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Chapter Five: Child Care Subsidies and the Local Supply of Child Care
Cost is one factor that influences parents’ selection of care: their choice results from a complex decision-making process that also takes into account their hours and schedules of employment, values, the availability of other family members to share in caregiving tasks, and their children’s ages and perceived needs. They select care that is available to them in their local markets, which, in turn, are shaped by the collective values and purchasing power of families in their communities. One goal of child care subsidies is to support families’ employment by reducing their work-related expenses and enabling them to secure what would otherwise be unaffordable child care arrangements. It stands to reason that, if enough subsidies go into a community to change families’ collective purchasing power, subsidies could influence the amount and characteristics of arrangements available overall.
In order to understand more about the supply of child care and the role of public funding in supporting and increasing regulated child care, we collected local information about supply of care in the 25 study communities in 2000. This chapter draws much of its data from information collected by local child care resource and referral agencies (CCR&Rs).
The chapter begins by describing the distribution of regulated center and family child care homes in the study communities in 2000. It then estimates the proportion of regulated child care available to low-income families, in the absence of a subsidy, and shows the potential effect of subsidies on families’ access to care. Finally, by combining information from CCR&Rs and from state subsidy payment systems, the study estimates the proportion of the regulated supply supported by subsidies in each of the study communities.1
Summary of Findings
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In the study communities, most regulated child care slots are in center-based care and education programs. Although regulated family child care homes outnumber centers in most counties, the difference in capacity in the two types of care more than offsets the smaller number of centers. In three-fifths of the counties, more than 75 percent of the regulated slots are in child care centers.
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The number of child care slots available for children under the age of 13 from families at all income levels varies widely across the study communities. At one end of the distribution, seven counties reported 300 or more regulated slots per thousand children under age 13. Five counties report 100 or fewer slots per regulated child.
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Maximum payment rates for subsidies appeared adequate to pay for large percentages of regulated slots in many of the study communities. In about two-thirds of the study communities, for both centers and homes, subsidy rates appeared adequate to purchase 75 percent of the care for infants, preschoolers, and school-age children, assuming providers accept subsidy payments.2 In a minority of communities, subsidies were adequate to purchase less than half of the regulated child care.
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In some communities, a significant proportion of the supply of child care in centers, facilities and regulated family child care homes was paid for by child care subsidies. In five of the 20 communities, children whose care was subsidized accounted for more than 30 percent of the slots in center-based care. Subsidies purchased at least 30 percent of the slots in regulated family child care arrangements in nine of 18 reporting counties.
The Distribution of Regulated Care in the Study Communities
The relative distribution of centers/facilities and regulated family child care homes varied across the study counties. In 16 of the 25 counties, homes outnumbered centers; in nine counties, centers accounted for half or more of regulated programs and, in one county group (Luna, Grant, and Hidalgo counties, New Mexico), centers constituted more than 75 percent of the regulated child care facilities.
Although there were fewer child care centers than family child care homes in most communities, there were more regulated center slots because centers generally have a much greater capacity. In 22 of the 25 counties, half or more than half of the child care slots were in centers. In 15 counties, more than three-quarters of the slots were in centers (see Exhibit 5-1 and Appendix Table 5-A).
The variation in state regulation of family child care homes accounts, in part, for differences across counties in the number of regulated family child care slots available. For example, family child care slots in homes with three or fewer children might be counted as part of the regulated supply in one county, but not in another where such homes are not required to be licensed.
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Regulated Slots Per Thousand Children
A second piece of information that is helpful in understanding the patterns of subsidized care in the communities is the extent to which the supply of regulated care is plentiful. One way to compare the regulated supply across counties is to calculate the number of slots per thousand children in each community. This is a useful way to make comparisons, but it is not an assessment of the adequacy of local supply to meet the needs of children in a community. Available supply is a function of a number of factors, including the income level of the community and the collective preferences of the families in the community for certain types of care at certain prices. It is also a function, in part, of the licensing standards in the community. In some communities, virtually all family child care homes are counted as part of the regulated supply, while in others virtually no child care homes are counted.
The study counties varied greatly in the quantity of regulated care available. At the more generous end of the distribution, seven counties reported 300 or more slots in centers/facilities and regulated family child care homes for every thousand children under age 13, or just under one slot for every three children. At the other end of the distribution, five counties reported fewer than 100 slots per thousand children (one slot for every 10 children). The remaining 13 counties report between 100 and 299 slots for every 1,000 children.3 (See Exhibit 5-2 and Appendix 5-B.)
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Subsidies and Increased Access for Low-Income Families
For the low-income families who desire care in the regulated market, subsidies hold the potential to increase access to regulated settings. To help assess the degree to which subsidies did so increase such access, we collected two pieces of information: whether providers reported their willingness to accept subsidies and whether the prices that they listed with CCR&Rs fell below the state’s reimbursement rate. The following section summarizes the information they provided. These are certainly not the only factors that contribute to access; others include the parents’ co-payment requirements and whether or not a family can locate an open slot of suitable care that is physically accessible. Nor does the information reported to CCR&Rs necessarily reflect providers’ real behavior—they may or may not accept a subsidy or the reimbursement rate, depending upon the demand for care by parents who would pay their full fees. The two pieces of information do, however, provide some insights in to the extent to which subsidies can increase access to care.
Centers and Regulated Family Child Care Accepting Subsidies
The proportion of centers that reported being willing to accept subsidies varied widely among the communities in the study. In 12 of 22 counties that reported data, 50 percent or more of all centers accepted children whose care was paid through public subsidy. In Madison County, Indiana, and Alamance County, North Carolina, 75 percent or more indicated their willingness to accept subsidy payments. By contrast, in Arlington County, Virginia, less than 25 percent of centers agreed to accept subsidized children.4 (See Exhibit 5-3.)
Across the board, a higher proportion of regulated family child care homes reported willingness to accept subsidies. In 16 of the 20 counties that reported data, more than half of family child care homes reported a willingness to accept subsidies. (See Exhibit 5-4 and Appendix Table 5-C.)
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Adequacy of the State Rate
In addition to describing the proportions of centers and regulated family child care homes willing to accept subsidies, we assessed their potential availability to low-income families by estimating the proportions that charged rates no higher than those paid by state subsidy systems for full-time care for 12-month-old, 4-year-old, and 7-year-old children.5
In many of the study communities, subsidy rates for centers were adequate to purchase most center care for all ages. As Exhibit 5-5 shows, in 16 of 23 counties, 75 percent or more of the centers and facilities charged less than the full-day rate for infants and toddlers; in 12 counties, a similar proportion of facilities charged less than the full-day rate for preschoolers; and in 15 counties, 75 percent charged below the state rate for school-age children. (It is important to remember, when interpreting these data, that states’ rules about payments for children’s absences and holidays may mean that providers receive less for subsidized children than they do for those unsubsidized.) (Also see Appendix Table 5-C.)
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Subsidies make regulated family child care more accessible to low-income families as well. In 16 of the 23 counties, at least 75 percent of family child care homes charged fees equal to or below the state rate for infants, and, in 14 of the counties, at least 75 percent of homes charged at or below the state reimbursement rate for preschool- and school-age children. (Exhibit 5-6 and Appendix Table 5-D.)
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Proportions of Regulated Child Care Supported by Subsidies
For the 20 counties for which information on types of subsidized arrangements was obtainable, we can compare the number of subsidized arrangements with the overall estimates of regulated supply described in the earlier section. We found that subsidies supported, at least partially, a substantial number of slots or regulated child care.6 Among these counties, the proportion of children in center care that were subsidized ranged from less than 10 percent in five counties to 30 percent or more in five counties (see Exhibit 5-7).7
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In many of the study communities, subsidies paid for the care of a higher proportion of children in regulated family child care homes than in centers. In nine of 18 counties, subsidized children in family child care constituted at least 30 percent or more of all children in regulated family child care. In four counties they constituted less than 10 percent (see Exhibit 5-8).
When determining the significance of the level of support described here, is important to recognize that public funding is likely to pay for a much more substantial amount of the supply in specific areas within the study counties. First, we are reporting the proportion of arrangements that were subsidized at the county level. This figure includes relatively high-income neighborhoods, where fewer children are likely to be subsidized, as well as low-income neighborhoods, where one would expect there to be many more subsidized children. Second, child care subsidies are just one type of public funding for early childhood care; during the late 1990s, Head Start and state-supported pre-kindergarten also underwent tremendous growth.8
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The study has documented the unprecedented increase in child care funding and its stabilization in the period of 1997-2002. These changes were reflected by the amount and nature of care subsidized in the study communities. The next chapter highlights the major findings from this report and their implications.
1 This section of the chapter summarizes material from The Supply of Regulated Child Care in 25 Study Communities (Collins et al., January 2005). (back)
2 Communities vary, however, in the proportions of centers and homes that accept subsidized children, regardless of whether their fees are at or below the state payment rate. In addition, state rules related to absenteeism, etc., affect the ultimate amount that providers actually receive for subsidized children. Parental co-payment requirements and additional charges to parents also must be considered when examining payment rates. (back)
3 Estimates for 2000 of county populations by age come from UPDATE, a database developed by the firm Claritas. The UPDATE database contains Claritas’ current-year and five-year projections for population and household counts, based on the 1980 and 1990 Census Summary Tape File 1 (STF1) and Summary Tape File 3 (STF3). All 1990 data in this database have been adjusted to be consistent with the 100 percent counts from STF1. (back)
4 The exhibits show separately the proportion of centers in Cook, Frankline, and Union Counties that have contracts with their states to serve a specified number of subsidized children. (back)
5 Again, as noted in a prior footnote, many—but not all—providers typically make rate information available to CCR&Rs. The percentages in this section are of those center and home providers that did so. Note that this is not a full-scale market rate study, but rather a crude calculation, using available data. (back)
6 Many parents receiving subsidies are required to contribute a copayment to cover some of the cost of care. (back)
7 Note that center slots and subsidized arrangements are not completely comparable. It is possible to have one child care slot that provides two part-time paid arrangements. We assume here that most of the subsidized arrangements use the entire schedule that the slot is available. (back)
8 The full report on the supply of regulated care in the study communities also estimates the percentage of supply supported by Head Start and pre-kindergarten funds. (back)
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