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

The nature of the governmental role in child care has changed profoundly in the past decade as the federal government established a set of new federal funding streams for child care, each with its own target populations, fiscal structure, and requirements. In a two-year period (1988 to 1990), Congress enacted four new child care funding streams: AFDC Child Care, Transitional Child Care, At-Risk Child Care, and the Child Care and Development Block Grant. By FY 1995, federal funding for these programs provided more than $2 billion for states. Implementation of these funding programs has significantly expanded the ability of states to provide child care subsidies to low-income families but has been accompanied by a set of frustrations flowing from the complexities of integrating four funding programs with (sometimes) four sets of rules.

Over the past five years, it has become common for child care administrators and other concerned persons to speak about "fragmentation" in the child care system and to articulate a vision for a single system of "seamless service."¹⁸ Variations in rules and requirements among the four programs have complicated attempts to develop a unified approach to the governmental role in child care and early education and to blend the four streams into a single system. Yet it is also important to appreciate that the barriers to seamless service are only partly attributable to differences in rules between funding streams. The barriers also reflect the difficult choices that must be made when resources are insufficient to assist all who are in need, the lack of integration between child care subsidy policy and tax policy, and the lack of integration between child care policy and early education policy. In the broadest sense, what is sometimes seen as fragmentation is a reflection of the lack of an overall vision for a social policy that harmonizes the goals of encouraging and supporting work force participation by parents with ensuring safe, healthy, and stimulating environments for children.

Seen from the perspective of families needing assistance, the fragmentation of current policy is apparent in a number of respects:

• Among low-income families with similar needs and circumstances, some benefit greatly from child care subsidies while others receive no assistance at all. For example, a working poor family receiving AFDC may be eligible for a subsidy while an equally poor family not on AFDC is not.



• A family that enters the subsidy system may lose all assistance while still in need simply because the family no longer qualifies for a particular categorical subsidy. For example, a parent who is employed may qualify for a subsidy but become ineligible if she loses her job, even if child care is essential for her job search; a family receiving a child care subsidy through the Child Care and Development Block Grant may lose its entire subsidy when a dollar of income places it above income eligibility guidelines (75% of state median income); and a mother who has left welfare for work may lose all aid for child care at the end of her 12 months of transitional child care assistance, even though her economic circumstances and need for child care are the same in the 13th month as they were in the 12th.



• A family in the subsidy system may find significant variations in provider reimbursement rates, sliding fee scale payment requirements, and provider health and safety requirements as the family moves from one program to another.



• The source of care that may offer the most appropriate child development services may operate only part-day, part-year (as is often the case with Head Start, public prekindergarten programs, and segregated programs for children with special needs). It may be difficult or impossible to combine participation in such a program with another source of "wraparound" child care.

On first impression, one may be tempted to blame some of the fragmentation described on "restrictive federal rules" that specify when particular federal funding streams can and cannot be used for particular populations. In some respects, this charge is accurate. For example, federal law mandates that a state provide transitional child care for 12 months but bars use of the funding stream for the 13th month. Federal law permits use of AFDC Child Care funding to provide for child care for extended periods of job search, but a state cannot use Transitional Child Care or At-Risk Child Care in similar ways. Moreover, there are often frustrating variations between funding streams in rules relating to sliding fee scales, payment rate requirements, and health and safety standards.

In a broader sense, however, the principal source of perceived fragmentation is not rules but resources. States currently have the legal authority to link federal funding streams with one another to, for example, extend transitional child care indefinitely to a low-income family through use of At-Risk, CCDBG, or SSBG (Title XX) funds, to provide child care subsidies to non-AFDC families, or to make child care broadly available for parents in education, training, or job searches. And, in any of these cases, states could opt to use state-funded subsidies to cover gaps in federal coverage. To a great extent, what is treated as a problem caused by inconsistent rules is in fact a problem caused by inadequate resources to serve all in need. Scarcity of dollars forces states to use their limited funds in restrictive ways.

A 1995 GAO survey of 7 states found that 5 states had waiting lists for subsidized child care ranging from 3,000 to 36,000 families; the other 2 states did not keep waiting lists.⁴⁴ Another 1995 study reported that 36 states indicated they had waiting lists for working poor child care, with 8 states reporting at least 10,000 children on their waiting lists.⁴⁵

Sixteen states reported using CCDBG funds to provide child care for families that would qualify for AFDC Child Care and Transitional Child Care, effectively displacing non-AFDC families from those CCDBG slots.⁴⁵ However, a state's choice to do so largely reflected its inability or choice not to expend the state dollars needed to draw down matching federal funds for AFDC-related child care.

To some observers, a principal flaw in the current system of financing is that states are mandated to guarantee child care to AFDC recipients who are working or in approved education and training programs and to provide 12 months of child care to families leaving AFDC due to employment. Open-ended federal funding is available, subject to state match, for these purposes. To minimize expenditure of state funds, states often prefer to use first the funds that do not require a match (for example, CCDBG). This can create a scenario where the only available child care slots are for AFDC and former AFDC recipients because child care subsidy funds that could have been used for the low-income working poor will have been expended. However, even with recent expansions, only a small fraction of AFDC families actually receives child care assistance—in FY 1993, fewer than 4% of AFDC recipients received child care assistance to participate in work, education, or training programs each month.⁴⁶

Although most of the discussion of fragmentation in child care policy focuses on the previously mentioned programs, there are two other important senses in which system fragmentation is substantial: the relation between direct expenditure and tax expenditure policy and the relation between child care subsidy and early education efforts. As noted, the annual federal tax expenditure associated with the CDCTC exceeds the combined federal spending for the four low-income subsidy programs. Moreover, the lack of any phaseout for DCAPs as level of family income increases means, in effect, that federal law offers a $1,980 annual subsidy for families in the highest tax bracket (based on an exclusion of $5,000 in taxable income for a family at a 39.6% marginal tax rate). At the same time, there may literally be no assistance to a working poor family that is too poor to incur tax liability and unable to access an existing subsidy program.⁴⁷

Perhaps the single largest area of fragmentation, however, involves the uncertain relationship between child care policy and early education policy. This is evidenced not just by the different rationales for the funding of early childhood programs (see the article by Cohen in this journal issue), but also by the way in which the programs operate. The largest single federal expenditure for a program involving the care of young children is for Head Start, commonly seen as an early education program. Most state prekindergarten and Head Start programs operate only part-day and part-year,^20,48 despite the needs of working parents for full-time child care. The 1993 Advisory Committee reported that fewer than 1% of Head Start children were served in programs operating eight or more hours a day and more than 48 weeks a year, even though 33% of Head Start children had at least one parent working full time.⁴⁸

The separation between child care and early education policy also reflects the tension between two very different visions of the primary goal, in which programs labeled as child care subsidy programs are viewed primarily in terms of strategies to support or require parental labor force participation, while programs labeled as early education programs are designed to focus on educational, developmental, health, and other needs of children. The work force subsidy goal is often driven by the need to maximize coverage with limited resources and sometimes results in attempting to minimize payment rates, encourage less formal care arrangements, and at times encourage families to manage without subsidized care at all. Each of these pressures leads to policy results in direct contravention of the early education goals. As long as these are viewed as opposing goals—rather than goals to be integrated into a single system—the fragmentation in government policy will not be alleviated by simply increasing the funding available for subsidies or simplifying rules governing particular funding streams.