NCPA - National Center for Policy Analysis

Federal Funding for Child Care is Adequate

March 12, 2003

Access to safe and affordable child care has been a major issue since the 1996 welfare reform law. The Bush administration has proposed a bill that would authorize spending $22 billion per year on child care, cash assistance and work-support programs for the needy. Some Senate Democrats contend the proposed funding is not enough and are demanding an additional $5.5 billion to $7 billion over the next five years.

Despite all the debate, no one has asked if funding is inadequate -- or simply, in some states, misdirected?

Child care funding has more than tripled since 1996. As welfare rolls fell, the proportion of welfare funds spent on cash payments fell from 70 percent of Temporary Assistance to Needy Families (TANF) spending in 1995 to 50 percent in 2000. This freed TANF funds for child care assistance. Thus the largest source of funds in recent years has been the TANF block grants.

  • In 1997, Child Care and Development Fund (CCDF) provided $1.9 billion for child care aid, while states spent only $200 million of their TANF funds on child care.
  • By 2000, CCDF had increased to $3.5 billion, and TANF child care funding had increased to $3.9 billion. (See Figure I.)
  • Working parents are also eligible for a refundable federal child tax credit of up to $600 per child, which President Bush has proposed increasing to $1,000.

The president has proposed increasing work requirements for welfare recipients, and as these people go to work, child care assistance is important. But with fewer people receiving cash assistance, states already have been able to shift more money to child care. By redirecting the money to the neediest families, states can provide ample child care assistance with the current funding levels.

Source: Jennifer Trice, "Is There a Child Care Crisis?" Brief Analysis No. 432, March 12, 2003, National Center for Policy Analysis.

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