Dear California State Preschool Program Executive Directors and Program Directors:

2025–26 California State Preschool Contract Changes

The purpose of this letter is to inform California State Preschool Program (CSPP) contractors of changes to contracts and reporting procedures beginning July 1, 2025. Please share this letter with your agency staff.

Budget Act Amendments

The Early Education and Nutrition Fiscal Services (EENFS) unit has processed amendments to Fiscal Year (FY) 2025–26 CSPP contracts to incorporate changes from the 2025 Budget Act. As a reminder, Budget Act amendments to CSPP contracts are processed as allocation letters, which do not require a signature from the contractor. A copy of the executed amendment, including a contract face sheet detailing fiscal changes, will continue to be provided by the California Department of Education (CDE) Contracts Office.

Allocation to Support Increases in the Number of Three-Year-Olds Served

Assembly Bill (AB) 102 (Chapter 5, Statutes of 2025) provided funding to support increases in the number of three-year-old children served in CSPP. Funding was allocated to CSPP contractors based on priority. First, to support contractors who had increased their three-year-old enrollment between March 2022 and March 2025, and secondarily to provide funding for contractors to increase the number of three-year-old children in future fiscal years.

Non-Local Educational Agency (non-LEA) CSPP contractors who experienced a growth in the number of three-year-old children between March 2022 and March 2025 received an increase up to 9.45 percent, while LEA CSPP contractors received up to 11 percent. This increase was based on actual child counts, representing an increase in enrollment between 2022 and 2025, and the growth percentage applied to March 2025 three-year-old enrollment. This child count was then multiplied by the appropriate adjustment factor (full-day vs part-day), the county rate in which services are provided, and the contractor’s minimum days of operation.

With the remaining funds, all CSPP contractors received a general increase of 2.44 percent, based on each contractor’s Maximum Reimbursable Amount (MRA), to support any future increases in the number of three-year-old children served.

Contractors received their contract amendment for this purpose in late September 2025.

Prospective Pay Allocations

AB 102 provided funding to assist contractors with the implementation of prospective pay, including automation costs. Contractors who have been approved to provide service through Family Child Care Home Education Network (FCCHEN) providers and/or subcontracts are eligible to receive this allocation. This allocation will be provided in FY 2025–26 to facilitate the implementation of prospective pay requirements that are expected to begin in FY 2026–27.

While there is no specific law detailing how prospective pay will be implemented, contractors who provide service through a FCCHEN provider and/or subcontract will be required to pay providers prior to services being rendered. This is expected to increase contractors’ administrative workload, as reconciliation based on actual enrollment will occur after payments are made.

These funds were appropriated through AB 102 for CDE to support alignment between CSPP and the child care and development programs administered by the California Department of Social Services (CDSS), as CDSS childcare programs funded with federal funds are required to implement prospective pay by federal law. Because of the cross-agency impacts, CDE is collaborating with the California Department of Social Services to align timing for releasing these funds with CDSS as well as timing on implementation. As more details become available, the CDE will share with contractors.

Fiscal Year 2025–26 Reimbursement Rates

Section 1 of Senate Bill (SB) 120 (Chapter 13, Statutes of 2025) amended Education Code (EC) Section 8242 to specify that the annual cost-of-living adjustment for preschool programs for FY 2025–26 required by EC Section 8242(b) and (c) shall be zero. As a result, there will be no allocation to increase the CSPP contract reimbursement rates in FY 2025–26.

The FY 2025–26 county reimbursement rates can be found at https://www.cde.ca.gov/fg/aa/cd/ratereformresources.asp.

Welfare and Institutions Code (WIC) Section 10227.6(j) stipulates that CSPP contract reimbursement beyond FY 2025–26 shall be no less than contractors’ current reimbursement, inclusive of the Cost of Care Plus Rate. While Cost of Care Plus Rate allocations are paid outside of contract, they should be perceived as an ongoing fund source.

Cost of Care Plus Rate Allocations

SB 120, later amended by SB 151 (Chapter 108, Statutes of 2025), authorized the CDE to continue providing FCCHEN providers and centers with the monthly Cost of Care Plus Rate in FY 2025–26. The Cost of Care Plus Rate allocation is a monthly payment for FCCHEN providers and centers, based on the number of children enrolled in a CSPP.

Allocations are based on a per-child rate amount dependent upon the region in which the FCCHEN provider or center is located, as well as a 10 percent administrative fee to CSPP contractors required to distribute monthly payments to FCCHEN providers or center subcontractors. WIC Sections 10277.1(f) and 10277.2(f) specify that the 10 percent administrative fee for processing the monthly payments to FCCHEN providers and subcontractors will be based on the per-child rate as of June 30, 2025. Contractors required to distribute one-time allocations to FCCHEN providers will receive a 5 percent administrative fee, as noted in the Allocations for Family Child Care Providers section below. 

To provide funding in a timely manner, the CDE is issuing Cost of Care Plus Rate payments as quarterly advances to CSPP contractors. Payment advances for CSPP contractors that are LEAs will be reconciled using the monthly enrollment data submission in the California Preschool Data Collection (CAPSDAC) System. For CSPP contractors that are not CAPSDAC users (e.g. non-LEAs and Community College Districts), Child Development Management Information System (CDMIS) 801A Report enrollment data will continue to be used for payment advances and reconciliations.

Allocations for Family Childcare Providers

Pursuant to SB 151 and the Agreement with the Child Care Providers United, all represented FCCHEN providers shall receive a one-time payment in addition to their monthly per-child allocation. Items A through C of this section detail the Cost of Care Plus Rate per-child amounts that are applicable to FCCHEN providers in FY 2025–26.

A. The per-child amounts for family childcare providers from July 1, 2025 through December 31, 2025 are as follows:

For additional information on the Cost of Care Plus Rate allocations, please refer to the Allocations Paid Outside of the CSPP Contract Frequently Asked Questions (FAQs), which can be found at https://www.cde.ca.gov/fg/aa/cd/allocationsfaq.asp.

One-Time Stabilization Payments

Pursuant to SB 151, FCCHEN providers and centers shall receive a one-time, per-child stabilization payment of $431, based on April 2025 enrollment in FY 2025–26. An additional five percent allocation will be issued to CSPP contractors to cover the administrative costs associated with distributing these payments to FCCHEN providers and subcontractors. The scheduled pay date for these payments is November 10, 2025, and the Invoice ID will be “SB 151 Stabilization.”

For CSPP contractors who provide services through family child care providers operating in their FCCHEN and/or who subcontract with centers, there are specific timelines for passing the funds to the provider or subcontractor. Specifically:

• For contractors operating a FCCHEN, per the union agreement, funds are required to be distributed to the family child care provider no later than January 1, 2026.
• For contractors who provide services through subcontractors, funds must be distributed to subcontractors promptly upon receipt of the one-time stabilization payments. The CDE recommends these payments be made to centers who are subcontractors no later than 21 calendar days following receipt of funds.

Fiscal Year 2025–26 California State Preschool Program Hold Harmless for Enrollment and Attendance

Per EC Section 8245.5(c), for FY 2025–26, if a program is open and operating in accordance with their approved program calendar and remains open and providing services through the program year, the CSPP contract reimbursement amount will continue to be based on the lesser of either of the following:

(1) One hundred percent of the contract MRA.

(2) Net reimbursable program costs.

For information on how CSPP contract reimbursement is calculated in FY 2025–26, please refer to the Limits of Reimbursement Section of the FY 2024–25 Enrollment, Attendance, and Fiscal Reporting, and Reimbursement Procedures for Early Education Contractors, also known as the EENFS Fiscal Handbook, located at https://www.cde.ca.gov/fg/aa/cd/. The FY 2025–26 version of the EENFS Fiscal Handbook, which will be posted in the fall, will include the same limits of reimbursement guidance as found in the FY 2024–25 EENFS Fiscal Handbook.

The hold harmless policy is expected to end on June 30, 2026, and contract reimbursement in FY 2026–27 will be based on the lesser of the three limits outlined in EC Section 8245.5(g):

• The contract MRA.
• Net reimbursable program costs.
• The product of the adjusted child days of enrollment for certified children times the contract rate.

While service earnings are not a limit of reimbursement in FY 2025–26, all contract earnings calculations include service earnings. Contractors should review the projected service earnings this fiscal year in preparation for the contract earnings and reimbursement changes in FY 2026–27.

Reporting Updates

Reporting Prospective Pay Administrative Costs and Contract Earnings Calculation Changes

AB 102 appropriated funding for the CDE to issue allocations to CSPP contractors that provide services through a FCCHEN provider or a subcontract for the implementation of prospective pay. Specifically, funding was provided to assist contractors with the following:

• Implementation of prospective pay. This allocation is intended to support the salaries and benefits of the staff who are performing payment reconciliation.
• One-time automation costs related to prospective pay.

Pursuant to SB 105, costs incurred for this purpose are exempt from the administrative costs limit set forth in EC Section 8258.

To allow the CDE to accurately determine a contractor’s administrative cost limit, FY 2025–26 Enrollment, Attendance, and Fiscal Reports and contract earnings calculations in the California Preschool Accounting Reporting Information System (CPARIS) have been modified. Contractors that provide services through a FCCHEN provider or a subcontract must report the costs associated with prospective pay on the Prospective Pay Administrative Cost line in the Enrollment, Attendance, and Fiscal Report. Administrative costs not associated with prospective pay must be reported on the All Other Administrative Cost line. Separating the prospective pay costs from other administrative costs will allow the contract earnings calculation to exclude expenditures related to prospective pay when determining the maximum administrative cost.

More information regarding the implementation of prospective pay will be forthcoming. Until guidance has been provided, contractors should not report any costs on the Prospective Pay Administrative Cost line.

Reporting Family Fees

Contractors must report the amount of family fees assessed between July 1, 2025, and June 30, 2026, on the line Family Fees for Certified Children in the FY 2025–26 Enrollment, Attendance, and Fiscal Reports submitted in CPARIS. Contractors are reminded that family fees reported on the Family Fees for Certified Children line must be based on the amount of fees the contractor expects to collect in the report month, regardless of when the revenue is received. Reporting fees according to this directive will ensure the CDE is reimbursing contractors accurately.

In instances where a family has children enrolled in both a CSPP administered by the CDE, and a childcare program administered by the CDSS, with the same number of hours, the contractor has the discretion on where to report the assessed fee (i.e., to either the CDE or the CDSS contract). However, to ensure consistency from one report month to the next, contractors must have written policies or procedures on how they determine the program to which they report the family fee.

Reporting Three- and Four-Year-Olds Served in a CSPP

Contractors are reminded that reporting child days of enrollment within the Two Years Old and Three Years Old and the Four Years and Older adjustment factor categories are based on the statutory age definitions. The following examples illustrate what age-based adjustment factor category should be used based on a child’s birthday:

• A child whose third birthday is on or before December 1, 2025, is statutorily three years old and shall be reported within the Two Years Old and Three Years Old adjustment factor category for the entire fiscal year.
• A child whose fourth birthday is on or before December 1, 2025, is statutorily four years old and shall be reported within the Four Years and Older adjustment factor category for the entire fiscal year.
• A child whose fourth birthday is after December 1, 2025, is statutorily three years old and shall be reported within the Two Years Old and Three Years Old adjustment factor category for the entire fiscal year.

Serving Children with Exceptional Needs in the California State Preschool Program

EC Section 8205(ae) defines funded enrollment as the number of subsidized children funded to be enrolled, based on the MRA, contract rate, inclusive of any adjustment factors, and approved program calendar, by a CSPP contractor. Pursuant to EC Section 8208(c)(1), in FY 2025–26, CSPP contractors are required to set aside five percent of funded enrollment for children with exceptional needs as defined in EC Section 8205.

EENFS developed an Exceptional Needs Funded Enrollment Calculator which contractors can use as a tool to determine the number of children associated with the five percent set aside requirement in determining the number of children funded to serve by service county, as well as the number of children required to meet the set aside to serve children with exceptional needs and children with severe disabilities. The Funded Enrollment calculator can be found at https://www.cde.ca.gov/fg/aa/cd/documents/fundedenrollmentcalculator.xlsx. Additionally, a video walkthrough of how to use the funded enrollment calculator can be found at https://youtu.be/c1i0d4RIe8Q .

Reimbursement for the Required Set Aside

To ensure funding is available to enroll children with exceptional needs within the required set aside, contractors will be fully funded for the percentage of funded enrollment set aside amounts, pursuant to EC Section 8208(c)(2)(B). The CDE will advance funding set aside for children with exceptional needs based on the normal apportionment schedule, regardless of whether the contractor is fully earning their set aside amount.

The CDE will determine the extent to which contractors are earning their set aside amount based on the child days of enrollment reported within the exceptional needs and severely disabled adjustment factor categories. Contractors who are not fully earning the amount set aside to serve children with exceptional needs will receive a service-level exemption credit, which allows the contractor to be reimbursed for identified expenses without meeting the service requirement. The service-level exemption credit does not increase the MRA, and the amount of the service-level exemption credit included in apportionment payments may be less than what is calculated, based on the limits of reimbursement pursuant to EC Section 8245.5(c).

The CSPP contract earnings calculations, found in CPARIS in the Certified Reports section, include the required set aside amount, the earnings associated with the set aside amount, and the service-level exemption credit, if applicable. Contractors can use this information to track their earnings related to the set aside amount.

Reporting Unearned Prior Year Service-Level Exemption Credit

Pursuant to EC Section 8208(c)(2)(B), contractors were fully funded in FYs 2022–23, 2023–24, and 2024–25 for the percentage of funded enrollment set aside amounts to ensure funding was available to enroll children with exceptional needs. Contractors that did not fully earn the MRA and the set aside in FYs 2022–23, 2023–24, and/or 2024–25 through providing services to exceptional needs and severely disabled children may have received a service level exemption credit in those fiscal years. The CDE will not be invoicing the portion of the credit that remained unspent. Instead, these funds will be considered deferred revenue, and contractors may use that funding to cover FY 2025–26 expenses.

The deferred revenue related to unspent FYs 2022-23, 2023-24, and/or 2024-25 set aside should be spent prior to other income sources, including current year contract funds, and must be reported as restricted revenue on the Restricted Income: Exceptional Needs/Severely Disabled Service Level Exemption Credit line in the FY 2025–26 Enrollment, Attendance, and Fiscal Report in CPARIS. As a reminder, revenue should only be reported when its corresponding expenses are also reported.

Determining FY 2025-26 Unearned Service-Level Exemption Credit

The amount of deferred revenue that a contractor can utilize in subsequent fiscal years may be less than the service-level exemption credit reflected in the contractor’s earnings calculation in CPARIS. The amount of deferred revenue is dependent upon the contractor’s expenditures reported in the same fiscal year the credit is calculated. The FY 2025–26 June and audited contract earnings calculations will include a new table that will calculate the amount of deferred revenue from the exceptional needs and severely disabled service level exemption credit.

California State Preschool Program/General Childcare and Development Transfer Requests

During the year, a contractor may find that projected services or funding needs have changed, requiring a transfer of funds between their CSPP and General Childcare and Development (CCTR) contracts. EC Section 8216 requires that the CDE arrange intra-agency adjustments between CSPP and CCTR contracts for the same agency and funding allocation to promote the full utilization of childcare and development funds. Although administration of CCTR programs has shifted to the CDSS, contractors may still request a transfer between their CCTR and CSPP contracts. Transfers between contracts can only be requested for the current fiscal year.

There are two periods for non-LEA contractors to submit transfer requests: (1) January 1, 2026, to January 15, 2026, and (2) April 1, 2026, to April 15, 2026. Transfer requests for CSPP will be available during the transfer periods and must be submitted in CPARIS. For information on how to submit the corresponding CCTR transfer request, please contact the assigned CDSS fiscal analyst.

As a reminder, LEA and Community College District (CCD) CSPP contracts are funded entirely by Proposition 98 funding. This change in the appropriation for CSPP funding began in FY 2015–16 and remains in effect. LEAs and CCDs therefore cannot transfer funds between CSPP and CCTR contracts.

If a significant portion of the contract MRA is being requested to transfer, the Early Education Division (EED) may require a Program Narrative Change form. The Program Narrative Change form should describe any changes to the number of sites operated by the contractor, any changes to the age group of children served by the contractor, and/or any significant changes in the provision of full-day versus part-day CSPP services. For further information or instructions on completing this form, please contact your assigned EED, Program Quality Implementation (PQI) office Regional Consultant.

For further information or instructions on completing the request, please contact your assigned EENFS fiscal analyst.

Reporting Requirements and Reminders

Enrollment, attendance, and fiscal data provided to EENFS must adhere to all applicable laws, regulations, and the Contract Terms and Conditions (CT&C). CSPP contractors should review written policies and procedures related to enrollment, attendance, income, and expenditure reporting no less than annually, and update procedures as frequently as necessary. The beginning of a fiscal year is also a good time to review cost allocation plans and equipment inventory records. Additionally, clearly written procedures should be developed to ensure accurate reporting to the EENFS, which may include a procedure for data reconciliation.

All federal and state funds allocated for the CSPP are subject to audit, including allocations outside of contract such as Cost of Care Plus Rate allocations. All income and expenditures must be appropriately tracked by contractors, which includes maintaining records for payments to FCCHEN providers, and all purchase orders or receipts must be maintained to verify appropriate use of funds.

All expenses reimbursable to the preschool program should be reported in CPARIS. Expenses must be reported in the Reimbursable Expenses section of the Enrollment, Attendance, and Fiscal Report in CPARIS; this includes salaries, operating expenses, and supplies. Any restricted revenue used for those expenses should be reported in the Revenue section. Income used to enhance the program beyond the basic early education services should be reported in the Supplemental Revenue section, and the associated expenses in the Supplemental Expenses section.

Contractors are reminded that reporting revenue is dependent on the source of the income and how it is spent. Revenue should only be reported when its corresponding expenses are also reported. Restricted revenue reported in the Restricted Income categories in the Enrollment, Attendance, and Fiscal Report is income provided for a specific, limited purpose, and that can only be expended for certified children (5 CCR Section 17700).

Additionally, if contractors earned government funding, such as Paycheck Protection Program, Employee Retention Tax Credit funding, or prior year exceptional needs set aside, related to expenses claimed as reimbursable to a contract, that revenue is considered program revenue, and the funds must be reported as restricted income. It is important to ensure all restricted income is correctly reported throughout the year. Restricted income that is not reported during the fiscal year will result in inaccurate projected contract earnings and could result in a large, unexpected billing when contract earnings are finalized.

EENFS projects contract earnings based on data provided by programs. The omission of expenses could lead to a cash flow shortage for the program. We encourage a thorough review of program expenses to ensure that all reimbursable expenses are being reported appropriately to EENFS.

5 CCR Section 17816 requires that contractors report expenditures on an accrual basis. Costs are projected by EENFS to determine payment. The effect of reporting costs on a cash basis is an under- or over-payment. To ensure proper cash flow, and to remain in compliance with 5 CCR and the CT&C, it is imperative that programs accrue their costs.

California Preschool Accounting Reporting Information System Resources

CPARIS can be accessed through https://cparis.cde.ca.gov/cparis/logon.aspx.

Monthly or quarterly CSPP Enrollment, Attendance, and Fiscal Reports and CPKS Support Contract Expenses Reports must be submitted through CPARIS. The CPARIS User Manual provides further information and detailed instructions on online reporting, including guidance related to adding new users to the system, viewing payment data, and submitting report data.

Additionally, contractors may reference the CPARIS FAQs regarding logging in, passwords, adding new users, user roles, and reporting. The User Manual and FAQs can be found on the home page of CPARIS, as well at https://www.cde.ca.gov/fg/aa/cd/cparishomepage.asp. If additional assistance is needed, contractors may email CPARIS Support at cparissupport@cde.ca.gov.

Additional Contract Resources

The EENFS webpage contains valuable resources for contractors, including the Enrollment, Attendance, and Fiscal Reporting, and Reimbursement Procedures for Early Education Contractors, also known as the EENFS Fiscal Handbook. Supplemental fiscal guidance, such as contract-related updates, rate reform resources, and the CT&C, can be found on the EENFS webpage at https://www.cde.ca.gov/fg/aa/cd/. Previously recorded webinars and associated FAQs for each presentation can be found at the link above as well as at https://www.cde.ca.gov/fg/aa/cd/webinarsandtrainings.asp.

Enrollment, Attendance, and Fiscal Reporting and Reimbursement Reminders

The Enrollment, Attendance, and Fiscal Reporting and Reimbursement Procedures, also referenced as the EENFS Fiscal Handbook, is in the process of being revised for FY 2025–26. Contractors will be notified via the EED email distribution list when the FY 2025–26 EENFS Fiscal Handbook is posted to the EENFS webpage. Contractors may sign up for the EED email distribution list at https://www.cde.ca.gov/sp/cd/ci/emailindex.asp.

Analyst Directory

The CDE understands that contractors may need additional support throughout the fiscal year due to changes in reimbursement and reporting requirements and encourages contractors to reach out for assistance in navigating these changes. If you have any questions about a specific contract or need clarification about any topic covered in this letter, please contact your assigned EENFS fiscal analyst.

Please refer to the EENFS analyst directory at http://www.cde.ca.gov/fg/aa/cd/faad.asp for up-to-date fiscal analyst county assignments and contact information.

Sincerely,

Corey Khan, Staff Services Manager III

Early Education and Nutrition Fiscal Services

Fiscal and Administrative Services Division