Investing in Our Future: A Guide to Child Care Financing-June 2002
Executive Summary
Written by:
Louise Stoney
Scott Groginsky
Julie Poppe
State legislators and other policymakers focus their attention on financing early care and education because of significant, positive short- and long-term effects on children and families. These include supporting the current workforce and economy, improving children's educational opportunities and outcomes, and reducing crime. To achieve these positive results, state decisionmakers are exploring options to ensure adequate supply and financing of good quality child care services.
Although the bulk of child care funds comes from the federal government, states play an important role in financing child care and early education services. Many key decisions are made at the state level. These include directing funding streams, building service delivery linkages, setting standards, and other important financing issues. Although financing strategies and approaches will vary from state to state, this book suggests several principles to help guide these decisions and offers a range of financing options that have been implemented in states and communities across the country.
These principles include the importance of using multiple funding streams and developing policies and procedures that allow early care and education funds to be easily "layered" within a single program. Legislators also may want to consider funding both families and early childhood programs and weaving these approaches into a single, coordinated system. Through direct institutional financing to early childhood programs and portable financing to individual families, legislators can ensure that all families-regardless of income-have access to high-quality early care and education services. In addition to restructuring state policy to maximize current funds, policymakers have available many nontraditional sources for early childhood financing, including beer or cigarette taxes, developer impact fees, lottery and gambling revenues, tobacco settlement money, private funds from businesses or foundations, among others.
Financing Supply
One of the most significant early childhood needs in many states is to increase investments in supply, including innovative ways to finance child care centers and family child care homes. Examples of how states currently help finance the cost of facility start-up, expansion and technical assistance include a range of loan, bond and tax credit strategies. State policies that help increase the number of qualified early childhood teachers also is critical to meet child care demand. States have established various initiatives aimed at improving recruitment, training and technical assistance for the early childhood workforce. These include grant programs that often are implemented through resource and referral agencies, strengthening family child care networks, and wage and benefit initiatives.
Resources for All Families
Child care is an essential and costly support for all working families, regardless of family income. For parents whose earnings are at or close to the poverty level, however, the high cost of quality child care can be a significant barrier.
State legislators can help structure subsidy systems for low-income families in ways that promote access, affordability and quality services. These decisions include, among others, targeting funds, establishing copayment and rate policies, and paying more for better quality programs or hard-to-find care, such as services for children for special needs or care during nontraditional work hours. To guide these decisions, legislators and other policymakers examine different federal and state revenue sources. Federal funds include the Child Care and Development Block Grant (CCDBG), the Temporary Assistance to Needy Families Block Grant (TANF), Head Start, and the Social Services Block Grant. States also invest general child care funds, state preschool funds and other state funds. States increasingly seek to coordinate these systems to maximize resources, improve family access, and strengthen child development outcomes.
Supporting low-income families is only part of the issue, however, as noted earlier, the cost of high-quality child care is out of reach for most families. To this end, building a high-quality early care and education system involves financing strategies that can strengthen early learning opportunities for all children and families. One way to address this need is to develop financing strategies that focus on both programs and families, as is routinely done in other sectors such as higher education, housing and transportation. To support institutions directly, states have offered quality improvement grants, wage supplements, health care benefits for early childhood providers, and (in some states) prekindergarten funds that can be "layered" with other public and private funds and are not limited to programs that serve only low-income families. Additional supports for families at all income levels can include dependent care tax credits, paid family leave, and supports for parents who choose to stay at home with their infant or toddler.
Financing Quality
Positive educational, economic, social and criminal justice outcomes rely on early childhood programs that are of good quality, according to recent research. For state lawmakers, regulatory policies are a starting place to protect the health and safety of children who attend early childhood programs. States also can encourage and support accreditation of early childhood programs. This encompasses a variety of quality elements, such as professional qualifications, curricula, parent involvement, physical environment, and other components.
Research has demonstrated that the training and education of early childhood providers is a crucial element in ensuring high-quality care and education. In recognition of this link, state policymakers have developed initiatives to enhance professional development opportunities and to strengthen provider wages and benefits. Comprehensive services-such as parent education, health services, and nutrition-also can improve the quality of early childhood programs, and policymakers are drawing on a variety of federal and state financing mechanisms to support these services.
As Congress and the president deliberate welfare reform reauthorization in a difficult economic climate and as research on brain development, caregiving and parental interactions continue to indicate the importance of the early years, child care funding issues will remain high on state and federal policy agendas.
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