American Public Human Services Association

Issues & Policy

Crossroads: Child Care

Current Program

Child care is a significant issue in the United States and demand for it and interest in it shows no sign of weakening. The public’s attention is fueled by several factors: first, the unprecedented numbers of women with children who are in the workforce; second, the high cost of care; and third, the difficulty that many families have in securing child care.

From a public policy perspective, child care is an essential service because of economic and labor issues, family and children’s issues, and in no small measure, because the success of the welfare reform law of 1996 depends upon it. Congress recognized that the law’s mandate for work would increase the need for child care, a necessity not readily affordable or accessible to low-income workers with children. As a result, much of the recent child care growth has occurred as a result of legislative changes in 1996, including the flexibility and funding afforded to states under the Personal Responsibility and Work Opportunity Reconciliation Act of 1996, P.L. 104-193 (PRWORA), and the expansion of child care funding.

Congress has tried to meet increasing demand by adding funds to the Child Care and Development Fund, Head Start, and other similar child care programs, and by allowing Temporary Assistance for Needy Families funds to be used for child care. Yet despite increased funding, with the unemployment rate the lowest in decades and the majority of mothers with children under age 18 in the labor force, there remains a pressing need for an adequate supply of affordable, reliable child care. States use these funds in a variety of ways, including center-based care, family home care, care in the child’s own home, and care by relatives.

For many poor families, simply finding child care can be difficult because of their circumstances, i.e., a lack of infant care, nontraditional work hours, or their remote geographic location. Moreover, it is disproportionately expensive for poor families. An analysis of the percentage of income paid by poor families for care showed that they spent 35.7 percent of their income on child care while nonpoor families spent 10.3 percent of their income on child care (Congressional Research Service analysis of U.S. Census Data).

On the present course, if welfare rolls continue to decline and as states strive to meet higher work participation rates, it is likely that the demand for child care will increase.

Not insignificant to the recent expansion of child care has been the relatively new emphasis on quality child care. This is largely the result of scientific research on learning, which has shown that a child’s brain development is strongly tied to his or her environment. The research, in turn, has spurred recognition in the importance of early childhood development in the environment that quality child care is capable of providing.

Still, it is important to recognize that even the best child care is not a replacement for the quality of family life. The family remains paramount to child development. Research clearly shows that, regardless of the amount of time a child spends in care situations, and notwithstanding the important influence of a quality child care program on enhancing a child’s development, the single most important factor in a child’s life remains the family context. As family assets and economic strength increase, the emotional and physical good health and well-being of a child increases. As risk factors multiply—poverty, low work skills, poor or transient housing, lack of affordable and accessible quality child care—the well-being of a child decreases.

The growth of child care services raises additional issues that will have to be addressed in the next few years. The need for more care, greater options, and a variety of services will result in an increased demand for infrastructure. A lack of facilities where care is most needed is likely to have an adverse effect on the child care system’s ability to address the needs of all families. Because child care is a relatively new and growing industry, backers of investment in the physical “plant” or buildings that house the care are not easy to find.

Funding

The Child Care and Development Fund (CCDF) is the name the Child Care Bureau has given to the new child care fund created by welfare reform. The fund is actually a consolidation of three federal funding sources and two state funds—discretionary funds, mandatory funds, and matching funds; state maintenance-of-effort (MOE) funds; and state matching funds. Congress has also created three quality set-aside programs as part of the discretionary fund.

Until fiscal year (FY) 2001, the discretionary fund, the Child Care and Development Block Grant (CCDBG), had been consistently funded at less than $1 billion since its creation in the Omnibus Budget Reconciliation Act of 1990 (OBRA 1990). For FY 2001, Congress provided a significant adjustment to the funding, increasing it to $2 billion.

The mandatory funds are the previous Aid to Families with Dependent Children (AFDC)–related child care funds. The law creates a formula whereby a state is given a child care block grant based on its previous federal funding level under the three welfare-related child care programs. The three programs on which the formula is based include AFDC/JOBS child care funds for recipients in the JOBS program, training, education or work; transitional assistance child care for recipients who had left AFDC; and at-risk child care for low-income families not on AFDC (the at-risk funds were capped). States receive these mandatory funds as an entitlement, and federal dollars are provided without the appropriations process. States do not have a spending requirement deadline. Funds may be carried over from year to year. Until FY 2001, mandatory funds represented the single biggest block of CCDF funds at approximately $1.2 billion.

The matching funds were a new source of child care funding included in the welfare reform law. From FYs 1999–2002, the matching funds increase each year by $200 million. In FY 1999 matching funds totaled approximately $900 million. In order to gain access to matching funds states must meet a child care MOE equal to the state matching dollars expending in FY 1994 for AFDC-related child care programs—AFDC/JOBS, transitional, and at-risk. These MOE dollars must be spent by the end of the fiscal year. After the MOE is satisfied, states match the federal funds at the Federal Medical Assistance Program (FMAP), also called the Medicaid matching rate. States must spend these funds by the end of the fiscal year. Finally, a state must obligate federal matching funds by the end of the fiscal year but must spend or liquidate the dollars by the end of the second fiscal year. Matching funds not used by one state will be redistributed to the remaining applying states.

A growing source of increased child care funds are the “set-asides” usually intended to address quality. In FY 1997, a $19 million fund for after-school resource and referral services was inserted into the appropriations bill. In FY 1998, a $50 million infant and toddler care fund was created. And in FY 1999, an additional $172 million in new quality funds were adopted. For FY 2001 the after-school funding stays at $19 million, but the set-aside for infants and toddlers rises to approximately $100 million, and the additional quality set-aside rises to nearly $200 million. States already have the authority to and do spend dollars on after-school care and infant care; these funds must be in addition to other state efforts on after-school and infant care and may have to be tracked separately.

Other sources of child care funds include Temporary Assistance for Needy Families (TANF) block grant funds that can be used in three ways to fund child care services. States have the option of transferring up to 30 percent of their TANF block grant into the child care fund. States also can spend TANF dollars directly on child care services for TANF-eligible families. In addition, states can include child care spending in their state TANF MOE requirement. Under both TANF and CCDF, states must maintain a previous historic level of spending. Some of these state child care dollars can count toward both a state’s TANF MOE and the state’s CCDF MOE.

Prior to the creation of CCDF, Title XX, the Social Services Block Grant (SSBG), and CCDBG were the only significant sources of federal block grant dollars for child care. Pre–welfare reform figures indicated that 15 percent of SSBG funds were used to pay for child care. Over the pre–welfare reform decade, the number of states using SSBG funds for child care fluctuated between 45 states in 1990 to 51 states in 1995.

Another category of child care is Head Start, which provides more than basic child care needs, but the population served by Head Start and state child care programs overlap. With its origins dating back to antipoverty programs of 1965, Head Start provides early childhood development, education, health, and nutrition services. The majority of recipients are TANF or AFDC families. Head Start funds flow directly between the U.S. Department of Health and Human Services (HHS) and local grantees, bypassing state child care programs. Historically, Head Start has been predominately a part-day, part-year program. In recent years, due to the recognition of the overlap in families served, greater efforts have been advanced by states, HHS, and in reauthorization legislation to blend funding and efforts between state child care programs and Head Start. The intent is to extend services to full day and full year so that families in need of such complete child care services will not be required to move their children between Head Start and other child care providers.

Recent awards of new Head Start grantees placed a higher value on those new Head Start grantees that coordinated with child care, including the provision of full-day services and the “blending” of new Head Start funds with child care funds. The Head Start reauthorization in 1998 included new legislative authority that placed a heavier emphasis on child care–Head Start linkage. Governors are to be consulted by HHS in the selection of grantees if the state invests Head Start funds. The new law also allows the use of copayments for Head Start families if the program blends funding with child care funds into a full-day, full-year program. In FY 2001 Head Start funding will increase to close to $6 billion.

Congress has also created the 21st Century Community Learning Centers, which provide after-school, continuing learning opportunities for children in a school setting. The program was created by Title X of the Elementary and Secondary Education Act. In 1998, $40 million was provided directly to applying projects (schools) in rural and urban settings. The 1999 Congress increased the funding level to $200 million, by 2000 it stood at $450 million. These programs are viewed by some as after-school child care, but the range of programs that are funded across the country is varied and may not always address child care needs. The funds flow directly between the U.S. Department of Education and the local grantee. This program is relatively new and efforts to blend funds or coordinate programs with state child care are limited.

Challenges

There are three challenges to child care in the upcoming reauthorization: first, maintain and enhance child care funding as the key support to a successful TANF program while recognizing child care’s role in helping a broader range of families; second, maintain state flexibility afforded states under the law and streamline the rules pertaining to administration of these funds; third, enhance the quality of child care services.

Support for child care is intertwined with the growing public sentiment that child care is a critical service for the American family. Its customers are both the children who are cared for in a range of settings and their parents who need dependable, safe, and effective care so they can meet their work, educational, and family responsibilities. As the family and society changed in the 20th century, so has child care.

Recommendations

Proposal

Maintain and Restore Funding; Preserve Flexibility

Continue funding the current CCDF at no less than $2 billion in discretionary funds and $2.7 billion in entitlement funding. In addition, add $200 million annually to the matching fund portion of CCDF. The law should continue to maintain the state’s option to draw down these funds by a matching fund formula. Funds that are not fully matched by some states should continue to be available to other states that have drawn down all their current funds.

Restore SSBG in full to $2.8 billion; maintain the TANF block grant at no less than current funding of $16.8 billion; preserve state authority to transfer up to 30 percent of the TANF block grant into CCDF, and preserve the ability to spend TANF funds directly on child care.

Maintain current program flexibility. Specifically, states should be allowed to obligate funds and liquidate them over time. This structure is an important part of CCDF flexibility and permits states an opportunity to design child care plans that balance the expansion of services and new quality of care initiatives. At the same time, APHSA recommends that the deadlines for expending the discretionary, matching, and mandatory child care funds be reviewed to determine if they can be improved upon.

Explanation

Child care expenditures are growing rapidly. In fact, states and local governments administer the largest sources of federally funded child care—CCDF, TANF, and SSBG. Since the establishment of CCDF, all states have met or exceeded the 100 percent MOE requirement; all federal matching funds have been drawn down; and all mandato-ry and discretionary funds have been obligated.

In 1999, child care spending had more than doubled since 1996. Recent data collected by APHSA show that while states experienced a historic expansion of child cares services in 1999, they also transferred large amounts of TANF funds to CCDF and spent TANF funds directly on child care services. In fact, in 1999 more TANF funds were spent on child care than all CCDF funds combined.

The current level of federal funding is inadequate to meet the needs of all CCDF-eligible families. Given the federal goal of providing services to all families with incomes at or below 85 percent of the state median, HHS officials estimate that less than 20 percent of all potential children are being served through CCDF.

Proposal

Examine Links to Other Programs

Eliminate the link between the Child and Adult Care Food Program and SSBG. Instead, the link should be made to SSBG, CCDF, or TANF-funded child care. This will have the impact of making some child care providers eligible for nutrition assistance under the Child and Adult Care Food Program, while not requiring them to meet an arbitrary spending requirement.

Continue and encourage Head Start awards that favor full-day, full-year services and services that blend funds. Any efforts to coordinate CCDF funded child care and other federal programs must maintain and respect parental choice in the design of these coordinated projects.

Evaluate future expansion of funds for afterschool and out-of-school time programs to determine their role in child care.

Explanation

An important service that plays a role in many child care programs is the U.S. Department of Agriculture’s (USDA) Child and Adult Care Food Program, which supports not only good nutrition for children in child care, but also can provide a vital link between CCDF programs and exempt child care services. This allows greater health, safety, and best practices information exchanges between these home-based providers and CCDF administrators. Unfortunately, the only way that for-profit providers of child care (no matter how marginal their profits) are able to qualify for the program is to establish that at least 25 percent of their child care “slots” or services are funded with SSBG dollars. This link is a remnant of earlier times when SSBG was the only major federal source of child care funding. SSBG has undergone severe reductions, forcing states to reduce their commitment to child care funding via SSBG. In turn, to maintain the eligibility of child care programs for the Child and Adult Care Food Program, states—at the advice of the Senate, USDA, and HHS—have been urged to pool these funds. “Pooled” means that states can mix very few SSBG dollars with other child care dollars to create a fund of child care dollars that are used to meet this food program requirement. These dollars fund 25 percent of child care slots so that these providers can qualify for a nutritional subsidy. The current structure creates unnecessary complication and administrative burden and results in restricting access for some children in child care. This is one example how other federal programs may play a role in the provision of child care. Other programs referenced in this paper include Head Start and programs that attempt to address out-of-school time needs of families and children.

After-school programs are an important part of child care services. This has been a special priority of some state child care systems. CCDF contributes a significant share of its funds for school-age child care. It is important that dollars invested in this service be maximized wherever possible. In recent years, after-school funding at the federal level has expanded significantly. APHSA urges that in future expansion of funds for after-school and out-of-school time programs be carefully evaluated to determine their role in child care. Out-of-school time funding must address child care needs.

Proposal

Engage in Efforts to Improve Quality

The federal government should support research that contributes to the understanding of measurable quality indicators that can be addressed at state and local levels.

Promote policies that encourage public and private sectors in building and sustaining an early care and education workforce that is well-trained, well-respected, and adequately compensated.

Explanation

For parents struggling to attain or maintain self-sufficiency, quality is a particularly significant issue. These parents are often the least skilled workers and fill entry-level positions in service and manufacturing industries that are associated with low pay and fluctuating hours or shift work. Many have compounded concerns around transportation, housing, medical care, and other basic needs. This makes their child care arrangements especially difficult to address and manage. Yet the overriding concerns for their children’s well-being remain a primary influence as they make decisions about work and advancement. If, as a nation, we expect families to be economically self-sufficient, we need to invest in the support services required to allow them to be so without sacrificing the well-being of their children.

Quality is an issue that will continue to grow in importance as the nation continues to recognize that child care is both a critical support for working parents and an opportunity to provide appropriate developmental and educational experiences that enhance the development and well-being of children.

Quality can be defined from various perspectives. From a family perspective, most parents are primarily concerned with the well-being of their children. Research supports the reality that parents cannot commit wholeheartedly to work and professional activity or training and educational opportunities unless they have confidence that while they work or study their children are in safe, stable care with trustworthy and competent caregivers. This reality cuts across the socioeconomic spectrum. As the majority of our modern work-force consists of working parents, safe, stable, developmentally appropriate child care, during the earliest years of a child’s life and into out-of-school care for school-age children, is critical in assuring a stable, competent, committed workforce.

States need time and flexibility to expand and explore child care quality initiatives to determine how to invest quality funds into activities that generate responsive, flexible, community-centered, culturally relevant child care options that support strong families and nurture capable children. To support parents in choosing providers who meet their needs and respect and reflect their family values and culture, there is a need to address quality in every program or setting, including center-based care, family child care homes, and care provided by relatives and neighbors.

The most significant factor influencing the quality of a child care setting is positive interactions between caregivers and children. The child care industry currently faces a critical staffing crisis. Practitioners in early care and education receive low wages and minimal benefits for work that requires a high degree of skill and competence. The ever-improving job market has had a negative impact on this segment of the workforce. Quality as well as capacity suffers from the effects of rapid turnover and an overabundance of entry level staff in an industry where experience and expertise make the critical difference for children and families in care.

Over the past several years, as CCDF has expanded and services in all jurisdictions have grown, these systems have expanded in different ways. States are as diverse in their child care services. Thus, enhancing the quality of child care will involve a diverse set of approaches, not just between states but within states. Strong families will affect the well-being of children and child care is certainly a critical element in helping families stay strong. We need to support families in their choices of care and improve the quality of that care wherever it is provided. This means continued investment and a stable child care system and source of funding. There needs to be a more active role from the public and private sectors in building and sustaining an educational structure that will encourage individuals to select a career in child care. This means more involvement from the higher education community along with private-sector support for such a commitment. If a career in child care becomes a genuine option, then the end result will be a reduction in the workforce turnover rate and an increase in the workforce skill level.

This funds committed to quality research should not be drawn from subsidy funds but should be part of a minimal national commitment to our children. Funding for all 50 states for research in this area could build a base of knowledge and help states make sound choices as they design integrated systems of care and education that benefit children, families, and a strong economy.

The goals of access and quality compete for limited child care resources. Increased reimbursement rates may build an infrastructure of quality child care. This approach would require significant increases in funding for child care assistance programs to support rate increases, as well as a continuing commitment to allocate some portion of funds toward quality enhancements that increase quality in all settings. APHSA believes funding increases in CCDF will help address the quality of child care.

Vision

Child care needs are likely to increase over the next decade and the demand for different types of care will grow as well. Maintaining and enhancing state flexibility in the financing and administration of child care are essential to meeting these needs today and in future years. Therefore, the current program structure that permits states to set priorities in the administration of CCDF, as well as the option to transfer TANF funds into CCDF, must remain intact. States should be granted more flexibility so that the financial rules governing CCDF do not consume valuable staff and administrative resources. In light of limited federal resources, the goals of achieving increased access to child care services often competes with the goal of improving child care. Additional funds may be necessary to make progress on both of these goals. However, new funds should not be targeted to certain populations or activities, and existing program funds should be leveraged together wherever possible. Enhancing the quality of child care services will produce real dividends today and for future generations as well.