LEGISLATIVE

ACCA ISSUE BRIEF: Access to Quality Child Care for Low Income Working Families

Statement of the Issue

Parents need affordable child care to work and children need quality child care for healthy development and success in school. The cost of child care is beyond the reach of most low and moderate income families. Children benefit most from high quality early care and education, yet parents particularly struggle to find and afford quality child care.

The State child care subsidy program was designed to help low income working parents stay off welfare but doesn’t cover the cost of basic licensed child care, let alone the cost of high quality early care and education. State child care payments are eight years behind the current cost of basic licensed care. Low income working parents cannot access the quality of care that their children need and deserve.

Long term Public Policy Goals

State payments on behalf of low income working families should be based on the current cost of care and adjusted regularly. The eligibility and payments should be designed to allow more families to qualify and better support the provision of quality care. The State should expand resources, incentives, and assistance for providers to improve the quality of care for center and home providers.

Background Data

• 33% of all children in Arizona live with a single parent. 55% of all Arizona children under age 6 live in households in which all available adults are in the workforce. These families must have stable child care arrangements to work.
• The cost of licensed full time care for children under 6 ranges between $5,000 to $8,500 per year depending on the child’s age, type of care, and area of the State – more than State college tuition.
• Arizona’s income eligibility level is 165% of the federal poverty level or $2,916 monthly or $34,992 annually for a family of three (i.e. single parent and two young children). 34 states have higher income qualifying levels for child care assistance than Arizona.
• In SFY 2007, the subsidy served a monthly average of 44,609 children from 24,223 families including low income working families (59%), families on public assistance who participate in work activities or transition from welfare to work (27%), and children involved with CPS (14%). Most families who are eligible do not use the State subsidy; it is used by families with no other options.
• While Federal law and Arizona statute require the State to make payments that are sufficient to ensure equal access for eligible children to the costs of care in the private market, the State limits provider payments to the cost of care in 2000, plus 5%.
• Arizona’s child care rates are at the bottom nationally. Only 4 other states use 2000 or earlier costs of care on which to base their subsidy payments. At least 41 states make payments that are closer to the current costs of care than Arizona.
• State payments, on the average, do not cover what at least two-thirds of the licensed centers in Maricopa and Pima County charged for young children in 2006. For example, the maximum the State will pay for a 3 year old in a preschool for 10 hours a day, 5 days a week in greater Phoenix is $125. The actual median cost in 2006 was $140. The State has created a market for low cost basic care.
• Parents who receive subsidy must pay up to $10 a day per child and 20% of their gross monthly income and cannot afford to pay the difference between the state’s payments and the actual costs.
• The State subsidy program was designed only as a parent work support program. It limits the time that children can attend early education programs based on parents’ work schedules. Minor income increase in parent’s income can drastically affect eligibility and disrupt child care arrangements. Providers’ revenue is inconsistent and unpredictable, negatively impacting staffing and quality.
• There are successful programs in operation that are designed to improve the quality of care but they are only able to serve a limited number of providers and have waiting lists for technical and financial assistance to homes and centers.
• In recent years, the child care program has been under assault with under funding that produced waiting lists, new arbitrary lifetime limits, more restrictions on eligibility and assistance, increased parent co-payments, and proposals to slash provider payments.

Connections to Poverty

• Child care assistance allows parents to work, support their family, and avoid welfare. It allows welfare recipients to participate in required training, get a job, and stay employed.
• Federal and State welfare laws require cash assistance recipients to participate in work activities and the State faces substantial fiscal sanctions if participation rates are not met.
• Single mothers who receive child care assistance are 40% more likely to remain employed after two years than those who do not receive assistance in paying for child care.
• Former welfare recipients with young children are 82% more likely to be employed after two years if they receive child care assistance.

Connections to Building and Sustaining a Quality Workforce

• Wages and benefits for teachers and caregivers are the single greatest factor in the cost of child care.
• The low state rates directly impact wages, benefits, and turnover. The State rates do not support quality. Low state rates depress teacher wages, limit employee benefits and training, increase turnover, and do not allow purchases of classroom curriculum materials, books, supplies, and equipment or facility improvements.
• The 2004 median hourly wage for teachers in private centers, those who typically care for DES subsidized children, was $8.57. Fully federally funded Head Start and public school supported programs are able to pay preschool teachers almost $14.00 per hour, or 63% more.
• 33% of private centers cannot provide any health care benefits for full time employees, while federal and school supported programs provide with comprehensive benefits to virtually all employees.
• Better paid teachers in federally funded and public preschool programs stay in their positions twice as long as teachers in private non-profit and proprietary child care centers.
• Child care for working families is provided by businesses, non profit community based agencies, and home based providers who cannot keep up with the rising costs for employees, food, facilities, and fuel.
• The Consumer Price Index (CPI) has risen almost 28% since 2000. With the 5% increase in 2007, the rates are still 23% behind. Providers are forced to either limit state supported children or compromise the overall quality of care they provide.
• Rate increases improve quality: a survey after a rate increase found that 90% of providers increased wages, 68% began offering benefits, 85% bought additional materials and supplies, 76% purchased new equipment, 73% made or planned to make facility improvements, and 57% purchased additional staff training.
• There is no more immediate and significant way to impact the child care workforce and access to quality of care for children from low income working families than by paying rates based on the current cost of care.

Public Policy Solutions

State child care subsidy rates should be increased and indexed to the current costs of care. An estimated $30 million is needed just to increase the rates to the 2006 costs. A three year plan is needed to bring the rates to the 2010 cost of care by State Fiscal year 2012.

The State should build on the state subsidy program, expand eligibility and assistance, and provide resources to expand high quality early childhood development programs for children from low income working families.

The State should significantly increase the amount of funding for teacher training, provider technical assistance, quality improvement projects, and incentives for quality.

Increase public investments in early care and education. Public investments support families, children, local businesses, and the economic vitality of communities and our State. ASU’s W. P. Carey School of Business found that for every $1 of incremental costs to implement a model preschool program in Arizona, there is $6.38 worth of benefits in future participant earnings, parental earnings, reduced crime and delinquency, and reduced special education costs. National longitudinal studies found a 16 percent real rate of return on the initial investments in early childhood.

Updated July 25, 2008

References

“State Child Care Assistance Policies 2006: Gaps Remain, With New Challenges Ahead”
National Women’s Law Center (NWLC) 2006.

2007 Kid’s Count Data Book. Annie E Casey Foundation, Baltimore, Maryland.

U.S Census Bureau 2000 and 2001 Supplementary Survey and the 2002 through 2005
American Community Survey.

US Bureau of Labor, Consumer Price Index – child care calculation based on increase from April 2000 to June 2008

Child Care Assistance Cutbacks: Policy Changes and Effects on Families, Children, and Providers”
U.S. House of Representatives Briefing April 30, 2007. Helen Blank, NWLC.

“Compensation and Credentials: A Survey of Arizona’s Early Education Workforce”. Governor’s Office of Children, Youth & Families, Association for Supportive Child Care, Children’s Action Alliance. July 2005.

“The Economics of Early Care and Education In Arizona” W.P. Carey Center for Business Research , Arizona State University April 2004.

Art Rolnick Senior Vice President and Director of Research, Federal Reserve Bank of Minneapolis,

Arizona Child Care Association – Fact Sheets, Position Statements, and Research. 2003-2007.