Most States Held the Line on Child Care Assistance, Largely Thanks to Economic Recovery Funds

A new report by the National Women’s Law Center shows that most states were able to protect their child care assistance programs in the face of major state budget gaps, largely thanks to an additional $2 billion in federal child care funding for 2009 and 2010 provided by the American Recovery and Reinvestment Act (ARRA). Yet, child care assistance policies still fall short in providing the help that families need, and states may take steps backward as they exhaust their ARRA funds unless there is new federal child care funding.

The report, State Child Care Assistance Policies: New Federal Funds Help States Weather the Storm, examines key state child care assistance policies—income eligibility limits, waiting lists, parent copayments, and provider reimbursement rates—and trends since 2009 and 2001. The majority of states did not have significant changes in these policies between February 2009 and February 2010.  However, most states’ policies remained in the same place as or behind where they were in 2001.

Between 2009 and 2010, six states increased their income eligibility limits for child care assistance beyond what was necessary to adjust for inflation, and an additional 32 states increased their income limits sufficiently to keep pace with inflation. All but one of the remaining states kept their income limits the same. Yet, in 21 states, the income limits in 2010 were lower as a percentage of the federal poverty level than in 2001. Over two-thirds of the states had income limits at or below 200 percent of poverty in 2010, even though families at this income level ($36,620 a year for a family of three) still struggle to cover their basic living expenses.

Nineteen states placed eligible families on waiting lists for child care assistance in 2010, the same number of states as in 2009, and only slightly lower than the number of states (21) in 2001. In some of these states, the waiting lists were very long—nearly 195,000 children in California, almost 67,000 children in Florida, about 38,000 children in North Carolina, over 22,000 children in Massachusetts, and over 11,000 children in Arizona. Families on the waiting list often struggle to afford child care while paying other bills or have no choice but to use lower-quality care because it is more affordable. Some parents on the waiting list are unable to work because they cannot afford child care on their own.

In about one-third of the states, families receiving child are assistance paid a lower percentage of their income in copayments in 2010 than in 2009, and in all but a few of the remaining states, families paid the same percentage of their income in copayments. Yet, in one-third to nearly half of the states, depending on income, families receiving child care assistance paid a higher percentage of their income in copayments in 2010 than in 2001. High copayments can strain the budgets of low-income families receiving child care assistance.

In 2010, only six states set their reimbursement rates for providers serving children receiving child care assistance at the federally recommended level (the 75th percentile of current market rates, the rate that is designed to allow families access to 75 percent of the providers in their communities). This was lower than the number of states—nine—with reimbursement rates at the recommended level in 2009, and one-third the number of states—22—with reimbursement rates at the recommended level in 2001. Low reimbursement rates deprive child care providers of the resources they need to provide a high-quality program and discourage high-quality providers from serving families receiving child care assistance. Yet children in low-income families receiving child care assistance need high-quality care that boosts their learning and development and gives them a strong start.

While the report focuses on states’ child care assistance policies as of February 2010, it  also includes some initial information about policy changes since that time—and that information offers a warning sign about what could happen if states do not receive additional child care funding as they use up their ARRA funds. Two states that used ARRA funds to increase their income eligibility limits have reduced or plan to reduce those income limits. Eleven states had or expected to have increases in their waiting lists for child care assistance, or expected to start waiting lists or to close intake. Nine states that used ARRA funds to expand access to child care assistance for parents searching for a job have reverted to their previous policies or plan to do so. New child care investments are essential to prevent such cuts and instead enable states to strengthen their child care assistance policies and help low-income families afford reliable, good-quality care.