Increased federal funding gives child subsidy a much-needed boost

Parents who seek child care for infants and toddlers face a common conundrum. Without child care parents cannot work, yet many working families cannot afford the costly child care they need to maintain employment. This is why helping families who earn low-incomes get access to quality child care is so important. Having access to quality child care means that not only can parents stay in the workforce, but children can learn the skills they need to be school ready.

The child care subsidy program fulfills this need for families by helping them cover some of the cost of child care. The program is funded through the federal Child Care and Development Block Grant (CCDBG), and in 2018 the program received a historic funding increase. The infusion of new dollars into Oklahoma’s child subsidy program has resulted in higher reimbursement rates for child care providers and lower costs and greater access to child care for families. The additional funding is a reprieve for a system that has been neglected for years and has seen an almost 30 percent decline in licensed care facilities over the past decade. The new dollars also offer an opportunity to examine additional ways to improve child care in Oklahoma such as improving quality and offering additional supports for infants and toddlers. 

Funding increase expands access and lowers costs for Oklahoma families 

In 2018, Congress approved a $2.37 billion funding increase to the Child Care and Development Block Grant to help states meet new program guidelines that were passed four years earlier.  In Oklahoma, the child care subsidy program is administered through the Department of Human Services (DHS), which received an additional $32 million in fiscal year 2018 as a result of these new federal funds. Information about the ensuing changes to the child subsidy program were gathered through interviews with DHS officials. 

While child subsidy eligibility has always been restricted to families working, in school, or in training, the new funding allowed the state to increase the number of families that are eligible for subsidies by raising the income limit to 85% of the state median income. This means a family with two household members earning up to $3,286 a month or a family with three household members earning up to $4,059 a month will now qualify for a subsidy.  In addition to allowing more Oklahoma families to access the child subsidy program, the new federal funding also allowed the state to lower co-payments, which is the cost families pay to the provider each month. Now families whose earnings put them at or below the federal poverty line will have zero co-payments.

The new payment schedule also significantly lowers costs for families with more than one child in care. Previously the number of children in subsidized care was a factor in determining the family co-payment, but now only family size is taken into account. Lastly, the new funding allowed the state to establish 12-month eligibility standards. In the past, families were not guaranteed long-term eligibility for a subsidy, which meant that when a family experienced short-term job loss or another life change, they would no longer qualify for the program. This instability made it difficult for families to find work or stay in school, and it disrupted the formation of attachments between children and their caregivers that is necessary for quality child care. Twelve-month eligibility guarantees families and children the stability they need to reap the long term benefits of quality care

Providers see higher reimbursement rates 

The changes made to the child care subsidy program not only reduced costs for families. They also allowed the state to increase payments made to licensed child care providers by increasing reimbursement rates. This is especially critical in Oklahoma where the number of licensed child care providers has declined 27 percent since 2010.

While child care is more plentiful in metro areas, rural Oklahoma faces a critical shortage of licensed care. On average, 55 percent of Oklahomans live in a child care desert where there are three times as many children as licensed child care slots. Before the rate increases, providers were only reimbursed between 30 percent to 50 percent of market rate for each child receiving a subsidy. Rates this low made it extremely difficult for providers to cover their actual cost of care and keep their doors open. The challenge was even more acute for rural child care providers that received a lower rate which reflected the lower cost of living in these parts in the state.

However, the infusion of additional federal dollars allowed the state to create a single statewide reimbursement rate. Now all two and three star- rated licensed child care facilities, where 96 percent of children on subsidy receive care, are reimbursed at 65 percent of the market rate. While the rate increase is not likely to completely address the financial struggles child care programs face, it is certainly a step in the right direction to encourage new facilities to open and help stabilize the existing market. 

Investing in quality child care is vital for Oklahoma’s economy

While most of the additional federal funding went to reduce costs for families and increase provider rates, some resources were also devoted to improving the quality of infant and toddler care. The Child Care and Resource Center partnered with DHS to create an infant and toddler specialist network which can be utilized for consultations by licensed facilities across the state. Some funding was also dedicated to helping child care workers get additional training and certification by offering stipends to help cover education costs.

The boost in funding has certainly helped expand access to child care across the state; however, additional measures must be taken to address licensed child care shortages, especially in rural parts of the state.  Additional funding could help further increase provider rates to the federally recommended 75 percent of the market rate, which could encourage the growth of new licensed child care facilities.  Further, the new increases gave the same percent rate increase to two star and three star facilities; offering three star facilities a greater rate increase could incentive providers to improve quality.

Ensuring Oklahoma families have access to high-quality child care is one of the most important ways to boost school readiness and academic outcomes later in childhood and adolescence. Investing in quality child care is also a smart decision for the economic vitality of Oklahoma, because it allows parents to keep working and better support their families.  Incentivizing the development of quality child care providers not only yields economic returns through the industry itself, but it also generates greater economic output through increased workforce participation and productivity statewide. 

ABOUT THE AUTHOR

Rebecca Fine joined OK Policy in July 2018 as the education policy analyst. Originally from New York, she began her career in education as an Oklahoma teacher. Rebecca proudly comes from a family of educators, and spent four years teaching middle school in Tulsa and Union Public Schools. She graduated magna cum laude with a B.A. in political science from the University of Rochester and received an M.A. in Educational Policy Studies from the University of Wisconsin-Madison.

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