Make Child Care More Affordable: States Should Use Relief Funds to Increase Income Eligibility

By Alyssa Fortner

Decades of underinvestment have produced a child care system that is widely inaccessible, unaffordable, and inequitable for many families. The instability of this system has nearly pushed the child care sector to its breaking point, and the COVID-19 pandemic has made this clearer than ever. Thankfully, the sector has received an infusion of federal relief funds. And one of the many ways states can use these dollars is to improve affordability and expand families’ child care access by increasing income eligibility limits.

Income eligibility limits determine which families can access child care supports, and these limits vary across states. According to research done by the National Women’s Law Center, a family of three in 2020 making 150 percent above the federal poverty level (FPL)—only $32,580—would not qualify for child care assistance in 13 states. These low eligibility levels are the result of a historic lack of investment in child care and force states to make difficult decisions with significant tradeoffs. This has led to families facing inequitable access to child care across the country—and the pandemic has only made this worse.  

The resources available for child care pandemic relief come from several sources including the Coronavirus Aid, Relief, and Economic Security (CARES) Act, the Coronavirus Response and Relief Supplemental Appropriations Act, 2021 (CRRSA), and the American Rescue Plan Act (ARPA). These funding streams total a historic $50 billion for the sector. This level of funding offers significant opportunities for states to make child care more accessible and affordable for families across the country.

During the pandemic, states have increased income eligibility for child care assistance using the relief funds in a variety of ways:

  • Using federal funds, Virginia has increased eligibility to 85 percent of the state median income (SMI) for families with at least one child under 5 who is not in kindergarten. For a family of three, for example, this would be $74,712. While the state originally used these eligibility limits until July 31, 2021, it has since extended them until December 31. Those who are approved during this window will continue to receive benefits for 12 months or until their income exceeds 85 percent SMI. So far, this has helped at least 1,000 additional families get child care assistance.
  • Through the state’s Hero Relief Child Care Assistance Program, Kansas increased its income eligibility to families who make up to 250 percent of the FPL ($54,900 for a family of three). To fund this expansion, the state is using CRRSA and ARPA dollars. This new limit went into effect on July 1, 2021, and the eligibility period will last for 12 months.
  • Beginning August 1, 2021, New Mexico started using ARPA emergency funds to increase eligibility for its Child Care Assistance Program (CCAP). The state raised its income eligibility from 200 percent of the FPL to 350 percent with a phase-out at 400 percent—making it the state with the highest eligibility limit. This means that, for example, a family of three’s eligibility would rise from $43,920 to $76,860, with a phase-out at $87,840. This dramatic increase will help alleviate the burden of child care costs for many middle-class families—families whose income is too high to qualify for assistance, but too low to comfortably afford care. This increase will remain in place for at least two years.

These are just a few examples of states’ actions to increase income eligibility that can create transformative change in their child care systems. As states continue to spend relief funding, increasing income eligibility limits could help lead to much-needed progress in addressing the crisis of unaffordable care. At the federal level, a higher eligibility threshold is being considered through a proposal in budget reconciliation. This would have a significant impact on equity in child care access nationwide. Meaningful increases in income eligibility should be a key component in efforts to shape a more equitable, sustainable child care system.