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Why Some States Leave Federal Child Care Grants on the Table

In recent years, a handful of states have missed out on millions in federal subsidies for child care.

(AP/Rebecca Blackwell)
Among all the state public assistance programs, subsidized child care is widely seen as one of the most “work-oriented.” Parents can work, look for work or take work-related training while their children get safe supervision in a licensed facility. Because of this, the federal Child Care and Development Block Grant tends to garner more bipartisan support than many other safety-net programs.

Yet in the past few years, a handful of states have cut back on child care spending, forgoing millions in federal matching grants. The economic downturn affected demand as well as states' ability to find the money to take advantage of the program. But now some of these states are looking to beef up their child care budgets so that they can trigger the federal match again.

“It’s not a widespread issue, but for these states, it’s been an ongoing issue,” says Hannah Matthews, an analyst with the Center for Law and Social Policy (CLASP), a research and advocacy group in Washington, D.C. Last year, Matthews co-wrote a paper for CLASP that found state and federal spending on child care assistance was at a 12-year low and the number of children receiving government-subsidized child care services was its lowest point since 1998.

In the 2015 fiscal year -- the most recent year for which data are available -- three states missed out on federal matching grants for a total of $33.9 million. Most of that total came from Michigan, which let $22.8 million go back to the federal government. At some point in the past three years, Idaho, Kansas, Maine, Rhode Island and Utah have also fallen short of spending thresholds to make use of federal grants.

In the states that have cut back on child care spending, officials contend that fewer people were applying for the benefits, suggesting that demand wasn't as great. But Annie McKay, president and CEO of Kansas Action for Children, a nonprofit child advocacy group, says what's really happening is the diminished resources have discouraged families from applying. "We know there’s roughly 200,000 kids [in Kansas] eligible and we’re serving less than 5 percent," McKay says. "It’s not as though the need has been taken care of. We’re just not meeting it."

Child care advocacy groups say that states hurt both providers and families when they fail to trigger the federal match. With less government spending by both the state and the feds, the amount of the subsidy per family often decreases. When parents can't afford to cover the difference in cost, providers can turn away children in the program. Lower subsidies also mean fewer child care providers. Between 2006 and 2015, the number of providers dropped 52 percent. They argue that they can't stay in business and accept subsidies that are so far below market-rate prices.

During and after the last economic recession, Idaho spent less on child care because demand for services had declined, says Lori Wolff, the welfare division administrator in Idaho. As more people lost their jobs, they didn’t need someone else to watch their children. But now that the employment rate is rising, demand for child care is also on an upswing. Last year, Idaho Gov. Butch Otter committed to a three-year plan to invest more money in the state child care program. The increase still won't fully tap the available federal dollars, Wolff says, but it'll be more than it has been since the recession.

Some other states may follow Idaho’s example in the coming year. Michigan Gov. Rick Snyder is calling for an increase of $34 million in state child care spending for the rest of 2017 and 2018, which should bring in additional federal matching dollars. His proposal is still being considered in the legislature, but versions of it have already passed both the House and Senate appropriations committees, suggesting that some kind of increase in spending is on the horizon.

Maine also considered legislation this year that would hike reimbursement rates for providers, resulting in $6.5 million more in annual state spending and an increase in federal matching dollars. Despite bipartisan backing for the bill, Maine Gov. Paul LePage opposed it, and the measure failed to get out of committee. In a hearing last month, a LePage official criticized the cost of raising reimbursement rates and called the proposed regulation "draconian."

J.B. Wogan is a Governing staff writer.
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