Child Care and Development Fund, Report to Congress for Fiscal Years 2002 and 2003
Highlights from the Report
Child care funding is at a historically high level.
There has been a significant increase in Federal and State funds for child care over the past decade, particularly since the 1996 welfare reform legislation was enacted. The chart below, Federal and State Child Care Funding, includes Federal funds appropriated for child care, TANF dollars transferred to CCDF and spent directly on child care, Social Services Block Grant spending (FY 1996 through FY 2003), and State MOE and Matching Funds for child care.
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*Federal funds include mandatory and discretionary Child Care and Development Fund (CCDF) appropriations, Temporary Assistance for Needy Families direct spending and transfers to CCDF, Social Services Block Grant spending, and State MOE and Matching funds for child care.
As a result of the increase, the following sources provide an unprecedented level of funding for child care subsidies, quality improvements, and related programs.
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Child Care and Development Fund (CCDF): Since 1996, Federal funding specifically appropriated for child care through CCDF has more than doubled-from $2.2 billion in 1996 (CCDBG and Title IV-A) to $4.8 billion (CCDF) in FY 2002 and FY 2003.
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Temporary Assistance for Needy Families (TANF): States can transfer up to 30 percent of their Federal TANF dollars to CCDF and spend TANF funds directly for child care. (See more detailed discussion of TANF funding below.)
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State Spending Associated With CCDF and TANF: State spending accounts for more than a quarter of total State and Federal child care expenditures under CCDF and TANF. In both FY 2002 and FY 2003, States reported spending a total of $2.2 billion in State funds under CCDF, exceeding the aggregate amount required to access the maximum amount of available Federal funds. As discussed below, States also include child care expenditures in reports of State MOE Funds for the TANF program.
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Social Services Block Grant (SSBG or Title XX): The Social Services Block Grant funds a broad range of social services, including child care. Based on the most recent data from FY 2003, 41 States reported spending $165 million of SSBG funds for child care.
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State Pre-Kindergarten Programs: According to a 2004 Government Accountability Office report, 40 States spent more than $2.4 billion for pre-kindergarten during the 2001-2002 school year. Ten States accounted for over 80 percent of this amount. A portion of these funds is reported as State spending under CCDF to meet State Match and MOE requirements.
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Other Federal Sources: Head Start, a $6.5 billion dollar program in FY 2002 and a $6.7 billion program in FY 2003, works directly and through referrals to other programs to provide comprehensive developmental services for low-income preschool children and social services for their families. Additionally, the U.S. Department of Education provided nearly $1 billion for after-school programs through its 21st Century Community Learning Centers in both FY 2002 and FY 2003.
States are using significant amounts of Temporary Assistance for Needy Families (TANF) funds for child care.
Through transfers to CCDF and direct spending, many States rely on TANF as a major funding source for child care. In FY 2002, 41 States transferred $2.1 billion in TANF funds to CCDF and spent approximately $1.6 billion in TANF funds directly on child care. In FY 2003, 41 States transferred $1.8 billion in TANF funds to CCDF and spent roughly $1.7 billion directly on child care services. Between TANF transfers and direct spending, States invested $3.7 billion in FY 2002 and $3.5 billion in FY 2003 in TANF funds for child care-representing almost a third of all Federal and State child care funding through CCDF and TANF in each of the 2 years.
States have MOE requirements for both the CCDF and TANF programs. State spending on child care can dually qualify toward both the CCDF and TANF MOE requirements. In agreement with the Congressional Research Service (CRS), ACF considers State spending on child care reported in their TANF MOE reports to be additional State spending on child care only to the extent that it exceeds the CCDF MOE requirement in the State. ACF estimates that in FY 2003, States spent $865 million in child care services that met TANF State spending requirements but also exceeded the required CCDF State spending. This is a conservative estimate because it assumes that, of the TANF MOE funds spent on child care, 100 percent are also reported as CCDF MOE.
CCDF serves on average 1.75 million children per month.
In an average month in FY 2002, 1.74 million children (1.03 million families) received child care services with CCDF funds, including TANF transfers and State Matching and MOE Funds. This number slightly increased to 1.75 million children (1.02 million families) in FY 2003. HHS estimates that an additional 700,000 children were served in FY 2002 and 610,000 in FY 2003 through SSBG, direct TANF, and excess TANF MOE Funds. Hence, on average 2.4 million children per month were served in both FY 2002 and FY 2003 after accounting for all Federal and related State funding sources. The number of children served reflects both a slight increase in total State expenditures on child care in FY 2003 (including use of prior year funds) and the flexibility given to States in setting child care policies, including income eligibility requirements and parent co-payments.
CCDF largely serves families with incomes below or near poverty level.
Median monthly income for families served in FY 2002 was $1,235, or $14,820 when annualized; about 13 percent of families had income that exceeded $2,000 per month. In FY 2003, median monthly income increased slightly to $1,255, or $15,060 when annualized, and nearly 14 percent of families had income that exceeded $2,000. TANF was reported as a source of income for 17 percent of families receiving services through CCDF in FY 2002 and 18 percent in FY 2003.
This pie chart shows the distribution of income for CCDF recipients in FY 2003. Over half the families receiving CCDF reported incomes below the Federal poverty level ($15,260 for a family of three in the contiguous United States).
For context, the following table displays Federal poverty guidelines in FY 2003. These guidelines provide a consistent standard across States and take into account family size. They do not, however, take into account variations in the cost of living among States (except Alaska and Hawaii) or the benefits low-income families may receive such as Food Stamps, medical assistance, housing allowances, child care assistance, or the Earned Income Tax Credit.
2003 HHS Poverty Guidelines (Annual Income)
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Size of Family Unit
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48 Contiguous States and DC
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Alaska
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Hawaii
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| 1 | $8,980 | $11,210 | $10,330 |
| 2 | $12,120 | $15,140 | $13,940 |
| 3 | $15,260 | $19,070 | $17,550 |
| 4 | $18,400 | $23,000 | $21,160 |
| 5 | $21,540 | $26,930 | $24,770 |
Source: Federal Register, Vol. 68, No. 26, February 7, 2003, pp. 6456-6458.
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Prior to January 2002, case-level administrative data reported by States did not indicate the size of the family receiving services. Some of the analysis included in this report, such as the use of Federal poverty levels, requires data on the size of the family. For these purposes, CCB has assumed a family size of three, which available data indicates is reasonable for a typical family receiving CCDF services. |
Key Findings From CCB-Supported Research: Child Care Subsidies
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State policy decisions result in a wide variety of State subsidy systems and coverage patterns.
States have a great deal of flexibility under CCDF to develop child care programs and policies to suit the needs of individual children and parents they serve. States have flexibility in at least four key areas: income eligibility, target population, parents' co-payments, and provider reimbursement rates.
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Income Eligibility: States have authority to set income eligibility up to 85 percent of the State median income. Most States set program eligibility below 85 percent of the Federal maximum in order to concentrate the funding on families with very low incomes.
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Priorities and Target Population: States decide whether to target certain populations-for example, whether to focus on families transitioning off TANF or to treat all families the same, regardless of TANF status or history. Some States serve all eligible families who apply, while others have waiting lists of eligible families. A number of States, including Illinois, Kansas, Oregon, Rhode Island, Vermont, Washington, and Wisconsin, have created a single subsidy system that serves low-income families regardless of welfare status or history. States must give priority to children with special needs and children from very low-income families but have the flexibility to define "special needs" and "very low-income" in their Biennial State Plans.
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Parent Co-Payments: Some States have co-payment schedules that are designed to gradually ease families into paying child care costs, while others require very small co-payments even for families well above the poverty line. Nationally, of families with income who were served through CCDF in FY 2002 and FY 2003, approximately one-fourth had no assessed co-payment. The average co-payment for all families receiving CCDF assistance was roughly 4 percent of family income. Excluding families with no assessed co-payment, the national average was about 6 percent.
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Provider Reimbursement: In setting reimbursement rates, States must ensure that eligible children have equal access to child care services comparable to those available to children whose parents are not eligible to receive CCDF assistance. Twenty-seven States report capping rates at the 75th percentile or higher (FY 2002-FY 2003 State plans). This means that families in these States should have access to at least 75 percent of the care in the local market. A growing number of States pay higher rates to providers that meet quality benchmarks (such as accreditation) or hard-to-find care (e.g., nights and weekends), providing an incentive to improve quality and supply.
States use CCDF dollars to fund a variety of innovative efforts to improve the quality of care.
As child care funding has increased in recent years, so has the amount States are spending to improve the quality of care. In FY 2002, States spent $945 million in current and prior year CCDF funds (including State funds and funds transferred from TANF) to improve the quality of child care services-accounting for 11 percent of combined Federal and State expenditures. In FY 2003, quality spending was $881 million, or 9 percent of total CCDF expenditures.
These figures underestimate State expenditures on quality because they do not reflect State investments and choices made through the child care subsidy system that impact the quality of care, such as decisions related to provider payment rates and family co-payment levels. A large number of States, for example, encourage improved caregiver training and program quality through tiered reimbursement; that is, payment systems that pay more for higher quality care.
States are implementing efforts to promote children's early learning through the President's Good Start, Grow Smart initiative.
In April 2002, President Bush announced an initiative to promote the school readiness of young children through nurturing environments that foster early literacy, language, prereading, and early math skills. The initiative encourages a Federal-State partnership linking CCDF-including funds used for improving the quality of child care-and Federal and State public and private efforts to promote early learning. Specifically, Good Start, Grow Smart asks CCB to work with States to achieve three goals:
1. Early learning guidelines on literacy, language, prereading, and early math skills for children aged 3-5 that align with State K-12 standards and describe what children need to know and be able to do to succeed in kindergarten.
2. Statewide professional development and training of child care teachers, providers, and administrators to enable them to support the school readiness of young children.
3. State plans for coordination across early childhood programs and funding streams.
During FY 2002 and FY 2003, CCB's Early Learning Team fostered State implementation efforts through extensive training and technical assistance, including regional forums, and through coordination with the U.S. Department of Education.
The Child Care Bureau's Early Learning Team shows off its Administration for Children & Families' 2003 Partnering for Excellence Award: Shown from left to right: (Back) Ivelisse Martinez-Beck, Carolyn Dean, Ginny Gorman, Lori Connors-Tadros, Eleanor Wagoner, Cathy Overbagh. (Front) Shannon Rudisill, Brenda Coakely, Associate Commissioner Shannon Christian. Not shown: Carol Gage, Valerie Krajec, Mary Jeffers-Schroeder, and Linda Reese-Smith.
The Child Care Bureau's research initiatives provide States with the data and evidence on which to base decisions about improving child care services and systems.
In collaboration with others in HHS and ACF, CCB makes substantial investments in child care research. These investments increase understanding about States' child care policy decisions, the implications of these decisions for the availability and quality of child care, the choices families make, and the outcomes for children and families. These research efforts provide information and data to help decisionmakers choose how best to use resources and craft child care policies.
Today, these efforts increasingly involve rigorous methodologies (including experimental designs) that will provide a sound basis for evidence-based practices and policies. They also involve a growing number of collaborative relationships with other Federal agencies and national organizations that promote coordinated and comprehensive efforts. A few of the activities currently underway include-
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Rigorous evaluation of alternative State child care subsidy policies designed to identify effective strategies for improving outcomes for families and children
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A multisite study of promising nontraditional approaches for improving the knowledge, skills, and performance of child care providers
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Child Care Policy Research Grants on a broad range of topics related to quality of care, parental choice, the availability of care for underserved populations, and the child care workforce
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Child care research partnerships, composed of teams of policymakers, practitioners, and researchers studying State and local child care markets, child care needs, utilization patterns, and outcomes for low-income families
Given that States make many of the key decisions in administering CCDF within the State and local child care markets, CCB is also investing in efforts to enhance States' capacity to collect administrative data and conduct policy-relevant research and analysis.
CCB provides training and technical assistance related to child care services and systems to thousands of constituents each year.
Through its network of technical assistance projects and services, along with Federal leadership, CCB provides training and technical assistance to States, Tribes, and local communities.
This network assesses States' needs, identifies innovations in child care administration, and promotes the dissemination and replication of solutions to the challenges faced by State and local child care programs. CCB technical assistance helps States, Tribes, and local communities build integrated child care systems that enable parents to work and promote the health and development of children. The network also supports public outreach and information dissemination. Some of the key themes that shaped the Bureau's work in FY 2002 and FY 2003 were the President's early learning initiative Good Start, Grow Smart, collaboration, and financing.
CCDF funds child care programs for over 500 federally recognized Indian Tribes.
In both FY 2002 and FY 2003, $96 million in CCDF funds was awarded to Indian Tribes, representing 2 percent of total funding. With few exceptions, Tribal CCDF grantees are located in rural, economically challenged areas. In these communities, the CCDF program plays a crucial role in offering child care options to parents as they move toward economic self-sufficiency. There is often a strong emphasis on traditional culture and language in Tribal child care settings and curricula. Unlike States, Tribes can apply to use a portion of their CCDF allocations for construction or renovation of child care facilities, as long as the level of direct services is not reduced. Between FY 1997 and FY 2003, ACF approved over $54 million in CCDF funds to construct or renovate 111 Tribal child care facilities.