Child Care Entitlement to States: An Overview

Child Care Entitlement to States: An Overview

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Updated February 12, 2024
Child Care Entitlement to States: An Overview
Overview
While this authorization has expired, annual appropriations
The Child Care Entitlement to States (CCES) was created
acts have continued to provide funding for the CCDBG.
by the Personal Responsibility and Work Opportunity
Reconciliation Act of 1996 (PRWORA, P.L. 104-193).
Figure 1. CCDF Legislative Evolution
PRWORA authorized the CCES in Section 418 of the
Social Security Act. Section 418 appropriates mandatory
child care funding for states, territories, and tribes. The law
calls for states to integrate CCES funds with discretionary
allotments from the Child Care and Development Block
Grant (CCDBG) and generally 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 child care funding streams is linked
to programs that existed prior to 1996, when PRWORA
simultaneously repealed, created, and consolidated federal
child care programs (Figure 1). Before this, four separate
federal programs supported child care for low-income
families. Each program had its own eligibility criteria and
program rules. Three programs were linked to a need-based
cash assistance program, Aid to Families with Dependent

Children (AFDC), while one (CCDBG) targeted low-
Source: Prepared by the Congressional Research Service (CRS).
income working families not connected to AFDC.
Jurisdiction was split across multiple committees.
Allocation of Funds
As amended by ARPA, Section 418 specifies that, from the
The 1996 law repealed the three AFDC-related child care
total amounts appropriated to the CCES, $75 million is to
funding streams, created a new mandatory funding stream
go to the territories (American Samoa, Guam, Northern
(CCES), and amended the CCDBG Act. To streamline and
Mariana Islands, Puerto Rico, and U.S. Virgin Islands) and
simplify administration, the law generally applied CCDBG
$100 million is to go to Indian tribes and tribal
Act rules to CCES funds. The Senate Finance Committee
organizations. In addition, since FY2016, annual CCDBG
and House Ways and Means (W&M) Committee typically
appropriations effectively apply two CCDBG set-asides to
exercise CCES jurisdiction. The Senate Health, Education,
CCES appropriations: up to 0.5% for technical assistance
Labor, and Pensions (HELP) Committee and House
and 0.5% for research.
Education and the Workforce (E&W) Committee typically
exercise CCDBG jurisdiction.
Remaining CCES funds are allocated to the 50 states and
the District of Columbia in two parts.
Authorization and Appropriations
• First, each state receives a fixed amount each year, equal
The 1996 law authorized and appropriated CCES funding
for each of FY1997-FY2002. Temporary extensions
to the federal funds the state received for AFDC-related
child care programs in the mid-1990s. This amount
provided funding into FY2006, when the Deficit Reduction
totals $1.2 billion annually and is sometimes called
Act of 2005 (P.L. 109-171) reauthorized the CCES and
“guaranteed” mandatory funding, as there are no state
appropriated $2.917 billion annually through FY2010. A
series of extensions maintained funding at the same level
maintenance-of-effort (MOE) or matching requirements.
over the next decade. In 2021, the American Rescue Plan
• Second, remaining CCES funds are allotted to states
Act (ARPA, P.L. 117-2) amended Section 418 to provide
based on their share of children under age 13. To receive
permanent annual appropriations of $3.550 billion for
these funds, each state must meet a MOE requirement
FY2021 and beyond. ARPA also made other changes to the
set at 100% of the amount the state spent on AFDC-
CCES (e.g., made territories eligible for the first time).
related child care programs in the mid-1990s. This totals
$888 million annually. States must also match these
The CCDBG Act—which establishes most of the program
funds with state dollars at the Medicaid matching rate
rules by which CCES funds are administered at the state
level—was reauthorized through FY2020 by P.L. 113-186.
(the Federal Medical Assistance Percentage, or FMAP).
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Discretionary CCDBG funds (appropriated separately from
Supporting TANF-Related Families
the CCES) are allotted to states by a formula based on their
Section 418 requires states to spend at least 70% of their
share of children under age five, share of children receiving
CCES funds on families receiving TANF, transitioning out
free- or reduced-price lunches, and state per capita income.
of TANF, or at risk of becoming dependent on TANF.
Beyond this, Section 418 largely defers to the CCDBG Act
Funding History
with respect to program rules—meaning that the discussion
Table 1 provides a 10-year CCDF funding history. Federal
following generally applies to the CCDF as a whole.
CCES funding of $2.9 billion was the largest single source
of annual CCDF funding until FY2018, when CCDBG
Eligibility
funding was increased by 83% to $5.2 billion. CCDBG
To be eligible for the CCDF, children must
funding has since increased, though in smaller increments.
• be under age 13 (or older in certain circumstances);
•
Federal CCDF appropriations are augmented each year by
reside with a parent or parents who are working or
CCES state match and MOE. Typically, state funds total
attending school or job training (unless the child needs
about $2 billion annually. (P.L. 116-127 temporarily
or receives protective services);
reduced state match by 6.2 percentage points during the
• have family income no greater than 85% of state median
COVID-19 public health emergency. In addition, ARPA
income (SMI), or lower depending on state policy; and
effectively exempted a portion of the increased CCES funds
• have no more than $1 million in family assets.
from match requirements in FY2021-FY2022.) States may
also transfer up to 30% of their Temporary Assistance for
States often adopt initial income limits below the federal
Needy Families (TANF) block grants to the CCDF. Such
maximum. States need not serve all eligible children.
transfers typically account for about $1 billion annually.
Transfers must be spent under CCDBG Act rules.
Payment Methods
States may contract with child care providers to serve
Supplemental and one-time mandatory appropriations
CCDF children, but it is more common for families to
provided by ARPA are not shown in Table 1. The CCDBG
receive a certificate (or voucher) to use at the provider of
received several supplemental appropriations during this
their choice. In FY2020, 94% of children used certificates.
period, including $30 million in FY2019, $3.5 billion in
FY2020, $10.0 billion in FY2021, and $100 million in
Provider Reimbursement Rates
FY2023. In addition, ARPA provided one-time mandatory
States set the payment rates for child care providers based
funding of $15.0 billion for the CCDBG, $24.0 billion for
on a market rate survey or an alternative methodology (e.g.,
child care stabilization grants, and $35 million for child
cost estimation). HHS recommends that states set payment
care administrative costs.
rates at the 75th percentile of the market. In April 2023,
HHS announced states would be required to set payment
Table 1. 10-Year CCDF Funding History
rates at the 50th percentile or above. States often use a tiered
(nominal dol ars in bil ions; excludes supplemental funds)
system, issuing higher payments to providers meeting
certain criteria (e.g., high quality or nontraditional hours).
Fiscal Federal
State
TANF
Year
CCES
CCES
CCDBG Transfer
Total
Parental Cost-Sharing
Parents are generally expected to share in the cost of child
2014
2.917
2.170
2.358
1.382
8.828
care, though states may waive co-payments in some cases.
2015
2.917
2.186
2.435
1.320
8.859
States set sliding fee scales based on income, family size,
and other factors. Currently, HHS suggests that states set
2016
2.917
2.178
2.761
1.403
9.260
parental fees at no more than 7% of family income; a July
2017
2.917
2.174
2.856
1.275
9.222
2023 proposed rule would make this a requirement.
2018
2.917
2.179
5.213
1.498
11,807
Health and Safety Rules
2019
2.917
2.124
5.258
1.302
11.634
The CCDF requires states and child care providers to carry
out or meet certain health and safety rules. For instance,
2020
2.917
1.863
5.826
1.437
12.072
• states must establish and enforce minimum health and
2021
3.550
1.813
5.878
1.158
12.400
safety standards covering broad areas, such as first aid;
2022
3.550
1.812
6.104
0.976
12.442
• states must conduct pre-licensure and unannounced
2023
3.550
2.159
7.941
TBD
TBD
annual inspections for licensed CCDF providers, and
annual inspections for license-exempt CCDF providers;
Source: CRS, based on CCES appropriations, CCDF al ocation data
(including transfers, as appropriate), and TANF financial data.
• states must set age-specific standards for group size
Notes: State CCES estimates include MOE and matching funds, and
limits and child-to-provider ratios; and
reflect real otment of prior-year funds except in FY2022-FY2023, due
• states must conduct criminal background checks on
to data limitations. (Federal funds do not reflect real otments.)
applicable child care providers and staff members.
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Child Care Entitlement to States: An Overview
Children Served
Karen E. Lynch, Specialist in Social Policy
About 1.5 million children were served by the CCDF in an
IF10511
average month in FY2020. Nearly two-thirds of the
children were under the age of six and the majority (87%)
were served in licensed or regulated settings.

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