The Oklahoma Department of Human Services this week approved changes to the state’s child care subsidy program that will increase hardships for struggling low-income working families, threaten access to quality child care, and harm child care providers who serve low-income children. [UPDATE: In late July, the Commission decided to defer a vote on these changes until November]
DHS’ actions were precipitated by budget shortfalls for the upcoming year exceeding $30 million. The Legislature reduced state appropriations to DHS for FY ’12 by a modest $6.0 million, or 1.1 percent, compared to FY ’11. However, the agency also faces the loss of one-time funding in this year’s budget, expected increases in program utilization, and higher employee benefit costs. To balance its budget, DHS proposed a series of measures, which included voluntary buyouts of 231 positions, mostly within its field operations division for children and family services, and cuts in contracts for various social services.
However, the largest program cuts are concentrated on the child care subsidy program. Funded through a combination of federal and state dollars, the subsidy program provides assistance to qualifying families by paying all or part of their child care expenses while parents or caretakers are working, going to school or receiving training. Children may attend licensed child care centers or family child care homes, which are paid a daily amount for subsidized children based on the child’s age and the facility’s quality of care. Families above a certain income level contribute a monthly co-payment. The program currently serves some 37,000 children in just under 24,000 families.
DHS has adopted two major changes aimed at reducing the cost of the child care subsidy program effective August 1, 2011:
- Raising monthly co-payments by 20 to 35 percent depending on income and the number of children in care. The increase is expected to affect some 13,000 families and reduce annual costs for DHS by $5.8 million. Families with income below $850 per month will continue not to have a co-payment obligation;
- Lowering the eligibility threshold for families newly applying for child care subsidies. The maximum monthly income for families not currently receiving subsidies will drop from $2,425 to $2,125 for a family with one child in care; from $2,425 to $2,125 for families with two children in care, and from $3,625 to $2,925 for families with three of more subsidized children. Families in the higher income brackets who are currently receiving benefits will remain eligible. DHS projects annual cost savings of $3.8 million from this measure.
These measures can be expected to have a significant financial impact on low-income working families. For example, the monthly co-payment for a single parent working full-time at $9.50 per hour will increase by $41 – from $162 to $203 – if she has two children in subsidized care. The child care co-payment, equivalent to $1.21 per hour, will now absorb over 12 percent of her wages. Meanwhile, as a result of the eligibility changes, a two-parent family with two children where both parents make the minimum wage of $7.25 per hour will no longer be eligible for subsidized care.
Coming at a time of rising costs for fuel, health insurance, and other household necessities, increased child care expenditures will squeeze already tight family budgets and place greater strain on public and private safety net providers. Faced with higher child care costs, some parents may choose to pull their children out of the system of licensed and subsidized child care in favor of informal and often unstable care arrangements with siblings, neighbors or friends. In other cases, the higher cost of child care may lead parents to stop working entirely – with a consequent loss of family income and, perhaps, a return to the welfare rolls.
The cuts will also affect the bottom line for child care providers, many of which are small locally-owned businesses that are already economically fragile. Many child care providers will lose clients, as higher co-pays and reduced eligibility lead some children to be withdrawn from the system of licensed care entirely. Others will be left to absorb part or all the higher co-payments themselves when families who are already receiving child care are unable to afford a 20 – 35 percent increase. For some providers, also dealing with rising operating costs and rates that have been frozen for several years, the lost revenue may push them out of business entirely.
Was DHS justified in making this decision? The agency clearly faces a shortfall and had its hands partly tied by the Legislature, which passed a bill expressly prohibiting DHS from cutting senior nutrition services, home- and community-based waiver programs, and various other services. Still, as noted by Commissioner Steven Dow, who was one of two commissioners to vote against the agency budget, the agency still has $15 million in carryover TANF (Temporary Assistance to Needy Families) funds that it could have tapped to mitigate the extent of the child care cuts. Linda Terrell, Executive Director of the Oklahoma Institute for Child Advocacy, stated:
State agencies are being asked to make tough decisions, but people working directly with children know the impact of their decisions. It is unfortunate that members of the commission see the value of a surplus over the value of ensuring working families have access to high-quality and safe childcare.
Given the available TANF surplus and a long history of actual expenditures coming in below projections, DHS could have adopted more modest co-payment increases and decided during the year whether additional budget-balancing measures were needed. As it is, this decision will be a serious blow for hard-pressed families trying to pay their bills and ensure quality care for their kids.