July 13 -- The Department of Health and Human Services, Administration for Children and Families proposes to amend the Child Care and Development Fund (CCDF) regulations. This notice of proposed rulemaking (NPRM) proposes changes to lower families' child care costs, which can be a significant financial strain for families and disincentivize work, training, and education. It proposes changes to improve child care provider payment rates and practices to increase parent choice for child care arrangements and help stabilize operations for participating providers. It also proposes ways for CCDF Lead Agencies to streamline eligibility and enrollment processes so families can receive child care assistance faster and so program bureaucracy is less likely to disrupt parent employment, training, and education and impede access to child care. The NPRM also includes technical and other changes to improve clarity and program implementation. Comments on this proposed rule must be received on or before August 28, 2023.
The Child Care and Development Fund (CCDF) is the primary Federal funding source devoted to supporting families with low incomes access child care and to increasing the quality of child care for all children. CCDF plays a vital role in supporting child development and family well-being, facilitating employment, training, and education, and improving the economic well-being of participating families. In fiscal year (FY) 2020, the most current available data, more than 900,000 families and 1.5 million children benefited from financial assistance through CCDF each month. At the same time, CCDF funding promotes the quality of child care for the sector: CCDF Lead Agencies must spend at least 12 percent of their CCDF funding each year to increase the quality of child care for all children. . . .
HHS is exercising its regulatory authority to provide additional clarity around key policies that are needed to provide more help for families so they can find child care that meets their families' needs and for the continued stabilization of the child care sector.
Access to affordable high-quality child care has numerous benefits for children, families, and society as a whole, supporting child and family wellbeing in the short-term and across the lifespan in a manner that fuels prosperity and strengthens communities and the economy. It is a necessity for most families with young children and improves parental earnings and employment.
Reliable access to child care supports parents' educational attainment, labor force participation, and full-time employment. Maternal employment increases in response to more available and more affordable child care, and conversely, maternal employment rates drop when child care becomes more expensive for families, across income brackets. The positive effects of high-quality child care are especially pronounced for families with low incomes and families experiencing adversity. Children with stably employed parents are far less likely to experience poverty, particularly deep poverty, than children whose parents have less consistent employment. High-quality child care environments can also be important for children's cognitive, behavioral, and socio-emotional development, helping chart a pathway to succeed in school and beyond.
Despite the importance of access to high-quality child care to children, families, communities, and to our country's economic growth, most families struggle to find or afford high-quality child care for their children because of the limited supply—there are not enough programs to serve families who need it, many programs do not offer care the hours or days families require it, and unaffordable costs lead parents to select lower quality care or forego it altogether. Every year, parents, employers, and taxpayers miss out on $122 billion in lost earnings, productivity, and tax revenue because of lack of child care. One in four parents of children under three have been fired from or quit a job because of challenges securing child care, and 41 percent have turned down a new job offer for this reason. Over their lifetime, parents who pause their careers to care for children lose three to four times their annual salary for each year out of the workforce. A parent who remains out of the workforce for five years reduces their overall lifetime earnings by nearly 20 percent. Not only is child care expensive for most families, but more than half of families in the United States live in communities where potential demand for child care outstrips supply by at least three to one (called child care deserts).
For many families, child care is prohibitively expensive. In 34 states and the District of Columbia, enrolling an infant in a child care center costs more than in-state college tuition. Families with children under age five and incomes below the Federal poverty line who pay for child care spend 36 percent of their income on child care on average, which leaves insufficient funding for food, housing, and other basic costs. Households with incomes just above the Federal poverty level spend more than 20 percent of their income on child care, on average. The cost of child care can drive families to seek out less expensive care, which may be unlicensed or unregulated and have less rigorous quality or safety standards and be less reliable, or forego child care entirely and exit the workforce. Even when families receive child care subsidies, affordability, in terms of co-payments, often remain a concern and can limit families' access to the child care that best meets their needs. Co-payments can be a barrier to parent employment, training, or education and are associated with family financial stress and economic hardship. Research finds that parents receiving subsidies continue to experience substantial financial burden in meeting their portion of child care costs. Other research shows that higher out-of-pocket child care expenses, such as co-payments, reduce families' child care use and parental (particularly maternal) employment.
Moreover, an inadequate supply of child care continues to be a significant problem nationally. A 2018 analysis found that 51 percent of families with children under the age of 5 lived in a “child care desert”—an area where the availability of licensed child care is so low that there are three times as many children under age 5 as there are spaces in licensed settings. A 2019 analysis of supply and demand in 35 states found only 7.8 million child care slots for the 11.1 million children under the age of 5 with the potential need for child care. In the 2019 National Household Education Survey on Early Childhood Program Participation, parents of children under the age of 6 reported the lack of open child care slots as the second biggest barrier to finding child care, with cost being the first. Parents have long struggled to find child care that meets their needs, and the decline in child care options, especially family child care homes, has perpetuated the problem. Between 2012 and 2019, the number of family child care providers decreased by 25 percent without a complementary increase in center-based programs.As previously noted, the COVID–19 public health emergency put significant additional strains on child care supply.
A key contributor to this lack of supply is though child care is often unaffordable and inaccessible for many families, child care providers usually operate with profit margins of less than 1 percent. To remain open, child care providers must keep costs low, and because labor is the main business expense, this translates to low wages and minimal benefits for essential and skilled work overwhelmingly done by women and disproportionately by women of color. These working conditions also lead to high turnover, with an estimated 26 to 40 percent of the child care workforce leaving their job each year.
Unfortunately, limited funding and policies that do not adequately support families and child care providers exacerbate systemic problems and interfere with CCDF fully meeting its purposes and goals. Child care subsidies only reach a small proportion of eligible families, with only 16 percent of the 12.5 million eligible children receiving assistance in FY 2019. Average CCDF co-payments in nine states exceed 7 percent of family income, which can be a significant and destabilizing financial strain on family budgets and barrier to participating in the CCDF program and maintaining employment. In addition, current CCDF payment rates and practices used by many States, Territories, and Tribes do not adequately cover the cost of providing high-quality care, particularly in low-income communities, undermining child care availability and parent choice. Some child care providers may find that relying on federally-subsidized child care introduces significant financial instability, which threatens their business viability. This instability may also lead providers to avoid serving families using child care subsidies.
This NPRM puts forth proposals to address some of the programmatic and systemic challenges described here to build toward a better child care system that properly addresses the needs of families across the country. Though significant investments and bold system reform are needed to fully realize this goal, it is clear the status quo is untenable and that more must be done in the interim through this NPRM, to make it easier for parents with low incomes to access affordable high-quality child care that meets their family's needs. First, to make child care more affordable to families participating in CCDF this NPRM proposes to require that Lead Agencies establish co-payment policies that ensure families receiving assistance under CCDF pay no more than 7 percent of their family income for child care. Further, the NPRM provides Lead Agencies increased flexibility to waive co-payments for additional families, in particular for families living at or below 150 percent of the Federal poverty level. Second, this NPRM proposes to improve payment rates and practices to increase the financial stability of child care providers that currently accept CCDF subsidies. This will encourage new providers to participate in the subsidy system, improve the quality of child care, promote continuity of care, and expand parent choice in care arrangements.
Third, the proposed revisions in this NPRM encourage Lead Agencies to reduce the burden on families of applying and re-applying for child care subsidies. This NPRM seeks to make presumptive eligibility an easier process for CCDF Lead Agencies and encourages more efficient enrollment and re-enrollment processes. Finally, this NPRM includes technical and other proposals to improve program clarity for Lead Agencies, parents, and providers.
Throughout the period since 2016 when the last CCDF Rule was published, HHS has continued to learn from Lead Agencies, parents, and child care providers; assessed the evolving early care and education landscape; examined the successes and challenges in the Act's implementation; and tracked the impact and implications of the COVID–19 public health emergency on the child care sector. The proposed revisions in this NPRM are designed to build on these lessons, improve on the work of the past, and build a stronger CCDF program that more effectively supports the development of children, the economic wellbeing of families, and the stability of child care providers.
HHS press release:
https://www.hhs.gov/about/news/2023/07/11/new-rule-proposed-improve-child-care-access-affordability-stability.html
WH press release:
https://www.whitehouse.gov/briefing-room/statements-releases/2023/07/11/fact-sheet-vice-president-harris-announces-actions-to-lower-child-care-costs-and-support-child-care-providers/
FRN:
https://www.federalregister.gov/d/2023-14290 [32 pages]
