1. FY 2014 Budget Update Fiscal Committee June 3, 2013

2. Overview: FY14 Senate Budget On May 23, 2013 the Senate engrossed S.3, the FY2014 budget, totaling $33.985B. The Senate has recommended a budget for EEC of $502.6M which is $18M more than the House’s recommended level of $484.6M. The Senate’s budget invests significantly more funds toward the Income Eligible caseload and begins to address the growing Income Eligible waitlist. Like the House, the Senate includes PAC language, albeit restricted, in the Income Eligible line item language. Like the House, the Senate did offer new items that attempt to provide additional resources in the Department’s effort to provide safe, efficient, and effective child care. 2

3. Comparison of FY14 Recommended Budget Levels 3

4. FY14 Budget Conference Process EEC must identify which items are “conferenceable”. EEC must then prioritize the “conferenceable” items and submit these to EOE. EOE will then review EEC priorities and compile a Secretariat wide list for submission to ANF. The EEC priorities are: Fund the admin account at the Senate level. Fund the IE account at the Senate level, but with the House’s PAC language. Fund the Supportive account at the House level. Fund the UPK and Family Engagement accounts at the House level. 4

5. FY14 Budget Conference Committee Over the next month representatives from both the House and Senate chambers will meet to resolve any differences in the House and Senate versions of the FY14 budget. After the negotiations the Conference Committee will present to both chambers for their consideration a Conference Report. The Conferees have been appointed: House: Chairman Brian Dempsey (D-Haverhill); Vice-Chairman Stephen Kulik (D-Worthington); and Representative Vinny deMacedo (R-Plymouth) Senate: Chairman Stephen Brewer (D – Barre); Vice Chairman Jennifer Flanagan (D-Leominster) and Senator Michael Knapik (R-Westfield). 5

6. FY14 Budget: Comparison 3000-1000 Administrative Account Appropriation House: $12,353,980 Senate: $12,844,972 Comparison – Both the House and Senate appropriations enable EEC to fully meet its FY14 maintenance needs. The Senate, however, recommends nearly $500K more than the House. This amount would enable EEC to increase workforce support in areas of dire need: licensing, monitoring, and caseload forecasting. Language House: Requires EEC to report on the progress of collecting data that tracks eligibility of client at the point of application, reason for attrition from services, improved methodology of caseload forecasting, and proximity of clients on the waitlist to nearest child care provider. Senate: Standard monthly reporting, but requires EEC to also report how many children were on the waitlist but found ineligible during the validation process. Senate also requires EEC to convene a group of internal and external constituents to conduct an assessment of various components of our child care system. Comparison – The House additional reporting language, particularly the improvement of caseload methodology, seems unnecessary as EEC meets with ANF, Senate, and House stakeholders every month to discuss caseload. 6

7. FY14 Budget Process: Caseload Accounts 7

8. FY14 Budget: Comparison 3000-3050 Supportive Account Appropriation: House: $80,821,506 Senate: $76,991,445 Comparison- Based on the current number of children in the DCF account, EEC projects that we would need $80.2M to pay for these children in FY14. The final House number would allow us to serve the projected FY14 caseload. The Senate number, however, is $3.8M less than the House number and $339K less than the FY13 funding level. Because the Senate budget retains the language “that all children eligible for services under this item shall receive those services” we might argue that the Senate funding level is inadequate even before we address serving all children on the DCF-managed waitlist and, furthermore, were we to serve all children on the DCF-managed waitlist, even the House number is not sufficient. Language: The House authorizes transferability of 3% from other caseload accounts into this account. Senate includes this authorization language in the 3000-1000 line item. 8

9. FY14 Budget: Comparison 3000-4050 DTA Related Appropriation: House: $128,063,499 Senate: $ 128,063,499 Comparison- The House and Senate budgets fund this account at $128M, which is the same level recommended by the Governor. Based on current projections, this amount is roughly $2.4M less than the FY14 maintenance need of $130.4M A loss in funding in this account in FY14 would require a further reduction in the Income Eligible account (utilizing the 3% transferability authorization) to cover the DTA related deficit, thus impacting access to care for other low-income families. Language: The House authorizes transferability of 3% from other caseload accounts into this account. Senate includes this authorization language in the 3000-1000 line item. 9

10. FY14 Budget: Comparison 3000-4060 (and 3000-4070) Income Eligible Account Appropriation: House: $214,340,742. The House recommends $214.3M, which is roughly $12.3M less than FY14 maintenance need of $226.5M. The House, however, does include unrestricted PAC language that would result in an additional $8.5M in FY14. The overall amount available under the House’s plan is $222.8, which is still nearly $3.7M less than the project caseload need of FY14. The main results of the House’s version (were it to prevail) would be the continued erosion of the Income Eligible caseload and unmitigated growth of the Income Eligible waitlist. Senate: $217,870,452 The Senate budget provides $217.8M, $7M PAC language, and proposes in a new account (3000-4070) $15M “for costs associated with reducing the waitlist for income- eligible early education and care programs, that funds from this account may be transferred to item 3000-4060.” Overall, the Senate’s Income Eligible related investment in FY14 is $239.9M. 10

11. FY14 Budget: Caseload Comparison Comparison Due to transferability language included in both versions, any analysis of the Income Eligible funding level is incomplete without factoring potential exposures in the other caseload accounts. The Senate’s FY14 recommendations for 3000-3050 and 3000-4050 is projected to be a combined $6.2M less than needed. The projected amount available in FY14 under the Senate’s plan, therefore, is actually closer to $233.7M. This amount is still generous enough to enable EEC to open access for nearly one thousand additional children. The House’s recommendation for 3000-3050 and 3000-4050 is only $2.3M, but that amount would from a much lower base than the Senate recommendation. The House’s adjusted FY14 Income Eligible related investment is $220.5M, which is roughly $6M less than basic FY14 maintenance need. Ideally, the Senate’s appropriation level prevails, but the House unrestricted PAC language is adopted. This would provide an additional $1.5M to the FY14 total available amount to support Income Eligible. 11

12. FY14 Budget: Comparison Other Significant Differences 3000-5075 Universal Pre-Kindergarten (UPK): The House budget funds this account at the FY13 level while the SWM recommended, and the Senate adopted, a FY14 appropriation reduced by $500K. In order to absorb this reduction, if the Senate appropriation were to prevail, EEC would have to review the level of funding for FY14 UPK grantees while at the same time reviewing its own expenditures to determine where there might be cost savings. 3000-7050 Family Engagement: The FY14 House budget figure of $18.1M equals the FY13 level. The Senate budget proposes a $1M reduction which could have a serious impact on the Coordinated Family and Community Engagement (CFCE) and Educator Provider Support (EPS) programs, both of which are funded from this account. RFRs have already been released for each program; proposals are due soon. The presumed level of funding for CFCE is $13,618,260 and $3,167,999 for EPS for a total of $16.7M. If the account were to be funded at only $17.1M, EEC would not be able to absorb a $1M reduction in its own expenditures in this account thus forcing a reduction to the FY14 funding levels for CFCE and EPS. 3000-7070 Reach Out and Read (ROR): The House increased the ROR appropriation in FY14 by $50K to $800K in FY14, but the Senate budget reduces it by $200K. 12

13. FY14 Budget: Comparison Minor Differences 3000-2000 Access Management: The House provided level funding for this account, but the Senate budget recommended, and the Senate approved, a $60K reduction from the FY13 appropriation level. 3000-5000 Head Start: The House version level funds this item, but the Senate approved an amendment to increase the appropriation from $8M to $8.2M. The Senate does include reporting language that requires EEC to provide the legislature by September 1, 2013 a spending plan for this account that compares FY14 award amounts to amounts awarded in FY13. 3000-6075 Mental Health: The House and Senate budgets are identical at $750K, and have only a minor technical difference. 13

14. FY14 Budget: Comparison Major Investments 3000-4070 Waitlist Initiative: This is a SWM initiative, and adopted by the Senate, that provides $15M for serving income eligible children from the waitlist. (Please see the discussion for 3000-4060 for fuller caseload context.) The House did not include a comparable initiative. Rate Reserve: The House added $7.5M for a one time rate reserve payment subject to the availability of funding through an FY13 state consolidated net surplus. Such funds would be used to help increase rates for early education and care providers. The Senate approved an amendment that provides $11.5M in reimbursement rate increase, also subject to the availability of funding through an FY13 state consolidated net surplus.  The major difference between the House and the Senate, aside from the funding totals, is that the House’s version is a one-time rate reserve payment; the Senate’s initiative is a reimbursement rate increase that would have to be annualized in FY15. 14

15. FY14 Budget: Comparison Other Proposals 3000-1001 Compliance Management (HOUSE PROPOSAL): This is to support the cost of the office for compliance management proposed in House outside section 14. The office would have a compliance manager who would review the oversight procedures utilized by EEC to ensure the safety of children attending child care or early education programs licensed by the department. The Senate did not adopt this initiative. 3000-3000 Innovative Curriculum in PreSchool Programs (SENATE PROPOSAL): This is a SWM initiative passed by the Senate at $250,000. The initiative is for the development of innovative curriculum in preschool programs for children from the age of 2 years and 9 months until they are kindergarten eligible. A matching amount of $1 is required for every $1 disbursed. 1599-0500 Study of Child Care (SENATE PROPOSAL): The Senate budget sets aside $500K in a reserve account for “a 2-year assessment of the provision of childcare supports funded in items 3000-3050, 3000-4050, 3000-4060, and 3000-4070; provided, that the assessment shall be directed by a nonprofit research organization with demonstrated experience assessing the business practices, service delivery and financial systems of state-subsidized childcare programs…” 15

16. FY14 Budget Process Prep Initial maintenance building process for FY14. starts in the summer of 2012. GOV Released on January 23, 2013. Funded EEC account at $619.4M, making significant investments in child care quality and access totaling $131M. Outside of the investments the Governor offered maintenance funding throughout the accounts House Released by HWM on April 10, 2013 and finalized by the House a few weeks later. The House did not embrace any early education initiatives offered by the Governor. On the contrary, the House budget slashed Income Eligible funding and included PAC language reasoning that there is a surplus currently in the account. The House did recommend maintenance funding for all other non-caseload accounts. Senate Released by SWM on May 15 and finalized by the Senate on 5/23/13. The Senate provided over $18M more in funding for the department as a whole compared to the House version. The major difference is that the Senate invested more in direct child care than the House. Senate’s caseload appropriation would enable EEC to maintain current caseload and begin reversing the growth of the IE waitlist caseload. Conf To reconcile the difference between the House and Senate versions a Conference committee is established comprising 3 members from each the House and Senate. The report of that committee is typically completed by mid to late June. The House and Senate enact the bill and send it to the Governor for his signature The bill becomes law upon the Governor’s signature. Veto & Override Governor may sign the bill with objections to certain items. Everything outside of those vetoed items become law July 1. The vetoed items must be overridden by 2/3 of the House and then the Senate. FY14 GAA Once vetoes and overrides are done the FY14 budget is complete. 16