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Cuts to the Child Care Subsidy System Force Parents and Providers to Make Difficult Choices

SOURCE: AP/Danny Johnston

A child plays near a housing unit at Our House, a nonprofit that provides child care, shelter, and other programs for working homeless people in Little Rock, Arkansas, on October 10, 2013.

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Most of us have heard about sequestration’s devastating impact on the federal Head Start program. Due to funding cuts, nearly 60,000 children were cut from the program in 2013, and some centers had to shut down classrooms or shutter their doors. Equally important but less visible are cuts to the child care subsidy system that have forced some families out of quality child care programs.

The government cut $115 million from the child care subsidy system in 2013 as a result of sequestration, exacerbating the damage done by years of funding that has failed to keep up with the growing cost of child care. Cuts to child care assistance have been largely absent from the national discussion on the impacts of sequestration, as they are difficult to quantify. Flexibility in federal child care funding allows states to set their own program requirements, including families’ eligibility, provider reimbursement rates, and health and safety standards. States can even choose to transfer funds from other federal grants into the child care subsidy funding stream, which can mask the impact of funding cuts. While it’s hard to pinpoint exactly how many children have lost access to child care, there are some troubling trends in states and communities across the country.

Many states have dealt with cuts by paying child care providers less and requiring low-income parents to pay more toward child care. According to a National Women’s Law Center report, only five states increased payments to child care providers in 2013, despite the rising costs of rent, utilities, food, and fuel—all of which drive up the cost of child care. At the same time, eight states increased the proportions of their incomes that families must pay in order to be eligible for child care assistance. Many states also allow providers to collect additional fees if subsidies do not cover the cost of child care for parents who do not receive a subsidy. States have also changed the way they reimburse providers: Child care providers report, for example, that the state no longer reimburses them for days a child is absent, resulting in a net loss for providers.

To better understand the impact that cuts have had on the child care subsidy system in the absence of national data, the Center for American Progress conducted interviews with child care providers that serve children in the child care subsidy system in multiple states. We also spoke to parents who face difficult choices in the child care subsidy system.

It’s clear that cuts to the child care subsidy system have resulted in fewer low-income children having access to high-quality child care. Several large child care providers have reported a drop in the number of children enrolled in their programs who currently receive a subsidy. The Child Care Network, for example, which operates 200 centers in 10 states, saw its proportion of subsidized children drop from around 60 percent in 2010 to 40 percent in 2013. Likewise, the New Horizon Academy, which operates 70 nationally accredited programs in Minnesota and Idaho, has experienced a 15 percentage-point drop in the number of children enrolled in the subsidy program, from 35 percent to 20 percent.

In most cases, children from families who do not receive a subsidy—and who can afford subsidy costs—take the place of these children, and families in the subsidy system are forced to go elsewhere. Many families find informal child care settings of varying quality or leave early childhood programs altogether. Mark Kehoe is the CEO of Brightside Academy, which operates 60 centers in urban areas that primarily serve children who receive child care subsidies. Over the past several years, he has seen an increase in providers with no credentials or training providing low-quality child care; some of them do not even follow requirements to collect co-payment from families. “The options of low quality [are] increasing, while the options of high quality [are] decreasing,” said Kehoe. “Access to low quality is increasing and in the long run, that is detrimental to what the child needs.”

Ashley Thorton is a single parent in Virginia who works full time to support her 2-year-old son. For the past six months and with the help of a child care subsidy, her son has attended a KinderCare program, where he has learned to count to 10, identify colors, and recite the alphabet. But Thorton recently received a notice that her child care subsidy would be terminated because she recently earned an extra $100 per month. Thorton does not want to take her son out of the classroom where he is learning, so she will pay to send him two or three days per week, and he will spend the other days with a family member. She is concerned, however, about moving him between two child care settings and upsetting a routine that has worked so well for him.

A single parent in Illinois also struggles to keep her 9-year-old daughter in the high-quality, safe child care program that a subsidy gives her the ability to afford. As co-payments have increased, she has had to cut back on groceries to make ends meet. Her housing situation has been unstable since she lost her home during the economic downturn, and she has had to move several times to afford child care. She believes it’s worth it, however, to maintain the safe and caring environment that the child care center provides. Even though she has made sacrifices in order to afford quality child care, she refuses to change child care providers. She remembers a friend’s baby dying from abuse sustained in an informal child care setting. She worries that any increase in her income will result in her losing her subsidy and that she will no longer be able to afford to send her daughter to the center.

Other families choose to leave the child care subsidy system altogether, leaving paid employment or school programs to care for their children rather than settling for low-quality child care programs. Chad Dunkley, who oversees 70 nationally accredited programs in Minnesota and Idaho, finds that, “Parents have seen the research on brain development, and they want their child in a high-quality child care setting. If they can’t find it, they would rather put their goals for improving their lives on hold than leave their child in an unsafe environment.”

To avoid raising enrollment fees, child care centers are finding ways to cut or defer costs. As the costs of wages, insurance, food, and supplies rise with inflation, child care providers must find creative ways to maintain services with less funding. Many large child care providers have deferred maintenance projects and capital investments; one provider that transports children to and from school has not replaced buses in 10 years. While this is a short-term fix to sustain operations during revenue shortfalls, child care providers will eventually have to address these kinds of improvements.

Cuts to child care have also had impacts on staff salaries and retention. For example, Brightside Academy has historically provided a 3.5 percent annual wage increase so that its staff can keep up with the cost of living, but this increase has been only 1.5 percent for the past three years. As a result, turnover has increased, particularly among more highly qualified teachers who have opportunities for better-paying positions. In 2008, New Horizon Academy froze wages for the first time in its 42 years of operation.

Cuts to the child care subsidy system are jeopardizing children’s access to quality child care, parents’ ability to hold down full-time jobs, and high-quality providers’ ability to participate in the child care subsidy system. If we want to give parents opportunities to improve their lives through education and employment and prepare their children for school, we need a well-funded child care subsidy system that supports children, parents, and providers.

Katie Hamm is the Director of Early Childhood Policy at the Center for American Progress.

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