The Future of Children, Princeton - Brookings: Providing research and analysis to promote effective policies and programs for children.

The United States does not have a single coordinated child care system. Instead, child care and early education involve a complex mix of private and public funding for an array of formal and informal, regulated and unregulated, primarily educational and primarily custodial care arrangements. Public funding may be federal, state, or local and may be in the form of tax relief, vouchers or reimbursements to families, contractual arrangements with providers, or direct provision of services. This article describes the principal sources of public and private funding for child care, highlights some of the key issues resulting from the current fragmented funding approach, and suggests some possible consequences if pending federal legislation restructuring several public funding programs is enacted.

It is impossible to quantify the amount of public and private funding expended on child care and early education each year. In part, this is because of difficulties in determining what should be counted in the calculation. Also in part, it is because data are not regularly or consistently reported in some of the categories that ought to be part of the calculation. In part, it is because some of the reporting likely results in double-counting (for example, parent fees for which a tax deduction is also provided). With these caveats, however, it appears that total public and private funding expended on child care and early education may reach or exceed $40 billion annually. This includes funds for a diverse range of services supported by contributions from families; federal, state, and local governments; and the private sector. It appears that most child care and early education expenditures are borne by families, most governmental expenditures are borne by the federal government, and the majority of federal expenditures are for two programs (Head Start and the Child and Dependent Care Tax Credit [CDCTC]) that are only occasionally considered in discussions of funding for child care.

Government policy in relation to child care and early education is inconsistent and fragmented, with troubling consequences. (See also the article by Cohen in this journal issue.) Among families in similar economic circumstances, some receive government subsidies and others do not. When a family enters the subsidy system, assistance may terminate long before the need for child care ends. Different funding streams operate with varying standards and rules, so child care providers that meet the health and safety standards applicable to one subsidy may not meet the standards of another. At the same time, the variation in standards among programs impairs the ability of government to use standards for publicly funded care as a means to affect the overall quality of child care.

Pending federal legislation would make significant changes in the federal and state roles in funding child care. At the time this article was completed, it was unclear whether Congress and the White House would agree on welfare legislation in 1996. The welfare legislation passed by Congress, and vetoed by President Bill Clinton in January 1996, contained substantial changes affecting four of the principal federal child care programs: the Child Care and Development Block Grant, the At-Risk Child Care Program, AFDC Child Care, and Transitional Child Care. In the welfare debates, there has been considerable controversy about the proposed level of child care spending, but far less dispute about the basic structural changes in child care under consideration. The last section of this article discusses the key changes under consideration and notes how such changes would (and would not) affect the federal role and the level of fragmentation in child care. The newly proposed work requirements for families receiving assistance would likely impose considerable stress on the limited available federal funding because a large share of the federally funded resources would need to be directed to meeting federal work participation rates. Although the proposed legislation would allow some additional harmonization among the four affected funding streams, it would have only a modest effect on the type of system fragmentation described here