California Assembly Bill AB120

California 2025-2026 Regular Session

• Introduced: 1/8/25
• Refer: 2/3/25
• Engrossed: 3/20/25
• Refer: 3/20/25
• Refer: 4/2/25
• Report Pass: 6/24/25
• Refer: 6/24/25
• Report Pass: 6/25/25
• Refer: 7/2/25

Caption

An act relating to the Budget Act of 2025. to amend Sections 8242, 8245.5, and 42238.15 of the Education Code, and to amend Sections 10227.5, 10227.6, 10243, 10271, 10277.1, 10277.2, 10280, and 10374.5 of the Welfare and Institutions Code, relating to early childhood education and childcare, and making an appropriation therefor, to take effect immediately, bill related to the budget.

Summary

AB 120 is a Budget Act trailer bill focused on early childhood education and childcare. It makes a series of changes to California’s subsidized childcare and state preschool reimbursement systems, including extending and modifying “cost of care plus” payments for family childcare providers and centers, shifting some reimbursements from attendance-based to certified-need-based calculations for the 2025-26 fiscal year, and extending the period for quarterly legislative updates on the state’s new reimbursement methodology. The bill also extends eligibility continuity for families that add a child during an existing eligibility period, ensuring the new child receives at least 12 months of eligibility before redetermination. The bill further adjusts how the state pays providers and contractors by changing daily-rate reimbursement thresholds from six hours to five hours in certain cases, suspending the childcare cost-of-living adjustment for 2025-26, and revising contract reimbursement rules for state preschool and childcare contractors. It also continues the Legislature’s move away from regional market rate surveys and toward an alternative methodology for setting future rates, with the stated intent that rates be unified, per-child based, and informed by geography, care setting, regulatory requirements, time categories, and child age. The bill includes a fallback to market surveys if the federal government does not approve the alternative methodology. AB 120 also makes appropriations, including $88.55 million from the General Fund for reimbursement based on families’ certified need during 2025-26, and it takes effect immediately as a budget-related measure. In addition, it updates reporting requirements for the Department of Social Services and the Department of Education, including cost-of-care plus payment administration, data sharing, and implementation reporting to the Legislature. The bill amends multiple sections of the Education Code and Welfare and Institutions Code that govern subsidized childcare, California state preschool, alternative payment programs, and family childcare home education networks. The general sentiment reflected in the voting history appears supportive. The bill passed the Assembly on March 20, 2025, by a wide margin and later received a 13-5 do-pass vote in committee on June 25, 2025. The absence of committee transcript material limits insight into detailed debate, but the strong vote margins suggest broad agreement on the bill’s overall direction, especially its funding and reimbursement changes for childcare providers. The main points of contention are likely to center on fiscal cost, the suspension of the 2025-26 cost-of-living adjustment, and the policy shift from attendance-based reimbursement to certified-need-based reimbursement. Those changes affect how much providers are paid and how much administrative tracking is required, so providers, fiscal watchdogs, and budget negotiators may differ on whether the new structure is adequately funded and operationally workable. Another potential issue is the bill’s reliance on an alternative rate-setting methodology and its interaction with any memorandum of understanding reached with provider organizations, which the bill says can control in case of conflict.

Impact

AB 120 amends the Education Code and Welfare and Institutions Code to change eligibility, reporting, and reimbursement rules for state-subsidized childcare, alternative payment programs, CalWORKs childcare, family childcare home education networks, and California state preschool programs. It extends or modifies existing cost-of-care plus payments, suspends the childcare COLA for 2025-26, changes daily-rate reimbursement thresholds from six to five hours, and requires certain 2025-26 reimbursements to be based on certified need rather than actual attendance. It also extends legislative reporting on the state’s alternative rate-setting methodology and expresses intent to replace regional market rate surveys with a unified, statute-based reimbursement structure.

Sentiment

The bill appears to have generally favorable support in the Legislature, as shown by a strong Assembly floor vote and a committee do-pass vote in the Senate process. The available record does not include committee testimony, but the vote margins suggest the bill was viewed as a broadly acceptable budget and childcare policy package. Support likely stems from its funding for providers and its continuation of the state’s childcare rate-reform efforts, even though some provisions reduce or defer automatic increases.

Contention

Likely areas of contention include the bill’s fiscal impact, especially the $88.55 million General Fund appropriation and the broader cost of extending provider payments. Another point of debate is the suspension of the 2025-26 COLA, which may be seen as limiting automatic inflation protection for providers even as the bill expands other payments. The shift to certified-need-based reimbursement, and the move away from attendance-based billing and regional market rate surveys, may also be controversial because it changes provider payment mechanics, administrative burdens, and the basis for future rate setting. Provider organizations may also focus on the bill’s interaction with memoranda of understanding and whether statutory reimbursement rules should yield to negotiated agreements.