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Designing Subsidy Systems to Meet the Needs of Families

An Overview of Policy Research Findings

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Document date: January 01, 2008
Released online: February 04, 2008

The nonpartisan Urban Institute publishes studies, reports, and books on timely topics worthy of public consideration. The views expressed are those of the authors and should not be attributed to the Urban Institute, its trustees, or its funders.

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Many state and local child care subsidy agencies have been redesigning their policies to better meet the needs of the families they serve, and to create more efficient and fiscally responsible systems. These strategies reflect states' growing understanding of the dynamic nature of low-income families' lives and of the challenges they face as they move toward stable employment. This report synthesizes findings from various research projects conducted by the Urban Institute (and other organizations), and lays out a range of policy strategies states are implementing to support eligible families in accessing and retaining child care subsidies.


Low-income families can face numerous challenges as they work toward stable and gainful employment. Child care subsidies are designed to help them overcome one major barrier they face—affording child care for their children—as they seek to become or remain employed. Research suggests that subsidies can play an important role in this effort, as subsidy use is associated with higher rates of employment and better employment outcomes (Schaefer, Kreader, and Collins 2006). As such, child care subsidies—mostly funded through the federal Child Care and Development Fund (CCDF) with related state funds, and funds that states allocate from their Temporary Assistance for Needy Families (TANF) programs—are a key public investment in a safety net for America’s working families, and for families moving from welfare to work. (Appendix A includes a description of the CCDF and some of its key provisions.)

As highlighted in previous Urban Institute studies, however, despite the importance of subsidies for low-income families, only some families that are eligible for services receive assistance. This disparity results from a number of factors, including insufficient funding in some states to serve all families that want services, as well as some families not wanting or needing assistance. Yet it appears that even when funds are available, some eligible families that want subsidies do not receive them, families that do receive them often stay on subsidies for relatively short periods, and some families that do not stay in the program appear to remain eligible even after they leave (Collins et al. 2000; Meyers et al. 2002; Grobe, Weber, and Davis 2006). While again multiple factors likely contribute to these patterns, research suggests that subsidy policies and practices can contribute to whether some eligible families receive subsidies in the first place, as well as whether eligible families that receive subsidies are able to retain them over time (Adams, Snyder, and Sandfort 2002; Shlay et al. 2002). These include policies and practices in areas such as what families must do to apply for subsidies, to recertify their eligibility, and to report changes in circumstances that may alter their eligibility, as well as how often families must take these steps; how easy or difficult their interactions are with the subsidy agency (Adams et al. 2002); and how agencies define eligibility when families experience changes in their circumstances (Snyder, Banghart, and Adams 2006).

Designing Subsidy Systems to Meet the Needs of Families The growing understanding of the importance of these issues has led states and localities to focus more on identifying ways to improve their services and design their programs to make it both easier for eligible families to receive services in the first place and to keep them once they receive them (see, for example, Snyder, Banghart et al. 2006). In addition to making processes easier for parents, several strategies appear to help administrators meet other critical program goals, such as reducing staff workload, keeping program costs down, and reducing improper payments (Snyder, Banghart et al. 2006). Some strategies that better support parents—for example, decreasing paperwork, simplifying interactions with parents, reducing inadvertent terminations or needless churning of clients—can also minimize unnecessary procedures that result in administrative costs.

Finally, strategies that help subsidized families retain subsidies also seem likely to affect CCDF program goals to support child development. While low-income families on subsidies may change providers while in the system (Grobe et al. 2006), inadvertent terminations of subsidies can mean at least some children experience disruptions in their care arrangements that would not have otherwise occurred. Given the central role that having a stable relationship with a loving caregiver has on a child’s well-being, minimizing those disruptions is clearly important for child development goals as well.

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Topics/Tags: | Children and Youth | Poverty, Assets and Safety Net

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