RL31605 -- Child Care: State Programs Under the Child Care and Development Fund

CONTENTS

• Summary
• Introduction
• Eligibility for CCDF-Subsidized Care
• Income Eligibility
• Changes in Eligibility Limits over Time
• TANF Families and Transitioning Families
• Families "At Risk" of Welfare Dependence
• Eligibility for Special Populations
• Equal Access Requirements
• Payments to Child Care Providers
• Cost-Sharing
• Quality Improvement Activities
• Health and Safety Standards
• Appendix A
• Footnotes

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

Table 1. CCDF Income Eligibility Limits for a Family of Three

Table 2. CCDF Eligibility for Special Populations of Children

Table 3. CCDF Rules for Determining Payment Rates to Child Care Providers

Table 4. Waiver of Cost-Sharing for Families with Incomes Below State-Defined Poverty Level

Table 5. CCDF Quality Improvement Activities

Table 6. Requirements Regarding Licensing and Health and Safety Standards for CCDF Providers, by Type of Setting

Appendix A1. State Descriptions of Treatment of TANF-related Groups Under CCDF

Thanks to [author name scrubbed] and Tom Gabe of the Domestic Social Policy Division of the Congressional Research Service for their valuable comments and contributions to this report.

Summary

The Personal Responsibility and Work Opportunity Reconciliation Act of 1996 (P.L. 104-193, PRWORA) restructured the major federal-state child care programs. It repealed three welfare-related child care programs and initiated a new set of federal rules referred to as the Child Care and Development Fund (CCDF). The CCDF combines funds provided under Section 418 of the Social Security Act established by PRWORA with funds provided under the Child Care and Development Block Grant (CCDBG). Both streams of funding are authorized through FY2002. Funds are distributed as grants to states for their use in subsidizing child care services to low-income families with children.

Federal law defines eligible children as those under age 13 residing with a family whose income does not exceed 85% of the State Median Income (SMI), taking into account family size. The federal eligibility rules are maximum income limits for states in designing their CCDF programs. States may adopt income eligibility limits below that maximum, and currently, all but nine states have indeed set a lower eligibility limit. Regardless of the established limits, because CCDF is not an entitlement for individuals, states are not required to aid families even if their incomes fall below state-determined eligibility thresholds.

Although states are not required to guarantee child care for welfare families, states may give special treatment to families receiving assistance from the Temporary Assistance for Needy Families (TANF) program, recognizing that under TANF, both states and individuals are now subject to work requirements. Generally, TANF families continue to have some special status in states' CCDF programs. In some states, TANF families are categorically eligible for services, although they may not actually receive service because funding may not always be available. TANF families are not responsible for a co-payment for child care services in 22 states.

Federal law requires states to assure that payment rates to child care providers ensure that CCDF-eligible children receive equal access to care comparable to that available to children not eligible for subsidies. States generally set payment rates based on prevailing market rates for child care. The most recent state plans indicate that 45 states (or territories) based their current payment rates on market rate surveys conducted in 2000 or 2001; and rates of the remaining seven states were based on surveys conducted in or prior to 1999.

Federal law also requires that states use not less than 4% of federal child care funds made available for each fiscal year to administer activities designed to improve the quality of child care. Prior to 1996, the CCDBG Act included a list of activities for which the quality improvement funds were to be spent; however, those categories are no longer itemized in law. Nevertheless, as part of the CCDF plan, states indicate whether they will spend any of their child care quality funds on activities that fall into those categories authorized under prior law (and any others).

Introduction

The Personal Responsibility and Work Opportunity Reconciliation Act of 1996 (P.L. 104-193) restructured federal child care programs, as part of a larger initiative to reform the nation's welfare system. The 1996 welfare reform law repealed three welfare-related child care programs that had been authorized under Title IV-A of the Social Security Act. To replace them, the law directly authorized and appropriated mandatory funds for child care through FY2002, under Section 418 of the Social Security Act. The law also amended and extended a fourth source of child care funds, the Child Care and Development Block Grant (CCDBG) Act, which authorizes discretionary child care funds, also through FY2002. ⁽¹⁾

In addition to consolidating the various child care assistance programs, the welfare reform law established a single set of rules applicable to child care. Both mandatory and discretionary child care funds must be spent in accordance with the provisions of the reconstituted CCDBG. Because these rules apply to child care supported by multiple funding streams (i.e., the CCDBG and Section 418 of the Social Security Act), the Department of Health and Human Services (HHS) refers to the unified program as the Child Care and Development Fund (CCDF). Figure 1 depicts the aforementioned changes to child care programs made in 1996 by the Personal Responsibility and Work Opportunity Reconciliation Act.

Under the CCDF, states receive a combination of discretionary and mandatory grants (totaling $4.817 billion in FY2002 CCDF appropriated funds), part of which is subject to state matching requirements. ⁽²⁾ States have flexibility, within federal parameters, to determine the population they will serve. However, the law does not entitle any individual family or category of recipient to child care assistance. The intent of the CCDF is to support state-administered child care programs for both welfare families and low-income, non-welfare, working families, by providing subsidies to cover some or all of the families' cost of assistance. (States establish sliding fee schedules which determine the share of child care costs that eligible families are expected to pay out of their own pocket.)

Final rules and regulations for the CCDF require states to submit comprehensive child care plans, which cover a time period of 2 years, to the Department of Health and Human Services (HHS) for its approval. ⁽³⁾ According to regulations, public hearings and a public comment period are required. This report describes CCDF programs for fiscal years 2002-2003 for the 50 states, the District of Columbia, the Northern Mariana Islands, American Samoa, Guam, Puerto Rico, and the Virgin Islands based on information from the state plans in the following areas: ⁽⁴⁾

• eligibility for child care assistance;

• treatment of families receiving, transitioning from, or at risk of becoming dependent on, public assistance;

• establishment of payment rates for child care providers;

• cost-sharing required of parents of children receiving subsidized care;

• quality improvement activities undertaken by the state; and

• health and safety rules.

Eligibility for CCDF-Subsidized Care

Federal law defines children eligible for CCDF-subsidized care as those under age 13 residing with a family whose income does not exceed 85% of the SMI for a family of equal size. ⁽⁵⁾ Eligibility is further limited to children whose parents are working or attending a job training or educational program, or children who are receiving protective services. Regulations permit states to waive, on a case-by-case basis, income eligibility requirements for children in protective care (including foster care if the state chooses to define foster care as a part of its protective services). States also have the option to aid children aged 13 to 19 who have special needs, are in protective care (including foster care), or are under court supervision.

Income Eligibility. The federal income eligibility rules are maximum income limits for states to use in designing their individual CCDF programs; states may adopt income eligibility limits below those in federal law. Because CCDF is not an entitlement for individuals, states are not required to aid families even if their incomes fall below the eligibility threshold established by the state. However, federal law does require states to give priority to families with "very low incomes," as defined by the state in their CCDF plan. While states clearly define "very low incomes" (usually in relation to either the state median income (SMI) or the federal poverty level (FPL)) in their state plans, it is not clear that "very low income" families are necessarily the top priority for receiving services. For instance, several states explicitly prioritize TANF families above "other eligible families with very low incomes" in their list of priority rules.

Table 1 illustrates the CCDF income eligibility limits across the 50 states and territories for a family of three. ⁽⁶⁾ Because median incomes vary by state, the income eligibility as a percentage of the state's median income is useful for comparing relative eligibility levels across the states and territories. As shown in Table 1, there is considerable variation among states with respect to eligibility limits. ⁽⁷⁾ Eight states use the maximum allowable limit under federal law, or 85% of SMI, as their eligibility threshold for families applying for CCDF subsidies. Twenty-six states chose eligibility limits between 39% and 59% of the State Median Income (SMI). Twenty-two states chose income eligibility limits between 60% and 84% of the SMI.

Table 1 also shows the general income eligibility limit for each state as a percent of the 2001 federal poverty level (scaled to a monthly amount). In 2001, the Federal Poverty Guideline for a family of three was $14,630 in the continental United States, $18,290 in Alaska, and $16,830 in Hawaii. (There is not an applicable Federal Poverty Guideline for the territories.) The corresponding monthly amounts are $1,219; $1,524; and $1,403.

The last column of Table 1 shows the "very low income" eligibility limits as defined by each state and territory for a family of three. As noted, federal law requires states to give priority to families with very low incomes, however those families may compete for services with other priority categories such as TANF recipients, children in protective services, or children with special needs. As with the general income eligibility levels, there is considerable variation among states in the setting of "very low income" limits. Several states (14) designate 100% of the federal poverty level as their very low income limit, while others base their limit on a percentage of the state median income. In a few cases, states indicate that they determine the very low income limit with respect to the sliding fee scales established to determine families' co-payments.

Table 1. CCDF Income Eligibility Limits for a Family of Three
(monthly income)

Source: Table prepared by the Congressional Research Service, based on information from the most recent CCDF state plans submitted by the states to the Department of Health and Human Services (HHS).

^a In Colorado, eligibility limits vary by county, from a low of 137% of 2001 FPL to a high of 225% (62% SMI). As of April 2002, two counties' limits were below 149% of FPL, six were between 150% and 169%, 35 were between 170% and 185%, and 17 were over 185%.

^b In Hawaii, the income eligibility limit for applicants is lower than the limit for recipients and those within 12 months of leaving TANF.

^c In Massachusetts, for a family currently without a contracted slot or voucher, their income must be at or below 50% of the SMI in order to access the CCDF system. Once a family has a subsidy, it will remain income-eligible until its income reaches 85% of SMI.

^d In New Jersey, the income eligibility limit for families entering the CCDF system is based on 200% of the 2001 FPL and the universal exit level for families is based on 250% of the 2001 FPL.

^e In Texas, local workforce development boards set their own income eligibility limits, and most (but not all) Boards have established limits that are below 85% of SMI (e.g. 55% of SMI; 150% of FPL). For example, in Dallas the general monthly income eligibility limit is 150% of FPL (which for a family of three is $1,829 (58% of SMI)).

^f Virginia uses three different income eligibility levels, depending on the region's metropolitan statistical area and cost of living factors.

Changes in Eligibility Limits over Time. Table 1 reveals the variation among states' eligibility limits, based on information from the most recent state plans. A comparison of the current plans with the previous plans from FY2000-FY2001 (not shown), indicates that most states and territories increased the dollar amount of their general income eligibility limits for FY2002-2003.

In many cases, states' median incomes have increased, and the dollar limits set for eligibility have been set to correspond to those increases. For example, Connecticut's monthly eligibility limit (for a family of three) increased from $3,264 to $3,966, but both amounts reflect 75% of the SMI as measured at the time the respective plans were submitted. However, it should be noted that an increase in the dollar amount does not necessarily translate into an increase in the limit as a percentage of SMI.

Nine states made no change to their general income limit dollar amounts between the current and the previous plans. In each of those cases, the state median incomes had increased, resulting in lower limits when measured as a percentage of SMI. Only a handful of states decreased the dollar amount of their income eligibility limits, and in none of the cases does the decrease appear to reflect a change due to a decrease in the state median income.

TANF Families and Transitioning Families. In addition to making changes to child care programs, PRWORA also ended the program of AFDC, which provided an entitlement to cash assistance for families that met a state's standard of need. PRWORA replaced AFDC with a program of Temporary Assistance for Needy Families (TANF). Under TANF, cash assistance is no longer an entitlement, and both states and individual recipients face new work requirements: states must have a specified percentage of their TANF caseload engaged in work activities each year, and TANF recipients are required to engage in work within 2 years of receiving benefits. ⁽⁸⁾ Unlike under AFDC, child care is no longer guaranteed to welfare families who need child care to engage in work, education, or training.

Under pre-1996 law, families who lost eligibility for welfare due to increased earnings were entitled to transitional child care for up to 1 year if they met the state's eligibility requirements, though some states provided transitional child care for longer periods under welfare reform "waivers." Under current law, no federal rules exist requiring or limiting transitional child care, so states may establish their own rules and time limits for providing transitional care.

However, a portion of federal child care funds continues to be targeted at welfare families and families leaving welfare. Under the CCDF program, states are required to spend at least 70% of their mandatory child care funds (the funds provided under Section 418 of the Social Security Act) on the families historically served by the programs replaced under PRWORA: families receiving cash welfare (TANF) assistance, families attempting to transition from TANF to work, or those "at risk" of welfare dependency.

As part of their CCDF plan, states are required to describe their treatment of TANF families, families attempting to transition off of TANF through work, and families at risk of welfare dependence. Following is a summary discussion of treatment of these three groups. (For state-by-state information see Appendix A of this report.)

Although the federal entitlement to child care no longer exists, low-income working families (including TANF families) continue to have entitlement status in a few states. In most of the remaining states, TANF families retain some special status in states' CCDF programs. ⁽⁹⁾

In addition, TANF families are not responsible for a co-payment for child care services in 22 states (See Table 4). A small number of states do require co-payments from working families on TANF, although most define work to include only paid activities, and exclude unpaid TANF work activities such as internships or education. As noted in Box 1, some states use TANF funds to pay for child care services for TANF families, while in others, child care services for these families are provided with CCDF funds (or TANF funds transferred to the CCDF).

Some states have chosen not to treat TANF families differently than other low-income families with respect to CCDF subsidies. In several states, priority for child care subsidies is based solely on income (or would be if a waiting list were necessary), without regard to TANF status.

Many states also continue to offer some form of transitional child care, although states vary in how long families are eligible for transitional child care and on whether or not these families are required to make a co-payment. Of states that reported a time limit for transitional child care services, the length of eligibility ranged from 3 months to 3 years. Among states offering transitional child care, minimal co-payments were often required of former TANF families.

There are also differences among states in how families are treated when they reach the time limit on transitional child care. In some states, these families are automatically transferred to low-income/at-risk child care subsidy status, while in others, former TANF families who reach their time limit on transitional child care must then compete for available child care subsidies with other low-income working families. ⁽¹⁰⁾ In some states, this can mean being put on a waiting list for services. In Alabama, families who leave TANF for employment are guaranteed a child care slot. However, once they have exhausted their transitional child care eligibility, they are served as funds are available on a first-come, first-served basis. In Nevada, on the other hand, if a family is already on the child care subsidy program (i.e., a TANF family or transitioning family), they would be continued without interruption. For other low income families not already in the subsidy program, the priority for receiving a subsidy would be determined by income.

Families "At Risk" of Welfare Dependence. States may define "at-risk" as they choose, and many states define this group to encompass the same population as is eligible for CCDF subsidies generally. In these states, the requirement (in Section 418 of the Social Security Act) that 70% of mandatory child care funds be spent on TANF families, families transitioning from TANF, and families at risk of TANF dependence may not be useful for targeting funds to the first two groups (i.e., the requirement could be met by spending all of those earmarked funds on "at-risk families"). However, as discussed, most states continue to assign some priority to TANF families and transitioning families, and families at risk of welfare dependence are often mentioned as lower priority for services relative to the TANF populations. Currently, data on CCDF subsidy receipt by TANF status is not available, so it is unclear what proportion of these funds actually serve TANF recipients or former recipients.

Eligibility for Special Populations. Federal law defines a child as eligible for CCDF services if they are under 13 years of age and their family's income does not exceed 85% of the SMI for a family of the same size. Regulations, however, allow states to use CCDF funds to provide child care services to children up to age 19 who are physically or mentally incapacitated (and incapable of self-care) or who are under court supervision. States that elect to extend eligibility in this way must also assign an age limit in their CCDF plans, and must provide their definition of physical or mental incapacity. Additionally, states may extend CCDF eligibility to children in protective services (including foster care, even if the foster parents are not in work or training). Regulations also permit states to waive income eligibility and cost-sharing requirements for child care services on a case-by-case basis for children who receive, or need to receive, protective services.

Table 2 shows whether states have extended CCDF eligibility to children in these specific categories. All jurisdictions except Ohio and the Northern Mariana Islands have granted eligibility to at least one of these groups. Of the 43 jurisdictions that provide CCDF-funded child care in protective services cases, the majority waive fee and income eligibility requirements for children who receive, or need to receive, protective services. In the other 13 jurisdictions, CCDF funds are not used for child care in protective services cases.

Column three in this table indicates which states elected to provide child care for children age 13 or over who are under court supervision, and the age up to which the state provides care for these children. Thirty-six states or territories extend eligibility to this group, with all but one setting the age limit at 17, 18, or 19. ⁽¹¹⁾ That state, New Hampshire, sets its limit at age 21 for this type of care.

Column four indicates whether a state allows CCDF funds to be used for foster children if states consider foster care a part of their protective services system. As noted, receipt of CCDF-funded child care is generally conditioned upon participation in work, education, or training activities by the parent. State plans show that 18 states allow funds to be used for this group, regardless of the work or training status of the foster parents.

The last column of Table 2 shows which states extend child care eligibility to children age 13 or older who are physically or mentally incapable of self-care under the state's definition, and the age limit those states chose. Final rules set 19 as the upper age limit of children with special needs who may be served with CCDF funds. Fifty-two states provide CCDF-funded child care for this group. As with children under court supervision, all but one of the states extending eligibility in this way allow care for children up to ages 17, 18, or 19. Minnesota, the exception, extends eligibility for children with special needs to age 14.

Table 2. CCDF Eligibility for Special Populations of Children

Source: Table prepared by the Congressional Research Service (CRS) based on information from CCDF state plans submitted by the states to the Department of Health and Human Services (HHS).

^a N/A denotes that CCDF-funded child care is not provided for children in protective services cases.

^b Answering yes means that for CCDF purposes the state considers these children to be in protective services.

^c Tennessee uses Social Services Block Grant (SSBG), not CCDF funds, to pay for child care for protective services (CPS) children.

Equal Access Requirements

Federal law requires states to assure that their payment rates for child care services ensure that CCDF-eligible children receive equal access to care comparable to that available to children not eligible for federal child care subsidies. CCDF final rules require states to certify to that effect in their state plans.

The final regulations require a state to consider three elements to determine if its child care program adequately fulfills the statutory requirements for equal access. The state must (1) assure that it offers parents a choice in categories ⁽¹²⁾ and types ⁽¹³⁾ of providers; (2) define adequate payment rates based on a sufficient market rate survey conducted no more than 2 years prior to the effective date of the currently approved plan; and (3) guarantee affordable co-payments for child care based on a sliding fee scale. The state is required to provide a summary of facts used to determine that its payment rates ensure equal access.

Payments to Child Care Providers. Table 3 outlines the information states relied upon (at the time of submitting their most recent state plans or amendments) for determining maximum payment rates for child care providers. Note that these rates reflect the maximum amounts that could be paid by the state to providers -- they do not include parents' out-of-pocket payments to providers. Final CCDF regulations require states to conduct a survey biennially to ensure that their payments sufficiently reflect current market conditions; however, as Table 3 indicates, not all states' rates are based on surveys conducted in the past 2 years.

Under prior law for welfare-related programs, child care payment rates were set at the 75th percentile, which meant that at least 75% of all child care providers surveyed by the state charged rates at or below this level. In issuing its final regulations, HHS suggested that states continue to use the 75th percentile as a "benchmark" for assessing whether the CCDF payment assures equal access to child care for families assisted by the CCDF. However, neither federal law nor regulations set minimum payment standards.

The second column of Table 3 provides information on the rules used by each state to establish maximum payment rates for child care providers. The table also reports the date of the survey upon which the current rates are based, and any state plan information regarding future market rate changes or surveys. The table reflects the information included in the current plans, which were prepared in 2001. In cases where plan language indicated an impending change, we have contacted states in an effort to provide more current information in the table. If a scheduled change could not be confirmed, the plan language has been quoted verbatim.

Twenty-five of the 56 states and territories chose the 75th percentile rule to set their payment rates for child care. ⁽¹⁴⁾ Thirteen states did not describe the rule they used to determine their payment rates. A number of states used a different percentile (not the 75th percentile) or fixed percentage of the payment rates reflected in the survey. For example, California uses 1.5 standard deviations from the regional market mean. In Colorado, counties set their own rates, by varying methods, for different types of care. Kansas distinguishes between licensed homes and child care centers, and registered homes, setting the rate for licensed homes and centers at the 65th percentile, and at the 60th percentile for registered homes. Florida is an example of a state that provides "tiered reimbursement" or enhanced rates (above the normal maximum) to providers who have met accreditation standards.

Remaining states described various other methods for determining their rates. Among states that described different rate-setting methods, several indicated that they chose to differentiate their payment rates based upon the following:

• type of provider;

• differences in age or special needs of the child;

• geographic area;

• full or part-time care;

• care provided during non-traditional hours;

• number of children in the family for whom care is provided;

• care provided to children of teen parents;

• child care provided to families receiving protective services or court-based care; and

• provider accreditation status.

In the case of special needs children or other unique care settings, federal law allows for, but does not require, reimbursement rates to be increased to offset the additional costs that may result from specially trained staff or specialized facilities. Some states indicated that the 75th percentile payment rate allowed providers room for growth and flexibility in the kinds of care they provided, as many providers currently charge rates below the maximum child care payment rate.

According to the state plans submitted for the period covering FY2002-FY2003, 45 states based their current provider payment rates on market rate surveys conducted in the years 2000 or 2001. Four states based their rates on market surveys conducted in 1999. The remaining seven states or territories based their rates on market surveys conducted prior to 1999. In Iowa's case, the most recent survey was conducted in 2000, but the legislature did not implement new rates based on that survey. Likewise, New Hampshire last conducted a market survey in 2000. However, their payment rates are based on a 1994 survey, with several increases having been made to the rates since 1998. Note that states may design their market rate surveys in any way they so choose; there is not a uniform standard.

Some CCDF plans provide information on when states plan to update their market rate surveys. In some cases, those dates may have passed. As mentioned earlier, where possible we have contacted states in order to update the table to reflect the current status. The information included in the fourth column of Table 3 therefore represents the information provided in the state plans, supplemented by information acquired by contacting select states, whose plans indicated anticipated changes.

Table 3. CCDF Rules for Determining Payment Rates to Child Care Providers

Source: Table prepared by the Congressional Research Service (CRS) based on information from CCDF state plans submitted by the states to the HHS.

Cost-Sharing. CCDF requires parents receiving child care assistance to pay a share of the costs of their child care services. Each state must establish and periodically revise a sliding fee scale for cost-sharing by families receiving subsidized child care. ⁽¹⁵⁾ By statute, cost-sharing payments must be based on income and family size, so payments will generally increase as the family's size and income increase. ⁽¹⁶⁾

As noted, the sliding fee scale is the third element in equal access to child care. Although federal law and regulations do not set limits on the amount of the cost of care a state may require the family to pay, HHS did provide a reference point for states to use in creating their sliding fee scales. In issuing its final regulations, HHS suggested that established fees not require the CCDF-subsidized family to pay more than 10% of its income for child care. This benchmark is not meant to limit states, but is offered as a reference point for states to consider when determining if their cost-sharing policy is consistent with the CCDF equal access requirement.

States vary in how they structure their sliding fee scales, with some states requiring that families pay a percentage of the cost of care (such as Hawaii), but the majority basing the required co-payment on family income. Most states do not require co-payments significantly above 10% of income; however, several states do require percentages as high as 20% of gross income from families at higher income levels, and Oregon requires up to 29% of family income for families with income above 120% FPL.

Although co-payments must generally be required for CCDF-funded services, regulations allow states to waive copayments for those whose income is at or below the poverty level (as defined by the state in their state plan) and for children in protective services on a case-by-case basis, as described in Table 2. Table 4 indicates which states automatically exempt families from the cost-sharing requirements because of income below the state-defined poverty level or other factors. In cases where states exempt only some of their low-income populations from child care fees, the final column of the table outlines the characteristics of families exempted.

Twenty-seven states chose to set the poverty level in their state at $14,630 per year ($1,219/month), the 2001 federal poverty level for a family of three. Several states continued to use the 1999 level ($1,157/month) for purposes of waiving cost-sharing requirements. In the remaining states, most set their state poverty definition near 100% of the 2001 federal poverty level. Among those with different levels, New Mexico and Florida define poverty for the purpose of waiving co-payments at 200% of the 2001 federal poverty level. Ohio, on the other hand, defines poverty at only 15% FPL.

Table 4. Waiver of Cost-Sharing for Families with Incomes Below State-Defined Poverty Level

Source: Table prepared by the Congressional Research Service (CRS) based on information from CCDF state plans submitted by the states to the Department of Health and Human Services (HHS).

a. For purposes of waiving cost-sharing requirements, poverty is defined by the state, and may not correspond to the federal poverty guidelines.

In six states, all families, including those with incomes at or below the state-defined poverty level, are required to pay a fee according to the state's sliding fee scale. Fourteen states or territories waive fees for all families with incomes at or below the poverty level. The remaining 36 states and territories waive fees for some families with income below the poverty line. The fifth column of Table 4 shows the types of families each state exempts from making a co-payment for child care.

As noted earlier, 22 states explicitly waive the co-payment for TANF families. Many additional states set a threshold of a certain percentage of poverty for waiver of the co-payment, which will include TANF families in many cases. Other families that receive waivers of the co-payment include: SSI recipients, children in protective services cases, and participants in the Food Stamp Employment and Training program.

Quality Improvement Activities

Federal law requires that states use not less than 4% of federal child care funds made available for each fiscal year to administer activities designed to improve the quality of child care. ⁽¹⁷⁾ Regulations clarify this to mean that of aggregate expenditures made with CCDF funds, ⁽¹⁸⁾ no less than 4% is to be spent on quality improvement activities. Readers should be aware that states' time limits for spending CCDF funds vary by the type of funding (e.g., a 3 year limit for discretionary CCDF funds), and therefore the percentage of funds spent on quality (with respect to the 4% minimum) cannot be fully assessed until 3 years following the year of appropriation. ⁽¹⁹⁾

Appropriations legislation has included additional provisions with respect to quality. For FY2001 and FY2002, CCDF discretionary funding included earmarks -- funding set-aside for a particular purpose -- for specific quality activities in the following areas: improving the quality of care for infants and toddlers ($100 million), and improving school-age care and child care resource and referral services ($19 million). Of the $19 million for school-age care and resource and referral activities, $1 million was designated for the Child Care Aware toll-free hotline, which provides consumer information and links families to their local resource and referral agency. ⁽²⁰⁾ (Spending from these earmarked funds are included in aggregate expenditure totals used to measure whether states have met the 4% spending limit on quality.)

Under the Child Care and Development Block Grant Act (CCDBG) prior to the 1996 welfare reform amendments, the funding used for quality improvement had to be spent on one or more of the following categories:

• resource and referral programs for the development, establishment, expansion, operation, and coordination of child care services;

• consumer education to improve the availability and quality of child care;

• grants and loans to assist in meeting state and local child care standards;

• monitoring of compliance with licensing and regulatory requirements;

• training and technical assistance in appropriate areas, such as health and safety, nutrition, first aid, the recognition of communicable diseases, child abuse detection and prevention, and the care of children with special needs;

• compensation to improve salaries of staff who provide child care services; or

• other quality activities that increase parental choice, and improve the quality and availability of child care.

Under current law, these specific categories are no longer itemized, but are nevertheless still authorized as optional uses of quality funds by regulation. In the CCDF state plan, states were asked whether they will spend their child care quality funds on activities that fall into any of the categories authorized under prior law, with the exception of resource and referral activities, for which funds have been specifically earmarked as part of annual appropriations. ⁽²¹⁾ Table 5 illustrates the provisions each state opted to fund with funds it has reserved for improving child care quality.

Table 5. CCDF Quality Improvement Activities

Source: Table prepared by the Congressional Research Service (CRS) based on information from CCDF state plans submitted by the states to the HHS.

Even though spending in these specific categories is no longer required under federal law, most states continue to make quality expenditures in these categories. Almost every jurisdiction (55) says that it will spend quality funds for consumer education. As noted, consumer education, which includes helping parents identify and locate quality child care, is also a part of resource and referral activities.

Forty-five states expend CCDF funds on grants or loans to providers as a part of their quality activities. Grant and loan programs are intended to assist child care programs in meeting state and local standards. They may also be designed to achieve other goals in improving the quality and availability of child care services. Grants and loans may also be allotted to help program start-up efforts for populations with difficult-to-serve needs. Care for special-needs children, care during non-traditional hours, and infant and toddler care all fall into this category. Grants and loans are also available for program expansion and program collaboration with Head Start, school-based programs, and public and private partnerships. Other areas where states focus these monies include equipment purchases or assistance to providers for quality improvement. ⁽²²⁾

Fifty-four states expend funds on monitoring compliance with licensing and regulatory requirements. Some of the funds in this category were set aside to hire staff to license and monitor child care providers at the state and local level. This quality category also aids in the training of licensing agency staff, and technical assistance providers. Funds are also used to implement and improve the efficiency of new monitoring systems.

Fifty-five states and territories participate in training and technical assistance quality improvement strategies. Some of the targeted priorities include the following:

• credentialing and career development organized both at the state and local level;

• disseminating information on developments in brain research;

• training in recognizing domestic violence and child abuse and neglect;

• training in the use of environmental rating scales to evaluate program quality;

• health and safety training for parents and providers;

• the care of children with special needs; and

• multi-cultural and anti-bias issues.

Forty-five states indicate in their plans for 1999-2001 that they intend to use quality funds to improve compensation for child care providers -- an increase from the 34 states in the 1999-2001 plans, and the 19 states whose initial state plans indicated an intent to use quality funds for this purpose. In many states, this quality initiative provides financial, educational, retirement, or health benefit incentives for child care workers in exchange for child care training and certifications. Many states are implementing the Teacher Education and Compensation Helps (TEACH) program to provide training scholarships and to increase the number of qualified teachers.

Fifty-four states also intended to use quality funds for other purposes. Other quality activities mentioned in the state plans include: public awareness campaigns, targeting child care services to under-served communities, services for children with special needs, and greater flexibility for child care services in year-round programs or non-traditional hours. An emphasis has been placed on expanding child care among all age categories of children. Activities also include coordination between early childhood education programs and child care, as well as efforts to strengthen private and public partnerships in the local communities.

Health and Safety Standards

Federal law requires the states to certify that requirements designed to protect the health and safety of children are in effect and applicable to all child care providers who receive CCDF funds. ⁽²³⁾ Health and safety requirements must include: the prevention and control of infectious diseases (including immunization); building and physical premises safety; and minimum health and safety training appropriate to the provider setting. Federal law also requires states to certify that child care providers receiving CCDF funds comply with all of the applicable state or local health and safety requirements.

Regulations do not establish a federal standard for immunization. Instead, federal rules require that states and territories assure that the state's existing immunization standards apply to all children receiving services under the CCDF. Regulations limit exemptions from the immunization requirements to the following groups:

• children who are cared for by relatives (defined as grandparents, great grandparents, siblings -- if living in a separate residence, aunts and uncles);

• children who receive care in their own homes;

• children whose parents object on religious grounds; and

• children whose medical condition contraindicates immunization.

The final rules also require the states to establish a grace period so children in families attempting to comply with immunization requirements can continue to receive child care services. States are encouraged, but not required, to consider the development of a system to track children's immunization records. Coordination between public health agencies and child care agencies is strongly recommended to achieve these goals.

States are required to describe the health and safety requirements applicable to all licensed and unlicensed child care providers receiving CCDF assistance. Some of these standards are reflected in a compilation of voluntary licensing and regulatory guidelines for child care providers maintained at the National Resource Center for Health and Safety in Child Care (NRCHSCC). The NRCHSCC compilation and a set of each state's regulations are available on the World Wide Web at http://nrc.uchsc.edu. HHS required states to include in their plans only those health and safety guidelines not contained in the NRCHSCC compilation. Health and safety information from CCDF state plans generally is limited to rules applicable to non-licensed care.

Table 6 shows which types of providers paid with CCDF funds in each state are subject to licensing under state law as reflected in the NRCHSCC compilation of requirements. The table also indicates whether relative providers are subject to health and safety standards.

Centers not subject to licensing under the NRCHSCC compilation are typically subject to alternative requirements, which are detailed in the state CCDF plans (but not shown here). For example, as the table shows, in 24 states, all or some providers of center-based child care are not subject to licensing under state laws as reflected in the information maintained by NRCHSCC. ⁽²⁴⁾ In several of those states, the exempted providers are school-based child care programs that are instead subject to health and safety requirements and regulations under the authority of a public or private school system. Other states exempt centers that are connected with churches or parochial schools. In most cases, only a subset of center-based providers are exempt. For example, in Michigan, all center-based providers receiving CCDF funds are subject to state licensing laws as reflected by NRCHSCC, except for centers on federal land (i.e., military installations or tribal land) and facilities where the parents are onsite (i.e., school-based care for teen parents).

Group homes, in contrast, are more regulated. Only five states report that they do not subject all providers to NRCHSCC licensing under state law. Family homes and in-home providers in the majority of states are not subject to licensing. Thirty-seven states do not require licensing of all family homes, and forty-eight states do not require licensing for all in-home care providers.

States have the option to exempt from health and safety requirements relatives (grandparents, great grandparents, aunts, uncles, or siblings) who live in a separate residence from the child in care. The CCDF plans indicate whether a state exempts relatives from all or none of the requirements, or, alternatively, if they subject relatives to a different set of requirements. Table 6 shows that 13 states subject relative providers to different requirements; however, no additional information regarding those requirements is included in the plans. Nine states exempt all relative providers from all health and safety requirements. In the remaining 34 states, all relative providers are subject to health and safety requirements.

Table 6. Requirements Regarding Licensing and Health and Safety Standards for CCDF Providers, by Type of Setting

Source: Table prepared by the Congressional Research Service (CRS) based on information from CCDF state plans submitted by the states to the Department of Health Human Services (HHS).

^a In their CCDF plans, the territories are asked to describe their health and safety requirements for different categories of care without reference to NRCHSCC licensing rules.

NA -- Not applicable

Appendix A

In their CCDF state plans, states are required to describe their treatment of TANF families, transitioning families, and families at risk of welfare dependence with respect to CCDF subsidy receipt. State responses to this CCDF plan provision varied in detail and structure. Appendix A reflects the language used by states in their CCDF plans, with minor editing for consistency and clarity. Although all states provide responses to this provision, it is unclear for some states whether these three groups receive priority relative to other families eligible for subsidies, or in what order these families will be served. For example, in New Hampshire, TANF families, transitioning families, and at-risk families are described as having priority over other families (with the exception of families that already have a child receiving a subsidy and need care for an additional child); however, there is no indication of how these three groups of families receive priority relative to each other. In addition, the information provided by a few states did not specifically address how these groups of families are treated by the state. In these cases, the table entry reads "no information."

Appendix A1. State Descriptions of Treatment of TANF-related Groups Under CCDF

Source: Table prepared by the Congressional Research Service (CRS) based on information from CCDF state plans submitted by the states to the Department of Health and Human Services (HHS).

Footnotes

1. ^(back)For information on reauthorization activity in the 107th Congress, See CRS Report RL30944(pdf), Child Care Issues in the 107th Congress, by [author name scrubbed]. For general background information on the CCDBG, see CRS Report RL30785, The Child Care and Development Block Grant: Background and Funding, by [author name scrubbed].

2. ^(back)For a detailed discussion of the funding streams that comprise the CCDF and the trends in spending from them, see CRS Report RL31274 Child Care: Funding and Spending under Federal Block Grants, by [author name scrubbed].

3. ^(back)Final rules and regulations for the unified system went into effect August 28, 1998. These regulations amended the previous CCDBG rules (45 CFR 98 and 99). The final rule implemented the child care provisions of the Personal Responsibility and Work Opportunity Reconciliation Act (PRWORA) of 1996 (P. L. 104-193) and incorporated technical corrections to PRWORA made by the Balanced Budget Act of 1997 (P. L. 105-33).

4. ^(back)Throughout this report, the term "state" refers to all 56 jurisdictions participating in the CCDF program.

5. ^(back)A state's median income is not the average income, but rather the income at which half of the families in the state have incomes above, and half below. The federal eligibility ceiling for each state is 85% of that amount, which varies by state. The percentage of families whose incomes fall under 85% of SMI will also vary (although it will be somewhere below 50% of all the state's families), depending on the distribution of income in the state.

6. ^(back)Data are not available on the average size of families served by CCDF funds, but the average family size for families receiving welfare, one of the target populations for CCDF funds, is three (a single-mother with two children).

7. ^(back)In some cases, there is variation within states, based on locality or whether the individual is a new applicant as opposed to a current recipient. For example, New Jersey has an eligibility limit of 49% of SMI (200% of FPL) for entering the CCDF system. Upon receiving a subsidy, families may reach a higher limit of 61% of SMI (250% of FPL) before having to exit the system. The following states also have different eligibility limits for new applicants and current recipients: Alabama, Hawaii, Indiana, Massachusetts, South Carolina, and Wisconsin.

8. ^(back)States may exempt single adult recipients (who comprise the bulk of TANF adults) with children under 1 year old from work requirements (12-month lifetime limit). TANF also forbids states to reduce or deny benefits to single parents with children under age 6 if they are unable to work due to a demonstrated lack of child care. For a more detailed discussion of TANF work participation standards, see CRS Report RL30767, Welfare Reform: Work Activities and Sanctions in State TANF Programs, by [author name scrubbed].

9. ^(back)In some states, TANF families are categorically eligible for services, although they may not actually receive service because funding may not always be available. For example, according to Arkansas' FY2002-2003 CCDF plan, TANF families who need child care to participate in work activities "will be" provided with child care; however, the plan also states that due to a lack of funding, new families have not been added to the child care rolls in Arkansas since late 1999.

10. ^(back)A recent Urban Institute report found that maintaining child care was not often "automatic" for families transitioning off welfare, and that the process required redetermination, administrative hassles, and other barriers which might keep former recipients from accessing subsidies for which they are eligible. For more information, see Adams, Gina, Kathleen Snyder, and Jodi Sandfort. 2002. Navigating the Child Care Subsidy System: Policies and Practices that Affect Access and Retention. Washington, D.C.: The Urban Institute. The report can be accessed on the internet at http://www.urban.org.

11. ^(back)In Tennessee, Social Services Block Grant (SSBG) funds (not CCDF funds) are used for this category of children.

12. ^(back)Categories of providers include: (1) center-based providers, licensed or otherwise authorized to provide child care services for fewer than 24 hours per day in a non-residential setting, unless the care in excess of 24 hours is due to the nature of the parent(s)' work; (2) group home child care providers, two or more individuals who provide child care services for fewer than 24 hours per day per child, in a private residence other than the child's residence, unless the care in excess of 24 hours is due to the nature of the parent(s)' work; (3) family child care providers, individuals who provide child care services for fewer than 24 hours per day per child, as the sole care giver, in a private residence that is other than the child's residence, unless the care in excess of 24 hours is due to the nature of the parent(s)' work; (4) and in-home care providers, defined as individuals who provide child care services in the child's own home.

13. ^(back)Types of providers include for-profit, non-profit, sectarian, and relative providers.

14. ^(back)Note that states that use the 75th percentile rule do not necessarily apply that rule to a current market rate survey. In those cases, if market rates have increased, the rates reflected by the "75th percentile" may be lower than the 75th percentile based on current market rates.

15. ^(back)The TANF High Performance Bonus criteria for FY2002 awards (which will be based on child care rules in effect during FY2001) will include a measure of the affordability of child care, determined by comparing required co-payments to family income.

16. ^(back)Several states cap this amount after a certain number of children or reduce the required co-payment for additional children.

17. ^(back)Almost half of the states reported that they plan to spend more than 4% of their CCDF funds for quality activities (not shown). Of these, four reported that they would spend over 20% of their CCDF funds for such activities: the District of Columbia (25%), North Dakota (27%), Oklahoma (23%), and Wisconsin (26%).

18. ^(back)This includes expenditures made from funds transferred from TANF and state CCDF matching funds, but not state maintenance-of-effort (MOE) spending.

19. ^(back)For more information on CCDF spending rules, see CRS Report RL31274 Child Care: Funding and Spending Under Federal Block Grants, by [author name scrubbed]. p.7-9.

20. ^(back)The resource and referral services link state child care agencies, child care providers, and parents. They assist in the process of locating appropriate child care settings, and maintain lists of all legal child care providers. The resource and referral agencies also play a role in consumer education for parents, providers, employers, as well as social service organizations. In many states, the resource and referral agency is responsible for determining eligibility of families for child care and monitoring child care providers throughout the state.

21. ^(back)Because quality funds are now specifically allocated for resource and referral activities, the list of quality activities in the current state plans no longer includes a category for "resource and referral programs." Therefore, this provision is not included in the table. However, in a separate section of the state plan, states now report activity to support resource and referral programs.

22. ^(back)Final program rules are more restrictive for sectarian providers than for state and local agencies and nonsectarian organizations involving funding of grants and loans for construction projects. Grants and loans are allowed for sectarian agencies or organizations only for the purpose of bringing the facility into compliance with the health and safety requirements.

23. ^(back)As noted in Box 1, CCDF rules regarding health and safety standards apply to providers who receive funds transferred from TANF to the CCDF, but do not apply to child care funded directly with TANF dollars.

24. ^(back)Not all states recognize all four types of care.

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