TANF Issues Paper: Child Care Funding and Quality

About 60% of all families that receive Temporary Assistance for Needy Families (TANF) include a child under the age of 6. One of the major barriers to employment for low-income families is the absence of affordable child care for their children. Even mediocre, custodial care is in short supply. Infant care is particularly expensive and hard to locate.

Current law requires that adult TANF recipients work after their youngest child is 12 months of age. Parents of preschoolers are required to work for 20 hours a week, with the figure rising to 30 hours when the child reaches age 6. States have the option to require mothers of newborns to work outside the home, and some exercise that option. In Tennessee, mothers are required to return to work when their babies are 16 weeks old.

The demand for child care for TANF families will be significantly increased if Congress adopts President Bush’s reauthorization proposal, because he is calling for all TANF parents to work outside the home for 40 hours a week, including those with preschool aged children.

Prior to the implementation of TANF in 1996, many households on welfare were able to make informal child care arrangements with neighbors and relatives so that the mother or grandmother in one recipient household could care for children of several families in her home while their mothers worked. Under TANF, however, all of the adults in families receiving benefits are required to work outside the home, so that such informal arrangements are far less likely to be possible, thus reducing the supply of affordable child care.

TANF’s primary purpose was to put low-income parents to work so that they would leave the public assistance rolls. Caseloads have dropped by over 50% since TANF was enacted. According to the Children’s Defense Fund, when the law was passed in 1996, only 11% of recipient households included someone who had a job or was in a work training program, although it is generally conceded that a far higher proportion had irregular, seasonal or part-time jobs during the course of a year. By 1999 (the last year for which figures are available), the proportion of working families on TANF had risen to 33%. The numbers continued to grow in 2000 and 2001. Overall, among all low-income single mothers (not just those on TANF), employment grew from 44% in 1996 to 55% in 1999.

This expansion in the employment of parents of young children, at the same time that their sources of informal child care arrangements had greatly decreased, has significantly expanded the need for child care. In addition, the increased demand has forced prices up, making good care too expensive for many poor families to purchase. The cost ranges from $4000 to $10,000 a year, more than many families have to meet all of their needs combined.

There is some government assistance available to help TANF families and other low-income households meet their child care needs, but it is far from adequate. The Child Care and Development Block Grant, the main source of funding, serves only one eligible child in seven. The TANF program itself also provides assistance. States are allowed to divert a portion of their TANF grants from cash benefits to child care and other supportive services, and most have done so. For the past several years, while the economy was strong and TANF recipients were finding jobs, most states did not need to use the full amount available for cash benefits, and so they invested part of their TANF surplus in child care. With the economy now somewhat weaker, the demand for cash benefits is increasing as people lose jobs and return to the program’s rolls. This trend will inevitably reduce the already inadequate funding available for child care.

The child care needs of some families are met through participation in the Head Start program, itself inadequately funded and not a full-day operation in most places. Finally, the Social Services Block Grant provides a small amount of child care funding to states.

There are two primary issues at stake in the child care debate in Congress in 2002 - supply and quality. The supply cannot be increased without a significant increase in funding. The child advocacy community, led by the Children’s Defense Fund, is calling for $20 billion in new funding over a five year period. Many child care advocates in Congress, while favoring a higher figure, are calling for $11.2 billion over five years as a reasonable compromise.

The Bush Administration contends that no new funding is needed because the TANF rolls have declined so much that funds not used for cash benefits will be available to meet increased child care needs. In fact, holding funding level will lead to the loss of 114,000 child care slots because of rising costs. In addition, the Administration plan takes no notice of the increased need for child care that will result from its intention to increase the work week from 20 or 30 to 40 hours. The Administration’s argument losses credibility in light of two facts:

(1) There has always been a severe shortage of child care for low-income families, even when the economy was at its best. With only about a quarter of the eligible caseload being served from all federal sources combined, funding could be doubled or tripled and still be inadequate.

(2) The TANF caseload is now increasing, so more funds will be needed for cash assistance, and the very source of child care dollars that the Administration claims is available to expand services will, in fact, have to be used for its original purpose, cash assistance. Many states have already begun making cuts in their child care programs to meet the increased demand for TANF cash benefits.

The second issue is quality of care. There has been a great deal of attention focused recently on education and on the importance of helping young children be ready to learn. For youngsters whose parents are working and not available to spend time tutoring their preschoolers, what happens to those youngsters in their child care settings is a crucial factor in their readiness to learn in school. Those who are taught social and language skills and who are encouraged to learn generally fare better than those who are in custodial care or watching television.

Current law requires that only 4% of available child care funds be devoted to quality improvement, which includes such things as teacher training, educational toys and books, and property maintenance. Several bills now before Congress would increase the amount set aside for quality improvement to 12%. The advocacy community supports this proposal, pointing out that quality improvement must be combined with increased funding, so that enhancing quality does not lead to decreasing supply.

Child care providers are generally poorly paid, despite the fact that owners of child care facilities tend to operate at a significant profit. The average salary is $16,350 a year, with few or no benefits. Often the workers are required to work less than full time so that they do not have to be given benefits. These conditions lead to great turnover in staffing. Some states now provide training for providers in order to stabilize their services. Other states, however, require no training for caregivers and do not do background checks. The increased quality "set aside" being considered in Congress could help to offset the deplorable conditions in some child care settings.

May 2002