Prosperity Watch Issue 50, No. 4: Child care subsidies crucial to financial well-being of low income families

June 23, 2015

A report released this month by NC Child details the impact made by child care subsidy policy changes passed by North Carolina lawmakers last year. Child care subsidies provide low income families financial assistance to help pay for the high cost of child care while parents are working.

In 2014 several changes were made to the state’s child care subsidy program which amounted to the loss of financial assistance for thousands of North Carolina families, including reducing income eligibility from 75% of the State Median Income (SMI) for families with children aged 0-12 ($50,244 for a family of four) to 200% of the federal poverty level (FPL) for children aged 0-5 ($47,700 for a family of four), and 133% of the FPL for  children aged 6-12 ($31,716 for a family of four). Other changes include the elimination of prorated fees for part-time child care meaning many families will no longer be able to afford care, as well as counting income of a non-parent relative caregiver like a grandparent against the child’s eligibility for subsidies.

According to lawmakers, these changes were made so that funds could be targeted to more young children on the child care subsidy waiting list in North Carolina, which as of May 2015, sits at 31,359. Addressing the waiting list is critical given that North Carolina has the third highest number of children on a waiting list nationally of those that maintain lists at the state level and that research shows access to stable and affordable child care is critical to healthy development.  The child care subsidy program is important to supporting family economic security on several levels. Parents are more likely to obtain and maintain work with child care subsidy assistance, young children are more likely to be placed in quality care settings which increase their future success and earning potential, and the child care industry which employs tens of thousands across our state is also supported by the subsidy system.

The map below provides a county by county breakdown of how many children have been or will be affected by the change to the income eligibility provision alone. In total, over 6,000 children have lost or will lose access to child care subsidies translating to thousands of parents who may have to quit their jobs or place children in undesirable care settings while at work.

The best way to address the waiting list would be simply to provide additional revenue to the child care subsidy system without cutting working families off who also desperately need assistance. Both the House and Senate budget proposals address one or more of these changes, although neither returns to the previous eligibility level of 75% of the SMI, meaning regardless of the provisions agreed upon in the final budget, there will be families who lose child care (i.e. a family of four earning between $47,700 and $50,244 will not be eligible under either plan and would have been eligible with 75% SMI). The SMI is generally a better eligibility guideline than the FPL because it is a more accurate estimate of regional income and costs. One provision both chambers agree on is to stop counting non-parent relative caregiver income against eligibility for the subsidy program.  That is the only change in the Senate budget proposal, whereas the House allows the 200% FPL eligibility threshold for children aged 0-8 instead of just 0-5, and also brings back the prorated parent fees for part-time care.

Child care is a significant cost in a family budget. Many low income families simply would not be able to afford care without assistance, an issue not fully addressed in either proposal. If shouldering the full cost of child care for a pre-school and school age child, families could easily be paying $1000 a month for care based on North Carolina’s most recent child care market rate study. For a family of four earning $48,000 a year, that amounts to 25% of a family’s yearly income, well above the recommended 10% affordability guideline provided by the U.S. Department of Health and Human Services.

NC Child provides policy guidance to reinstate income eligibility at 200% FPL for all children aged 0-13, to reinstate the prorated part-time co-pay rate and to exclude income of a nonparent relative caretaker. These recommendations will pave the way to a stronger child care subsidy system that supports working parents, children’s learning potential and the child care workforce.
 

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