The Child Care Subsidy System Requires Our Attention

There are 600,000 children under age four living below the poverty line in Texas and the cost of center-based child care is often far more than low income parents can hope to afford. Through the child care subsidy system, the state of Texas reimburses child care providers to serve low income families at reduced rates. Child care subsidies not only help parents maintain stable employment, they can, if done right, ensure the healthy development and safety of Texas’ youngest at-risk children. The federal government funds child care subsidies, but program implementation is largely under local control. The Texas Workforce Commission gives the authority to 28 Local Workforce Development Boards (LWDBs) to determine eligibility limits and reimbursement rates.

Who is eligible?
Parents receiving protective services, TANF, and Social Security Income are automatically eligible and receive child care subsides at no cost. Families not in these programs must earn no more than 85% of the state median income ($50,593 for a family of four in Texas) to be eligible. However, local boards often set more stringent eligibility limits, generally 50%-75% of the state medium income, and generally these families must pay a co-payment of 9%-11% or their monthly income. After determining eligibility, LWDBs grant subsidies based on a three tier priority system, described below.

• First Priority Group (assured services): children of parents who are eligible for Choices child care, TANF Applicant child care, FSE&T child care, and Transitional child care
• Second Priority Group (served subject to the availability of funds): children who need to receive protective services child care, children of a qualified veteran or qualified spouse, children of a foster youth, children of teen parents, and children with disabilities
• Third Priority Group: determined by the LWDBs
  

How are reimbursement rates set?
Periodically, the Texas Workforce Commission studies the child care market rates throughout Texas.  The data captured by the Child Care Market Rate Survey is then used LWDB's to set maximum rates of reimbursement for child care providers that serve qualifying families and children.

Reimbursement rates vary based on provider type (licensed centers, licensed child care homes, registered child care homes, and self-arranged, or relative, care), length of daily care, and age of children. LWDBs use child care market rate research to determine a maximum daily reimbursement rate. Nowhere in Texas do these rates reach federally recommended levels. In fact, they are often a third to a half lower than what is recommended. Due to these disincentives, it can be very difficult for families to find a quality provider who both participates in the subsidy program and has open spots for new children.

LWDBs can grant higher subsidy rates to providers who participate in quality improvement programs or models, including the Texas Rising Star Program, the Texas School Readiness Certification, and the Texas Early Education Model. However, these initiatives must be supported by existing funds, so setting higher reimbursement rates limits the number of children that can be served.  This often results in LWDBs setting rates for high quality providers that are not much higher than rates for non-participants, discouraging participation in improvement initiatives. Below is a comparison of normal rates and quality initiative rates in different areas:

Why does the child care subsidy system need our attention?
Low reimbursement rates result in disincentives for providers to participate in the subsidy system, and for those that do participate in the system, subsidies are often too low to encourage quality improvements. Providers accepting subsidies are often forced to make budget cuts to stay afloat, and subsidized families often have no choice but to place their children in child care centers that lack resources, supplies, and qualified caregivers. Accepting subsidies makes it harder for providers to employ highly trained professionals, retain quality employees, lower child to adult ratios to recommended levels, and provide much needed training in education, care and safety. Below is a graphic produced from a survey of child care providers in Texas, indicating how many providers in Texas cope with low child care subsidy rates:

It is almost impossible for providers to participate in quality improvement programs, as doing so would incur more costs but offer few benefits due to relatively low rate increases. As explained in the charts above, child care providers do not receive sufficient increases in reimbursements for participating in quality enhancing programs. This and some other factors have led to the overall decline in the Texas Rising Star Program throughout the years.  This is particularly concerning because Rising Star not only improves the quality of child care in Texas, but it provides parents and families with a star rating system that affords them the opportunity to make informed choices about the child care they select. Notice the chart below, which illustrates the decline in the amount of providers participating in Texas Rising Star:

Many child care providers receiving subsidies are also forced to limit the number of children they serve, threatening the availability of spots for subsidized children. Without steady, available child care it is very difficult for parents to find and maintain employment.

Subsidized child care is vital for low income families as they strive for financial independence, but it is dangerously underfunded in Texas.  While some families benefit from subsidized care and find steady employment, many other families struggle with waiting lists and unsafe child care conditions.  In order to remedy these problems, TECEC plans to implement public awareness, research, policy analysis, and community organization efforts to find and fight for the best solution for Texas children.

To get involved, email Don Titcombe at dtitcombe@tecec.org .