2. Within amounts appropriated specifically therefor, and after deducting funds as specified in subdivision three of this section the commissioner shall allocate funds to local social services districts for grants to eligible not-for-profit day care centers for retention and recruitment of teaching and supervisory staff, as follows:

1. (a) a city social services district with a population in excess of one million shall be allocated a portion of such funds based on an equal weighting of:

   1. (i) its proportion of the state population of children aged five and under, and
   2. (ii) its proportion of total claims for reimbursement received by the department by May thirty-first, nineteen hundred eighty-eight for the low income, transitional and teen parent day care programs authorized by chapter fifty-three of the laws of nineteen hundred eighty-seven.
2. (b) all other eligible local social services districts shall be allocated the remaining portion of funds based on each district's proportionate share of licensed not-for-profit day care capacity relative to the total capacity of all such other eligible districts.

3. Five percent of the funds appropriated for such recruitment and retention purposes shall be reserved for administration of the program and allocated as follows:

1. (a) each local social services district shall be allocated an amount equivalent to five percent of the funds it receives under paragraphs (a) and (b) of subdivision two of this section, provided that no district shall receive an amount less than twenty-five hundred dollars nor greater than one hundred fifty thousand dollars, and
2. (b) remaining funds shall be allocated to the department. In the event that a not-for-profit child care resource and referral agency or the department distributes funds in an eligible district, as provided herein, such agency or department may retain the amount that otherwise would be available to the eligible district.

6. Eligible districts may apply on or before the ninetieth day following the effective date of this section to receive such allocated funds by submitting to the department a plan on forms provided by the department. Such plan shall be developed by the local social services commissioner in consultation with directors of participating eligible day care centers, as such term is defined herein. Such plan shall include: methods to increase the amount of day care provided for families having an income at or below two hundred percent of the federal proverty level in such district; proposed steps to be taken to sustain gains in recruitment and retention of staff achieved by funds provided herein; information specified in paragraph (c) of subdivision seven of this section; and a proposed allocation of funds to eligible day care centers based on the following factors:

1. (a) forty percent of the funds allocated to such district shall be distributed to each eligible center based on such center's share of the total full time equivalent teaching and supervisory staff of such centers in the district as a whole;
2. (b) forty percent of the funds allocated to such district shall be distributed to each eligible center based on such center's share of the number of children from families having an income at or below two hundred percent of the federal poverty level receiving day care services in all such centers in the district, regardless of whether such children are receiving subsidized care; and
3. (c) notwithstanding any other provision of this subdivision, twenty percent of the funds allocated to such district shall be distributed to some or all eligible centers in a manner to further improve recruitment and retention of qualified staff. Distributions under this paragraph shall be based on factors including, but not be limited to seniority; educational qualifications; worker income; benefit levels, vacancy and turnover rates; or enhancement of distributions pursuant to paragraph (a) or (b) of this subdivision. The commissioner shall make copies of proposals available to the public upon request.

7. For the purposes of this section, an eligible day care center means a not-for-profit center which provides services for children in single or double sessions for six or more hours per day for five or more days per week and holds a permit or certificate issued pursuant to (i) the provisions of section three hundred ninety of this article, or (ii) the New York city health code as authorized by section five hundred fifty-eight of the New York city charter; provided, however, that:

1. (a) a center whose permit has been denied, suspended or revoked, or which is found in any twelve month period preceding or following the date of the allocation of funds made pursuant to subdivision two of this section to be in violation of section three hundred ninety of this article after a hearing conducted as provided therein or after decision by any court of competent jurisdiction, shall not be eligible to receive funds pursuant to this section;
2. (b) the existence of a current contract for purchase of day care services between an eligible district and a center may not be required as a precondition to receive such funds, but such center shall agree to accept children subsidized by the district in the next available space after receipt of a request from the district to place a child in such center;

3. (c) each such center must provide to the local social services district the following information on forms provided by the department:

   1. (i) child care capacity, by ages of children;
   2. (ii) the number of children in such center, by ages, whose families have incomes at or below two hundred percent of the federal poverty level, regardless of whether such children are receiving subsidized care;
   3. (iii) the number of children specified in subparagraph (ii) of this paragraph receiving subsidies and the type of subsidy;
   4. (iv) a schedule of fees charged for services;
   5. (v) the total annual revenue from all sources, including fees, donations, grants, revenue from local governments and revenue from state agencies;
   6. (vi) the total annual expenditures for rent or mortgage payments; equipment, property, liability and other insurance; utilities; food; supplies and materials; and
   7. (vii) total annual expenditures for salaries and benefits, including the number, title, qualifications and salary levels of existing staff and types and amounts of benefits; and
4. (d) each eligible day care center must agree, to the maximum extent feasible, to enhance its future revenues to sustain the level of staff salary and benefits as provided herein.

(c) promulgate regulations not later than July first, nineteen hundred eighty-nine, to establish a maximum rate of payment for day care centers which shall reflect adjustments in the cost of care since the establishment of the maximum rate in effect on January first, nineteen hundred eighty-six. Such maximum rate shall be calculated by applying thereto increases in the cost of living since January first, nineteen hundred eighty-six, updated by the department through December thirty-first, nineteen hundred eighty-nine, and also to the extent possible and based on the availability of such information, factors such as changes in the costs of insurance, rent, utilities and labor and benefits and such other factors the department shall deem appropriate, which exceed such increases in the cost of living, as updated through December thirty-first, nineteen hundred eighty-nine; provided, however, that:

1. (i) actual payment for day care services rendered shall not exceed the actual cost of such care;
2. (ii) nothing contained herein shall prevent the department from establishing a rate of payment for day care centers greater than that required pursuant to this subdivision;
3. (iii) approved rates of payment in excess of the rate established pursuant to this paragraph in effect prior to July first, nineteen hundred eighty-nine shall be continued;
4. (iv) nothing contained herein shall prevent the department from approving exceptions to the rate of payment established herein to meet specific identified needs of a local social services district;
5. (v) such regulations may include a higher maximum rate of payment for infant care, or care of children with special needs. d. Notwithstanding any other section of law to the contrary, by April first, nineteen hundred eighty-nine, the department shall develop guidelines and may, with the approval of the director of the division of the budget grant to local districts for one year waivers to income eligibility standards established pursuant to law for subsidized day care under the special day care services program. Such waivers shall be granted to increase eligibility standards up to twenty-five percent of the federal poverty level above the income eligibility standard established by law as a percentage of the federal poverty level. Waivers shall be granted only upon the submission of documentation establishing that:
6. (i) the local social services district is serving substantially all eligible families with incomes at or below the established income eligibility standard. A district shall be deemed to be serving substantially all eligible families if it meets the following two criteria: (a) the percentage of eligible children served in the district meets or exceeds the percentage of eligible children served statewide under the special day care services program and (b) the district has provided day care services to any additional children whose families have been identified in such district's outreach program as described in subparagraph (ii) of this paragraph as eligible for and desiring subsidized day care services;
7. (ii) the local district has established a district-wide outreach program which identifies eligible families who are not receiving subsidized child day care under the special day care services program, and informs all such families of their availability, and assists such families desiring subsidized services to obtain them;
8. (iii) a family receiving a subsidy under the district's waiver provisions shall be required to contribute a greater amount towards the cost of care than a family eligible under the established income eligibility standard;
9. (iv) the local district has included an estimate of the number of children who will be served under the waiver provisions;
10. (v) the local district has submitted claims to income eligible day care expenses under Title XX of the federal Social Security Act;
11. (vi) the district has available to it a higher allocation in the current fiscal year than the amount of reimbursement received by such district in the previous fiscal year for subsidized care under the special day care services program.
12. (e) submit a report to the governor and to the chairmen of the senate finance committee and the assembly ways and means committee not later than December thirty-first, nineteen hundred eighty-nine on the program established pursuant to this section, including the number, amount and recipients of grants in each eligible district; the purposes and uses of such grants; an evaluation of any resulting improvements in recruitment and retention of qualified staff, current local eligibility standards, any use of the waiver process, state cost of increasing the eligibility standards established by law up to twenty-five percent and fifty percent of the federal poverty level on a county by county basis for subsidized day care under the special day care services program and recommendations for long-term solutions to the problems of recruitment and retention of teaching and supervisory staff.