Tax Reform: Access to Child Care for Working Families

Congress appears close to agreeing on a budget resolution, which will include instructions for the Senate Finance Committee and House Ways & Means Committee to approve tax reform legislation. For working families with young children, it’s important to look beyond the leadership framework announced in September and ask about the details.

Nearly 15 million children under age 6 live in families with working parents. Many of these parents struggle with child care costs.1

kids under 6 with working parents pie chart

Source: U.S. Census Bureau

The average annual cost of center-based care for an infant is $10,476; the average annual cost of center-based care for a preschool-age child is $8,469.2  The average annual cost for infants in home-based care is $7,669; the average annual cost for a preschool-age child in home-based care is $6,967.3  Historically, the tax code has helped make child care more affordable for parents. The rationale has been that working parents with young children need child care in order to obtain and retain employment and employers depend on working parents.

The current Child and Dependent Care Tax Credit (CDCTC) offers working families with child care expenses a modest credit in recognition that child care is an expense related to work. Although child care costs have increased over the past 16 years, the value of the credit has not been increased since 2001.  Among families with children who benefit from the CDCTC, taxes are reduced by an average of $551.

Another policy in the current tax code that helps families with child care costs is the provision that allows employers to offer Flexible Spending Accounts (FSAs), which enables employees to set aside up to $5,000 per year tax-free to be used for reimbursement of child care expenses. In 2014, 39 percent of civilian workers had access to a dependent care FSA.

The tax reform framework as proposed by President Trump and the Congressional leadership simplifies the tax code by lowering tax rates. It doubles the standard deduction (currently $6,350 for single individuals and $12,700 for married couples).4 However, it eliminates personal exemptions (currently $4,050 for each taxpayer, his or her spouse, and each child – currently indexed annually for inflation).5  The framework says that the Child Tax Credit (which is available for families with children under age 17)  will be “significantly increased” – but it doesn’t say by how much and it doesn’t mention any income tax breakpoints that may apply (i.e., at what income level households would receive the full significant increase (whatever amount it is) and at what income level it would be phased out).

Although the framework does not pay for itself (i.e., the expected revenue loss over 10 years is about $1.5 trillion), lower rates are achieved (at least in part) by eliminating credits and deductions not mentioned in the framework. The child care related provisions in the current tax code are not mentioned and therefore fall into the bucket of potential tax policy to be eliminated.

For working families with young children, tax policy that helps support their need for paid child care is important. Some families may not need paid child care. However, many families depend on it. For those families with child care costs, the current child care provisions in the tax code should be updated, not discarded.

As tax reform is debated, and pro-growth strategies are supported, it’s important to understand that jobs require working parents. And, many working parents of young children need paid child care. Senator King (I-ME) and Senator Burr (R-NC) introduced legislation last January (S. 208) to update both the Child and Dependent Care Tax Credit and Dependent Care Flexible Spending Plans.  It’s time to dust that bill off the shelf and recognize that updating the child care related provisions in the tax code should be part of the tax reform discussion. These provisions are specific – families must have qualifying children, must be working, and must have child care costs.

Increasing the child tax credit for families with children younger than age 17 (as the framework outlines)  is good policy.  It helps partially offset the cost of raising children. However, it is not specifically related to whether a family with young children has child care expenses.  There is a cost to raising children, all families know that. However, it is even more expensive for families who have child care costs. That’s why retaining and updating the child care provisions in the current tax code is important.

1U.S. Census Bureau, Table B23008, Age of Own Children Under 18 Years in Families and Subfamilies by Living Arrangements by Employment Status of Parents, 2016 American Community Survey 1-Year Estimates.

2Child Care Aware of America, 2017. Parents and the High Cost of Child Care: 2016 Update.

3Ibid.

4U.S. Congress Joint Committee on Taxation, The Taxation of Individuals and Families, JCX-41-17, September 12, 2017.

5Ibid.

 

Unlicensed Child Care Puts Children At Risk

The Child Care and Development Block Grant (CCDBG) is allocated to states to both assist families in affording the cost of child care and to improve the quality of child care (such as through training or other activities). In October, new state reported child care data was released by the U.S. Department of Health and Human Services (HHS) with regard to the number of low income children in each state assisted through  CCDBG.  boy playing w blocks, verticle stock

Overall in FY2013, about 1.4 million children received assistance each month (about 47,500 fewer children in 2013 compared to 2012). The number of children receiving assistance is one part of the story. An equally important part of the story is the type of child care paid for by CCDBG.

In many cases, low income families who receive assistance are able to access quality child care that they would not otherwise be able to afford.  That’s good news for children who will be in a safe setting that promotes their healthy development. And, great news because research shows that high quality child care makes a difference for all children, but particularly for the school readiness of low income children.

What is troubling is that of the 1.4 million children receiving federal subsidies, about 15 percent (218,265) are in unlicensed care. This means that these children are in settings where little is known about the provider except that she receives a government check to care for low income children. In many states, these unlicensed providers are not required to have training, there are no minimum health and safety protections for children (or maybe there is a checklist that providers submit “self-certifying” compliance) and no inspections are required – unless there is a parent complaint.

In 11 states plus Puerto Rico, 25 percent or more of the children receiving a subsidy are in unlicensed care (Hawaii, Oregon, Alabama, Puerto Rico, Nevada, Illinois, Connecticut, Michigan, New York, Missouri, North Dakota, and Indiana).

unlicensed by percentage snapshot fy2013

In 18 states, of the children in unlicensed settings whose care is paid for through CCDBG, more than half of the children are with non-relatives.

Unlicensed NonRelative Care Declining FY2013

Why does it matter? Child care licensing serves to provide some minimum health and safety protections for children in child care. States may require minimum training for providers and an emergency plan in the case of a fire or simple things like working smoke detectors and a fire extinguisher. In the past month in Virginia, 3 babies have died in unlicensed at home child care programs where providers had no training for emergencies, no fire extinguishers, and no working smoke detectors.  For Virginia, 46 infants have died over the last few years in unlicensed care. In Missouri, more than 67 babies have died in unlicensed care.  In Indiana, 18 babies have died in unlicensed care. Maybe some of these children were on a subsidy, but we don’t know because current law does not require reporting of this type of data.

The death of any child is a tragedy. It’s an even greater tragedy when the deaths can be prevented. Licensing  serves to protect the health and safety of children. One would think that when taxpayer dollars are used to pay for the care of low income children, that the settings paid for would be safe. But, with unlicensed care, we just don’t know. What we do know is that unlicensed care poses risks to children since there are no minimum health and safety protections.

This week, the Senate will consider legislation to reauthorize (renew) the Child Care and Development Block Grant (CCDBG). The bill was approved by the House of Representatives on September 15.  If approved by the Senate this week, the measure will be forwarded to the President to be signed into law. The bill includes important new health and safety protections for children. It requires more accountability for state expenditure of federal funds.  But, most importantly, it will help strengthen the quality of child care in every state so that parents have more choices among quality settings.

Arkansas, Massachusetts, North Carolina, Oklahoma, Ohio, and Wisconsin, choose not to use subsidy dollars to pay for unlicensed care.  For the rest of the states, the bill will require a review of the policies to protect children when the states allow funding for unlicensed settings.  The bill requires:

  • a comprehensive background check (a fingerprint check against state and federal records, a check of the state child abuse registry and a check of the state sex offender registry) for all licensed or regulated care and unlicensed nonrelative care where subsidies are used;
  • States that choose to use subsidies to pay for unlicensed care to publicly explain why such care does not endanger the health, safety, or development of children;
  • At least one annual inspection of all providers receiving a subsidy, including unlicensed non-relative care;
  • Minimum training on important health and safety topics like safe sleeping practices and training related to the social, emotional, physical, and cognitive development of children; and
  • States to report deaths in child care, differentiated by type of setting and whether the setting is licensed or unlicensed.  Requiring the collection of this data is not to be morbid, but to better inform states and HHS about any trends and training that might make a difference.

The bill does not require assistance to families to be used for licensed care. However, it does require states to ensure that if they choose to use taxpayer dollars in unlicensed care, that children are safe. Children should be safe in child care – whether that care is paid for by a subsidy or not.

Working Families Near Victory on Safe, Quality Child Care

On September 12, a bicameral, bipartisan agreement was announced on legislation to reauthorize the Child Care and Development Block Grant (CCDBG), the federal law that allocates funds to the states to assist families with the cost of child care and to improve the quality of child care.  The last time that Congress reauthorized or made changes to CCDBG was in 1996 – 18 years ago. teacher and kids circle time

Much has happened since that time. Today, 74.7% of mothers with school-age children are working and 64% of mothers with children under age 6 are working. In fact, today, 57.3% of mothers with infants are working.  In today’s economy, mothers work to support their families.  Census Bureau data released on September 16 showed that the number of men and women working full-time, full year, increased by 1.8 million, suggesting a shift from part-year, part-time work status to full-time, year round work.

The fact of the matter is that mothers work. Working families, spurred by working moms, need child care in order to ensure that they can support their families.

In 1990, Congress passed the Child Care and Development Block Grant (CCDBG). The law was historic at the time because it offered modest child care subsidies to low income families to support their effort to work. The theory was that a work support was better than welfare support. In 1996, that concept was re-affirmed when CCDBG was reauthorized as part of welfare reform.

Today, 18 years after Congress last revised CCDBG, we have an advantage of better understanding the neuroscience behind child development and lessons learned from the deaths that have occurred in child care throughout the country.  Any child’s death is tragic, but it is even more tragic when it can be prevented.  And that’s the thrust behind the bicameral, bipartisan CCDBG bill. We can better protect children in child care, we can better promote their healthy development, and we can expect more accountability from states that accept federal child care funds.

The House of Representatives passed the CCDBG reauthorization bill on Monday, September 15. The Senate spent the remainder of last week attempting to get agreement to pass the measure. Despite the fact that the Senate approved similar legislation in March by a vote of 96-2, the body was not able to pass it by unanimous consent (UC) before adjourning Thursday evening, September 18.  Unanimous consent was necessary because there was not time before adjourning for lengthy floor debate. Therefore, there were about 30 bills that were approved by UC Thursday night, but not the child care bill.

Two Senators objected to passing the child care bill: Senator Coburn (R-OK) and Senator Toomey (R-PA). The CCDBG bill will be the pending business of the Senate on November 12 when the Senate reconvenes after the election. Hopefully, the measure will pass and be sent to the President for his signature into law.  While that is certainly good news, the delay is not without consequence.  On the surface, it may seem that a delay of 8 weeks is nothing after 18 years. That is true. However, at the same time, the delay pushes the bill into the next fiscal year which begins October 1.  For practical purposes, that means that states will have 3 years (instead of 2) to pass conforming measures to ensure that children are safe and that state policies are accountable as federal funds are spent.

The CCDBG bill is a bipartisan measure that will help support both the needs of working families and the needs of children.  Let’s hope that the Senate will pass this measure without delay in November.

For a summary of the bill, click here.
For a detailed comparison of current law with the provisions in the House passed bill (and pending Senate bill), click here.

Congress Reaches Bipartisan Agreement on Child Care!

On September 12, 2014, a bipartisan group of House and Senate leaders announced an agreement on legislation to reauthorize the Child Care and Development Block Grant (CCDBG), which allocates funds to states for child care – to help families afford the cost of child care and assist states in improving the quality of child care. Pre school

While Congress generally reviews laws periodically to adjust them for new research, best practices, and to address any shortcomings not foreseen when bills are drafted (a process referred to as reauthorization,  which generally occurs every 5 years on average), it has been 18 years since CCDBG was last reauthorized in 1996. Much has been learned during the intervening years from the science of brain development to the child care policies within states.  For example, national studies have shown that most state child care policies are weak and the oversight of those policies is even weaker.

Legislation to reauthorize CCDBG was approved by the Senate in March.  The House held a hearing (also in March), to hear from experts about the need for quality child care. This summer, House Republicans and Democrats negotiated a reauthorization bill starting with the measure that was approved by the Senate. With adjournment expected soon this fall, House Education and Workforce Committee members, Chairman John Kline (R-MN), Ranking Member George Miller (D-CA), Rep. Todd Rokita (R-IN) and Rep. David Loebsack (D-IA) reached an agreement and negotiated a final bill with Senate Health, Education, Labor, and Pensions (HELP) Committee members – Chairman Tom Harkin (D-IA), Ranking Member Lamar Alexander (R-TN), Senator Barbara Mikulski (D-MD) and Senator Richard Burr (R-NC).

At a time when Congress is polarized, and budget and international events, engagements, and threats are the focus of contentious debate on the House and Senate floor, it is just short of a miracle that a bipartisan, bicameral, group of leaders came together and reached an agreement on an issue that is critical for working families with children.

The fact of the matter is that working families need child care in order to get and retain a job. Children need a safe place to be and a setting that promotes their healthy development. The Child Care and Development Block Grant (CCDBG) reauthorization bill agreement, as announced yesterday, will both promote children’s safety and improve accountability for the expenditure of federal funds.  It also shows that Congress can come together in a bipartisan manner and in a manner that unites both the House and the Senate on behalf of children.  Kudos Representatives Kline, Miller, Rokita, and Loebsack and Senators Harkin, Alexander, Mikulski, and Burr!  Working families commend your initiative and dedication to push partisan politics aside and support good, common sense policy for children.

The measure is expected to be considered by the House and the Senate during the week of September 15.

Child Care and Development Block Grant Act of 2014

In Brief:  The bicameral, bipartisan, CCDBG agreement reached to reauthorize the Child Care and Development Block Grant (CCDBG) improves the quality of child care by requiring basic health and safety protections for children whose care is paid for by taxpayer dollars.  The funds set-aside for state activities to improve the quality of care will require more accountability for the use of those dollars.  In addition, more emphasis would be placed on strengthening the child care workforce, the cornerstone of quality child care.

For a detailed bill summary, click here. 

For a copy of the bicameral, bipartisan press announcement, click here.

For a copy of the bill, click here.

More Accountability Needed: Child Care Aid by Race

May marks the 60th anniversary of Brown v. Board of Education, the landmark Supreme Court decision that outlawed “separate but equal.”   In the decades since 1954, much as been done to integrate schools, boost performance rates among all children and close the achievement gap that is first noticed in kindergarten. As a nation, we’ve come a long way, but we have a long way to go.

The 2013 National Assessment of Educational Progress (NAEP) test scores of our nation’s 4th graders show that:

  • 21 percent of white 4th graders read below grade level;
  • 47 percent of Hispanic 4th graders read below grade level; and
  • 50 percent of African American 4th graders read below grade level.

Studies have well documented the school readiness gap when children enter kindergarten. African American and Hispanic children enter kindergarten below their white peers in reading and math related school readiness skills.

If we are serious about closing the achievement gap, we need to look at where children are before they enter school and strengthen the quality of early childhood settings. Most states now operate Pre-K programs. As studies show, Pre-K can make a difference.  But, Pre-K is not a panacea. The reality is, that most children are in some form of child care every week.  Given the hours that children spend in child care, and the age at which they begin child care settings, it is time to strengthen the quality of child care (for children age 4 and younger) to ensure that children start school ready to succeed and to close the achievement gap.

The Child Care and Development Block Grant (CCDBG) is the primary source of federal child care funding to states. More than 1.5 million children each year receive assistance through CCDBG. The split between white and African American children among CCDBG children assisted is about equal (43% of the children whose care is paid for with CCDBG dollars are white; 42% of the children are African American).

What we know from the most recent (FY2012) CCDBG data is: overall, about 256,241 children or 17 percent of the children whose care is paid for by CCDBG are in unlicensed care. While licensing requirements vary by state, little is known about the safety and quality of unlicensed settings – even if federal CCDBG subsidies are used to pay for it.  For example, there may be no training requirements for child care providers or only minimal training required – far below state licensing standards. There may be no health and safety requirements or only minimal requirements – far below state licensing standards. There may be no inspections or unlicensed settings may “self-certify” that they meet any state requirements (if they apply). Background checks for unlicensed child care providers receiving subsidies are mostly based on a name check, not a fingerprint check matched against state and federal records to prohibit those who might attempt to use an alias or circumvent a background screening system.

Unlicensed care does not mean illegal care. Some child care settings are license-exempt, which means that a state statute specifically exempts that category of care from licensing requirements. (For example, a state may specifically exempt “drop in” care, a child care setting in a mall designed to care for a child for a few hours on an irregular basis while a parent shops).  Some states do not license family child care homes until they reach a certain threshold of children. (For example, in 27 states, family child care homes are not required to have a license until they care for 4 or more unrelated children).

Why the attention to unlicensed care?   In 10 states, 30 percent or more of the children whose care is paid for with CCDBG funding are in unlicensed settings. (Alabama, Connecticut, Hawaii, Illinois, Michigan, Missouri, Nevada, New York, North Dakota, and Oregon). For a table of CCDBG funded unlicensed care in all states, click here.  It may be that these settings are safe and offering quality care, but the reality is, we do not know.  What we do know is that minimum protections for children required by licensed care are not required.

In 18 states, 50 percent or more of the children whose care is paid for with CCDBG subsidies are African American.

Race Table Picture

The percentage of children under age 13 within each state in unlicensed care varies greatly. In Arkansas, the District of Columbia, Massachusetts, North Carolina, Ohio, Oklahoma, Rhode Island, and Wisconsin, either no CCDBG dollars are spent on unlicensed care or 1 percent or fewer of the children whose care is paid for by CCDBG are in unlicensed care. Among the remaining states, the percentage of children in unlicensed care paid for by CCDBG varies from 72 percent in Hawaii to 2 percent in Georgia.

African American Children Under Age 5 in Unlicensed Care Paid for by CCDBG: What we know from the data is that for children under age 5, African American children are twice as likely to be in unlicensed care than white children (21.4 percent vs 11.8 percent).

Children Under Age 5 by Race

We know that the 4th grade reading test scores show that African American children are more than twice as likely compared to white children to read below grade level. We know that the school readiness gap is first noticed in kindergarten but does not begin in kindergarten. It’s time to bring more accountability to CCDBG funding to ensure that all children are in settings to promote their safety and healthy development.

There is much attention today to expanding Pre-K programs for 4 year-old children. That’s a great goal. However, the fact remains that for many children, child care is their early learning program.  From the research, we know that low income children are more likely to start school behind their more economically well-off peers. From a policy perspective, we know we have an opportunity with CCDBG dollars to ensure that low income children are in higher quality settings than they otherwise would be able to access. However, from the data, we know that nearly one-fifth of those who receive assistance are in unlicensed settings – settings that we know little about except that they are not required to have minimum protections for children.  And, from that same data, we know that African American children under age 5 whose care is paid for with a subsidy are twice as likely as white children to be in unlicensed care.

Sixty years after Brown vs Board of Education, we still have a long way to go. As we seek to close the achievement gap for students in K-12 schools, it is time to review the settings children are in before they start school. Our first step ought to be to review the settings children are in that are funded by taxpayer dollars. Licensed or unlicensed, are federal CCDBG dollars spent in an accountable manner? Are children, whose care is paid for with taxpayer dollars, in settings that are safe and that promote their healthy development?

It is troubling that given the plethora of research that underscores the importance and impact of quality child care on the school readiness of children, and particularly those at risk,  that  African American children under age five are twice as likely as white children to be in unlicensed settings.  If we truly care about school readiness, we can and should create more accountability for how our federal dollars are spent — for all children.

 

The Evidence is In – Quality Preschool Matters!

Earlier this fall, New America hosted a panel, “Too Much Evidence to Ignore: New Findings on the Impact of Quality Preschool at Scale.”  The panel discussion offered an opportunity for leading researchers and policy analysts to discuss a new report, “Investing in Our Future: The Evidence Base on Preschool Education.”

The report is an analysis of 84 preschool programs throughout the country where evaluations have concluded that children benefit across language, reading, math, and social-emotional skills.  Key findings include:Image

  • The number of children in a classroom, the ratio of teachers to students, and staff qualifications all help to increase the likelihood of more children entering school ready to succeed – however, children benefit most when teachers engage in stimulating interactions that support learning and are emotionally supportive.
  • Access to preschool benefits children from middle income families as well as low income families (although children from low income families benefit more).
  • Children across various racial/ethnic groups benefit from preschool as do children who are dual language learners and children of immigrants.
  • Working with parents can augment the effects of preschool on children’s development, but only when modeling positive interactions or providing opportunities for practice with feedback.
  • High quality early childhood education programs are among the most cost-effective educational interventions and benefit society as a whole.

What does this all mean?  Decades of research has been conducted on preschool programs.  What we know is that quality preschool can make a difference for children’s school readiness. There has been much discussion about preschool teacher qualifications.  But, the research shows that preschool teacher qualifications alone do not ensure greater gains for children.  Coaching and mentoring that provide teachers with support to better implement curricula and interact with and engage children, leads to better child outcomes – higher quality programs that lead to children learning.

Preschool teachers interacting with children foster higher order thinking.  Warm, responsive teacher-child relationships characterized by back and forth conversations (“serve and return”) not only help children learn in the short-term but also predict the persistence of gains into the school years.  Curricula matters, however, evaluations found that intensive professional development – coaching at least twice a month where expert teachers provide feedback and support for in-classroom practice, makes a difference in improving classroom quality.

According to the National Institute on Early Education Research (NIEER), currently, about 42 percent of 4 year-olds attend publicly-funded preschool (28 percent attend public preschool programs, 11 percent  attend Head Start, and 3 percent attend special education preschool programs).  We know early education works.  We know it is cost-effective.  It’s time to ensure that all 4 year-old children have access to quality preschool – regardless of family income and regardless of geography.

Time to Strengthen the Child Care and Development Block Grant

The Child Care and Development Block Grant (CCDBG) is the primary source of federal child care funding for states.  Under CCDBG, funds are allocated to each state to help make child care more affordable for families and to help states engage in activities to improve the quality of child care.   The CCDBG statute contains few requirements, which has resulted in state laws that vary greatly.  In some states, a child care license is not required until 13 children are cared for in a home.  In many states, very little training is required for child care providers.  While child care policies are generally weak, oversight of those policies is even weaker.  Some states only conduct inspections every five or ten years.

The Child Care and Development Block Grant law has not been reviewed or reauthorized in 17 years.  Bipartisan legislation was recently introduced to strengthen the law – S. 1086, the Child Care and Development Block Grant Act of 2013.  In addition, the U.S. Department of Health and Human Services has recently proposed new regulations in an effort to strengthen the law to the extent possible under existing regulatory authority.  The comment period with regard to the new regulations is open to the public through August 5, 2013.

About 1.6 million children throughout the country receive child care assistance. The CCDBG law does not require that subsidies be used in licensed child care.  What does that mean?  About 18 percent or about 290,000 children are in unlicensed care.  While state licensing laws vary with regard to minimum health and safety protections for children, there are no minimums for unlicensed care.  Where are the children whose care is paid for with taxpayer dollars? See the tables below to see state by state information about taxpayer funded child care in your state.

Children Whose Care is Paid for Through CCDBG

Community economic vitality depends on the availability of quality, affordable child care.  The fact is that families with young children need child care to work.  And, child care is expensive.  All children in child care should be in settings that are safe and promote their healthy development.  When taxpayer dollars are used to assist families, there should be some accountability in the expenditure of those funds so that children are not in potential danger financed through public funds.  Both the Senate bill and the HHS proposed regulations will help strengthen the quality of child care and the accountability for child care funding.  Call your Senators today and urge support for S. 1086 introduced by Senators Mikulski, Burr, Harkin, and Alexander.  Comment on the HHS regulations and let the federal government know it’s time to strengthen federal policy to protect children.