Child Care: Funding and Spending under Federal Block Grants

March 19, 2002 RL31274

The welfare reform law of 1996 ( P.L. 104-193 ) sharply increased federal child care funding for low-income families, with the expectation that new work requirements for welfare parents (most of whom were single mothers) would increase demand for child care services. This additional funding was accompanied by the creation of a unified and expanded Child Care and Development Block Grant (CCDBG) program, with the aim of serving low-income families, regardless of welfare status. The expanded program is financed through two funding streams commonly referred to in combination as the Child Care and Development Fund (CCDF). CCDF appropriations in FY2002 from the two funding streams total $4.8 billion: $2.7 billion in mandatory funding and $2.2 billion in discretionary funds ( Figure 1 ). The two funding streams fall under separate committee jurisdictions, and carry with them different rules regarding allocation, state matching requirements, and time limits for obligating and spending money. A portion of the mandatory funding is "guaranteed" to states and is based on states' spending on child care prior to the 1996 welfare law. In order for a state to be eligible for its share of the remaining mandatory funds, which require state matching, the state must first spend a designated amount (also based on historical spending) of its own state funds. Discretionary CCDF funding is 100% federal (i.e., requires no state match) and is allocated according to a different formula than either portion of mandatory funds. Both the mandatory and the discretionary funding streams expire at the end of FY2002 and are due to be reauthorized this year, the mandatory funding as part of welfare (TANF) reauthorization. Although the CCDF is the only federal grant program dedicated solely for the purpose of providing child care subsidies and activities for low-income families, states also are using two other federal block grants for this purpose: TANF and the Social Services Block Grant (SSBG). States have increasingly used TANF dollars for child care services within their TANF programs ($2.2 billion in FY2000) in addition to transferring TANF funds to the CCDF. The TANF transfers to CCDF in FY2000 ($2.4 billion) exceeded the discretionary funds appropriated for any single year so far. Overall, expenditure data show that in FY2000, states spent more than $9 billion in federal and state funds associated with the CCDF and TANF -- more than double the amount spent on child care via these programs in FY1997. SSBG expenditure data are not available for FY2000, but states are reported to have spent almost $400 million in SSBG funds in FY1999 to support child care services. As Congress decides how much funding to make available for child care, it will need to consider multiple programs, and the various funding streams within them. It is unclear whether the current level of child care funding via TANF and SSBG will be sustained if the recent economic downturn gives rise to needs perceived to be more pressing.

RL31274 -- Child Care: Funding and Spending under Federal Block Grants


Updated March 19, 2002





CONTENTS

<font size="+1">List of Tables</font>

Table 1. CCDF Appropriations (Mandatory and Discretionary) FY1997-FY2002

Table 2. SSBG Appropriations and TANF Transfers

Table 3. Total CCDF Expenditures by Funding Source FY1992-FY2000

Table 4. CCDF Expenditures Made in FY2000 by Funding Type and Year of Funding Source

Table 5. TANF Child Care Spending FY1997-FY2000

Table 6. Total CCDF Expenditures by State: FY1992-FY2000

Table 7. TANF Child Care Expenditures

Table 8. FY2000 CCDF Expenditures by Fund

Table 9. Computation of "Excess" TANF MOE Child Care Expenditures in FY2000

Appendix A. FY2002 CCDF Allotments, by Funding Type

Appendix B. Transfers from TANF to CCDF, cumulatively (FY1997-FY2000) and for FY2000, by state (with percentages of cumulative grants and FY2000 TANF grant)

Appendix C. Total CCDF and TANF Child Care Expenditures by Funding Source: FY1992-FY2000

<center>Acknowledgement</center>

Special thanks to [author name scrubbed] of the Congressional Research Service (CRS) for his valuable comments and technical contributions to this report. Additional thanks to CRS colleagues Vee Burke, Christine Devere, Tom Gabe, [author name scrubbed], [author name scrubbed], and [author name scrubbed] for their comments, and Angela Harris for her production assistance.



Summary

The welfare reform law of 1996 (P.L. 104-193) sharply increased federal child care funding for low-income families, with the expectation that new work requirements for welfare parents (most of whom were single mothers) would increase demand for child care services. This additional funding was accompanied by the creation of a unified and expanded Child Care and Development Block Grant (CCDBG) program, with the aim of serving low-income families, regardless of welfare status. The expanded program is financed through two funding streams commonly referred to in combination as the Child Care and Development Fund (CCDF).

CCDF appropriations in FY2002 from the two funding streams total $4.8 billion: $2.7 billion in mandatory funding and $2.2 billion in discretionary funds (Figure 1). The two funding streams fall under separate committee jurisdictions, and carry with them different rules regarding allocation, state matching requirements, and time limits for obligating and spending money. A portion of the mandatory funding is "guaranteed" to states and is based on states' spending on child care prior to the 1996 welfare law. In order for a state to be eligible for its share of the remaining mandatory funds, which require state matching, the state must first spend a designated amount (also based on historical spending) of its own state funds. Discretionary CCDF funding is 100% federal (i.e., requires no state match) and is allocated according to a different formula than either portion of mandatory funds. Both the mandatory and the discretionary funding streams expire at the end of FY2002 and are due to be reauthorized this year, the mandatory funding as part of welfare (TANF) reauthorization.

Although the CCDF is the only federal grant program dedicated solely for the purpose of providing child care subsidies and activities for low-income families, states also are using two other federal block grants for this purpose: TANF and the Social Services Block Grant (SSBG). States have increasingly used TANF dollars for child care services within their TANF programs ($2.2 billion in FY2000) in addition to transferring TANF funds to the CCDF. The TANF transfers to CCDF in FY2000 ($2.4 billion) exceeded the discretionary funds appropriated for any single year so far. Overall, expenditure data show that in FY2000, states spent more than $9 billion in federal and state funds associated with the CCDF and TANF - more than double the amount spent on child care via these programs in FY1997. SSBG expenditure data are not available for FY2000, but states are reported to have spent almost $400 million in SSBG funds in FY1999 to support child care services.

As Congress decides how much funding to make available for child care, it will need to consider multiple programs, and the various funding streams within them. It is unclear whether the current level of child care funding via TANF and SSBG will be sustained if the recent economic downturn gives rise to needs perceived to be more pressing.



Introduction

The welfare reform law of 1996 (P.L. 104-193) provided an increase in federal child care funding for low-income families, with the expectation that newly implemented work requirements for welfare recipients (many being single mothers) would create a greater demand for child care services. This additional funding was accompanied by the creation of a unified and expanded Child Care and Development Block Grant (CCDBG) program, with the aim of serving low-income families, regardless of welfare status. The expanded program is financed through two funding streams: one discretionary (authorized by the CCDBG Act), and one mandatory (appropriated under Section 418 of the Social Security Act). These two funding streams are commonly referred to in combination as the Child Care and Development Fund (CCDF).

Since passage of the welfare law, states have spent increasing amounts of both federal and state money on child care. (As will be discussed later, a portion of federal mandatory funding to states is contingent on states spending some of their own state funds on child care.) Although the CCDF is considered the primary source of federal funding for child care subsidies for low-income working and welfare families, two other federal block grants are contributing significantly to the child care funding picture: the Temporary Assistance for Needy Families (TANF) block grant, and the Social Services Block Grant (SSBG).

States use all three of these sources to help finance child care assistance for families, but only the CCDF is dedicated solely for this purpose. The CCDF supports child care subsidies and activities, and nothing else, whereas TANF and SSBG provide a wide range of assistance, including child care.

This report focuses on the financing structure of the CCDF, actual expenditures made from it, and the role of TANF and the SSBG in child care funding and spending. Authorization for the discretionary portion of the CCDF and appropriations for both the CCDF mandatory funds, as well as the TANF block grant, are due to expire at the end of FY2002. Therefore, Congress is expected to confront child care financing issues this year as part of both the child care and welfare reauthorizations. Debates over the level of funding necessary for child care are already percolating, and although the 1996 law consolidated several components of federal child care funding, the financing structure remains complicated, potentially leading to calls for simplification. Multiple CCDF funding streams (with different state funding and spending rules) fall under different congressional committee jurisdictions, and comprise only a portion of a complex child care financing picture.

Seeing the full picture also requires focusing on the degree to which TANF funds contribute to child care expenditures. Recent TANF expenditure data show that states are spending increasing amounts of TANF funds for child care services within the TANF program ($2.2 billion in FY2000); however, the extent to which this will continue during an economic downturn is an unanswered question for TANF and child care state administrators alike. States also have the authority to transfer up to 30% of their annual TANF block grant to the CCDF and/or the SSBG (at a maximum of 10%) for use under those programs' rules, and as this report will discuss, many states have done so.

Before examining these three sources of child care funding in greater detail, the next section provides an overview of how changes made as part of the 1996 welfare law affected child care programs and funding. The report concludes with an analysis of trends in child care expenditures, both nationally and by state, and the implications of the recent spending trends for reauthorization.

Overview of Child Care Changes in 1996

The current structure of federal child care programs and funding is more easily understood by tracing its evolution from the system that existed prior to 1996, when the welfare law simultaneously repealed, created, and consolidated child care programs described below.

Welfare (AFDC) Child Care Programs. Before 1996, four separate federal programs specifically supported child care for low-income families. Three were associated with the cash welfare system. Families on welfare (then Aid to Families with Dependent Children (AFDC)) were entitled to free child care. Families who had left the AFDC rolls with employment were entitled to 12 months of "transitional" subsidized child care. The third AFDC-related child care program targeted families who, without a child care subsidy, would be "at risk" of qualifying for AFDC. These three programs operated under three separate sets of rules, and targeted three separate populations. Critics argued that mothers navigating their way through the welfare system faced unnecessary complexity that could be alleviated with a more unified child care program.

All three of the AFDC-related child care programs were funded with mandatory money, and fell under the same congressional committee jurisdiction (Ways and Means Committee in the House, and the Finance Committee in the Senate). AFDC Child Care and Transitional Child Care were both open-ended federal entitlements (i.e., there was no limit on program funding), with the federal share of payments to states based on the state's Medicaid matching rate. The AFDC At-risk program, on the other hand, was not open-ended, but was instead authorized as a "capped entitlement" to the states at an annual level of $300 million.

CCDBG. The fourth pre-1996 child care program for low-income families was the Child Care and Development Block Grant (CCDBG). Established in 1990, it supported child care for low-income families not connected to the AFDC welfare system. The block grant subsidized child care for children under age 13 whose working family income did not exceed 75% of state median income (SMI), adjusted for family size. In addition, it provided funds for activities to improve the overall quality and supply of child care for families in general. Unlike the AFDC-related programs, the CCDBG was funded with discretionary funds appropriated as part of the annual appropriations process. Authorizing legislation fell under the jurisdiction of the Education and Labor Committee in the House (later renamed the Committee on Education and the Workforce) and the Labor and Human Resources Committee in the Senate (later renamed the Committee on Health, Education, Labor and Pensions).

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How the 1996 Welfare Law Expanded Child Care Funds. The 1996 welfare reform law (P.L. 104-193) repealed AFDC and its three associated child care programs. Like cash welfare, child care was no longer to be an individual entitlement to welfare families. Instead of preserving three separate programs, the new law created a consolidated block of mandatory funding under Section 418 of the Social Security Act. Like the earlier three programs, this new block of funding was designed to be largely targeted toward families on, leaving, or at risk of receiving welfare (now Temporary Assistance for Needy Families (TANF)). (1) However, unlike the three AFDC-related child care programs, each of which was administered under its own set of rules, the 1996 law instructed that the new mandatory funding be transferred to each state's lead agency managing the CCDBG, and be administered according to CCDBG rules. The law appropriated $13.9 billion for this new child care block grant over 6 years (up $4 billion from spending estimated by CBO under old law). Committee jurisdiction for the mandatory funds remained with the House Ways and Means and Senate Finance Committees.

In addition to creating the new block of mandatory child care funding, the 1996 welfare law reauthorized and amended the CCDBG. The 1996 law authorized discretionary funding levels at $1 billion annually (the authorized "such sums as necessary" for FY1995 had led to an appropriation of $935 million), and modified the program rules, including an expansion of program eligibility (from 75% of SMI to 85% of SMI). The discretionary funding and the CCDBG program rules remained under the same committees' jurisdiction as before.

This combination of new mandatory funding and expanded CCDBG discretionary funding is commonly referred to as the Child Care and Development Fund (CCDF) and makes up the largest source of federal program funding ($4.8 billion in FY2002) appropriated solely for child care subsidies and child care activities for low-income families. (2) (States are required to spend no less than 4% of their combined mandatory and discretionary CCDF allotments on activities to improve the quality and availability of child care.) A more detailed explanation of the CCDF, its funding streams, rules, and appropriations, is provided below.

The Child Care and Development Fund (CCDF)

"CCDF" v. "CCDBG": What's in a name?

The "Child Care and Development Fund" (or "CCDF") is a term that emerged from the aforementioned consolidation and expansion of child care programs that took place in 1996. This term does not appear anywhere in statute, but rather was coined by the Department of Health and Human Services (HHS) to refer to the combination of mandatory and discretionary funding provided to states for their use in administering child care programs governed by the rules and regulations of the CCDBG. Readers should note that while the "CCDF" is in essence a funding term, it is not unusual for it to be used interchangeably with "CCDBG." Nevertheless, from a financing perspective, there are technical distinctions between these two acronyms, which are noted in the following discussion of the multiple funding streams that comprise the CCDF.

CCDF Funding Streams

Mandatory Funding. The mandatory funding component of the CCDF is sometimes referred to as "entitlement" funding. This refers to an entitlement to states, not individuals. Although the individual entitlement to child care was eliminated in 1996, states remain entitled to a portion of federal funds for child care. From specified annual block-granted amounts appropriated in Section 418 of the Social Security Act (for FY1997-FY2002) as part of the 1996 law, each state receives a fixed amount. That fixed amount is guaranteed, and equal to the funding received by each respective state under the three earlier AFDC-child care related programs in FY1994, FY1995, or the average of FY1992-FY1994, whichever is greatest. In other words, states are entitled to receive this portion of federal funding without having to "match" those dollars with any child care spending from their own state funds.

In order for a state to be eligible for its share of the remaining funds (also known as "matching funds"), that state must first meet a "maintenance-of-effort (MOE) requirement." Meeting the MOE requires that a state expend at least the same amount of state funds for child care as it did under its AFDC-related child care programs in FY1995 or FY1994 (whichever was higher). Once a state's child care spending has reached that MOE level in the given year, it may begin to access its share of the year's remaining federal mandatory funds. States' matching fund allotments are determined after setting aside the "guaranteed" mandatory portion described above, and are based upon each state's relative share of children under age 13. Every dollar of state child care expenditures above the MOE amount is matched at the state's Medicaid matching rate, to the extent provided for by the state's allotment of federal matching funds. (3)

Discretionary Funding. The discretionary portion of the CCDF is authorized by the Child Care and Development Block Grant Act (as amended in 1996). Actual funding amounts are determined in the annual appropriations process. This portion has sometimes been singled out as "the CCDBG funding" when referring to funding trends over time, because prior to 1996, the discretionary child care funding was the sole source of CCDBG funding. However, since 1996, the distinction between discretionary and mandatory funds has not been so relevant from the programmatic angle (since all CCDF money is directed to CCDBG programs), but rather from the standpoint of differences in rules regarding the time limits that states have for obligating and expending the different funding streams (discussed below) and state matching requirements on those funds.

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Discretionary funds are allocated among states according to the formula contained in the original CCDBG Act of 1990 and retained in the amended act of 1996. That formula is based on each state's share of children under age 5, its share of children receiving free or reduced-price lunches, and its per capita income. Half of 1% of the appropriated funds is reserved for payments to the territories, and between 1% and 2% is reserved for Indian tribes and tribal organizations. (CCDF allotments for FY2002 categorized by funding type (i.e., mandatory, matching, and discretionary) are found in Appendix A.) Discretionary funds do not require a state match. The CCDBG Act currently authorizes funding through FY2002 at $1 billion annually; however, actual appropriations have surpassed that level (up to $2.1 billion in FY2002).

Funding made available for both the discretionary and mandatory portions of the CCDF for each of FY1997 through FY2002 are shown in Table 1. The second and third columns of the table distinguish between advance and same year appropriations, with the fourth column showing the total discretionary funding amount available for the given fiscal year. Readers should note that the total amount shown as appropriated does not reflect all funds ultimately made available for CCDF expenditures. As mentioned earlier in this report, states may transfer a portion of their TANF allotments to the CCDF for expenditure under that program, and have chosen to do so in varying degrees.

Table 1. CCDF Appropriations (Mandatory and Discretionary) FY1997-FY2002
($ in millions)

Fiscal year Discretionary Funding Mandatory ("Entitlement") funding Total
Advance appropriation from prior year Same year's appropriation All available funds for FY
1997 0a  19a  19a 1,967 1,986a
1998 937 66 1,003 2,067 3,070
1999 1,000 0 1,000 2,167 3,167
2000 1,183 0 1,183 2,367 3,550
2001 1,183 817 2,000 2,567 4,567
2002 0 2,100 2,100 2,717 4,817

Source: Table prepared by the Congressional Research Service (CRS) using annual Health and Human Services (HHS), Administration for Children and Families budget justifications.

a What appears in the table to be limited discretionary CCDF funding in FY1997, and consequently, in total funding, actually reflects a shift to advance appropriating of funds for the following fiscal year. The FY1997 appropriation law provided $956 million for CCDBG, with only $19 million available immediately during FY1997, and the remainder available on October 1, 1997 (the first day of FY1998). In earlier years the funds appropriated for CCDBG became available for obligation only in the last month of the given fiscal year, and therefore most of the appropriation for a given year ($935 million in FY1996) was actually obligated in the following fiscal year.

Time Limits on States for Obligating and Spending CCDF Funds. Specific and different rules govern time limits for obligating and spending CCDF money, depending on the funding stream (Figure 2). First, what does it mean for a state to "obligate" funds? Essentially, obligated CCDF funds reflect money that states have committed to spend from their CCDF grant awards. (4) CCDF regulations impose some restrictions on state definitions of "obligations," but generally leave discretion to the states in defining what constitutes an obligation. Examples of obligations may involve states "subgranting" funds to programs that operate independent of state agencies (i.e., state-supervised county-run programs or private contractors) or making transactions that require future payment for services. When the state actually makes a payment for the service, an expenditure is recorded.

CCDF Discretionary Funds. States have 2 years in which to obligate discretionary funds appropriated in a given fiscal year. States have an additional year to actually spend the money (in other words, a total of 3 fiscal years from the time of appropriation). For example, CCDF discretionary funding appropriated for FY2001 is available for obligation through the end of FY2002. States then have until the end of FY2003 to actually make payments on those obligations. (They can, however, make expenditures at any point within the 3-year period.) If a state fails to make expenditures for all its obligations within the 3-year limit, HHS will take back that portion of the grant award that is not spent.

CCDF Mandatory Funds. The deadlines for states to obligate and expend mandatory funds differ from those for discretionary funds. (Different rules apply to Indian tribes.)

  • Mandatory "guaranteed" CCDF funds must be obligated by the end of the fiscal year in which they are awarded, only if the state intends to qualify for matching funds. If a state does not intend to qualify for matching funds, there is no deadline for obligating funds. Regardless, there is no deadline for states to expend these funds. As explained earlier, in order for a state to qualify for federal matching funds, it must first meet a maintenance-of-effort (MOE) requirement.

  • MOE state funds must be obligated and expended within the fiscal year of the grant award if the state is to become eligible to receive its share of federal matching funds for that year.

  • Matching funds (both the federal and state share) must be obligated within the fiscal year of the grant award. A state then has an additional year to make expenditures. In the event a state fails to expend its share of matching CCDF funds by the end of the second fiscal year, HHS will take back the unmatched portion of the federal grant award.

Figure 2 provides a pictorial representation of the varying time frames that states have for obligating and expending funds from the various CCDF funding streams. States' flexibility to obligate and spend funds across years is of particular relevance when analyzing CCDF expenditures over time, and will be addressed in more detail later in this report. However, before analyzing those expenditures, both nationally and by state, the following sections describe the role that two other federal block grants (TANF and SSBG) play as additional funding sources for child care.

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Source: Figure prepared by the Congressional Research Service (CRS).

Additional Funding Sources: TANF and SSBG

As noted earlier, child care for low-income families is also supported by funds from TANF and the SSBG. Although states are not required to use these funds for child care, expenditure data indicate that these block grants are indeed supplementing funds appropriated directly through the CCDF.

TANF. The welfare reform law provides fixed block grants ($16.5 billion annually through FY2002) for state-designed programs of time-limited and work-conditioned aid to families with children. (5) Since its implementation, increasing amounts of TANF funding have been used for supporting child care, both through transfers to the CCDF, and by funding child care within the TANF system itself. As mentioned earlier, states are permitted to transfer a combined total of 30% of their annual TANF allotments to the CCDF and the SSBG (with a maximum limit of 10% to the SSBG). Once transferred, the funds must be administered according to the rules of the program that receives them. TANF rules apply to funds that remain within the TANF program. (6)

Over the course of FY1997-FY2000, states transferred a total of $6 billion from TANF to the CCDF, representing over 9% of their TANF allotments awarded over the 4-year period. The $2.4 billion of that total that was transferred in FY2000 represents 14% of states' FY2000 TANF allotment. In other words, the amount transferred from TANF to CCDF in FY2000 ($2.4 billion) exceeds the amount that was appropriated directly in discretionary CCDF funds for FY2002 ($2.1 billion), or any single fiscal year so far. For a state-by-state table showing cumulative amounts of TANF funds transferred to the CCDF in FY1997-FY2000, and transfers made from FY2000 allotments in FY2000, see Appendix B of this report.

Transferring funds to the CCDF is not the only channel through which states may use TANF funding to support child care services for low-income families. TANF funding can be used directly to pay for a variety of services that support work, and child care is a prime example. In FY2000, states reported spending a total of $2.2 billion of federal TANF and related state funds on child care. (7) Note that this is in addition to the aforementioned TANF funds transferred to the CCDF for expenditure under that program. (An analysis of trends in expenditures from both these funding sources begins on page 13.)

SSBG. The SSBG is a flexible source of federal funds that states may use to support a variety of social services, including child care. (8) States are entitled to a specified allotment of funds, based on population size, and there is no state match required for receipt of these federal funds. States have complete discretion over how these funds are distributed and to whom. Restrictions are placed only on any funds states opt to transfer from their TANF allotment to the SSBG. States have the authority (through FY2002) to transfer up to 10% of their TANF allotment to the SSBG. Any of these transferred funds must be used only for expenditures to assist children and families whose income is less than 200% of the federal poverty guidelines.

Over FY1997-FY2000, states have cumulatively transferred $3.9 billion (or 6% of their TANF awards for the period) to the SSBG. However, unlike TANF transfers to CCDF, a transfer to the SSBG is not necessarily subsequently spent on child care. Nor are the funds that are directly appropriated for the SSBG required to be used for child care. States use (at their own discretion) only a portion of all SSBG funds to support child care services. The most recent HHS analysis of state-reported SSBG expenditures reveals that in FY1999, 43 states spent a total of $397 million for child day care services, accounting for 13% of all FY1999 SSBG expenditures. (9) This represents a greater percentage of all SSBG expenditures than that made in FY1998, when 46 states applied just over 9% ($279 million) of all SSBG expenditures toward child day care services.

As shown in Table 2, funding appropriated directly to the SSBG has been decreasing since 1997, with additional transfers from TANF hovering around $1 billion. (The amount transferred in FY2001 is not yet available.) Appropriations for FY2002 were $1.700 billion, a decrease of $25 million from the prior year. The extent to which FY2000 and FY2001 SSBG funding, in addition to any funds transferred from TANF, has and will be used for child care expenditures is not yet known.

Table 2. SSBG Appropriations and TANF Transfers
($ in billions)

Fiscal year Appropriation Transferred from TANF
1996 2.381 not applicable
1997 2.500 0.6
1998 2.299 1.2
1999 1.909 1.0
2000 1.775 1.1
2001 1.725 not available
2002 1.700 not available

Source: Table prepared by the Congressional Research Service (CRS).

Analysis of Child Care Expenditures

This report has thus far focused on sources of child care funding, emphasizing the amounts made available each year through federal block grants, and the rules that apply to states for obligating and spending those funds. The next sections focus on the data that show what amounts states have actually spent from year to year. Following is an analysis of trends in actual child care expenditures using data available from the CCDF, TANF, and their predecessor programs. (The limited information available regarding the SSBG's role in funding child care expenditures has already been discussed in the preceding section.)

In this report, expenditures for a given fiscal year reflect expenditures made within that given fiscal year, regardless of the year in which the funding was provided. However, for FY2000, a breakdown of spending by year of funding source is also provided. (Recall that as described earlier, states are afforded different time frames for spending money from different funding streams.) With multiple funding sources available, expenditure data help in answering the questions of how much states are spending on child care for low-income families, via which programs, and in what time frame.

Overview of Child Care Spending Trends

The following sections look at components of child care spending by program (CCDF and TANF), and more specifically, by funding stream within a given specified program. However, before doing so, it is useful to focus on the "big picture."

What is the "Big Picture"? Child care expenditures made through the CCDF and TANF programs have been growing steadily since the passage of the 1996 welfare law, and build on levels that were already increasing prior to that time. The most recent available data indicate that in FY2000, combined child care expenditures made from these two programs totaled over $9 billion - more than double the level of expenditures made for child care via these same two programs in FY1997.

Expenditures from the CCDF (made from funds provided either directly through the CCDF or from TANF transfers to the CCDF) represent the largest portion of that child care spending, reaching over $7 billion in FY2000. Supplementing this were over $2 billion in additional child care spending within the TANF system. Figure 3 displays the growth in spending for child care, showing combined expenditures from CCDF and TANF (both federal and state shares) for FY1997-FY2000. For FY1992-FY1996, the figure reflects expenditures made for AFDC-related child care programs (both federal and state shares) and the CCDBG. The chart does not indicate which programs and funding streams comprise what portion of each year's spending. A discussion of those breakdowns follows, starting with an analysis of CCDF expenditures.

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Source: Figure prepared by the Congressional Research Service (CRS) based on data provided by the Department of Health and Human Services (HHS).

Note: For a breakdown of these expenditures by funding source, see Appendix C.

Trends in CCDF Spending

As described earlier, CCDF funding comes in both mandatory and discretionary amounts. One portion of mandatory money is "guaranteed"; another portion of the mandatory money is only available to states if they first meet an MOE requirement (with state funds) and then provide additional state matching funds. No match applies to the discretionary fund. Therefore, expenditure data for CCDF can be broken down into those same categories: mandatory and discretionary, distinguishing between federal and state contributions.

Table 3 shows the breakdown of CCDF (and predecessor program) expenditures for FY1992-FY2000, by funding source. For FY1992-FY1996, the amounts shown as federal CCDF mandatory "guaranteed" spending actually reflect federal expenditures for AFDC-related child care spending. Why? Because the "guaranteed" funding amounts for the CCDF are based on AFDC child care spending during this period. Likewise, the MOE requirements established for the CCDF are based on the state spending from the AFDC era, and are therefore included in the MOE column. The CCDF federal matching money essentially represents "new" mandatory funding, which states can only access by spending the required share of their own state funds.

Expenditures made from federal funds are shown in the first three columns of expenditures, and those made from state funds are in the fourth and fifth columns. The final column shows total expenditures made from the CCDF and its predecessor programs in each year. The trend in total CCDF spending mirrors that of "the big picture." That is, total CCDF expenditures have grown each year.

Table 3. Total CCDF Expenditures by Funding Source FY1992-FY2000
($ in millions)

Fiscal year Federal CCDF funds State CCDF funds Total CCDF spending
Discretionary fundsa Mandatory "guaranteed" fundsb Matching federal share MOE Matching state share
1992 332 801 -- 616 -- 1,749
1993 675 890 -- 662 -- 2,227
1994 835 1,055 -- 798 -- 2,688
1995 832 1,235 -- 950 -- 3,017
1996 850 1,280 -- 994 -- 3,125
1997 1,009 986 552 945 416 3,909
1998 1,486 1,169 867 1,031 715 5,268
1999 2,583 1,165 882 1,018 636 6,283
2000 3,064 1,127 1,095 1,049 887 7,222

Source: Table prepared by the Congressional Research Service (CRS) based on data provided by the Department of Health and Human Services (HHS).

Notes: Child care expenditures in the territories are excluded. Totals may not add due to rounding.

a Discretionary fund expenditures include spending from TANF transfers to CCDF.

b Expenditures made in FY1992-FY1996 from the federal share of AFDC-related child care matching funds are included in the same column as the mandatory CCDF expenditures because these expenditures were the basis for determining mandatory "guaranteed" funding levels for the CCDF. Similarly, the FY1992-FY1996 expenditures made from the state share of AFDC-related child care matching funds appear in the same column showing CCDF MOE expenditures (for FY1997-FY2000) because they formed the basis of determining the MOE requirement level.

CCDF Spending in FY2000. As Table 3 shows, in FY2000, a total of $7.2 billion was spent from the CCDF. Over $3 billion of the $7.2 billion total reflect expenditures made from federal CCDF discretionary funds. Approximately $2.2 billion in CCDF expenditures were made from "guaranteed" mandatory funding and the federal share of matching funds. Why do the federal expenditures made from the CCDF in FY2000 (discretionary + mandatory + federal share of matching = $5.3 billion) significantly exceed the FY2000 CCDF funding level (see Table 1) of $3.5 billion? First, the expenditure numbers shown in Table 3 reflect spending by states in FY2000, and, as explained in the discussion of time limits for obligation and expenditure of funds, states may make expenditures from not just the current year's funding, but also from funds provided in earlier years. (10) Moreover, when states transfer funds from TANF to the CCDF, those transfers ultimately show up as CCDF expenditures (included in the discretionary column).

Table 4 provides a breakdown of CCDF expenditures made in FY2000, showing the source of those expenditures both by type (i.e., discretionary, mandatory, matching) and the year the funding was actually appropriated. For example, the first column of expenditures shows that a cumulative total of almost $3.1 billion in expenditures from CCDF discretionary funds were made in FY2000. Of that amount, over $1.2 billion can be attributed to discretionary funding appropriated in FY1998 and FY1999, and $1.8 billion was expended from funds appropriated in FY2000. States were able to spend more in discretionary funds than were actually appropriated in FY2000, in part because expenditures from transferred TANF funds are included as discretionary.

Table 4. CCDF Expenditures Made in FY2000 by Funding Type and Year of Funding Source
($ in millions)

Year of
funding
source

`FY2000

federal funding expenditures

FY2000

state funding expenditures

Total

Discretionarya Mandatory
"guaranteed"		 Matching MOE Matching
FY1998 244 24 NAc  NAb  NAc  273
FY1999 1,018 120 149 NAb  121 1,392
FY2000 1,801 983 946 1,049 765 5,574
FY98-00
cumulative		 3,064 1,127 1,095 1,049 887 7,222

Source: Table prepared by the Congressional Research Service (CRS) based on data provided by the Department of Health and Human Services (HHS).

a Included in the discretionary totals are any expenditures made from funds transferred from TANF to CCDF in the given year.

b States must make expenditures for meeting the MOE requirement within the given year, and therefore FY1998 and FY1999 MOE expenditures were made in each of those respective years, and applied to the MOE requirement for those years.

c Federal and state shares of CCDF matching funds must be expended by states by the end of the fiscal year following the year of appropriation. Therefore, FY1998 matching funds had to have been expended by the end of FY1999, and could not be a source of FY2000 expenditures.

TANF Child Care Spending

TANF contributes to the big picture of child care spending in two ways: expenditures made from funds transferred to CCDF (discussed above) and expenditures made directly within the TANF system. Of the expenditures made directly within TANF, some are made from federal funds, while others are made from state funds associated with the TANF maintenance-of-effort (MOE) requirement. TANF, like the CCDF, has its own MOE requirement, which states must meet if they are to be eligible for their full TANF allotment. The TANF MOE requires states to expend on TANF-eligible families an amount equal to their "historic" spending level (generally in FY1994-1995) on TANF predecessor programs: AFDC, Emergency Assistance, Job Opportunities and Basic Skills, and AFDC-related child care. Why is this important to the calculation of TANF's contribution to child care spending?

Role of the TANF MOE in Calculating Child Care Spending. Within the rules for applying state child care expenditures toward TANF and CCDF MOE levels, states may "double count" many expenditures toward both programs' requirements. In other words, as long as a child care expenditure is for a TANF-eligible family, it may be applied toward both the TANF's MOE level and the CCDF MOE. States are not required to explain in either their TANF or CCDF expenditure report whether any, all, or none of their MOE spending overlaps. As a result, if MOE expenditures from the CCDF and TANF expenditure forms were to be added together, the resulting total might overstate the level of MOE child care spending actually made by the states. Therefore, for this analysis of TANF child care expenditures, only TANF MOE spending that exceeds the level of CCDF MOE expenditures made by a state will be counted (recognizing that this method results in the most conservative estimate). A step-by-step look at the process of reaching "unduplicated" TANF MOE expenditure amounts is provided later in the report, where TANF expenditures are analyzed on a state-by-state basis.

Trends in TANF Child Care Spending. TANF expenditure data reveal that states as a group are spending increasing amounts of TANF funds on child care services. Table 5 shows that the combined total of federal TANF funding and the "excess" (or "unduplicated") child care expenditures made from state funds has grown from over $133 million in FY1997 to almost $2.2 billion in FY2000.

Table 5. TANF Child Care Spending FY1997-FY2000
($ in millions)

Expenditure Type  FY 1997 FY1998 FY1999 FY2000
TANF Federal funds 13.5 259.3 604.4 1,411.2
TANF state funds ("excess" child care MOE) 119.9 195.3 464.6 773.9
Total 133.4 454.6 1,069 2,185.2

Source: Table prepared by the Congressional Research Service (CRS) based on data provided by the Department of Health and Human Services (HHS).

Note: Child care expenditures in the territories are excluded.

State-by-State CCDF and TANF Spending

CCDF Trends. Earlier tables provide the spending picture from a national perspective, but do not reveal trends in individual state spending. Table 6 shows total CCDF (and predecessor program) spending made by each state over the same FY1992-FY2000 period shown for the nation as a whole in Table 3. The final column of Table 6 reveals the percentage change that occurred in total CCDF expenditures made by each state between FY1996 (the last year before the unified CCDF was implemented) and FY2000.

TANF Trends. As expressed in the discussion of funding sources, states are not required to spend any given amount of their TANF funds on child care. States have the flexibility to spend their TANF funding on a variety of services, in addition to cash assistance, and therefore it is useful to look not only at national trends regarding the use of TANF funding for child care, but also at state-by-state trends. Table 7 provides the same breakdown of TANF child care expenditures by year and type (federal or state) as that shown in Table 5, but on a state-by-state basis. Table 7 shows that all but 13 states have reported spending some level of TANF funds for child care over the 4 year period.

Table 6. Total CCDF Expenditures by State: FY1992-FY2000
($ in millions)

 
State 1992 1993 1994 1995 1996 1997 1998 1999 2000 Percentage
change:
FY1996-
FY2000		  
Alabama 31.9 39.8 40.8 47.0 48.6 52.4 60.7 74.4 103.6 113.0  
Alaska 6.6 7.6 7.5 10.0 7.2 13.1 17.3 31.7 27.0 273.2  
Arizona 32.6 35.8 41.0 47.1 53.9 61.2 81.9 107.9 105.6 95.9  
Arkansas 8.1 14.1 13.7 13.8 17.0 23.2 16.5 34.2 44.1 159.9  
California 206.5 152.3 335.2 285.1 330.8 368.8 586.1 796.8 956.6 189.2  
Colorado 16.6 26.1 33.2 32.7 27.2 32.9 51.2 66.7 53.0 95.1  
Connecticut 23.1 27.5 30.6 49.5 59.0 58.7 72.2 143.2 158.5 168.5  
Delaware 6.7 8.7 10.3 12.3 12.2 17.5 24.4 24.7 34.1 180.6  
Dist. of Columbia 8.5 9.1 9.4 10.9 10.6 13.6 20.2 27.6 45.1 327.3  
Florida 98.7 104.0 109.0 129.1 147.4 157.3 232.7 350.0 327.5 122.2  
Georgia 58.2 73.6 82.8 88.2 105.2 132.4 162.1 145.5 177.9 69.1  
Hawaii 2.1 6.1 9.3 13.1 12.8 20.5 30.6 34.6 25.2 97.2  
Idaho 4.1 7.2 12.4 6.1 6.0 9.1 16.1 24.6 25.7 330.7  
Illinois 51.6 90.4 105.4 164.7 191.9 236.0 300.8 354.8 387.8 102.1  
Indiana 6.3 27.9 50.3 63.2 66.9 78.3 138.6 92.2 146.7 119.5  
Iowa 17.5 17.7 16.6 23.0 21.5 20.1 49.3 47.2 86.2 300.5  
Kansas 27.6 21.6 27.8 25.2 28.6 35.1 45.7 49.9 61.1 113.3  
Kentucky 22.9 42.7 39.8 41.7 43.6 51.6 60.6 62.8 75.2 72.5  
Louisiana 13.0 31.7 33.8 39.6 40.5 47.4 62.3 120.1 134.0 230.6  
Maine 3.1 9.3 8.0 5.7 12.3 15.4 19.0 24.7 23.4 90.2  
Maryland 44.4 52.7 61.2 60.4 58.6 58.4 104.8 101.3 147.9 152.3  
Massachusetts 69.2 80.6 91.8 93.6 116.8 243.1 216.5 244.1 227.9 95.2  
Michigan 48.9 75.3 66.0 86.8 65.1 122.0 295.7 178.9 94.4 45.0  
Minnesota 35.4 44.8 51.2 56.8 62.4 69.6 68.9 91.0 127.0 103.4  
Mississippi 7.7 5.6 36.4 11.4 17.8 48.4 32.5 43.3 65.3 266.8  
Missouri 37.5 48.2 52.4 59.4 62.8 79.9 89.3 114.6 133.2 112.0  
Montana 4.7 5.7 7.3 7.1 8.4 8.3 14.1 18.9 20.2 140.4  
Nebraska 19.2 17.1 28.9 21.6 19.3 27.3 40.9 51.6 60.9 215.7  
Nevada 4.9 8.1 7.3 9.4 8.7 13.0 18.4 20.3 22.1 153.9  
New Hampshire 9.3 9.8 8.8 14.1 11.1 16.2 20.5 18.9 24.4 118.9  
New Jersey 61.8 55.7 77.3 111.2 114.3 108.7 134.0 86.3 218.0 90.7  
New Mexico 9.1 18.3 23.1 14.3 21.5 28.8 39.5 46.6 52.8 145.6  
New York 137.3 193.7 188.5 261.5 201.4 236.2 393.1 502.2 608.1 201.9  
North Carolina 43.5 93.7 141.1 136.3 100.1 169.5 224.5 274.1 250.0 149.7  
North Dakota 4.3 6.3 5.8 5.3 4.1 7.5 5.4 10.1 9.1 123.4  
Ohio 83.8 119.7 120.6 143.4 144.8 191.3 226.8 219.2 317.0 119.0  
Oklahoma 41.7 42.8 46.3 50.5 52.8 57.6 71.5 110.5 92.6 75.4  
Oregon 21.7 34.0 39.9 41.6 51.7 53.3 56.3 60.2 64.0 23.8  
Pennsylvania 79.3 95.4 112.2 134.1 139.8 192.8 170.3 281.3 297.3 112.7  
Rhode Island 9.7 11.3 13.3 14.6 15.3 18.7 25.8 33.8 52.7 245.3  
South Carolina 11.5 19.7 18.8 31.5 38.2 28.5 67.0 59.5 59.7 56.3  
South Dakota 3.0 4.6 5.6 6.0 2.8 6.3 10.7 11.7 13.2 366.1  
Tennessee 26.0 45.1 67.8 77.5 82.8 107.9 136.7 155.6 170.6 106.0  
Texas 125.0 172.5 167.8 192.0 198.6 218.0 274.7 356.0 421.4 112.2  
Utah 17.5 18.0 30.9 25.8 29.7 28.4 39.6 46.2 44.3 49.1  
Vermont 5.5 6.5 9.0 10.6 10.6 15.5 17.5 19.1 19.8 87.7  
Virginia 37.5 55.5 41.9 56.5 55.8 85.6 79.2 136.3 134.0 140.0  
Washington 57.1 66.1 81.2 95.1 100.8 116.6 172.4 216.3 283.9 181.7  
West Virginia 7.7 15.2 18.5 17.7 15.9 24.1 41.1 17.2 44.2 178.6  
Wisconsin 35.1 46.5 44.2 56.9 63.3 76.9 123.7 137.3 139.0 119.7  
Wyoming 4.1 5.3 5.6 6.2 6.0 5.7 8.1 7.6 7.8 29.0  
Total 1,749.0 2,227.0 2,687.7 3,017.1 3,124.6 3,908.8 5,268.0 6,283.5 7,221.2 131.1  

Source: Table prepared by the Congressional Research Service (CRS) based on data provided by the Health and Human Service (HHS).

Note: Included in these amounts are any expenditures made from funds transferred from TANF.

Table 7. TANF Child Care Expenditures
($ in thousands)

 

FY1997

 FY1998 FY1999  FY2000 
State  TANF federal TANF state Total TANF TANF federal TANF state Total TANF TANF federal TANF state Total TANF  TANF federal TANF state Total TANF
Alabama 0 0 0 7,199 0 7,199 7,547 0 7,547 1,924 0 1,924
Alaska 0 0 0 0 0 0 2,125 0 2,125 7,596 0 7,596
Arizona 0 0 0 0 0 0 2,295 0 2,295 27,285 0 27,285
Arkansas 0 0 0 0 2,665 2,665 0 3,242 3,242 5,468 3,391 8,859
California 0 0 0 71,530 57,015 128,545 171,332 154,654 325,987 504,977 185,677 690,654
Colorado 0 407 407 0 1,400 1,400 0 1,775 1,775 1,251 0 1,251
Connecticut 0 43,322 43,322 0 67,412 67,412 35,764 0 35,764 21,158 0 21,158
Delaware 0 385 385 0 0 0 0 0 0 0 4 4
Dist. of Columbia 0 5,279 5,279 5,000 7,814 12,814 0 11,408 11,408 12,436 11,417 23,853
Florida 0 0 0 71,139 976 72,115 0 946 946 132,190 428 132,618
Georgia 0 17,836 17,836 7,000 0 7,000 0 13,046 13,046 1,000 0 1,000
Hawaii 0 0 0 0 0 0 0 0 0 0 0 0
Idaho 0 0 0 0 0 0 0 0 0 0 2,662 2,662
Illinois 0 0 0 0 0 0 35,208 24,906 60,114 23,034 182,365 205,399
Indiana 0 0 0 0 0 0 0 0 0 111,106 2 111,108
Iowa 0 2,861 2,861 0 0 0 0 1,001 1,001 10 0 10
Kansas 0 0 0 0 0 0 0 0 0 0 0 0
Kentucky 0 0 0 0 0 0 10,363 0 10,363 10,958 0 10,958
Louisiana 0 0 0 0 0 0 0 0 0 0 0 0
Maine 0 0 0 0 3,019 3,019 0 5,347 5,347 3,443 2,458 5,901
Maryland 43 0 43 9 138 147 2,475 302 2,777 28,906 1 28,907
Massachusetts 0 0 0 0 1,679 1,679 37,507 4,467 41,973 104,733 18,802 123,535
Michigan 11,537 49,769 61,306 81,753 26,580 108,333 211,176 72,916 284,092 151,240 215,229 366,469
Minnesota 0 0 0 0 0 0 0 30,691 30,691 0 42,255 42,255
Mississippi 6 0 6 6 0 6 0 0 0 6,101 0 6,101
Missouri 0 0 0 0 18,779 18,779 0 26,584 26,584 0 41,853 41,853
Montana 0 0 0 0 0 0 0 0 0 0 0 0
Nebraska 0 0 0 0 0 0 0 0 0 0 0 0
Nevada 0 0 0 0 0 0 0 0 0 567 0 567
New Hampshire 0 0 0 0 0 0 0 0 0 0 0 0
New Jersey 0 0 0 0 0 0 21,545 0 21,545 0 0 0
New Mexico 0 0 0 0 0 0 0 0 0 0 0 0
New York 0 0 0 0 0 0 0 80,000 80,000 0 26,349 26,349
North Carolina 0 0 0 157 0 157 1,089 0 1,089 15,408 27,469 42,877
North Dakota 0 0 0 0 0 0 0 0 0 979 0 979
Ohio 0 0 0 0 6,447 6,447 19,361 4,032 23,393 79,008 0 79,008
Oklahoma 0 0 0 3,600 0 3,600 10,462 6,300 16,762 21,178 0 21,178
Oregon 0 0 0 5,631 0 5,631 5,727 2,421 8,148 15,797 3,941 19,737
Pennsylvania 0 0 0 0 0 0 0 0 0 13,933 0 13,933
Rhode Island 0 0 0 0 0 0 0 0 0 0 0 0
South Carolina 0 0 0 0 0 0 0 0 0 0 0 0
South Dakota 0 0 0 0 0 0 0 0 0 0 0 0
Tennessee 0 0 0 0 0 0 4,674 0 4,674 7,625 456 8,082
Texas 0 0 0 0 0 0 0 0 0 0 0 0
Utah 0 0 0 4,451 0 4,451 0 0 0 1,242 128 1,369
Vermont 483 0 483 460 356 816 988 744 1,732 2,695 1,499 4,195
Virginia 220 0 220 1,391 318 1,710 569 0 569 5 0 5
Washington 0 0 0 0 0 0 0 0 0 760 0 760
West Virginia 0 0 0 0 0 0 0 0 0 6,720 0 6,720
Wisconsin 1,194 7 1,201 0 0 0 24,193 19,832 44,026 90,513 7,556 98,069
Wyoming 0 0 0 0 710 710 0 0 0 0 0 0
Totals 13,484 119,867 133,351 259,327 195,309 454,636 604,400 464,614 1,069,014 1,411,248 773,943 2,185,191

Source: Table prepared by the Congressional Research Service (CRS) based on data provided by the Department of Health and Human Services (HHS).

Note: These amounts do NOT include expenditures made from funds transferred from TANF to the Child Care and Development Fund (CCDF).

A Closer Look at FY2000. Table 8 provides a detailed breakdown of CCDF and TANF child care expenditures made by each state, showing spending amounts by funding source. The final column of the table reflects the calculation of "excess" child care TANF MOE expenditures, which are explained in more detail below.

Calculating "Excess" TANF MOE Child Care Expenditures. Table 9 includes the expenditure data used to make the "excess" TANF MOE expenditure calculations for FY2000. The "excess"expenditure amount is defined here as any amount that remains after the total reported CCDF MOE expenditures are subtracted from the TANF child care MOE reported amount. If the subtraction yields a negative amount, or zero, then there is no excess amount to report as a state-funded TANF expenditure. If the reported TANF MOE child care spending amount is greater than the amount reported toward the CCDF MOE, then the positive difference is counted in Table 9 as the excess amount.

For example, as shown in the first column of numbers in Table 9, Alabama was required to make $6.896 million in child care expenditures from state funds to meet its annual CCDF MOE requirement. According to Alabama's reporting form for FY2000 CCDF expenditures, they spent precisely that amount in FY2000. The third column shows the level of child care expenditures reported on the TANF expenditure form toward the TANF MOE: $4.409 million. Because the TANF MOE expenditures do not exceed the CCDF MOE expenditures, and all $4.409 million could already potentially be accounted for as part of the $6.896 million reported as CCDF MOE spending, no expenditures are counted toward state TANF child care spending. (In other words $4.4 million minus $6.8 million yields a negative number.)

In other cases (Arkansas, for example), Table 9 shows that the reported TANF MOE child care expenditures ($5.278 billion) exceed those reported toward the CCDF MOE ($1.887 billion). Therefore, the excess (rounded to $3.4 billion in this case) is the amount that appears in Table 8 under TANF child care MOE.

Table 9 also reveals the extent to which states reported expenditures above the required MOE level. According to FY2000 expenditure reports, 12 states reported CCDF expenditures above the level required for meeting the CCDF MOE.

Table 8. FY2000 CCDF Expenditures by Fund

 

CCDF federal funds

 CCDF state funds  TANF funds 
State  Discretionary  Mandatory
"guaranteed"		 Matching  MOE  Matching  Federal funds  "Excess"
child care
MOE funds
Alabama 63.3 16.0 12.1 6.9 5.3 1.9 0.0
Alaska 14.3 3.5 2.9 3.5 2.7 7.6 0.0
Arizona 54.4 19.8 13.2 10.0 8.1 27.3 0.0
Arkansas 22.1 3.9 11.8 1.9 4.4 5.5 3.4
California 501.0 78.0 151.6 85.6 140.4 505.0 185.7
Colorado 9.1 14.3 9.5 9.0 11.2 1.3 0.0
Connecticut 8.3 18.7 13.2 105.1 13.2 21.2 0.0
Delaware 5.8 5.5 2.9 17.0 2.9 0.0 0.0
District of Columbia 32.2 4.6 1.8 4.6 2.0 12.4 11.4
Florida 147.5 43.0 58.6 33.4 45.0 132.2 0.4
Georgia 54.4 34.0 33.4 33.7 22.4 1.0 0.0
Hawaii 5.5 5.0 5.0 5.0 4.8 0.0 0.0
Idaho 13.7 2.9 5.5 1.2 2.4 0.0 2.7
Illinois 168.4 56.9 52.8 56.9 52.8 23.0 182.4
Indiana 77.6 14.0 24.6 15.4 15.2 111.1 0.0
Iowa 45.5 9.7 15.1 5.7 10.2 0.0 0.0
Kansas 26.0 9.8 11.1 6.7 7.4 0.0 0.0
Kentucky 28.2 17.6 15.7 7.3 6.5 11.0 0.0
Louisiana 98.7 3.5 18.7 5.2 7.9 0.0 0.0
Maine 11.1 3.0 4.6 4.0 0.8 3.4 2.5
Maryland 50.4 23.3 25.5 23.3 25.5 28.9 0.0
Massachusetts 102.8 35.0 22.5 45.0 22.5 104.7 18.8
Michigan 37.9 32.1 0.0 24.4 0.0 151.2 215.2
Minnesota 58.5 12.3 17.6 19.7 18.9 0.0 42.3
Mississippi 40.0 6.1 13.4 1.7 4.1 6.1 0.0
Missouri 54.6 24.7 22.6 16.5 14.8 0.0 41.9
Montana 11.6 3.2 2.9 1.3 1.1 0.0 0.0
Nebraska 14.6 10.6 7.1 24.1 4.5 0.0 0.0
Nevada 5.7 3.3 5.3 2.6 5.3 0.6 0.0
New Hampshire 5.2 4.6 4.8 5.0 4.8 0.0 0.0
New Jersey 68.9 25.2 48.2 26.4 49.3 0.0 0.0
New Mexico 30.5 8.3 8.1 2.9 3.0 0.0 0.0
New York 252.1 113.8 52.4 102.0 87.9 0.0 26.3
North Carolina 91.7 69.4 31.9 37.9 19.1 15.4 27.5
North Dakota 1.7 2.8 2.5 1.0 1.1 1.0 0.0
Ohio 116.4 70.1 45.4 53.1 32.0 79.0 0.0
Oklahoma 22.9 24.9 24.3 10.6 9.9 21.2 0.0
Oregon 10.7 19.5 13.3 11.7 8.8 15.8 3.9
Pennsylvania 86.4 69.9 43.0 46.6 51.5 13.9 0.0
Rhode Island 15.5 6.6 3.9 23.4 3.3 0.0 0.0
South Carolina 22.5 9.9 16.2 4.1 7.0 0.0 0.0
South Dakota 6.1 1.7 3.1 0.8 1.4 0.0 0.0
Tennessee 79.4 37.7 21.7 19.0 12.7 7.6 0.5
Texas 191.8 27.0 103.6 34.7 64.2 0.0 0.0
Utah 11.6 12.6 11.2 4.5 4.5 1.2 0.1
Vermont 9.7 3.9 2.2 2.7 1.3 2.7 1.5
Virginia 45.6 21.3 23.6 21.3 22.1 0.0 0.0
Washington 152.7 41.9 23.8 43.4 22.1 0.8 0.0
West Virginia 15.5 15.4 7.7 3.0 2.6 6.7 0.0
Wisconsin 62.1 24.5 21.1 16.4 14.8 90.5 7.6
Wyoming 1.9 1.5 1.8 1.6 1.0 0.0 0.0
Totals 3,064.2 1,126.9 1,094.8 1,048.6 886.7 1,411.2 773.9

Source: Table prepared by the Congressional Research Service (CRS) based on data provided by Health and Human Services (HHS).

Table 9. Computation of "Excess" TANF MOE Child Care Expenditures in FY2000
($ in thousands)

State

CCDF MOE requirement

 CCDF expenditures reported toward CCDF MOE requirement TANF child care expenditures reported toward the TANF MOE requirement Excess TANF MOE child care expenditures (more than reported for CCDF MOE requirement)
Alabama 6,896 6,896 4,409 --
Alaska 3,545 3,545 2,996 --
Arizona 10,033 10,033 10,033 --
Arkansas 1,887 1,887 5,278 3,391
California 85,593 85,593 271,270 185,677
Colorado 8,986 8,986 1,271 --
Connecticut 18,738 105,064 97,866 --
Delaware 5,179 16,957 16,961 4
District of Columbia 4,567 4,567 15,984 11,417
Florida 33,416 33,416 33,844 428
Georgia 22,183 33,698 33,698 --
Hawaii 4,972 4,972 -- --
Idaho 1,176 1,176 3,838 2,662
Illinois 56,874 56,874 239,239 182,365
Indiana 15,357 15,357 15,359 2
Iowa 5,079 5,712 5,712 --
Kansas 6,673 6,732 6,674 --
Kentucky 7,275 7,275 -- --
Louisiana 5,219 5,220 5,219 --
Maine 1,750 4,013 6,471 2,458
Maryland 23,301 23,301 23,302 1
Massachusetts 44,973 44,973 63,775 18,802
Michigan 24,411 24,411 239,640 215,229
Minnesota 19,690 19,690 61,945 42,255
Mississippi 1,715 1,715 1,715 __
Missouri 16,549 16,549 58,401 41,853
Montana 1,314 1,314 1,314 --
Nebraska 6,499 24,073 6,499 --
Nevada 2,580 2,580 2,303 --
New Hampshire 4,582 4,973 4,582 --
New Jersey 26,374 26,374 -- --
New Mexico 2,895 2,895 2,895 --
New York 101,984 101,984 128,333 26,349
North Carolina 37,927 37,927 65,397 27,469
North Dakota 1,017 1,017 1,017 --
Ohio 45,404 53,067 45,404 --
Oklahoma 10,630 10,630 10,630 --
Oregon 11,715 11,715 15,656 3,941
Pennsylvania 46,629 46,629 46,629 --
Rhode Island 5,321 23,413 23,413 --
South Carolina 4,085 4,085 4,085 --
South Dakota 803 803 803 --
Tennessee 18,976 18,976 19,432 456
Texas 34,681 34,681 34,681 --
Utah 4,475 4,475 4,603 128
Vermont 2,666 2,666 4,166 1,499
Virginia 21,329 21,329 21,329 --
Washington 38,708 43,400 34,016 --
West Virginia 2,971 2,971 2,971 --
Wisconsin 16,449 16,449 24,005 7,556
Wyoming 1,554 1,554 1,554 --
Totals 887,607 1,048,593 1,730,620 773,943

Source: Table prepared by the Congressional Research Service (CRS) based on data provided by the Department of Health and Human Services (HHS).

Filling In the Big Picture

Figure 4 "fills in" the big picture with a more detailed breakdown of the overall spending trends presented in Figure 3. The supporting table of data can be found in Appendix C.

<center></center>

Source: Figure prepared by the Congressional Research Service (CRS) based on data provided by the Department of Health and Human Services (HHS).

Funding Issues in Reauthorization

Congress is expected to address child care financing issues as part of reauthorizing child care and welfare legislation. The issue of how much funding to make available for child care will likely be at the forefront, but is complicated by the fact that child care is supported by multiple funding sources. As policymakers consider funding levels for child care, the following questions might be asked with respect to each potential funding source:

  • Are funds from this source specifically dedicated for child care?

  • How are funds from this source allocated to states? (What is the distribution formula?)

  • Are states required to match funds from this source with their own state funds?

  • Can funds from this source be transferred to other programs?

  • How long do states have to obligate and spend funds from this source?

The answers to these questions highlight the varying implications of providing child care funding through different sources. For instance, funds provided through CCDF are the only funds dedicated solely for child care, but nevertheless, expenditure data (through FY2000) reveal that TANF has also played a significant role in funding child care, both through transfers to CCDF and directly within TANF. Therefore, should CCDF funding levels be set with the presumption that states will continue to use the same amount of TANF funds for child care? A lesser or greater amount? Likewise, what are the implications of the CCDF funding decision on setting the overall TANF funding level? Will an economic downturn prompt states to make different decisions as to how they allocate their TANF funds? Greater child care expenditures have been fueled by reduced cash welfare caseloads through FY2000; will these spending trends continue if cash welfare caseloads level off or rise? To what extent are CCDF funds used to serve welfare (TANF) families?

Even with respect to the funds targeted specifically for child care (i.e., the CCDF) the implications for states differ depending on whether funds are provided via the mandatory or discretionary stream. As described earlier, the mandatory and discretionary portions of the CCDF are currently allocated among states according to different formulas, based on different factors. Consequently, the same amount of funding will translate into different allocation amounts for states, depending on the funding stream from which the money is allocated. Furthermore, mandatory funds bring with them state matching requirements (for the non-"guaranteed" portion). Of course, whether states actually spend state funds in order to access the available federal mandatory funds depends on each state's individual decision to participate in the matching program. For example, Michigan has not always opted to access its full matching grant, but has instead applied state child care expenditures toward meeting its TANF MOE requirement.

Discretionary and mandatory CCDF funds also carry with them different time limits for states to obligate and spend the money. Policymakers will be faced with deciding: What portion of CCDF funding should be delivered via discretionary money versus mandatory money? Should the formulas for allocating those funds remain as they are? Should states' historical spending levels from the early 1990s continue to serve as the basis for the fixed amount of "guaranteed" mandatory funding? Should matching requirements remain the same? How long should states have for obligating and spending the funds?

Decisions regarding states' authority to transfer funds between block grants (i.e., TANF funds to CCDF and SSBG) are also expected as part of the reauthorization process. In addition to the allowable level of transfer, some critics of the status quo argue that states should be allowed to transfer TANF funds remaining from prior years, rather than only current year funds. Of course, just as an economic downturn could prove to affect states' decisions to use TANF funds directly for child care, so too could it affect their decisions to transfer funds.

Appendix A. FY2002 CCDF Allotments, by Funding Type
($ in millions)

State  Discretionary  Mandatory "guaranteed" Matching (federal share) Totals 
Alabama 42.9 16.4 22.8 82.2
Alaska 4.1 3.5 3.8 11.5
Arizona 43.5 19.8 28.4 91.7
Arkansas 25.6 5.3 13.7 44.6
California 243.6 85.6 192.5 521.7
Colorado 23.2 10.2 22.5 55.9
Connecticut 15.5 18.7 17.4 51.7
Delaware 4.4 5.2 4.0 13.6
District of Columbia 3.6 4.6 2.4 10.6
Florida 105.5 43.0 74.3 222.8
Georgia 69.9 36.5 44.7 151.2
Hawaii 8.0 5.0 6.1 19.1
Idaho 11.6 2.9 7.4 21.8
Illinois 78.6 56.9 66.7 202.2
Indiana 39.6 26.2 32.2 98.0
Iowa 18.9 8.5 14.7 42.1
Kansas 19.0 9.8 14.4 43.2
Kentucky 37.3 16.7 20.3 74.3
Louisiana 51.7 13.9 24.3 89.9
Maine 8.0 3.0 5.9 16.9
Maryland 27.9 23.3 27.9 79.0
Massachusetts 28.6 45.0 30.9 104.5
Michigan 60.7 32.1 53.1 145.8
Minnesota 27.0 23.4 25.8 76.2
Mississippi 34.9 6.3 15.6 56.8
Missouri 38.9 24.7 28.8 92.3
Montana 6.4 3.2 4.5 14.1
Nebraska 11.7 10.6 9.0 31.3
Nevada 10.9 2.6 10.8 24.2
New Hampshire 5.3 4.6 6.3 16.2
New Jersey 39.7 26.4 43.4 109.5
New Mexico 19.3 8.3 10.1 37.7
New York 117.1 102.0 96.4 315.6
North Carolina 59.8 69.6 40.8 170.3
North Dakota 4.6 2.5 3.1 10.3
Ohio 69.3 70.1 58.6 198.1
Oklahoma 32.5 24.9 17.9 75.3
Oregon 21.7 19.4 17.1 58.2
Pennsylvania 65.7 55.3 58.9 180.0
Puerto Rico 47.4 0.0 0.0 47.4
Rhode Island 5.6 6.6 5.1 17.3
South Carolina 38.4 9.9 20.6 68.8
South Dakota 6.2 1.7 4.0 11.9
Tennessee 44.2 37.7 28.7 110.6
Texas 202.6 59.8 120.6 383.0
Utah 21.4 12.6 14.7 48.7
Vermont 3.5 3.9 2.9 10.3
Virginia 40.9 21.3 35.6 97.8
Washington 35.0 41.9 30.7 107.6
West Virginia 15.1 8.7 8.0 31.8
Wisconsin 31.0 24.5 27.3 82.8
Wyoming 3.3 2.8 2.5 8.6
         
Territories and Tribes         
America Samoa 2.7 0.0 0.0 2.7
Guam 4.0 0.0 0.0 4.0
N. Mariana Islands 1.6 0.0 0.0 1.6
Virgin Islands 2.2 0.0 0.0 2.2
Tribes 42.0 54.3 0.0 96.3
         
Total 2,083.7 1,231.9 1,478.3 4,793.9

Source: Table prepared by the Congressional Research Service (CRS).

Appendix B. Transfers from TANF to CCDF, cumulatively (FY1997-FY2000) and for FY2000, by state (with percentages of cumulative grants and FY2000 TANF grant)

State  Total cumulative TANF grants awarded
FY1997-FY2000		 Cumulative TANF grants (FY1997-FY2000) transferred to CCDF Percent of cumulative TANF grants (FY1997-FY2000) FY2000 TANF grants transferred to CCDF in FY2000 Percent of FY2000 TANF grant transferred to CCDF in FY2000
Alabama 418,753,154 73,248,632 17.5% 20,306,319 17%
Alaska 214,505,299 33,375,162 15.6% 13,134,900 20%
Arizona 937,872,629 102,214,710 10.9% 51,734,178 20%
Arkansas 199,270,696 5,000,000 2.5% 5,000,000 8%
California 14,458,958,043 877,615,000 6.1% 520,315,000 14%
Colorado 469,438,218 65,194,150 13.9% 29,221,458 20%
Connecticut 1,069,529,232 - 0.0% - 0%
Delaware 118,424,438 5,849,500 4.9% 4,849,500 14%
D.C. 382,790,488 48,043,926 12.6% 18,521,963 16%
Florida 2,344,950,569 264,631,372 11.3% 117,613,943 19%
Georgia 1,307,877,397 95,750,125 7.3% 51,700,000 14%
Hawaii 325,524,819 20,213,506 6.2% 915,000 1%
Idaho 111,118,345 13,235,039 11.9% 6,624,947 20%
Illinois 1,985,575,708 242,337,170 12.2% 125,325,778 20%
Indiana 835,988,658 195,476,822 23.4% 41,359,822 19%
Iowa 497,634,166 42,034,454 8.4% 26,404,972 20%
Kansas 407,724,244 28,490,335 7.0% 15,336,680 15%
Kentucky 713,081,419 115,760,032 16.2% 36,240,000 20%
Louisiana 653,707,831 156,210,354 23.9% 54,106,043 30%
Maine 306,839,541 23,190,837 7.6% 7,336,003 9%
Maryland 877,685,860 137,458,818 15.7% 45,819,606 20%
Massachusetts 1,868,046,687 383,787,077 20.5% 91,874,224 20%
Michigan 3,143,942,863 281,798,590 9.0% 9,363,210 1%
Minnesota 915,479,748 72,292,367 7.9% 17,098,100 6%
Mississippi 360,344,979 42,645,514 11.8% 18,691,998 20%
Missouri 838,993,744 64,123,032 7.6% 20,712,684 10%
Montana 169,642,404 25,769,908 15.2% 7,612,239 17%
Nebraska 223,426,590 9,000,000 4.0% 4,000,000 7%
Nevada 175,273,137 - 0.0% - 0%
New Hampshire 154,085,043 - 0.0% - 0%
New Jersey 1,514,263,411 301,852,683 19.9% 79,795,989 20%
New Mexico 455,187,418 46,521,342 10.2% 19,528,227 15%
New York 9,319,061,424 761,600,000 8.2% 437,000,000 18%
North Carolina 1,180,040,646 157,833,798 13.4% 65,880,426 20%
North Dakota 88,876,489 500,000 0.6% 500,000 2%
Ohio 2,911,873,040 77,453,492 2.7% 77,453,492 11%
Oklahoma 594,451,025 118,890,206 20.0% 30,199,871 20%
Oregon 668,204,335 - 0.0% - 0%
Pennsylvania 2,629,891,350 194,091,000 7.4% 67,122,000 9%
Rhode Island 334,962,828 17,730,261 5.3% 4,085,057 4%
South Carolina 394,967,259 10,175,262 2.6% 1,046,630 1%
South Dakota 82,536,526 5,963,361 7.2% 4,363,361 20%
Tennessee 804,213,896 133,444,177 16.6% 50,402,091 24%
Texas 2,005,877,272 168,653,815 8.4% 38,292,192 7%
Utah 322,686,833 3,740,480 1.2% - 0%
Vermont 189,412,724 25,889,490 13.7% 7,729,551 16%
Virginia 592,469,414 88,984,715 15.0% 27,699,905 17%
Washington 1,510,874,418 250,005,775 16.5% 100,037,747 24%
West Virginia 415,166,588 15,353,655 3.7% - 0%
Wisconsin 1,270,217,409 176,429,520 13.9% 63,500,000 20%
Wyoming 82,230,508 9,100,000 11.1% - 0%
Total  63,853,950,762  5,988,959,464  9.4%  2,435,855,106  14% 

Source: Table prepared by the Congressional Research Service (CRS) based on data provided by HHS.

Appendix C. Total CCDF and TANF Child Care Expenditures by Funding Source: FY1992-FY2000
($ in million)

  Federal CCDF funds  State CCDF funds    TANF   
Fiscal year Discretionarya  Mandatory "guaranteed"b Matching federal share Maintenance of effort (MOE) Matching state share Total CCDF spending TANF federal funds TANF "excess" child care MOE funds Total TANF Total child care spending
1992 332 801   616   1,749       1,749
1993 675 890   662   2,227       2,227
1994 835 1,055   798   2,688       2,688
1995 832 1,235   950   3,017       3,017
1996 850 1,280   994   3,125       3,125
1997 1,009 986 552 945 416 3,909 13 120 133 4,042
1998 1,486 1,169 867 1,031 715 5,268 259 195 455 5,723
1999 2,583 1,165 882 1,018 636 6,283 604 465 1,069 7,352
2000 3,064 1,127 1,095 1,049 887 7,221 1,411 774 2,185 9,406

Source: Table prepared by the Congressional Research Service (CRS) based on data provided by the Department of Health and Human Services (HHS).

Note: Child care expenditures in the territories are excluded.

a Discretionary fund expenditures include spending from TANF transfers to CCDF.

b Expenditures made in FY1992-FY1996 from the federal share of AFDC-related child care matching funds are included in the same column as the mandatory CCDF expenditures because these expenditures were the basis for determining mandatory "guaranteed" funding levels for the CCDF. Similarly, the FY1992-FY1996 expenditures made from the state share of AFDC-related child care matching funds appear in the same column showing CCDF MOE expenditures (for FY1997-FY2000) because they formed the basis of determining the MOE requirement level.



Footnotes

1. (back)Section 418 of the Social Security Act requires that states spend at least 70% of their mandatory child care funds on families receiving TANF assistance, families attempting to transition from TANF to work, or those "at-risk" of welfare dependency. However, because the at-risk group is not defined as a distinct group from other working poor families (the targeted group for CCDBG discretionary funds), the 70% target could, in practice, be met by spending all funds on low-income working families with no connection to TANF (i.e., the requirement could be met by spending all of the "earmarked" funds on "at-risk" families). National data on CCDF subsidy receipt by TANF status are not available.

2. (back)Other federal programs and tax provisions related to child care, but not discussed in this report, include Head Start, the 21st Century Learning Center Program, the Child and Adult Care Food Program, the Dependent Care Tax Credit, and the Dependent Care Assistance Program. For a description of these programs and recent funding levels, see CRS Report RL30944(pdf), Child Care Issues in the 107th Congress, by [author name scrubbed].

3. (back)A table of state CCDF allotments for FY2002, by funding type, is found in Appendix A.

4. (back)Note that the rules being discussed here regarding obligations and expenditures apply to states, not the federal government. From the perspective of the federal budget, an "obligation" instead refers to the CCDF grants awarded to states.

5. (back)For detailed information on the TANF block grant's financing structure and the rules that apply to it, see CRS Report 30723, Welfare Reform: Federal Grants and Financing Rules Under TANF, by [author name scrubbed].

6. (back)Most TANF program requirements for a family or the state (i.e., work requirements, time limits, child support assignment) are triggered when TANF money is spent on "assistance," as defined by HHS in regulation. Whether a supportive service such as child care is classified as assistance depends on the situation. For example, child care for a working person is not assistance and would not trigger TANF requirements. However, child care provided to a nonworking person, such as a cash welfare recipient in a training program, would be categorized as "assistance" and would therefore trigger TANF requirements.

7. (back)Not included in the $2.2 billion figure are any expenditures made by the states to meet the TANF MOE requirement that could also be counted toward meeting the CCDF MOE requirement. The treatment of state child care expenditures under TANF and CCDF, and the potential of "double counting" certain state expenditures is discussed in greater detail later in this report.

8. (back)For more information on the SSBG see CRS Report 94-953, Social Services Block Grant (Title XX of the Social Security Act) by Melinda Gish.

9. (back)U.S. Department of Health and Human Services; Administration for Children and Families, Office of Community Services. Social Services Block Grant Program: Annual Report on Expenditures and Recipients 1999. Washington. GPO, 2001.

10. (back)For those interested in how states have responded to the obligation and expenditure time frames, the end of FY2000 marked the time limit for states to have spent all available CCDF discretionary funds originally provided in FY1998. Expenditure data indicate that nine states failed to obligate a total of $296,000 by the 2-year obligation deadline. An additional $305,000 in discretionary funds that were obligated (by four states) were not actually expended by the time limit (i.e., end of FY2000). In other words, of all FY1998 discretionary funds made available (and TANF funds transferred in FY1998), states had obligated and expended all but 0.03% by the end of FY2000. Of FY1998 matching funds, only three states failed to obligate all available funds, and all obligated funds (by all states) were spent by the deadline. Similarly, all but 0.2% of FY1998 mandatory funding, which has no deadline for expenditure by the states, had been spent by the end of FY2000.



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