We Don’t Just Need More Money

Louise StoneyAlliance for Early Childhood Finance

Visioning a New Child Care Financing Structure

in Maine

September 27, 2002

High-quality early care and education services that: offer children opportunities for early learning support families with a range of year-round, full and part-day services provide comprehensive services to children and families who need them

What Are We Financing?

Our charge today is to explore various financing systems…so we won’t be spending time costing out the service…But for purposes of discussion, let’s assume we are talking about per child costs in the $6,000 - $7,000 range for full-

day early learning and $10,000 - $12,000 range for comprehensive services.

What will it cost?

Assume Layer

edLayeredLayeredLayeredFunding

CACFP

Head Start

Preschool

CCDFCommunity FoundationEmployer Subsidy

The ECE Layer Cake

Parent Fees

Establish common funding standards and monitoring practices across all ECE funding streams;

What can policy makers do to

encourage and support layered funding?

Assume that a program will have a single budget to which multiple funders will contribute, a single/coordinated audit, etc.

Coordinate or consolidate Requests for Proposals and reporting requirements;

and direct financing.

Combine

lba etorP

Higher Education - government appropriations to public & private colleges; grants for research & special projects; endowment/investment income; revenues from auxiliary services (food, housing, bookstore, sports..)

What is a direct subsidy?

Funding that directly supports an institution or industry

Funding that directly supports an institution or industry

Housing: Equity from the Low Income Housing Tax Credit, Federal Community Development Financial Institution Grants and Subsidized Loans, HUD Grants, Foundation and other private sector grants.

What is a direct subsidy?

Funding that is tied to a specific child or family & follows them to the

program/services they select.

Higher Education - government grants to students (Pell, BEOG) scholarships, subsidized loans, tax credits.

Housing - Section 8 vouchers, home mortgage tax deduction, housing subsidies from government or an employer.

What is a portable subsidy?

In other fields, direct and portable subsidies are designed to work in tandem….

Direct and portable subsidies work in

tandem.

….but this is not the case in early childhood care and

education.

Direct Subsidies - Head Start, state pre-k/school readiness grants, subsidy contracts, a few private sector grants, CACFP.

In early care and education:

Portable Subsidies - child care certificates, the dependent care tax credit, private scholarships.

Cost/price analysis in child care and higher

education.

13

87

58

0

10

20

30

40

50

60

70

80

90

100

Total Cost

All Child Care Centers 1993-94

All private non-profitcolleges 1995-96

Tuition &Fees

InstitutionalSubsidy

42

Early care and education policy needs to recognize that direct and portable subsidies are not substitutes for one another but should be combined.

The moral of the story:

Quality Improvement Grants “Base Funding” Contracts Grants for Specific Costs (wages, benefits, facilities) Industry Supports (economies of scale) Tax Benefits for Families and Programs

Financing Approaches that Combine Direct &

Portable Assistance

Texas Comprehensive Child Development Centers Wisconsin Quality Improvement Grants Mississippi Child Care Enhancement Grants Colorado Educare Differential Reimbursement

Quality Improvement Grants

Connecticut Child Care and School Readiness Contracts

Georgia Prekindergarten The Military child care system

Base Funding Contracts

Wage Initiatives - stipends to providers (NC, WS, OK, IL, NY), grants to programs (WA), stipends & grants combined (CA)

Subsidized Benefits - RI and NC Facility Grants & Subsidized Loans (CT, IL, RI, NC, MA, and

others)

Grants for Specific Costs

Tompkins County (Vision) Kansas City World-Class Early

Education System payroll support

Industry Supports

Tompkins County Early Education PartnershipChild Care Financing Model – Vision for Tompkins County

Coordinated ScholarshipProgramsingle point of entrycommon application formautomated system to

coordinate funds frommultiple sources

Cornell FSA/D

Community ScholarshipProgram

Employer FSA/D

Head Start and UPK(Referral or coordinated intake)

In-NetworkProviders

Direct FundsOperating assistanceProfessional developmentFacilitiesToys, equipmentFood subsidy

Support ServicesBilling/fee collection, FSAD managementUSDA Food Program managementManagement assistanceTraining/ professional developmentProgram support (e.g. Infant/toddler

specialist, classroom observations, childassessment, etc.)

Wage supplementsGroup purchasing discountsDevelopment Director

Out-Of-NetworkProviders

Tax BenefitsDCTCDCAP

DSS Subsidies

(parents can still choosethese providers & pay for it

with scholarships but thereimbursement will be

lower and parents wouldpay the difference)

(single payersystem)

Colorado School Readiness Tax Credit (proposed)

Oregon Child Care Investment Tax Credit (modeled on LIHTC)

Child and Dependent Care Credit (Maine et al)

Additional industry-related tax benefits (new ideas)

Tax Benefits

from Tompkins County, NY)

280 early care and educationbusinesses

serve3,557

children 3,557 workin

g parent

s

Direct Effects from child care

establishments taking in revenue.

$15.2 Million, 700 jobs

Economic Impact of

Child Care

Business Spending

$24.2 Million in Product

and893 jobs

Indirect Effects from businesses and

suppliers making purchases.

$4.8 Million, 86 jobsInduced Effects

from child care workers spending

wages.$4.2 Million, 107

jobsParent Impact

3,557 jobs and $101 Million in wages

Parent wages$112.3 Million

Parent child care

payments $11.3milli

on

Child Care is a vital part of the local

economy.(

Economic impact of child care subsidies.

Total Direct Impact of Subsidies

$1.3 MillionTotal

Economic

Impact of Child

CareSubsidi

es

$5.3 Million

Indirect Effect from

Centers&Suppliers Making Purchases$416,017Induced Effect

from Child Care Staff Spending

Wages$364,015

Average

Children

Enrolled Per Month

413

Productivity Impact from

Parent’s Wages $3.2 Million

Average Wage

of Parents$15,54

8

Parents

Receiving

Subsidies

206

Average

Annual Subsidy By Child

$3,150

Tompkins County gains $4 for every $1 invested in child care subsidies

0%10%20%30%40%50%60%70%80%90%100%

Alabama California DC Florida OregonServices Retail Other Industries

Child care subsidies support the services and retail trade industries.Employment among families who receive child care

subsidies.

A Case for Action

Source: Occupational Outlook, 1996-2006

Georgia Industry Employment Growth, 1996-2006

12% 14% 16% 17%22%

25% 27%

44%

0%5%

10%15%20%25%30%35%40%45%50%Pe

rcen

t Cha

nge

8. Retail Trade

5. Agriculture, Forestry, Fishing6. Wholesale Trade 7. Communications, Public Utilities

1. Construction2. Finance, Insurance, Real Estate3. Transportation4. Services

The services sector leads employment

growth.

1 2 3 54 6 7 8

some of the best ideas

haven’t been tried yet.

Think outside the box.

Think Outside the Box.

Fees, Surcharges & “Sin” TaxesArkansas: a new surcharge on beer, earmarked for

child careCalifornia: imposed a surcharge on cigarettes

The Military: uses revenues from the PX

“Earmarks” on Revenue Maine, Kansas and Kentucky: earmarked tobacco

settlement fundsGeorgia: earmarked part of the lottery for pre-k

Missouri: earmarked a portion of the Gaming Commission Fund

Think Outside the Box.

Tax CreditsMaine: doubled state DCTC for families

who select “quality” child care; and Employment Increment Tax Credit could

be adapted to early care & educationColorado: School Readiness Tax Credit

(proposal)New York: greatly expanded its

Dependent Care Tax CreditOregon: child care investment tax credit

modeled on low-income housing tax credit

Think Outside the Box.

Other Public Funds Rhode Island: taps into health care funds to help pay the cost of health insurance for

child care providers. Connecticut: makes tax exempt bonds

available to help finance facilities, then uses TANF funds to underwrite a portion of the

debt.New York, D.C., Boston: use criminal

justice funds to help create child care centers in court buildings.