Last month the President Obama signed the Child Care and Development Block Grant Act of 2014 (CCDBG), which passed both Houses of Congress with overwhelming bi-partisan support.
Access to high-quality child care is an important consideration for American families and parents—especially those struggling to make ends meet.
Until last month, there hadn’t been any reauthorization of the CCDBG since 1996, and it was kept afloat with discretionary funding. The House Education and the Workforce Committee explained that:
Approximately 1.5 million children under the age of 13 are served in some type of child care arrangement supported through the federal Child Care and Development Block Grant (CCDBG) program. The program funds state efforts to help low-income families –parents who are working, pursuing an education, or enrolled in job training – access crucial child care services.
The program has supported countless working families for many years; however, weaknesses in the program have raised the need for reform. Due to a patchwork of licensing, monitoring, and related safety requirements across the country, children are not always as protected as they should be. Further, a wide variety of programs and lack of coordination make it difficult for families to understand the full array of options and determine the best care setting for their children.
While the latest CCDBG stands out for its express desire for greater parental choice (Sections 2 and 11), inclusion of faith-based providers (Sections 5, 6, and 11), and the prohibition against federal control over early learning and developmental guidelines (Section 5), it’s worth curbing our enthusiasm about more government involvement in child care.
The Department of Health and Human Services (HHS), Office of Child Care (OCC) provides key program statistics and explains that:
The new law makes significant advancements by defining health and safety requirements for child care providers, outlining family-friendly eligibility policies, and ensuring parents and the general public have transparent information about the child care choices available to them.
Yet data from HHS’ OCC show that many of the new mandates are at best unnecessary. For example, fully 99 percent of all children served attend providers that are licensed (84 percent) or legally operate without a license (15 percent) because the providers are family members or non-relatives operating a home-based center (more details here and here, p. 3).
The added costs are also staggering. While mainstream media outlets such as The New York Times are reporting that the new CCDBG will cost “just” $5.2 billion (for now), that figure leaves out billions more in annual mandated state spending and compliance costs—that compound over the five-year reauthorization period beginning in 2015.
Thus, the program actually costs far more, more than double to be exact at $11.5 billion just for starters, once the $6.2 billion in states’ required matching funds and maintenance of effort (MOE) funding is added to the actual $5.3 initial federal funding tally (which includes spending for territories and tribes not just states) for fiscal year 2014.
The annual regulatory compliance costs inflate that initial sticker price by a staggering 23 percent.
The combined annual costs of the additional CCDBG mandates relating to income verification, licensing enforcement, health and safety training, quality improvement spending, consumer information, and criminal background checks total an estimated $266 million annually, based on estimates from the Congressional Budget Office (CBO). Over the five-year CCDBG reauthorization period, the compliance costs alone will exceed $1.2 billion from 2015 through 2019.
If elected officials really wanted to help families in need, all the funding currently associated with the CCDBG would simply remain in the states and not go to Washington in the first place. At the current annual $11.5 spending level and with just over 1.45 million children participating that amount works out to more than $7,900 per child. The hundreds of millions of dollars in annual regulatory compliance costs would add almost $200 more to that amount.
A better approach would be for states to simply disperse funds to eligible families in the form of child care savings accounts, similar to the way states such as Arizona operate education savings account (ESA) programs for K-12 students. Those accounts are not only audited annually by the state treasurer’s office, but by law quarterly random audits are also performed and parents must submit quarterly expense reports (with receipts, p. 10) before subsequent quarterly disbursements are made (here and here, pp. 20 and 36ff). Using ESAs fraudulently results in the account being frozen, and those suspected of committing fraud are referred to the state attorney general’s office for investigation.
Compared to the federal government’s track record of providing less service at higher cost (including repeated instances of fraud and waste), the better approach is keeping the feds out of child care, ensuring more tax dollars stay with citizens in the states, and letting them decide the best ways to help parents in need access the child care of their choice.
[A previous, more expansive blog posting on this issue is available at The Independent Institute’s Beacon Blog here.]