More Stable Funding Can Help Improve Quality in Child Care

Blog Post
Feb. 9, 2016

Federal child care subsidies play a crucial role in the lives of low-income families, greatly improving access to care so that parents can work and attend school. For thousands of Americans with young children, child care costs hover at or near the top of their expenses. In about half of states, child care is more expensive than college tuition. With low adult-child ratios, safe facilities, appropriate environments, and qualified teachers, it’s no surprise that even decent child care costs a significant amount of money. Without access to subsidies, thousands of parents would be unable to access care.

The Child Care and Development Block Grant (CCDBG), the primary federal program that provides child care subsidies to low-income families through states, has been a rare area of bipartisan agreement in a Congress notorious for agreeing on and accomplishing little. The law was reauthorized in 2014 and Congress has been slowly but steadily increasing funding for the program over the years. However, this law leaves a lot of room for state flexibility, and some states have been better than others in helping families access care.

Unfortunately, there are multiple factors that can impede low-income families from actually receiving their child care subsidies. A couple of the more obvious obstacles might be income eligibility guidelines or long waiting lists for subsidies. But some of the largest impediments are state-level policies that discourage child care providers from opening their doors to families paying with subsidies. If states fail to adequately reimburse child care providers (i.e. pay them around the same amount as private-paying families) for children receiving subsidies, providers may choose not to serve those children or the quality of care that they are able to provide might suffer. Another option is for child care providers to ask families to cover the difference. Either way, families paying with subsidies lose out.

In our recent report, From Crawling to Walking: Ranking States on Birth-3rd Grade Policies that Support Strong Readers, we rank states on policy indicators that promote strong literacy skills by the end of third grade. We included two indicators around how states reimburse child care providers:

  1. Is the state's reimbursement rate equal to or above the 75th percentile of current market rate in 2014?
  2. Does state provide reimbursement of child absence days?
For child care providers to offer high quality services to families eligible for subsidies, they must be reimbursed sufficiently. The federal government recommends that states reimburse providers at the 75th percentile of the market rate to safeguard against providers turning away children who qualify for subsidies and to ensure that they receive enough money to provide quality services. Right now, as depicted on the map below (taken from our interactive Atlas tool), only two states met that threshold in 2014. According to the National Women’s Law Center, this is a “significant decrease from the twenty-two states with rates at the recommended level in 2001.” A handful of states did increase their rates this in the past year but they are still below the federally recommended level.

Another way that states might discourage providers from offering services to families paying with subsidies is if they fail to reimburse for child absences. When private-paying families miss a scheduled day of child care they usually still pay for the day of care. Afterall, the provider still has to cover expenses of running the program-- such as rent, facility management, teacher salaries, and administrative costs-- even if the child is absent. However, many states set restrictions around reimbursing providers for days that the child is absent, even though the provider has incurred sunk costs.

States have a varying and often confusing policies when it comes to reimbursing for absences. As depicted in the map below, only seven states reimburse for an unlimited number of absences and three do not reimburse for any. Other states differ significantly on their generosity. For instance, Washington state “ reimburses for all absent days for licensed child care centers and licensed family child care providers, if the child is scheduled to attend and payment is authorized for care for those days and if the child attends care as scheduled at least one day during the month,” whereas North Dakota only “reimburses for up to 16 hours per calendar month if a child is absent due to an illness or medical appointment.” Colorado and Texas, on the other hand, allow localities to make such determinations.

Many of these state policies could lead to children with subsidies losing their spot in child care or low-income families covering the cost of missed days. These policies are especially detrimental when you consider that children from low-income families may be prone to absences for several reasons. For one, disadvantaged children are more likely to be sick, which may lead to unscheduled absences. Children in low-income families could also be prone to absences because of their parent’s unpredictable work scheduling or transportation challenges.

On the bright side, the newly reauthorized CCDBG law does leave some room for addressing this problem. In the proposed regulations for the new law, the U.S. Department of Health and Human Services (HHS) says, “While Lead Agencies have flexibility to determine payment processes for subsidies, we believe that it is appropriate to set some Federal benchmarks for what constitutes timely payments, delinking of payments and absent days, and generally accepted payment practices.” If these benchmarks make it into the final rule, it would help ensure families with subsidies can access quality care. "