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Updated July 18, 2019
Child Care Entitlement to States
Overview
of FY2020-FY2021, while H.R. 1753 and S. 802 would
The Child Care Entitlement to States (CCES) was created
provide $3.525 billion for each of FY2020-FY2024.
by the 1996 welfare reform law (P.L. 104-193). This law
authorized the CCES in Section 418 of the Social Security
The CCDBG Act—which establishes most of the program
Act, which directly appropriates annual mandatory child
rules by which CCES funds are administered at the state
care funding for states and tribes. The law calls for CCES
level—was reauthorized through FY2020 by P.L. 113-186.
funds to be integrated, at the state level, with discretionary
allotments from the Child Care and Development Block
Figure 1. Legislative Evolution of the CCDF
Grant (CCDBG). The law also requires CCES funds to be
spent under CCDBG Act rules. In combination, the CCES
and CCDBG are commonly called the Child Care and
Development Fund (CCDF). The CCDF is administered by
the U.S. Department of Health and Human Services (HHS).
Legislative Evolution
The current structure of federal child care funding streams
is linked to the system that existed prior to 1996, when the
welfare reform law simultaneously repealed, created, and
consolidated federal child care programs. Before this, four
separate federal programs supported child care for low-
income families. Each program had its own eligibility
criteria and program rules. Three of these programs were
linked to the old welfare system, Aid to Families with
Dependent Children (AFDC), while one (CCDBG) targeted
low-income working families not connected to AFDC (see
Figure 1). Jurisdiction for the four child care programs was
split across multiple congressional committees.
The 1996 law repealed the three welfare-related funding
streams, created a new mandatory child care funding stream
(CCES), and amended the CCDBG Act. In an effort to
Source: Prepared by the Congressional Research Service (CRS).
streamline and simplify administration of these funding
streams, the law generally applied CCDBG Act rules to
Allocation Formula
CCES funds. Since enactment, the Senate Finance and
The law requires HHS to reserve between 1% and 2% of
House Ways and Means (W&M) committees have
CCES funds for tribes and tribal organizations. In addition,
generally exercised jurisdiction over the CCES, while the
FY2019 CCDBG appropriations provisions allow HHS to
Senate Health, Education, Labor, and Pensions (HELP) and
reserve up to 0.5% for technical assistance and 0.5% for
House Education and Labor (E&L) committees have
research. Remaining CCES funds are allocated in two parts.
generally exercised jurisdiction over the CCDBG.
First, each state receives a fixed amount each year, equal
Authorization Status
to the federal funds the state received for welfare-related
The 1996 law authorized and appropriated CCES funding
child care programs in the mid-1990s. This amount
for each of FY1997-FY2002. Temporary extensions
totals $1.2 billion annually and is sometimes called
provided funding into FY2006, when the Deficit Reduction
“guaranteed” mandatory funding, as there are no state
Act of 2005 (P.L. 109-171) reauthorized the CCES and
maintenance-of-effort (MOE) or matching requirements.
appropriated $2.917 billion annually through FY2010.
Since then, the CCES has been funded at the same level
Second, remaining CCES funds ($1.7 billion annually)
($2.917 billion) by a series of short- and medium-term
are allotted to states based on their share of children
extensions. The current extension (provided by H.R. 2940)
under age 13. To receive these funds, states must meet a
is scheduled to expire on September 30, 2019.
MOE requirement set at 100% of the amount states
spent on welfare-related child care programs in the mid-
Several bills in the 116th Congress would appropriate CCES
1990s (totaling $888 million annually). States must also
funding at an increased level for FY2020 and beyond. For
match the federal funds with state dollars (totaling about
example, H.R. 3298 would provide $3.917 billion for each
$1.3 billion annually) at the Medicaid matching rate.
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link to page 2 Child Care Entitlement to States
Discretionary CCDBG funds (appropriated separately from
have a parent who is working or attending job training
the CCES) are allotted to states by a formula based on their
(unless the child is receiving protective services);
share of children under age five, share of children receiving
have family income no greater than 85% of state median
free- or reduced-price lunches, and state per capita income.
income (SMI), or lower depending on state policy; and
TANF Transfers
have no more than $1 million in family assets.
States may transfer up to 30% of their basic grants from
States commonly adopt initial income eligibility levels
Temporary Assistance for Needy Families (TANF) to the
below the federal maximum. At the start of FY2018, state
CCDF. Transferred funds must be spent according to
income thresholds for initial eligibility ranged from an
CCDBG Act rules. In FY2017, states transferred nearly
estimated 32% to 85% of SMI for a family of three.
$1.3 billion in federal TANF funds to the CCDF.
Because the CCDF is not an entitlement to individuals,
Funding History
states are not required to serve all eligible children.
Table 1 provides a CCDF funding history for FY2011-
Payment Methods
FY2019. This table shows that federal CCES funding of
States may contract with child care providers to reserve
$2.9 billion was typically the largest single source of annual
slots for CCDF children, but it is more common for families
CCDF funding until FY2018, when CCDBG funding
to receive a voucher (or certificate) for child care services,
increased by 83% to $5.2 billion. (The higher CCDBG
allowing them to select the provider of their choice. In
funding level was sustained in FY2019.) Federal CCDF
FY2017, 94% of children were served by vouchers.
appropriations are augmented each year by state match and
MOE funds associated with the CCES (about $2.2 billion
Provider Reimbursement Rates
annually) and by state transfers of federal TANF funds to
States set the payment rates for child care providers serving
the CCDF (more than $1.2 billion annually).
participating children. Payment rates must take into account
market rate costs. HHS recommends that states set payment
Table 1. CCDF Funding History, FY2011-FY2019
rates at the 75th percentile of the market rate. It is common
(nominal dollars in billions)
for states to use a tiered system, issuing higher payments to
providers meeting certain criteria, such as those meeting
Fiscal Federal
State
TANF
high quality standards or serving special populations.
Year
CCES
CCES
CCDBG Transfer
Total
Parental Cost-Sharing
2011
2.917
2.172
2.223
1.565
8.876
The CCDBG Act generally requires parents to share in the
2012
2.917
2.175
2.278
1.358
8.729
cost of child care, though states may waive co-payments in
2013
2.917
2.168
2.206
1.367
8.658
special circumstances. States set sliding fee scales, based on
income, family size, and other factors. HHS suggests that
2014
2.917
2.170
2.358
1.382
8.828
states set such fees at no more than 7% of family income.
2015
2.917
2.186
2.435
1.320
8.859
Enhanced Health and Safety Rules
2016
2.917
2.178
2.761
1.403
9.260
The CCDBG Act of 2014 (P.L. 113-186) strengthened
federal requirements related to health and safety, licensing,
2017
2.917
2.174
2.856
1.288
9.235
and enforcement. Under the reauthorized CCDBG Act,
2018
2.917
2.179
5.213
NA
NA
states must establish and enforce minimum health and
2019
2.917
2.124
5.223
NA
NA
safety standards covering several broad areas, such as
first aid, building safety, and emergency preparedness;
Source: Prepared by CRS based on CCES appropriations, CCDF
allocation data, and TANF financial data from HHS.
all providers receiving CCDF funds must complete pre-
Notes: State CCES estimates include MOE and matching funds. State
service and ongoing training on health and safety topics;
estimates reflect reallotment of prior-year funds (except in FY2019).
states must set age-specific standards for group size
limits and child-to-provider ratios;
Supporting TANF-Related Families
states must conduct pre-licensure and annual
Section 418 of the Social Security Act requires that states
unannounced inspections for all licensed CCDF
spend at least 70% of their CCES funds on families
providers, and annual inspections for license-exempt
receiving TANF, families transitioning off of TANF, or
CCDF providers;
families at risk of becoming dependent on TANF. Beyond
this, the Social Security Act largely defers to the CCDBG
states must ensure licensing inspectors are trained and
Act with respect to CCDF program rules. As a result, the
qualified, and must set inspector-to-provider ratios; and
eligibility, participation, and other program rules discussed
states must conduct criminal background checks on
below apply to the CCES and other CCDF funding streams.
applicable child care providers and staff members.
Eligibility
Children Served
The CCDBG Act stipulates that eligible children must
Preliminary data indicate that 1.32 million children were
be under age 13 (or older in certain circumstances);
served by the CCDF in an average month in FY2017.
Nearly two-thirds of these children were under the age of
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Child Care Entitlement to States
six. The majority (71%) were served in licensed or
Karen E. Lynch, Specialist in Social Policy
regulated center-based child care settings.
IF10511
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