February 5, 2003

Actual Loss in Child Care Subsidies Likely Would Be Far Greater

By Sharon Parrott and Jennifer Mezey


PDF of full report

View Related Analyses

If you cannot access the files through the links, right-click on the underlined text, click "Save Link As," download to your directory, and open the document in Adobe Acrobat Reader.
A table in the Bush Administration budget shows that under the Administration’s child care block grant funding proposals, the number of children who will receive child care subsidies is projected to fall by 200,000, from 2.5 million children currently to 2.3 million children by 2007.[2]

This decline is the result of the Administration’s proposal to freeze various sources of federal child care funding over the next five years, including the Child Care and Development Block Grant, the Temporary Assistance for Needy Families (TANF) block grant (a substantial portion of which is used for child care), and the Social Services Block Grant.[3]  Because the cost of providing child care increases as the wages, salaries, and rental costs of child care programs rise with inflation, freezing child care funding causes the number of children who can be served each year to decline.

Currently, due to funding limitations, only one in every seven children who are eligible for child care assistance under federal rules actually receive that help.  Millions of low-income working families with children that need assistance paying for child care do not get it because of insufficient funding for child care programs.[4]

This gap would grow under the Administration’s budget.  In fact, the number of children under the age of five in the United States is projected to increase by 3 percent over the same period that the number of children who could be served by child care programs is projected to fall by 200,000.

Furthermore, the 200,000 figure is likely to understate by a substantial amount the decline that would occur under the budget in the number of children who receive child care subsidies, because the Administration’s projections are based on overly optimistic assumptions about the level of both state resources and federal TANF resources that states will devote to child care over the next five years.
If states withdraw state resources or federal TANF funds from child care programs, the reduction in the number of children who will receive child care subsidies by 2008 will be significantly larger than the 200,000 reduction projected by the Administration.

Finally, it is important to note that the if the Administration’s TANF reauthorization proposals are enacted, many states likely will reduce the number of low-income working families that receive child care assistance in order to devote more resources to meeting the new work requirements in the Administration’s proposal.  The President has called once again for the enactment of a welfare plan that would require states to increase substantially the number of cash assistance recipients participating in work programs and would raise the number of hours parents are required to participate to 40 hours per week.  Last year, the Congressional Budget Office estimated that the cost of meeting the work requirements included in the House-passed TANF reauthorization bill — requirements modeled on the Administration’s work proposals — would be between $8 billion and $11 billion over five years.  (These costs included costs associated with expanding welfare-to-work programs as well as the cost of providing child care to parents participating in these programs.)

To meet these new mandates, many states likely would cut funding for child care subsidies for low-income working families not receiving cash assistance in order to provide child care subsidies to cash assistance recipients newly required to work or required to work more hours as well as to fund the increased work program costs associated with these new requirements.  Thus, even if the total reduction in the number of children receiving child care subsidies were 200,000 as projected by the Administration, more than 200,000 children in low-income working families not receiving welfare benefits would be expected to lose access to child care assistance if the Administration’s TANF proposals are adopted.

End Notes:

[1] Sharon Parrott is from the Center on Budget and Policy Priorities and Jennifer Mezey is from the Center for Law and Social Policy.

[2] Analytical Perspectives, Budget of the United States Government, Fiscal Year 2004, Table 15-3, "Beneficiary Projections for Major Benefits Programs."

[3]  Additionally, for FY 2004, the Administration has proposed a $400 million cut in the 21st Century Community Learning Centers program which provides funding for after-school activities.

[4] Jennifer Mezey, Mark Greenberg, and Rachel Schumacher, The Vast Majority of Federally-Eligible Children Did Not Receive Child Care Assistance in FY 2000: Increased Child Care Funding Needed to Help More Families, Center for Law and Social Policy, October 2002.