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Rate Increase Application Letter

California Department of Education
Official Letter
California Department of Education
Official Letter

November 9, 2017

Dear County and District Superintendents and Executive Directors of Center-Based Child Care and Development Programs:


California Education Code (EC) Section 8265(d) allows a rate increase for contractors on a case-by-case basis in order to maintain service levels for contracts currently at a rate less than the Standard Reimbursement Rate (SRR). Increases approved through this application will be retroactive to July 1, 2017. Contractors may apply for a rate increase if the contract rate for a center-based child development contract has a daily rate less than $45.44 for General Childcare and Development Program (CCTR) or $45.73 for California State Preschool Program (CSPP), and secondly meets one or more of the following:

  • Loss of program resources from other sources;

    Contractors must clearly demonstrate how the loss of supplemental funds or in-kind contributions will affect the program. Copies of correspondence from the funding source(s) documenting the reduced funding must be submitted. The loss of in-kind contributions must be quantified with a dollar amount.

  • Need of a contractor to pay the same child care rates as those prevailing in the local community;

    Contractors must clearly demonstrate how their current contracted rate has had an adverse effect on the quality of care offered by the contractor. The lesser of the contractor’s documented requested contracted rate, the SRR, or the Reimbursement Ceilings for Subsidized Child Care found on the Reimbursement Ceilings for Subsidized Child Care Web page at will be used to determine the maximum rate allowed.

  • Increased cost directly attributable to new or amended regulations;

    Contractors must clearly demonstrate that they will experience a cost increase as a direct result of one or more provisions of a new or amended regulation. To be considered under this criterion, contractors must identify and describe how each new or amended regulation will increase cost.

  • Increased costs necessary to maintain the prior year’s level of service and ensure the continuation of the program;

    Contractors must clearly demonstrate that they will experience a cost increase that threatens the ability to maintain the prior year’s service level. To be considered under this criterion, the contractor must provide documentation of each cost increase.

If program costs have increased for any of the above reasons over multiple years, contractors can review prior year June Year End Earnings calculations (CDNFS 8501F or CDNFS 9500F) to determine whether contract expenses have a history of exceeding service earnings. If net reimbursable costs (Line 8) have a multi-year history of exceeding service earnings (Line 21), a rate increase may be warranted.

In all cases, contractors must clearly demonstrate that the current year’s projected costs have increased and thereby threaten continuation of the existing program. Copies of prior and current year documentation for all areas of increased costs must be attached.

Documentation must reflect a complete audit trail for increased costs. For example, applications based on labor cost increases must be documented by board-adopted salary schedules for Fiscal Years (FY’s) 2016–17 and 2017–18, listing of the appropriate staff on the salary range or step, and the number of staff affected. Board minutes can indicate that the FY 2017–18 salary increase is contingent on the approval of the rate increase application. Any worksheets or calculations that help clarify and/or justify the amount requested should also be included.

Eligible contractors who wish to apply for a rate increase must complete the attached application (CDNFS 3104) and return it with an original signature to the Child Development and Nutrition Fiscal Services (CDNFS) unit by December 31, 2017. No faxed applications will be accepted, because an original signature is required. Applications and all supporting documentation must be received by the deadline to be considered. Extensions will not be granted.

Applications will be evaluated based upon the information and documentation submitted, as well as an analysis of the contractor's historical earnings. Applications will be approved, partially approved, or denied based on CDNFS’ evaluation. If available information does not clearly support the amount being requested, that portion of the request for a rate increase will be denied. Contract service levels may not decrease below the current level of services being projected in FY 2017–18 as a result of a rate increase. EC Section 8265(d)(2) requires that child care agencies funded at the lowest rates be given first priority for increases. Therefore, rate increases are subject to the availability of funding if the rate increase results in a need to increase the contract’s maximum reimbursable amount (MRA). However, increases to the contract’s MRA is not always necessary, as under earnings may be used to fund the rate increase.

If you have questions about this application process, please contact Elena Fong, Fiscal Analyst, Child Development and Nutrition Fiscal Services, by phone at 916-324-6560, or by e-mail at


Original signed by Andrea Johnson

Andrea Johnson, Staff Services Manager II
Child Development and Nutrition Fiscal Services
Fiscal and Administrative Services Division


Last Reviewed: Monday, November 13, 2017

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