The blog of the Urban Institute
July 9, 2019

Expanding Child Care Subsidies Could Serve Two Million Additional Children

It’s refreshing to see child care getting much more attention in the 2020 presidential campaign than we have seen in previous campaigns. Sen. Elizabeth Warren (D-MA) recently introduced legislation that would greatly expand child care options for families.  Affordable child care is a signature piece of Sen. Kristin Gillibrand’s (D-NY) Family Bill of Rights. Sen. Amy Klobuchar (D-MN) has sponsored legislation to address the shortage of child care facilities and workers in rural areas.

And several other candidates have vocalized support for legislation sponsored by Sen. Patty Murray (D-WA) and Rep. Bobby Scott (D-VA) that would ensure that families earning less than 150 percent of their state’s median income wouldn’t pay more than 7 percent of their income on child care.

These proposals underscore a growing national consensus that our current child care system leaves many families unable to find or pay for high-quality child care.

A key component of the current system is the Child Care and Development Fund (CCDF), which provides subsidies to low-income families for children younger than 13 (or children older than 13 with special needs). CCDF is a block grant and not an entitlement, so not all families who qualify receive subsidies through the program.

CCDF lacks the funding necessary to provide all eligible families with subsidies. Only about one in seven children with family income under 85 percent of state median income (the maximum limit under federal law) were served by CCDF and other federal funds (PDF) in 2015. Income eligibility and other program rules also vary by state since states have discretion to set policy within federal parameters.

We recently modeled a hypothetical expansion of CCDF subsidies so that all families earning less than 150 percent of the federal poverty guidelines who are working and meeting their state’s other eligibility rules could receive a subsidy if they wanted one. We produced both national and state-by-state estimates.

As a key part of our analysis, we also estimated the number of nonworking mothers who would join the workforce if they could get a subsidy. Research shows that child care costs are a barrier to employment for many parents.  That’s why we factored increased maternal employment into our projections for the number of additional children who could be served by a subsidy expansion. We found that more mothers in the workforce would reduce the number of children in poverty and would raise family incomes.

Here is what we found, nationwide:

  • An additional 800,000 families with incomes less than 150 percent of the federal poverty guidelines who are already working or meeting their state’s eligibility rules could receive subsidies, representing a 73 percent increase in families served by CCDF-funded programs in an average month.  More than half of these families have children younger than 3.
  • An additional 270,000 mothers—including 132,000 mothers of children younger than 3—would join the workforce knowing they could receive a subsidy. Adding these parents to the 800,000 families who are eligible but not currently receiving subsidies would double the current CCDF family caseload. 
  • The net result of these additional families in the caseload translates to more than 2 million additional children—including 588,000 children younger than 3—who could be served by subsidies: 1.6 million children whose parents are already working and 500,000 children whose mothers would start to work.
  • About 385,000 children—including about 100,000 children younger than 3—would be raised out of poverty, representing a 3 percent reduction in the number of children living in poverty, nationwide. This results mostly from increases in maternal employment.

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In our state-by-state analysis, we found wide variations in the number of additional children who would benefit from the expansion we modeled, because of differences in current state eligibility rules and funding approaches. 

For example, in some states, the maximum income that allows a family to become initially eligible for a subsidy is below 150 percent of the federal poverty guidelines, so the hypothetical policy we modeled makes more families eligible and guarantees them a subsidy if they want one. We generally see more significant increases in the number of additional children served in these states. 

Some states that already use an income limit at least as high as 150 percent of the federal poverty guidelines make funding choices that allow them to serve more eligible families. We generally see less significant increases in the number of additional children in these states.

  • Thirteen states would experience jumps in the number of children served by at least 200 percent and 18 states would experience increases between 100 and 200 percent.
  • These states experienced the most dramatic increases in numbers of children served: Arkansas (491 percent), South Carolina (486 percent), Nevada (282 percent), Louisiana (273 percent), and Michigan (263 percent).

States also varied by levels of child poverty reduction that would result from the child care subsidy expansion we modeled. In four states—Alaska, Arkansas, Minnesota, and Montana—the number of children in poverty would be reduced by 6 percent. In nine other states, the number of children in poverty would be reduced 4 to 5 percent.

Research shows that reducing the time a child spends in poverty is associated with higher educational attainment, more consistent employment, and lower rates of teen pregnancy.

This modeling exercise shows that expanding child care subsidies would not only give low-income families more options for accessing high-quality care, but would also create positive incentives for nonworking parents to enter the labor market. Giving families a chance to increase their incomes through work will reap long-term benefits for their children and the family—well beyond the immediate impact of having high-quality child care experiences.

Photo via santypan/Getty Images.

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