GAO Releases New Report on Child Care Assistance

May 06, 2010

By Elizabeth Hoffmann

Yesterday, the Government Accountability Office (GAO) released a report examining trends in child care subsidy receipt. GAO analysis found that between 2006 and 2008, the average number of children and families served by the Child Care and Development Block Grant (CCDBG) declined by about 170,000 children, or 10 percent. The number served had been fairly steady between 2000 and 2006. However, data varies by state-34 states had declines in children served between 2006 and 2008, while the remaining 17 states had increases. More information can be found in CLASP's detailed fact sheets on CCDBG participation and expenditure data, as well as state profiles.

Many states also fund child care assistance through Temporary Assistance to Needy Families (TANF), either directly or through transferring up to 30 percent of their TANF money to CCDBG, and through the Social Services Block Grant (SSBG). Direct participation data on child care subsidies funded through these two funding streams is not available, but GAO uses other data to estimate a decline in recipients of child care assistance from these funds as well.

Yet, between 2000 and 2007, the number of children from birth to age 13 living in low-income households (those earning less than 200 percent of the federal poverty level) grew by nearly 1.2 million children, or 5 percent. (Center on Budget and Policy Priorities analysis of March 2001 and 2008 Current Population Survey data.) In other words, the number of children receiving help has fallen while the number of children living in low-income families potentially eligible for assistance has grown. The result may be a larger share of unserved children today, as compared to 2000. 

GAO found that multiple reasons could contribute to this decline in child care assistance participants in CCDBG and other funding streams.

  • State Policy: States can set child care assistance policies that directly affect resource allocation, such as whether to use other funding streams like TANF and SSBG for child care, what the provider payments are, what family co-payments are, and what the family eligibility levels are.
  • Supply of Child Care: Around half (43 percent) of states reported that the number of regulated child care providers had decreased in their states since 2006. Increased state-level requirements of providers participating in the subsidy program and the economic downturn may have influenced some providers' decisions to no longer offer child care.
  • Demand for Child Care: Factors related to the current economic climate may also be affecting parents' demand for child care. With higher unemployment rates and reduced hours, some parents may not be able to meet work-related eligibility requirements. Changing work schedules, including to shift work at non-traditional hours, may also cause parents to demand different types of child care or drop out of the subsidy program.

Despite the overall decline during the period from 2006-2008, some states reported taking actions that could help improve access to child care subsidies for low-income children and families. For example, GAO found that 18 states raised income eligibility levels, 14 states improved other factors related to eligibility (such as allowing additional eligible work/educational activities or expanding time allowed for job search), and 9 states decreased parent co-payments.

The Department of Health and Human Services (HHS) provided comments on GAO's findings. HHS notes that there has been a decline in CCDBG inflation-adjusted spending, at the same time that there has been an increase in the cost of child care. With fewer resources available, states must make difficult choices between decreasing the number of children served, reducing the amount of child care subsidies, or reducing quality expenditures.  

In 2009, CCDBG received an additional $2 billion in funding to be used over two years through the American Recovery and Reinvestment Act (ARRA). This funding provides states with the opportunity to maintain and improve state child care policies through several policy options. Several states have already taken action to improve child care access and quality using their ARRA funds.

There are several policy choices that can enact to limit or expand access to subsidies. One, the reimbursement rate that states set for child care providers receiving child care subsidies, may specifically address the issues raised in the GAO report. Research has found that if rates are too low, child care providers may not be able to stay in business, or may be unable to serve children receiving subsidies. In 2009, less than one-fifth of states set their reimbursement rates at levels that are adequate for providers.

Child care subsidies are critical for low-income families' ability to obtain and maintain employment, while ensuring that their children are in safe, reliable care. Moving forward, it will be important to continue federal investments in CCDBG and promote state policies to ensure access to high-quality care for low-income children and families.

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