LEGISLATIVE FISCAL ESTIMATE
[Second Reprint]
ASSEMBLY, No. 4177
STATE OF NEW JERSEY
220th LEGISLATURE
SUMMARY
DATED: MAY 26, 2023
Synopsis: Extends duration of law requiring certain provider subsidy payments
for child care services be based on enrollment.
Type of Impact: Potential State expenditure increase.
Agencies Affected: Division of Family Development, Department of Human Services.
Office of Legislative Services Estimate
Fiscal Impact 12-Month Period
Potential State Expenditure Increase Up to $48 million
 The Office of Legislative Services (OLS) concludes that this bill will result in the Division of
Family Development in the Department of Human Services incurring a potential increase of
up to $48 million in expenses under the Child Care Subsidy Program due to continuing an
enrollment-based payment system through June 30, 2025. The OLS notes that the department,
in response to FY 2024 OLS Discussion Point Questions, indicated the continuation of this
policy, absent a legislative mandate, through June 2024. As such, this bill will incur costs for
the State from July 1, 2024 through June 30, 2025 – a 12-month period.
 The OLS does not have access to data on the existing cost of this policy, but notes that the FY
2023 Appropriations Act allocated $48 million from the federal Coronavirus State Fiscal
Recovery Fund grant for the purpose of this initiative. As of May 22, 2023, these funds have
yet to be disbursed, and the OLS assumes that this allocation will be used to support the bill’s
provisions in FY 2024. In FY 2025, the State would need to shift these federal dollars to
another federal or State source.
 The Department of Human Services indicated during the FY 2024 Budget Process that an
undisclosed amount of the $100 million proposed increase for the Child Care Subsidy Program
is intended to continue this policy in FY 2024. Absent this proposed State funding in FY 2024
and FY 2025, this estimate will increase by an indeterminate amount.
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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 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.
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, to provide that the provisions of the law continue until June
30, 2025, instead of expiring on June 30, 2022 as provided for in existing law.
FISCAL ANALYSIS
EXECUTIVE BRANCH
None received.
OFFICE OF LEGISLATIVE SERVICES
The OLS concludes that this bill will result in the Division of Family Development incurring
a potential increase of up to $48 million 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 the department, in
response to FY 2024 OLS Discussion Point Questions, indicated the continuation of this policy,
absent a legislative mandate, through June 2024. As such, this bill will incur costs for the State
from July 1, 2024 through June 30, 2025 – a 12-month period.
Since March 2020, in response to the COVID-19 pandemic, the Department of Human
Services 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 the FY 2023 Appropriations Act allocated
$48 million from the State’s flexible $6.24 billion federal Coronavirus State Fiscal Recovery Fund
grant, which the State received under the American Rescue Plan Act of 2021, for the purpose of
this policy. As of May 22, 2023, these funds have yet to be disbursed, and the OLS assumes that
this allocation will be used to support the bill’s provisions in FY 2024.
In FY 2025, the State would need to shift these federal dollars to another source. To the extent
that the department can continue to use federal COVID-19 assistance funds, the State costs
incurred by the bill will be reduced. For example, 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 May 22, 2023, $83.8 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
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assumes that federal COVID assistance could partially offset the State costs of this bill, rather than
eliminate the costs. It is also possible that additional funds from the federal Coronavirus State
Fiscal Recovery Fund grant will be allocated for the purposes of this bill. All stimulus funds from
this source must be obligated by December 31, 2024 and expended by December 31, 2026.
The OLS 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. To the extent that these factors have changed since the $48 million federal allocation
under the FY 2023 Appropriations Act, the annual State cost of this bill may increase or decrease.
In addition, the Department of Human Services indicated during the FY 2024 Budget Process that
an undisclosed amount of the $100 million proposed increase for the Child Care Subsidy Program
is intended to continue this policy in FY 2024. Absent this proposed State funding in FY 2024
and FY 2025, the estimate under this bill will increase by an indeterminate amount.
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.).