LEGISLATIVE FISCAL ESTIMATE
[First Reprint]
SENATE, No. 2478
STATE OF NEW JERSEY
220th LEGISLATURE
DATED: AUGUST 9, 2022
SUMMARY
Synopsis: Amends law requiring certain provider subsidy payments for child
care services be based on enrollment.
Type of Impact: State expenditure increase.
Agencies Affected: Division of Family Development, Department of Human Services.
Office of Legislative Services Estimate
Fiscal Impact 34-Month Period
State Expenditure Increase Indeterminate
 The Office of Legislative Services (OLS) concludes that this bill will result in the Division of
Family Development (DFD) in the Department of Human Services (DHS) incurring an
indeterminate increase in expenses under the Child Care Subsidy Program due to continuing
an enrollment-based payment system beyond June 30, 2022, the expiration date for the existing
policy codified in law, through June 30, 2025. The OLS notes that in May of 2022, the DHS
announced the continuation of this policy, absent of a legislative mandate and upon the
identification of additional discretionary funds, through August of 2022. As such, this bill will
incur costs for the State from September 1, 2022 through June 30, 2025 – a 34-month period.
 The OLS lacks the data to quantify this increase but notes that the distribution of ages of
children served under the Child Care Subsidy Program will be a significant cost-driver in this
initiative, as infants generally receive the highest subsidy payment and school-aged children
receive the lowest subsidy payment. To the extent that the department uses federal COVID-
19 assistance funds to implement this policy, the costs incurred by the bill will be reduced.
 The OLS also estimates that the department will experience costs to comply with the
reporting requirements of the bill, and notes that P.L.2021, c.324, in concurrence with the
Governor’s recommendations, appropriated $400,000 to complete the initial study
required pursuant to that law.
Office of Legislative Services Legislative Budget and Finance Office
State House Annex Phone (609) 847-3105
P.O. Box 068 Fax (609) 777-2442
Trenton, New Jersey 08625 www.njleg.state.nj.us
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BILL DESCRIPTION
This bill extends the applicability of P.L.2021, c.324, which requires that subsidy payments
to licensed child care providers be based on enrollment of students who are eligible for child
care services, rather than on attendance. As originally enacted, P.L.2021, c.324 would ha ve
expired on June 30, 2022. This bill instead provides that the provisions of P.L.2021, c.324
will continue in effect for an additional three years, and will expire instead on June 30, 2025.
P.L.2021, c.324 currently directs the Division of Family Development in the Department of
Human Services to submit a report to the Governor and the Legislature on the study conducted
under the provisions of P.L.2021, c.324 within 12 months following the effective date of that
law. This bill provides that, in addition to that initial report, the division will be required to
submit a final report within three years following the effective date of this bill.
FISCAL ANALYSIS
EXECUTIVE BRANCH
None received.
OFFICE OF LEGISLATIVE SERVICES
The OLS concludes that this bill will result in the DFD in the DHS incurring an indeterminate
increase in expenses under the Child Care Subsidy Program due to continuing an enrollment-based
payment system beyond June 30, 2022, the expiration date for the existing policy codified in law,
through June 30, 2025. The OLS notes that in May of 2022, the DHS announced the continuation
of this policy, absent of a legislative mandate and upon the identification of additional
discretionary funds, through August of 2022. As such, this bill will incur costs for the State from
September 1, 2022 through June 30, 2025 – a 34-month period.
Since March 2020, in response to the COVID-19 pandemic, the DHS has paid child care
providers based on enrollment rather than attendance using various sources of federal COVID-19
assistance funds, such as the Coronavirus Relief Fund and the Consolidated Appropriations Act.
The OLS does not have access to data on the cost of this policy over the course of its
implementation, but notes that as there have been improvements in pandemic conditions, the cost
of this policy has likely decreased as enrollment and attendance numbers become more aligned.
To the extent that the department can continue to use federal COVID-19 assistance funds, the
costs incurred by the bill will be reduced. Specifically, the division received $267.3 million in
supplementary discretionary funds under the Child Care and Development Block Grant program
as part of the federal American Rescue Plan of 2021. These funds may be used for activities
allowed under the Child Care and Development Fund, which include the provision of child care
services, activities to improve the quality of child care, and administrative costs. Under federal
law, these funds must be obligated by September 30, 2023 and spent by September 20, 2024. As
of June 8, 2022, $225.7 million of these discretionary funds are unexpended or unencumbered. As
these federal funds are required to be encumbered before the policy under the bill expires, the OLS
assumes that federal COVID assistance could partially offset the State costs of this bill, rather than
eliminate the costs.
According to its responses to FY 2023 OLS Discussion Points, the DHS intends to use these
funds for the following: maintaining supplemental payments to providers for children receiving
assistance through the state’s child care assistance program; continuing to provide child care
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assistance for parents who do not meet work requirements due to work hours’ fluctuation at
redetermination of benefits; and implementing financial incentives to increase the number of child
care providers that offer non-traditional evening and weekend hours. To the extent that the
discretionary funds under the Child Care and Development Block Grant program are used to
implement the bill’s provisions, the above efforts may be disrupted or require State funding.
The OLS lacks the data to quantify this increase but notes that the distribution of ages of
children served under the Child Care Subsidy Program will be a significant cost-driver in this
initiative, as infants generally receive the highest subsidy payment and school-aged children
receive the lowest subsidy payment. Other factors include the number of providers within the
Grow NJ Kids program, which received a higher per child subsidy rate in exchange for
participating in the State’s Quality Rating and Improvement System.
The OLS also estimates that the department will experience costs to comply with the reporting
requirements of the bill, and notes that the P.L.2021, c.324, in concurrence with the Governor’s
recommendations, appropriated $400,000 to complete the initial study required pursuant to
that law.
Section: Human Services
Analyst: Sarah Schmidt
Lead Research Analyst
Approved: Thomas Koenig
Legislative Budget and Finance Officer
This legislative fiscal estimate has been produced by the Office of Legislative Services due to the
failure of the Executive Branch to respond to our request for a fiscal note.
This fiscal estimate has been prepared pursuant to P.L.1980, c.67 (C.52:13B-6 et seq.).