Financing

An essential factor in designing and implementing child care and early childhood education initiatives is financing. State lawmakers have a variety of options to consider when determining their need for short- or long-term funding and the types of funding sources available.

Two major federal sources of funds include the Child Care and Development Fund (CCDF) and the Temporary Assistance to Needy Families (TANF) block grant. States also may use the Social Services Block Grant (Title XX), IDEA funds, and others.

State general fund dollars are a significant source of funds, used for matching federal programs or expanding state programs. Other financing options include dedicated taxes such as a portion of a sales tax, cigarette tax, or beer tax. States have also relied on gambling revenues, lottery funds, tobacco settlement funds and private funding from business or foundations, among others. In some cases, local governments add funding through local initiatives for matching or other expanded funding.

In recent years, with tight budgets and reductions in expenditures, stable financing has become an increasingly significant issue. NCSL's Child Care and Early Childhood Education Project has written a variety of publications regarding financing and has provided on-site technical assistance through expert presentations that can address financing options and can provide examples of states' experiences with funding options and the amount of revenue from particular sources.

Financing Early Care and Education: Funding and Policy Choices in a Changing Fiscal Environment, describes various funding and policy approaches for policymakers to consider when developing a law, policy or budget action related to child care and early childhood education.

This report can be accessed by those with passwords at http://www.ncsl.org/legis/cyf/ccfinance.pdf, or can be purchased through the NCSL publications website.

Additional Resources

A newly published survey by the General Accounting Office (GAO), Child Care: Recent State Policy Changes Affecting the Availability of Assistance for Low-Income Families, describes state funding and policy choices for child care assistance programs. Child care administrators in 50 states and the District of Columbia were surveyed to determine what choices states made since January 2001 in providing subsidy assistance to TANF families, families that are making the transition from TANF and low-income families. Thirty-five states made key changes that affect the availability of child care assistance. According to the survey, "Twenty-three states made changes tending to decrease availability of assistance, nine states made changes tending to increase availability of assistance and three states made a mix of changes." Governors' budget proposals for 2004 showed a mix, with measures in 11 states to maintain funding, in 11 states to decrease funding and in seven states to increase funding. In addition, the report presented findings on income eligibility, other eligibility factors, waiting lists/freezing applications, copayments, reimbursement rates and spending on quality initiatives.

The GAO report can be found online at www.gao.gov/new.items/d03588.pdf.

A new strategy brief, Blending and Braiding Funds to Support Early Care and Education Initiatives, presents financing strategies that state and local policymakers can use to coordinate, align and integrate funds. The authors explore the current funding landscape and address the challenges involved in coordinating funds. The Finance Project, a nonprofit policy research, technical assistance and information organization, published the brief in January 2003.

It is available online at www.financeprojectinfo.org/Publications/FP%20Blending%20Funds%201_24.pdf.

For more information on child care issues, please contact Steffanie Clothier in the Denver office at 303.364.7700 or cyf-info@ncsl.org or either Sheri Steisel or Lee Posey in the D.C. office at 202.624.5400 or fedhumserv-info@ncsl.org.