Transforming the Financing of Early Care and Education (2018) / Chapter Skim
Currently Skimming:
2 Landscape of Early Care and Education Financing
2 Landscape of Early Care and Education Financing
Pages 45-82
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From page 45... ...
That section covers the major sources that cover ECE costs -- primarily families and the federal and state governments -- and describes the financing mechanisms that are used to fund ECE programs. This discussion lays the foundation for the committee's assessment in Chapters 3, 4, and 5 of how the current financing structure compares to the six principles set forth in Chapter 1 (see Box 1-4 and accompanying discussion)
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From page 46... ...
Early Care and Education before 1960 The first formal ECE programs (for children from birth to schoolentry) , which were modeled after German kindergartens, were founded in the mid-1800s.
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From page 47... ...
. Up until the 1930s, the federal government had largely stayed out of funding ECE programs.
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. As the war came to an end, so did the federal funding for ECE programs (although in some instances, local communities took over financial responsibility for their ECE programs and centers)
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From page 49... ...
The combination of the first two factors -- new evidence about childhood development and more women in the workplace -- contributed to a dramatic expansion of private ECE programs for middle-class families, particularly an expansion into full-day care (Institute of Medicine and National Research Council, 2015)
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echoed this call, with the recommendation that "the Federal government fund comprehensive child care programs, which will be family-centered, locally controlled, and universally available" (White House Conference on Children, 1971, p.
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From page 51... ...
Since the advent of the day nurseries, many ECE programs had not required much, if any, formal 2 A nonrefundable tax credit is one that is paid only up to the amount of taxes otherwise due, meaning a nonrefundable credit cannot reduce a taxpayer's tax liability beyond zero. If the amount of the credit exceeds the amount of taxes due before applying the credit, the remainder of the credit is not refunded to the taxpayer.
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From page 52... ...
established a system of high-quality ECE programs for military families. Family contributions to an ECE program were determined on a sliding scale, with the family contribution increasing as income increased.
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From page 53... ...
Though the CCDBG Act was a major step in ECE policy, serious limitations remained: low funding levels meant that states could only reach a limited number of qualifying families, quality standards varied considerably by state, and little of the federal funding could be used for quality improvements. Also in 1990, the Head Start Expansion and Quality Improvement Act was passed, which reauthorized funding for Head Start and required that 10 percent of funds be used for quality improvement activities, including staff compensation and training.
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From page 54... ...
The reauthorization also required states to establish professional development and training requirements, but like Head Start, did not contain any provision for commensurate compensation of the ECE workforce (Office of Child Care, 2014)
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From page 55... ...
. This tension in the field prompted the National Institute of Child Health and Human Development to launch its Study of Early Child Care and Youth Development survey in 1991, which collected information from children and their families from birth to age 15 and made the survey data available to researchers.
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From page 56... ...
CURRENT EARLY CARE AND EDUCATION FINANCING LANDSCAPE The use of early care and education in the United States is largely paid for by families and the public sector. Whereas public K–12 education, which is available to all children, is financed almost entirely by the public sector (local, state, and federal funding sources)
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As a result, some ECE programs (and the financing that structures them) emphasize child development and education, while others focus on the role that early care and education plays in enabling parents (especially mothers)
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From page 58... ...
As shown in Table 2-1, those with incomes below the federal poverty level spend $180,000 $135,000 $90,000 $45,000 $0 All HHs <0.5 0.5–1 1–2 2–3 3–4 4–5 5– >= top top out out Ratio of Household Income to Federal Poverty Level Household Income Annual ECE Costs FIGURE 2-1 Household income and ECE payments by household groups defined by ratio of household income to federal poverty level. NOTE: For the purposes of assigning families to income groups and computing average income per group, a maximum income eligibility level, the level above which families would receive no assistance, was estimated.
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, Median Household Expenditure for All Children Ages 0 to 5 Years Not in Kindergarten Household Category All Households <0.5 FPL 0.5–1 FPL 1–2 FPL 2–3 FPL 3–4 FPL 4–5 FPL >5 FPL Only Households That Pay for ECE Weekly expenditures $100 $60 $84 $68 $96 $100 $120 $143 Share of income 0.10 0.21 0.19 0.14 0.11 0.10 0.09 0.06 All Households That Use ECE Weekly expenditures $44 $0 $0 $23 $47 $80 $86 $113 Share of income 0.04 0 0 0.04 0.05 0.06 0.06 NOTE: Because a small number of families spend considerably more than average on early care and education, the median weekly expenditures and share of income are presented, rather than the mean (average) expenditures.
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From page 60... ...
were provided to children ages 5 and under, and (3) delivered services in an educational or child care setting" (U.S.
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From page 61... ...
In general, total public funding for early care and education for children from birth to 3 years is limited, compared to funding for children of ages 4 and 5 years, even though the costs per child of highquality ECE services are greater in the younger years (see Chapter 6)
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some states) programs DCAPe Working families Employer- 1.000 – with tax liability, administered ages 0–12 years account to pay (and adults)
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eThe Child and Dependent Care Tax Credit (CDCTC) , Dependent Care Assistance Program (DCAP)
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To be eligible for Head Start programs, families must earn no more than 100 percent of the federal poverty level,4 be homeless, or receive 4 Programs may enroll up to 10 percent of children from families with incomes above the federal poverty level and up to 35 percent of children from families with incomes between 100 percent and 130 percent of the federal poverty level, if certain conditions are met.
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Nevertheless, in fiscal 2016, only 31 percent of eligible children ages 3 to 5 years were served by Head Start and only 6 percent of children under 3 years were served by Early Head Start, due to inadequate funding levels (National Head Start Association, 2017)
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66 FIGURE 2-2 Head Start and Early Head Start program overview, fiscal 2016. NOTE: Head Start administrative data do not report race and ethnicity separately.
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The CCDBG Act and CCDF The CCDBG Act, first enacted in 1990 and reauthorized in 2014, provides funding through CCDF to states, territories, and tribes to help families access ECE programs. The reauthorization act lists the purposes of the CCDBG Act as: • to allow states flexibility in developing ECE programs; • to empower working parents to make decisions regarding ECE services; • to help parents make informed choices about ECE services; • to assist states in delivering high-quality early care and education in order to "maximize parents' options and support parents trying to achieve independence from public assistance"; • to improve the quality of ECE programs; • to improve the care and development of the children who partici pate; and • to "increase the number and percentage of low-income children in high-quality" ECE programs.6 6 S
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From page 68... ...
States are required to report on their progress in improving the quality of ECE programs and are required to establish a system for professional development and training of educators and staff (Office of Child Care, n.d.)
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From page 69... ...
. For further discussion of adequacy of funding and equitable access to ECE services, see the section in Chapter 4 titled "Equitable Access." Federal Tax-Based Expenditures Two major federal income tax benefits are designed to help lessen the burden of family ECE costs: the Child and Dependent Care Tax Credit (CDCTC)
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From page 70... ...
To be eligible to claim the CDCTC, ECE services must be used in order to allow a parent or guardian to work, look for work, or participate in a qualifying education or training program. Because the CDCTC is a tax credit, families must pay upfront for the ECE services and then recoup any benefit from the credit when filing their federal income tax return.
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2 care tax credit. If you had expenses that met the requirements for 2016, except that you didn't pay them until 2017, you may be able to claim those expenses in 2017.
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Currently, states and localities invest a considerable amount of money in early care and education, contributing significantly to total funding under the CCDBG Act and paying for virtually all of publicly state-funded prekindergarten programs.14 Importantly, through their financing of these programs, states and localities have been responsible for setting and implementing most of the policies determining quality of and access to ECE services and coordination across the array of different ECE programs in the United States. At the same time, the ability to quantify the resources invested below the federal level is largely limited to the contributions from state governments.
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. 16 To enroll in state-funded prekindergarten in Kansas, children must meet one of eight risk factors, including being eligible for a free or reduced-price lunch or having household income not greater than 185 percent of the federal poverty level (Barnett et al., 2017)
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. In addition to the state tax credit available to families, employer-based tax credits are in place in some states to subsidize employer contributions to ECE costs.
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From page 75... ...
. Some corporations and economic development entities have developed position statements in support of investment in early care and education, have established funded programs to advance recognition of the importance of early care and education and other investment in human capital in the earliest years, or have taken both these steps.17 In many communities, placebased philanthropies address critical local ECE needs, including augmenting local funds to expand access to quality ECE services in their communities, building awareness of ECE options and relevant policy issues, incubating innovations and pilot programs, and supporting research and evaluation (see e.g., PNC Financial Services Group, 2017)
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2. Access to information to help locate ECE services in the com munity, also known as Child Care Resource and Referral services (41%)
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extending their pa rental leave policies, the 2016 National Survey of Employers found no significant change in paid parental leave benefits for either women or men from 2012 to 2016 (Matos, Galinsky, and Bond, 2017)
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From page 78... ...
.21 Of course, public spending on early care and education is derived from revenues from taxes on individuals and businesses, and in this way, employers are indirectly contributing to ECE spending. Private and Corporate Philanthropy Private philanthropic organizations support ECE programs in a variety of ways, although estimates of the total contribution are not readily available.
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From page 79... ...
The scholarship model tested initially in St. Paul was designed to be user-friendly for parents, portable across ECE programs, and to drive parental choice of high-quality ECE options by requiring selected centers to demonstrate best practice through participation in Parent Aware.
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In an SSA, a centralized hub entity provides "back-office" supports such as bookkeeping, payroll, bulk purchasing, collections, facility maintenance, and custodial services for a cluster of otherwise autonomous private ECE providers. The theory behind SSAs is that cost savings on the business side can enable greater investment in high-quality staff and pedagogical supports, increasing the quality of ECE services and ultimately leading to better outcomes for children (Opportunities Exchange, n.d.)
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From page 81... ...
The Merages believe SSAs to be a results-oriented, nonregulatory innovation that supports sustainable reform in the ECE sector. ELV formed the ELV Alliance model to build shared services among affiliates (ECE providers)
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From page 82... ...
While a number of programs have recently dedicated funding for quality improvements and the professionalization of the ECE workforce, quality remains inconsistent across programs. These issues are explored further in Chapter 3.
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