MARYLAND FAMILY NETWORK

Public Policy

The Child Care Subsidy Program assists low-income families with paying for child care. Child care subsidies are funded by federal and state general funds through the Maryland State Department of Education (MSDE) and are administered by local Departments of Social Services (DSS). The local DSS office gives an eligible family a voucher for each child needing care, with a co-payment assessed on a sliding scale. The family purchases child care directly from the provider, paying any difference between the cost and the amount that the voucher pays.

Discussions of Reimbursement Rates, Funding for Slots, Eligibility, and New Challenges follow.

A. Child Care Subsidy Reimbursement Rates

To ensure that families continue to have access to the widest range of providers, on January 1, 2002, rates paid to regulated child care providers were increased to the 75th percentile of January 2001 market rates. This represented, on average, a 5 percent rate increase statewide. However, while these reimbursement rates remained unchanged in subsequent years, the market rates continued to rise. Measured against 2005 market rates, providers were being reimbursed at the 35th percentile in that year.

The last rate increase was implemented in October 2007, when MSDE raised reimbursement rates to the 45th percentile of the 2005 market rate – clearly an improvement, but still far below the federally recommended 75th percentile of current market rates. At the same time, MSDE implemented a commensurate increase in parent co-payments, a move that places particular hardship on families with more than one child in care and those residing in jurisdictions where child care is relatively expensive.

Purchase of Care Regional Configuration for Payment Rates Region U- Cecil, Queen Anne’s, St. Mary’s, Talbot and Washington counties; Region V- Caroline, Dorchester, Kent, Somerset and Wicomico counties; Region W- Anne Arundel, Calvert, Carroll, Charles and Prince George’s counties; Region X- Howard and Montgomery counties; Region Y- Baltimore, Frederick and Harford counties; Region Z- Allegany, Garrett and Worcester counties; Region BC- Baltimore City

Payment rates for informal care are set at approximately 50% of the family child care rate in each jurisdiction.

B. Funding for Child Care Subsidies

In FY 2004, DHR allocated a total of $106,433,926 to local DSSs for child care subsidies. In FY 2004, the Department used $16.5 million in Temporary Assistance for Needy Families (TANF) funds to support child care for low-income families. In FY 2005, the child care subsidy allocation was $111,835,167, and in FY 2006, the allocation was $103,064,217. In FY 2007, the child care subsidy allocation was $106,920,029. In FY 2008, the Child Care Subsidy Program allocation was $110,900,000. That allocation initially remained unchanged for FY 2009, but action of the Board of Public Works in October 2008 reduced it to $105.6 million. The allocation for FY2010 was $104,101,499.

C. Eligibility

In order to receive a subsidy for child care through the Child Care Subsidy Program, families must meet both need and income requirements. Applicants must fall within the priorities for service, which are established by the MSDE.

• 1. Income criteria

  Families who are receiving or have applied for Temporary Cash Assistance (TCA), or who are not receiving TCA but have an income that is within established limits, are eligible for child care subsidies.

  In September 1999, Governor Parris N. Glendening announced that the state would transfer $45.8 million in TANF funds to the Child Care Subsidy Program to expand program eligibility and assist additional working families. The major components of this initiative included:

  • Increasing income eligibility to 45% of the 2000 State Median Income (SMI).
  • Providing a $2200 income disregard per child for families who have assumed custody of a child that is not their own.
  • Providing a $2200 income disregard per child for the family of a minor.
  • Eliminating the co-payment assigned to the fourth and subsequent children in a family.

  These income eligibility changes were implemented through a regulation change on May 1, 2000. The Child Care Subsidy Program was expanded again in January 2002 by increasing income eligibility to 50% of SMI. (However, as Maryland’s SMI has continued to climb, child care subsidy eligibility has remained pegged to the 2002 figure, effectively lowering the eligibility level.)

  2. Priorities

  Effective August 1, 1997, child care subsidy priorities were changed to comply with the new federal welfare reform legislation. Services are provided to families in the following order of priority:

  1. Families who have applied for, or who are receiving, public assistance;
  
  2. Families who are attempting, through work activities, to transition off of public assistance; and
  
  3. Families who are working, attending public school, or in training and who are at risk of becoming dependent on public assistance, who also have an income within established child care subsidy income guidelines.

Within each category, first priority is given to the families of children with disabilities.

D. New Challenges

A series of financial maneuvers by DHR at the close of FY 2002 that were intended to address deficits in other areas of the Department had the unintended consequence of opening a gap in the child care subsidy budget. This, combined with the expense of expanded eligibility and higher reimbursement rates, led DHR to impose cost containment measures in January 2003. For the first time since the mid-1990s, a child care subsidy waiting list was established. Families who would otherwise meet child care subsidy income requirements but were not current or recent recipients of Temporary Cash Assistance were no longer issued vouchers but were instead advised to place their names on the wait list and be served when the cost-containment measure was lifted.

DHR initially projected that savings realized through this measure would allow the Child Care Subsidy Program rolls to be re-opened in the Fall of 2003. However, the attrition rate of subsidy program participants slowed, reducing the amount of savings. After hitting a high-water mark of more than 20,000 children, the wait list was partially opened on July 1, 2005, and fully reopened on November 1, 2005.

As a result of the lower than anticipated savings, DHR undertook additional cost-containment measures. In February 2004, DHR implemented a significant increase of the co-payment rates for parents participating in the Child Care Subsidy Program. The statewide range of the increase was from $19 per month for families with the lowest income to $90 per month for families with the highest income. Average increases by county range from a low of $32 per month in Garrett County to a high of $87 per month in Howard County. Copayment rates increased again, in tandem with provider reimbursement rates, in October 2007. According to MSDE, the average co-payment increase per family was 6 percent. (A complete table showing the new co-payment rates appears in an appendix to this Handbook.)

Prior to 2005, the Child Care Subsidy Program suffered from repeated out-transfers of funds to other DHR program areas (primarily foster care). In addition to the FY 2002 closeout maneuvers cited above, DHR transferred $22 million out of child care subsidy in FY 2004 and $23 million in FY 2005.

Given this history, FOF/MCC strongly supported legislation in the 2005 Session to transfer all of the State’s child care programs from DHR to MSDE. Although the legislation was successful, it was amended to leave child care subsidy under the control of DHR, with the provision that MSDE and DHR study the advisability of transferring child care subsidy to MSDE at a later time. A child care subsidy study group was convened and reported its conclusions to the General Assembly in November 2005. The study group offered many excellent recommendations, including a gradual increase in subsidy reimbursement rates to reflect current market conditions and a reevaluation of family co-payment scales. (Implementation of those rate increases has stalled, with drastic effects: in 2009 reimbursement rates fell below the 25th percentile of the 2007 market rates.) However, the study group did not take a formal position on moving child care subsidy; instead, it urged the Governor to designate a lead agency.

In February 2006, Governor Ehrlich took the occasion of FOF/MCC’s Child Care Day in Annapolis to issue an Executive Order transferring the Child Care Subsidy Program to MSDE, effective July 1, 2006. The Executive Order also created a new Child Care Coordinating Council, chaired by the Director of the Governor’s Office for Children and comprising senior leaders from MSDE and DHR.

With an impending budget crisis looming for FY 2008, the Department of Legislative Services recommended a $5 million cut to the Child Care Subsidy Program. Upon review by the General Assembly, the recommendation was rejected. The General Assembly approved the Governor’s $4 million increase for the program, but added budget language mandating that $3 million of the appropriation be used to increase reimbursement rates for providers. For FY 2009, the Child Care Subsidy Program was level funded at $110.9 million. For FY 2010, the allocation was $104.1 million.

Position

FOF/MCC should continue to press for adequate funding of the Child Care Subsidy Program for all low-income families and ensure that state funding is sufficient to support TANF work requirements. In addition to monitoring the child care subsidy rate structure, the administration of child care subsidy, and the effect of federal welfare reform/child care regulations on child care subsidy in Maryland, FOF/MCC should advocate for reimbursement rates at the 75th percentile of current market rates, reduced co-payment rates, and eligibility expansion.