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Updated November 6, 2018
Child Care Entitlement to States
Overview
The 1996 law repealed the three welfare-related funding
The Child Care Entitlement to States (CCES) was created
streams, created a new mandatory child care funding stream
by the 1996 welfare reform law (P.L. 104-193). This law
(CCES), and amended the CCDBG Act. In an effort to
authorized the CCES in Section 418 of the Social Security
streamline and simplify administration of these funding
Act, which directly appropriates annual mandatory child
streams, the law generally applied CCDBG Act rules to
care funding for states and tribes. The law calls for CCES
CCES funds. Since enactment, the Senate Finance and
funds to be integrated, at the state level, with discretionary
House Ways and Means (W&M) committees have
allotments from the Child Care and Development Block
generally exercised jurisdiction over the CCES, while the
Grant (CCDBG). The law also requires CCES funds to be
Senate Health, Education, Labor, and Pensions (HELP) and
spent under CCDBG Act rules. In combination, the CCES
House Education and the Workforce (E&W) committees
and CCDBG are commonly called the Child Care and
have generally exercised jurisdiction over the CCDBG.
Development Fund (CCDF). The CCDF is administered by
the U.S. Department of Health and Human Services (HHS).
Authorization Status
The 1996 welfare reform law authorized and directly
Legislative Evolution
appropriated CCES funding for each of FY1997-FY2002.
The current structure of federal child care funding streams
Temporary extensions provided CCES funding into
is linked to the system that existed prior to 1996, when the
FY2006, when the Deficit Reduction Act of 2005 (P.L.
welfare reform law simultaneously repealed, created, and
109-171) reauthorized the CCES and directly appropriated
consolidated federal child care programs. Before this, four
$2.917 billion annually through FY2010. Since then, the
separate federal programs supported child care for low-
CCES has been funded at the same level ($2.917 billion) by
income families. Each program had its own eligibility
a series of short- or medium-term extensions. The current
criteria and program rules. Three of these programs were
extension is scheduled to expire on December 7, 2018.
linked to the old welfare system, Aid to Families with
Dependent Children (AFDC), while one of these programs
The CCDBG Act—which establishes the program rules by
(CCDBG) was targeted to low-income working families not
which CCES funds are administered at the state level—was
connected to the welfare system (see Figure 1). Jurisdiction
reauthorized through FY2020 by P.L. 113-186.
for these four child care programs was split across multiple
congressional committees.
Allocation Formula
The law requires HHS to reserve between 1% and 2% of
Figure 1. Legislative Evolution of the CCDF
CCES funds for tribes and tribal organizations. In addition,
FY2019 CCDBG appropriations provisions allow HHS to
reserve up to 0.5% for technical assistance and 0.5% for
research. Remaining CCES funds are allocated in two parts.
First, each state receives a fixed amount each year, equal
to the federal funds the state received for welfare-related
child care programs in the mid-1990s. This amount
totals $1.2 billion annually and is sometimes called
“guaranteed” mandatory funding, as there are no state
maintenance-of-effort (MOE) or matching requirements.
Second, remaining CCES funds ($1.7 billion annually)
are allotted to states based on each state’s share of
children under age 13. To receive these funds, a state
must meet a MOE requirement set at 100% of the
amount the state spent on welfare-related child care
programs in the mid-1990s. This amount totals $888
million annually. In addition, states must match these
federal funds with state dollars (totaling about $1.3
billion annually) at the Medicaid matching rate.
Discretionary CCDBG funds are allocated using a separate
Source: Prepared by the Congressional Research Service (CRS).
formula, which is based on each state’s share of children
Notes: SSA = Social Security Act. SMI = State Median Income.
under age five, children receiving free- and reduced-price
lunches, and state per capita income.
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link to page 2 Child Care Entitlement to States
TANF Transfers
States commonly adopt initial income eligibility levels
States may transfer up to 30% of their basic grants from
below the federal maximum. At the start of FY2017, state
Temporary Assistance for Needy Families (TANF) to the
income thresholds for initial eligibility ranged from an
CCDF. Transferred funds must be spent according to
estimated 33% to 85% of SMI for a family of three.
CCDBG Act rules. In FY2017, states transferred nearly
Because the CCDF is not an entitlement to individuals,
$1.3 billion in federal TANF funds to the CCDF.
states are not required to serve all eligible children.
Funding History
Payment Methods
Table 1 provides a CCDF funding history for FY2010-
States may contract with child care providers to reserve
FY2018. This table shows that federal CCES funding of
slots for CCDF children, but it is more common for families
$2.9 billion was typically the largest single source of annual
to receive a voucher (or certificate) for child care services,
CCDF funding until FY2018, when CCDBG funding
allowing them to select the provider of their choice. In
increased by 83% to a high of $5.2 billion. Federal
FY2016, 89% of children were served by vouchers.
appropriations to the CCDF are augmented each year by
state match and MOE funds associated with the CCES
Provider Reimbursement Rates
(about $2.2 billion annually) and by state transfers of
States set the payment rates for child care providers serving
federal TANF funds to the CCDF (more than $1.2 billion
participating children. Payment rates must take into account
annually).
market rate costs. HHS recommends that states set payment
rates at the 75th percentile of the market rate. It is common
Table 1. CCDF Funding History, FY2010-FY2018
for states to use a tiered system, issuing higher payments to
(nominal dol ars in bil ions)
providers meeting certain criteria, such as those meeting
high quality standards or serving special populations.
Fiscal Federal
State
TANF
Year
CCES
CCES
CCDBG Transfer
Total
Parental Cost-Sharing
The CCDBG Act generally requires parents to share in the
2010
2.917
2.185
2.127
1.373
8.602
cost of child care, though states may waive co-payments in
2011
2.917
2.172
2.223
1.565
8.876
special circumstances. States set sliding fee scales, based on
income, family size, and other factors. HHS suggests that
2012
2.917
2.175
2.278
1.358
8.729
states set such fees at no more than 7% of family income.
2013
2.917
2.168
2.206
1.367
8.658
Enhanced Health and Safety Rules
2014
2.917
2.170
2.358
1.382
8.828
The CCDBG Act of 2014 (P.L. 113-186) strengthened
2015
2.917
2.186
2.435
1.320
8.859
federal requirements related to health and safety, licensing,
and enforcement. Under the reauthorized CCDBG Act,
2016
2.917
2.178
2.761
1.403
9.260
states must establish and enforce minimum health and
2017
2.917
2.174
2.856
1.288
9.235
safety standards covering several broad areas, such as
2018
2.917
2.179
5.213
NA
NA
first aid, building safety, and emergency preparedness;
Source: Prepared by CRS based on CCES appropriations, CCDF
all providers receiving CCDF funds must complete pre-
al ocation data, and TANF financial data from HHS.
service and ongoing training on health and safety topics;
Notes: State CCES estimates include MOE and matching funds, and
states must set age-specific standards for group size
reflect re-al otment of prior-year funds.
limits and child-to-provider ratios;
Supporting TANF-Related Families
states must conduct pre-licensure and annual
unannounced inspections for all licensed CCDF
Section 418 of the Social Security Act requires that states
providers, and annual inspections for license-exempt
spend at least 70% of their CCES funds on families
CCDF providers;
receiving TANF, families transitioning off of TANF, or
families at risk of becoming dependent on TANF. Beyond
states must ensure licensing inspectors are trained and
this, the Social Security Act largely defers to the CCDBG
qualified, and must set inspector-to-provider ratios; and
Act with respect to CCDF program rules. As a result, the
states must conduct criminal background checks on
eligibility, participation, and other program rules discussed
applicable child care providers and staff members.
below apply to the CCES and other CCDF funding streams.
Children Served
Eligibility
Preliminary data indicate that 1.37 million children were
The CCDBG Act stipulates that eligible children must
served by the CCDF in an average month in FY2016.
be under age 13 (or older in certain circumstances);
Nearly two-thirds of the children served in an average
month were under the age of six.
have a parent who is working or attending job training
(unless the child is receiving protective services);
Karen E. Lynch, Specialist in Social Policy
have family income no greater than 85% of state median
income (SMI), or lower depending on state policy; and
IF10511
have no more than $1 million in family assets.
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Child Care Entitlement to States
Disclaimer
This document was prepared by the Congressional Research Service (CRS). CRS serves as nonpartisan shared staff to
congressional committees and Members of Congress. It operates solely at the behest of and under the direction of Congress.
Information in a CRS Report should not be relied upon for purposes other than public understanding of information that has
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