1. FY2012 Caseload Projection and Options Policy and Fiscal Committee June 6, 2011

2. Introduction EEC must sustain policy decisions implemented in FY11 to address the FY11 deficiency to help mitigate the FY12 structural deficiency. 1. Keep Income Eligible voucher access closed. 2. Strictly enforce the 5% Flex Cap on Contracted Slots. 3. Do not open up access for Teen Parent and Homeless slots. Both the House and Senate appropriation levels are well below the anticipated FY11 IE spending level of $245.4M based on April reports. As later slides will illustrate, strong actions are required of the department to live within the FY12 budget. 2

3. Totals FY12 IE Budget Breakdown 3 Total FY12 allocated budgeted dollars for known expenditures FY12 Contract/Flex budgeted funds based on awarded contracts. FY12 projected spending once # of contract/flex no longer exceed 5%. Remaining FY12 unallocated budgeted dollars available for voucher caseload. FY12 Proposed Budget - House and Senate

4. FY12 Known Off the Top Costs 4 To remediate the FY11 IE deficiency, EEC will utilize ARRA CCDF funding originally budgeted for ARRA costs in July and August of 2011 to support eligible CCDF expenditures in IE. This action, though necessary, will create a $2M hole in the FY12 IE account. VALUE: $2M To provide continuity of care for the 941 ARRA CCDF children for the remainder of FY12 will cost $4.7M ($2.8M in contracts and $1.9m in Vouchers). VALUE: $4.7M. IE funding will be directed toward the Special Education Inclusive Classroom grants at the FY10 and FY11 level. VALUE: $9M After all revenue obligations are considered for there will be $212.2M (Senate) to $221.7M (House) in revenue to support standard IE caseload. In FY11, EEC is currently projecting to spend $236.9M in caseload.

5. FY12 IE Contract Cost Assumptions 5 EEC projects a need of $127.2M for contact and flex spending in FY12. This assumes Aprils contract/flex caseload amount of 16,936 children multiplied by the average contract/flex annual cost per child of $7,512. EEC also projects that the enforcement of the 5% flex cap on contract slots will produce $3.6M in savings. After the cost for IE Contracts and flex slots is considered, the amount remaining for vouchers in FY12 IE would be $88.6M (Senate) to $98.1M (House).

6. FY12 IE Voucher Cost Assumptions This reduction is the net reduction after the addition of late billers and subtraction of attrition is calculated. Reducing the caseload up to 3,100 children beginning July 1 is not a practical scenario. EEC assumes reduction would be achieved throughout FY12 which means a greater number of children will be impacted in FY12. Using the Senates figures, if 500 per month is reasonable then voucher caseload will be 6K children less at the end of FY12 then at the beginning. Overall spending will need to be cut by $15.2 to $24.7M from FY11 levels. 6

7. FY12 Spending: Keep Access to Vouchers Closed House: To remain in budget in FY12 the IE Voucher caseload must be reduced by a net of 250 children and their monetary value per month. This presumes, for example, that if 1,000 children leave in a given month (attrition) then 750 children could come in the same month (late billing). If voucher caseload reduction exceeds the 250 mark (especially in the early months) then access closure policy could be revisited. Senate: To remain in budget in FY12 the IE Voucher caseload must be reduced by a net of 500 children and their monetary value per month. This presumes, for example, that if 1,000 children leave in a given month (attrition) then 500 children could come in the same month (late billing). If voucher caseload (and corresponding voucher value) reduction exceeds the 500 mark (especially in the early months) then access closure policy could be revisited. This is unlikely and we should be prepared for access to be closed throughout FY12. 7

8. FY12 Spending: Other Measures May Be Necessary House: While not likely, other measures to reduce costs may need to be considered if voucher caseload is not reduced enough to remain within budget. Senate: Other measures to reduce costs may need to be considered if voucher caseload is not reduced enough to remain within budget. If the ARRA Children are not granted continuity after their scheduled care ends in late August/early September, more money ($4.7M) would be available to support IE Vouchers. HOUSE: With an additional $4.7M in the budget the IE Voucher caseload would have to be reduced by only 100 children per month to remain in budget. This scenario makes the possibility of opening access during FY12 more likely and could eliminate the need to consider other actions. SENATE: With an additional $4.7M in the budget the IE Voucher caseload would have to be reduced by only 370 children per month (as opposed to 500 without) to remain in budget. This scenario makes opening access a remote possibility in FY12, but does not assure this or promise that other options would not be necessary. 8

9. FY12 Spending: Recommendation Keep access to IE vouchers closed throughout the first half of FY12. EEC will reassess this policy when 5 months of caseload data is available (January) and determine the best manner to re-open access with an eye on FY13. Allow care for the ARRA children to expire. This care was only scheduled to late August and early September. EEC is currently assessing the number of ARRA children who are 4 years old or older to determine savings if only this group were removed from care, leaving children 3 years old and younger in IE. Prepare the field for the possibility of additional measures to reduce spending if caseload does not sufficiently shrink. 9