Child Care:

Additional Information Is Needed on Working Families Receiving Subsidies

GAO-05-667: Published: Jun 29, 2005. Publicly Released: Jul 29, 2005.

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Since the Congress enacted welfare reform legislation in 1996, child care assistance has served as a key support for work efforts among low-income families. Researchers have found that reliable, high-quality child care is critical to sustaining parents' ability to work, while safeguarding their children's health and intellectual development. States have flexibility in determining which low-income families are provided child care subsidies funded by the Child Care and Development Fund (CCDF), Temporary Assistance for Needy Families (TANF), and related state resources. States must balance the funds available for subsidies with the number of families who want subsidized child care. In doing so, states may find it necessary to change child care policies that affect program access or the amount of subsidy that eligible families receive. As Congress considers reauthorizing CCDF and TANF, we updated our previous report "Child Care: Recent State Policy Changes Affecting the Availability of Assistance for Low-Income Families" by providing current information on (1) the choices states have made for providing child care assistance to (a) TANF families, (b) families transitioning off TANF, and (c) other lowincome families; (2) the extent to which states have changed policies since 2001 that could affect access to child care assistance programs and the amounts of subsidies provided to families; and (3) the number of children and families receiving child care assistance from CCDF and TANF funds.

All states make TANF, transitioning families, and other low-income families eligible for assistance. However, some states set additional criteria that may limit the extent of service to transitional and, especially, to other low-income families. Thirty-one states--an increase of six states since our previous report--reported that, using their state's eligibility criteria, they were able to provide child care assistance to all the families who apply and are deemed eligible for such assistance. Most states reported that they give higher priority to TANF families than transitional and other low-income working families when program resources are insufficient to serve all who apply. Since 2001, many states have made changes in eligibility and enrollment policies that could decrease program access while at the same time may provide larger subsidies to families receiving assistance. Thirty-five states made the following eligibility and enrollment changes that affect program access since 2001: 19 made changes tending to decrease access to assistance; 8 made changes tending to increase access to assistance; and 8 made a mix of changes. In addition, many states have made co-payment and provider reimbursement rate changes, but of those that made changes, more states increased provider rates than increased co-payments, which could result in families receiving larger subsidies. States may be providing larger subsidies in an effort to keep pace with increasing child care fees or to provide families with a broader array of options among providers. According to HHS data, the number of children and families receiving child care assistance under CCDF has remained relatively constant since 2001, but little is known about those subsidized with TANF direct funds. According to HHS, approximately 1.75 million children and over 1 million families have been served through CCDF (including TANF dollars transferred to CCDF) on an average monthly basis since fiscal year 2001. However, HHS officials did not have information on working families receiving child care assistance directly through TANF funds, although most ($1.4 billion of $1.7 billion) of the federal TANF funds directly spent on child care is directed to these families.

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