Report on Alternative Outcome Measures: Temporary Assistance for Needy Families (TANF) Block Grant . Child Care Affordability and Quality

12/01/2000

As more and more families move from welfare to work, there is an increasing need for access to affordable, high-quality child care. Affordable child care is necessary to enable most low-income parents, particularly single parents, to move from welfare to work. A growing body of research indicates that quality and stability of the child care setting influences outcomes for children as well as the ability of parents to retain employment. Moreover, high quality child care can contribute to the healthy development of children, especially children in low-income families who are often disadvantaged educationally as well as financially. However, most high-quality child care is unaffordable for low-income workers, including those moving from welfare-to-work, without government subsidies.

Measurement issues. There is no simple way to measure the success of state efforts to make high-quality child care accessible and affordable to low-income families. Under both TANF and the Child Care and Development Fund (CCDF), states have almost total flexibility to determine both eligibility for child care subsidies and the package of subsidies that is provided. An ideal measure of child care access and affordability would reflect the percentage of eligible children served and how great a share of their income all low-income parents are paying for child care, both those who are benefitting from subsidies and those who are not. However, such a measure could only be calculated by asking questions not currently included on any survey that produces annual state-level estimates. For the FY 2002 High Performance Bonus, HHS intends to use a measure which combines the fraction of eligible children receiving child care subsidies with the amount of the required copayment as compared to family income. These factors measure the breadth and the depth of state child care subsidies.

Measuring the quality of child care is even more complex. While research has indicated several factors that are believed to contribute to high-quality child care (e.g. training of child care providers, high staff-to-child ratios), there is no universal agreement on what constitutes high-quality child care. For this reason, in the FY 2003 High Performance Bonus HHS intends to use a process measure that indirectly assesses the quality of services by comparing actual rates paid to applicable market rates. The logic behind the selection of this measure is that families in states which reimburse at a higher fraction of market rates will have access to a broader range of child care options, including higher quality care, which often costs more than mediocre care. While high reimbursement rates do not guarantee that families will access high-quality care, low reimbursement rates ensure that low-income families will not be able to access such care.

Data issues. A direct assessment of the affordability and quality of child care used by low-income families would require a new survey effort, which is not feasible for an ongoing performance measurement system.

The measures used under the TANF High Performance Bonus can generally be calculated using a combination of administrative data reported through CCDF and Census Bureau information on family income. HHS measures access to child care based on the percentage of children in families with 85 percent or less of the state's median income (the maximum eligibility level allowed under federal law) who are served with child care subsidies. HHS measures affordability based on the relationship between the state's reported family co-payments for subsidized child care and reported family income. The final quality component of the High Performance Bonus measure of child care requires states that choose to compete for the Bonus to report additional data collected through their mandatory biennial market rate surveys.

Fairness issues. Given a fixed amount of funds to be spent on child care subsidies, states may choose to allocate it in a variety of ways. They may provide generous subsidies to a smaller number of families, or more limited subsidies to a greater number of families. If the spending per family is to be limited, this can be accomplished either by requiring families to pay a greater portion of the child care expense (reducing affordability) or by capping the amount they will pay per child (thereby restricting family choice of child care providers, and potentially reducing the quality of the care received). Additional funding can be used to expand a program in any of these dimensions. The High Performance Bonus measures combine these elements in order to reflect these tradeoffs and avoid promoting one choice over the others. However, because this measure has not been calculated in the past (and the precise details of the measure are still under development), it is unclear whether this measure will truly be neutral among all approaches.