State officials and family advocates say 300,000 low-income families are in danger of losing child-care subsidies until a California budget is signed.

As a result of a recent state Supreme Court decision, the state controller has said that, as of July 1, the Department of Education cannot release subsidy funding until legislators agree upon a budget.

Shondell Pearson, 31, of North Sacramento said temporarily losing child-care money for her three youngest children may force her to leave her job as a family service worker with the Sacramento Employment and Training Agency.

"I can't leave them at home," she said. "I'm really going to have to think about quitting my job if that happens."

After spending nearly a decade on and off welfare, Pearson has been studying at American River College and working full time since 1997, thanks largely to the availability of subsidized child care.

She and her husband, who also works, have begun making payments on a house, but now Pearson is afraid she will have to go back on aid to care for Julian, 6; Jamil, 4; and Jada, 18 months.

Advocates say the temporary loss of subsidies could force parents throughout the state to make similarly painful decisions.

"They have the option of losing their job, staying home, going back on public assistance," said Donna Sneeringer, a manager with Child Action, a nonprofit group in Sacramento that links parents with appropriate providers.

"The other alternative is to leave children home alone, with older children or with neighbors. They're going to try to do the best they can, but it will really put the children at risk," she said.

Child-care providers -- particularly those who work in small centers or their own homes -- also face difficult decisions.

"I either close my doors because I can't afford to work for free, or I terminate care for subsidized families, or I increase the pay rates of private-pay families," said Gayle Sarkissian, who cares for 14 children -- eight of them on subsidies -- in Citrus Heights. "I'm hoping these people will get busy and do their jobs so I don't have to make those decisions."

Sarkissian spoke at a press conference sponsored by child-care advocates Thursday at the Norwood Early Learning Center in Del Paso Heights. The center serves 72 children and is in danger of temporarily losing the bulk of its funding and canceling much of its programming.

"We feel we can keep things going at least through August," said Sharon Neese, a manager of the Sacramento Employment and Training Agency, which operates Norwood and several other centers.

Michael Jett, director of the Child Development Division of the state Department of Education, said some parents and centers could face difficult decisions.

"People are holding their breath; they're very concerned," he said.

Legislators are notoriously late finalizing the state's annual budget by the July 1 deadline. Last year's budget was signed in September.

In a normal year, Jett said, the Department of Education would send child-care providers the fiscal year's first three months of funding around July 15.

For a number of reasons, this year's impasse may have especially severe consequences on child care.

The first factor stems from the recent Supreme Court decision, Jarvis v. Westly, which legally prevents the state from making payments to some child-care providers, community colleges and other vendors who do business with the state until the budget is signed.

"We have lots of vendors, whether they provide child-care services or whether they provide just normal office products, who are going to be in a potential cash-flow crunch," said Walter Barnes, chief deputy controller. "That will happen no matter what kind of service they provide."

In the past, some child-care providers turned to banks for loans. For smaller agencies, however, getting a loan can be exceptionally difficult in hard economic times.

"We have agencies that cannot even pay the interest on that loan," said Denyne Kowalewski, executive director of the California Alternative Payment Program, which coordinates payments for child care throughout the state

For parents, the decision to leave a job to care for a child may have repercussions during a period of economic downturn.

"Temporary unemployment in an economy like this, it's going to be really hard to find another job," said Alli Harper, lead organizer of Parent Voices, a grass-roots organization advocating affordable and accessible child care.

California's subsidized child-care system includes CalWORKs recipients and other low-income families.

CalWORKs child-care subsidies are provided in three stages. Stage 1, which begins when a family goes on welfare, is funded through the state Department of Social Services. Federally mandated, Stage 1 subsidies will not be affected by the funding freeze.

Stage 2 is for more economically stable families and is funded through the state Department of Education. Kowalewski said that parents may be considered stable if they are in school, have a job or have a home.

The Department of Education also funds Stage 3 subsidies, which are for families who have been off CalWORKs for at least two years.

Stage 2 and Stage 3 subsides will be affected by the delay, as will other subsidies funded through the Department of Education for low-income families not in the CalWORKs system.

Gov. Gray Davis has proposed $2.2 billion for all Department of Education child-care programs combined.

About 584,000 children have been subsidized through the Department of Education in the past year, according to Jett, and advocates say up to 500,000 of them could be affected by the budget delay.

State officials are searching for the legal means to fund child care for the 165,000 children served by Stage 2 subsidies in an average month. They say the remaining children will definitely not be eligible for subsidies until the budget is passed.

Sibil Berg, 27, of Fair Oaks is the single mother of children ages 3, 5 and 8. She pays $65 a month to send them to in-home child care while she works as a payroll administrator.

Without subsidies, child care would cost $75 a day. If she had to pay that price, in addition to taxes and medical insurance, her take-home pay would be only $119 a week.

"I may have to quit my job," she said. "That would be the only thing to do. I'd make more money being at home on aid than working.

"I don't want to raise my children in that lifestyle," she added.