reports

 

C.S.H.B. 3771 requires TWC to publish and submit to the legislature a report detailing the efficacy of the program not later than December 15 of each even-numbered year. The report must include the following information:

·         the amount appropriated to the program fund during the preceding state fiscal year;

·         the total number of standardized agreements submitted by employers;

·         the total amount of state matches paid out of the program fund, disaggregated by county;

·         information regarding the size, geographical location, and industry type of employers who participated in the program;

·         the number, license type, quality rating level, and geographical distribution of participating child-care providers;

·         average cost for services charged by child-care providers participating in the program and information regarding the amount by which those costs have increased or decreased during the most recent reporting period compared with previous reporting periods;

·         the number and total dollar value of agreements not approved by TWC; and

·         demographic information regarding employees participating in the program.

The bill requires TWC, not later than January 1, 2025, to publish and submit to the legislature a report detailing the commission's plan for implementing the program.

 

Civil Penalty

 

C.S.H.B. 3771 subjects a person who intentionally provides false information to TWC for purposes of receiving the benefits of the program to a civil penalty of not more than $500 per violation. All money collected as a result of such penalties must be paid into the state treasury and credited to the program fund.

 

 

Rule Adoption Deadline

 

C.S.H.B. 3771 requires TWC to adopt any rules necessary to administer the program not later than January 1, 2025.

 

EFFECTIVE DATE

 

September 1, 2023.

 

COMPARISON OF INTRODUCED AND SUBSTITUTE

 

While C.S.H.B. 3771 may differ from the introduced in minor or nonsubstantive ways, the following summarizes the substantial differences between the introduced and committee substitute versions of the bill.

 

The substitute includes provisions absent from the introduced making program implementation and state match issuance mandatory only if the legislature specifically appropriates money for that purpose for a given fiscal year and authorizing TWC to implement the program and issue a state match using other money available for that purpose.

 

Whereas the introduced required TWC to take certain actions in administering the program, the substitute requires TWC to adopt rules and procedures necessary to administer the program, including those specified by the bill. With respect to TWC's administration of the program, the introduced and the substitute differ as follows:

·         the substitute omits a requirement from the introduced for TWC to secure third-party vendors to assist in administering the program;

·         the substitute includes requirements absent from the introduced for TWC to establish procedures for the following:

o   notifying each party to the agreement of the results of an eligibility determination; and

o   determining the amount of the state match and notifying the employee and child-care provider regarding the amount;

·         whereas the introduced required TWC to establish eligibility verification procedures for employers, employees, and providers, the substitute requires the establishment of eligibility and income verification procedures for employees and eligibility criteria for providers, including quality standards;

·         whereas the introduced required TWC to establish procedures for issuing and logging a state match paid to a participating provider, the substitute requires the establishment of procedures for issuing and logging any payments to a participating provider;

·         whereas the introduced authorized TWC to contract with third parties to administer the program or parts of the program, the substitute authorizes TWC to procure grants or contracts, in accordance with other law, with third parties for such administration; and

·          whereas the introduced prohibited TWC from disclosing an employee's personal information without the employee's written consent, the substitute requires the confidentiality protocols established by TWC to ensure that such information is not disclosed without the employee's written consent.  

 

The substitute includes a requirement absent from the introduced for an employer to provide at least 20 percent of the cost of the employee's child care as the employer contribution. Additionally, whereas the introduced required the employer to make contributions to the employee's eligible child-care costs in accordance with the agreement directly to the child-care provider or through a third-party vendor, the substitute requires the employer to make the contributions in accordance with TWC guidelines.

 

The substitute omits an authorization from the introduced for the comptroller of public accounts to require employers seeking economic development incentives to participate in the program.

 

Whereas the introduced conditioned a child-care provider's eligibility to receive money under the program on the provider participating in the Texas Rising Star program, the substitute conditions eligibility on the provider being a high-quality program as determined by TWC.

 

The substitute omits the provision from the introduced that prohibited a program agreement from extending beyond the end of the fiscal year in any given year. With respect to the requirement for a program agreement to include the frequency of the contribution to be made directly to the child-care provider, the substitute omits a specification, which was present in the introduced, that contributions are made in accordance with the provider's established billing cycle.  

 

Both the introduced and the substitute require a certain percentage of the program fund to be distributed under agreements with employers with fewer than 50 full-time employees in each fiscal year, but the substitute adds a specification that this distribution requirement must be followed to the greatest extent practicable. Moreover, while both versions set limits on how much of the fund may be used for program administration purposes, they differ in the following ways:

·         whereas the introduced required five percent of the total fund to be distributed to TWC to administer the program during the 2024 fiscal year, the substitute requires not more than 10 percent of the total fund to be distributed to TWC in that fiscal year for establishment of the program; and

·         whereas the introduced set the amount to be distributed to TWC for program administration in each subsequent fiscal year at three percent of the total fund, the substitute establishes a sliding scale where the amount of money in the fund that TWC may use for program administration ranges from five to fifteen percent of the total fund depending on the total annual amount of the total fund. 

 

The introduced required TWC, in issuing state matches, to consider agreements in the order received, whereas the substitute requires TWC to establish procedures for prioritizing and approving agreements, including maintaining a waitlist.

 

The substitute omits provisions from the introduced relating to the modification and termination of program agreements that did the following:

·         authorized an employer or employee to terminate an agreement at any time and for any reason;

·         required the terminating party to notify all the parties to the agreement and specify the desired termination date;

·         required all parties to the agreement to be financially obligated up to the termination date; and

·         prescribed specific procedures for the following situations, including with respect to notifying TWC and the effects on state matches:

o   if the relationship between the employee and employer is severed;

o   if an employer fails to make a contribution in accordance with the agreement terms;

o   if an employee fails to pay the child-care provider for costs not covered by the employer contribution and the state match in accordance with the agreement terms; and

o   if a child-care provider ceases participation or otherwise becomes ineligible to participate in the program.

The substitute requires TWC instead to establish procedures for notifying TWC and the parties to the agreement regarding termination of the agreement by any party and to establish criteria and procedures for modifying or terminating an agreement, including in those specified situations, except the substitute does not reference a situation in which an employee fails to pay a provider for uncovered costs not covered by the employer contribution and the state match.  

 

The substitute changes the deadlines for TWC to adopt rules necessary to administer the program and to publish and submit to the legislature a program implementation plan from September 1, 2024, as in the introduced, to January 1, 2025. The substitute replaces the introduced version's requirement for TWC to publish and submit a biannual report on the program not later than July 15 and December 15 of each year with a requirement for TWC to publish and submit a biennial report not later than December 15 of each even-numbered year.