CalMatters is a nonprofit, nonpartisan newsroom committed to explaining California policy and politics.

Gabriela Guerrero’s children are all grown and have moved out, but the former stay-at-home mom never stopped raising kids.

The children who attend her home daycare in El Centro, in Imperial County near the Mexico border, are as young as 3 months old. Some are the children of farmworkers who drop them off at Guerrero’s house before their shifts in the pre-dawn hours. Nearly all are from families poor enough to qualify for state subsidies.

Many of the families can’t afford basic needs, Guerrero said, so the 57-year-old makes sure to provide their children with milk, diapers and sometimes clothes.

“I want the families to go to work knowing that (their children are) well taken care of, and they’re being loved and fed correctly,” she said.

Guerrero’s labor of love barely earns her a living. After paying two assistants and other costs, she figures she takes home about $3 or $4 an hour. She takes on credit card debt to keep her business going.

For years, family child care providers — the vast majority of them women of color — have said they don’t get paid enough by the state of California to cover the costs of their businesses. Their fight for better pay and benefits, a two-decades-old effort, is reaching a fever pitch in California’s capital this year.

They’re pressing Gov. Gavin Newsom to raise their pay, and they have the Legislature on their side. Lawmakers put $1 billion for raises in their version of a state budget that they passed last week. That funding remains one of the key differences between Newsom and the Legislature as they hammer out a budget deal before July 1 that accounts for an estimated $32 billion deficit.

The full cost of California child care

Newsom deemed the child care industry critical to getting parents back to work and recovering the state’s economy from the pandemic. He signed legislation in 2019 allowing home child care providers like Guerrero to unionize and bargain with the state over subsidized child care reimbursement rates. And the state has issued multiple rounds of temporary stipends to providers who lost revenue during the pandemic.

But the 40,000-member union representing the home-based providers says Newsom’s administration isn’t offering providers enough to keep them in business long term. The union’s current contract expires in less than two weeks, at the end of June.

Bargaining for a new one this year, the union has called for a 25% bump in reimbursement rates the state pays to providers who care for low-income families’ kids — and state funding for the union to set up a trust to issue retirement benefits.

Providers staged a rally with about 2,000 members and supporters at the Capitol last week and plan to set up camp outside the Governor’s Mansion this week.

“As a direct result of their action, providers are gaining ground in negotiations towards pay increases and basic benefits — but we have yet to see a fair and just contract offer from the state,” said Max Arias, chairperson of the Child Care Providers’ Union, in a statement. “There appears to be no interest in committing to ongoing rate increases or covering the full cost of care.”

Family or home-based providers care for 28% of children who attend licensed facilities in California. Parents also send children to daycare centers or state-funded preschools, or pay a family member or friend.

A stopgap measure

To some advocates and members of the Legislative Women’s Caucus, even winning the raises would be only a stopgap measure to keep providers in business. The child care industry has experienced a slow recovery over the past three years and still employs 5% fewer people than it did before the COVID-19 pandemic, according to a recent study by the UC Berkeley Center for the Study of Child Care Employment.

They’re pushing the state to move faster to fundamentally overhaul the way it calculates reimbursement rates. Sen. Monique Limón, a Democrat from Santa Barbara, authored a bill this year directing the state to overhaul the rates and provide the $1 billion raise in the meantime.

The $1 billion in the Legislature’s budget “solves an immediate problem,” she said. “It doesn’t solve the full, 10-year problem.”

The state’s reimbursement rates are generally tied to how much providers charge in the private market — but because many child care providers lower their prices to meet what parents can afford, the rates have ended up artificially low, in a system that a state-commissioned report last year described as a “market failure.” That in turn results in chronic shortages of child care for parents.

That report, on child care funding in California, was commissioned by a working group the state convened as part of its current contract with the child care union. In the report, the national firm Prenatal to Five Fiscal Strategies found California pays some daycare owners as little as a quarter of what the service costs.

A new model

In the southern region of the state, where Guerrero lives, the firm estimated it costs a home-based provider like hers more than $39,000 a year to provide quality care for one infant or toddler. The state reimburses about $12,000.

The same report recommended the state adopt a new method for calculating reimbursement rates that is based on real costs like the ones the firm calculated, rather than surveys of daycare rates. It has drawn support from both business and labor: a letter by the advocacy group Children Now urging the state to implement the recommendations was signed this year by the Service Employees International Union and the California Chamber of Commerce.

Asked to comment on the overhaul plan, both the state Department of Finance and the Department of Social Services said the issue is being negotiated with the child care union.

No new payment method has been developed yet, though the state this year restarted the working group to advise on overhauling rates. Because the current rates are so low, a new model could be dramatically more expensive for the state. In some cases, providers may have to be paid three or four times what the state currently covers.

Advocates say it’s possible the state could come up with a new payment method that gradually, over several years, gets the pay closer to providers’ real costs.

Eric Peterson, director of client services and policy at Bananas, an Oakland agency that helps families find child care and subsidies to pay for it, sat on the working group that commissioned the cost report.

In nearly three decades in the field, Peterson said, pay for providers “has never been adequate.”

“Everybody knows … we can’t pay the true cost of care in a year,” he said. “The intent is to acknowledge the true cost and find a schedule to get there.”

Transit, child care among the sticking points in state’s $300B budget talks