Child Care Funding: How much is needed and is there enough?

Transcript

MS. ISABEL SAWHILL: Good morning everybody, welcome to a Brookings forum on child care funding. This is the fifth forum that we have done in a series on our Welfare Reform and Beyond project. I am Belle Sawhill and I co-direct the project along with Ron Haskins and Kent Weaver.

The project, as a whole, has two major goals: first, to synthesize the available research on welfare reform and make it available to the public and to policymakers in forums that are useful and, we hope, understandable. Secondly, we're trying to encourage the development and discussion of some new policy options for low-income families with special emphasis on low-income working families with children.

I want to emphasize that there is a huge amount of information now available on our website and will be more there all the time. The address of the website is over there underneath the placard. And just this week we put up new data in our Facts at a Glance section on child care expenditures and child care arrangements. It's data from the Urban Institute's National Survey of American Families. And, in the spirit of synthesizing available research and data, we want you to note that we tried to give broader dissemination to everybody's work, not just our own.

In all of our work — one of our objectives is to get a broader discussion and debate going on these issues, which is one reason we've been holding these public forums. And not only are we making them available to people like you who are here today in person, but they are also being webcast very broadly around the country and people can watch this on streaming video from wherever they are as long as they have a computer on their desk. And furthermore, we hope to get some of the people who are watching on the web, as well as some of you, into the discussion as we proceed today. For those who are watching by computer, if you have a question you can e-mail it to us at question — question singular — at Brookings.edu. There are many experts here today in addition to the ones up on the panel, and we do hope to get some of you into the conversation as well.

At this point I want a turn this over to today's moderator, my friend and colleague, Ron Haskins. He and I don't always agree, particularly on this issue, but I am really pleased and proud to have him at Brookings. And I always knew he was smart and funny, and what I now know in addition is that he never sleeps, he just works, and he has a weakness for cookies —(laughter) — which I share with him, which is why we can get over our other disagreements.

So, without further ado, to you, Ron.

MR. RON HASKINS: Thank you, Belle. Of all those points about me, the one that she believes the most firmly in is the last, that I am a cooking hog.

So our topic is, "Is there enough money?" And that leads, of course — our whole project is directed at reauthorization that leads naturally to questions: should Congress take some action, should there be more money, what should Congress do about this issue? There are lots of other issues in child care. We may touch on those, including quality and so forth. In some sense, all of those issues are dependent — closely related to the issue of money, so perhaps they will come up. But it's our intention to talk about the money — is there enough and do we need more? Let me mention a few facts.

In your folder you have a figure that looks like this, which we put together in the last several days. And I would say that it's very difficult to put together a summary of the money. What we have here, I think we probably should call it the funds available — federal funds available to the states, because this is primarily the appropriations that are made by the appropriations committees in the year '93 and 2000. But the point — and it's certainly obvious — and that is that just in those seven years the amount of money available for child care has almost doubled. And it's very clear, I believe, that this year it will increase by well over, I would say, at least $1.4 billion — maybe a little bit more. There was a big appropriation in the appropriated part of the Child Care and Development Block Grant that was somewhat unexpected, and there's new money in Head Start and, of course, a built-in increase every year. And this year, 2001, is the last year that that increase is built-in for the Child Care and Development Block Grant.

So, in addition, there's a lot of state money; probably, in '93, maybe $2 billion dollars in state money — or maybe $1.5 (billion), something in that area. So, I think we could almost think of this as a golden age of money for child care. There has been a dramatic increase, there's a tremendous amount of money, and there may be issues about what's on the horizon that will cause us some difficulty.

Now, to discuss all this, we have really a terrific panel of people with lots of experience and who are actively engaged in research on this. And indeed especially Jean Layzer and Gina Adams are, even now, doing large-scale studies — quite remarkable studies of child care, so they bring a special important background to this. Jean is from Abt Associates and Gina Adams, of course, is from the Urban Institute and works on the National Survey of American Families. We also are very fortunate to have Elaine Ryan here. Elaine, we think, can speak for all the states because she is with the American Public Human Services Association. We hesitated to invite Elaine because she infrequently has any opinions — (laughter) — and also she doesn't express them very dramatically. But we decided to go ahead and have her anyway. And then finally, of course, we have Doug Besharov here.

The first three panelists are going to make presentations about this issue of money — is there enough money and what should the federal government do? And Doug is going to be reacting to the things that they say. When that's finished, I'm going to pose some questions to them. And then when that's finished, we will open up for audience comments, and audience includes our webcast audience. And Doug (sic) has already given the e-mail address for any of our webcast audience that would like to mail in questions.

So we'll begin now. Each panelist will have seven minutes to make a statement, then we'll go to my questions and then we'll go to your questions.

So let's go ahead begin with Jean Layzer. Jean, welcome, and have at it.

MS. JEAN LAYZER: Thank you.

What I'm going to talk about — a lot of the information that I'm giving you is derived from the study we are currently doing, the National Study of Child Care for Low-Income Families. It's a five-year study in 17 states and 35 communities that, together, represent — taken together represent communities with substantial proportions of low-income children. In fact, our states, taken together, contain more than half — almost 60 percent of all children who are federally eligible for child care subsidies. And I thought I'd reorganize it a little bit, as I was thinking about it. I would like to talk about sort of the rosy side of the picture first.

We've seen this enormous increase in both federal and state spending over the last three years. In many of the states that we have looked at, they have either doubled or almost tripled their child care spending. Most of them have exceeded the Maintenance of Effort requirement, the state funds that are required for them to draw down their CCDF funds. They have used TANF funds, both through transfer and spending directly on child care. They have also put in additional monies of their own to provide child care subsidies.

And what we see is that, because of that, there are many more children in these states getting subsidies — public subsidies than the Urban Institute estimate of 1.8 million might suggest. Just in 16 of our states alone, without counting California, more than 1.1 million children receive subsidies. Again, the rosy side of the picture — all of these states give TANF recipients priority for subsidies. They are serving all the TANF applicants who need child care. They are serving a much greater proportion of TANF recipients than they were three years ago. They are in their waiting list for TANF recipients. They also give priority to people who are transitioning from TANF. There are many, many more children receiving subsidies in general. And the growth has been in the non-TANF populations.

Nevertheless, if we turn to the less-rosy side the picture, for those families who are not currently on TANF or transitioning from TANF, 12 of our 17 states have waiting lists. Almost all of the states set eligibility limits much lower than the federal eligibility limits. And even though their eligibility limits are much lower than the federal eligibility limits, in fact, the families that they are serving are at the lowest end of the eligibility limits. In some of the states the median income of subsidy recipients is a third of the eligibility limits. So they are serving people at the bottom. There are increasing waiting lists for subsidy, and we think that we haven't seen the limits of demand, even so. In those states that are committed to serving all families who apply and are eligible for subsidies, we've just seen that there continue to be applications for subsidies.

Nevertheless, it seems to us unlikely that the demand — the need is as great as the 15 million children, again, who are federally eligible, and there are lots of reasons for that. There are federally funded preschool programs, many mothers work while their children are in school. And the challenge is really for us to decide what is the need and what would it take to meet it? We chose to say, let's look at two scenarios. What would it cost if you had — if all the states in our study did as well as the best state? Illinois meets almost a quarter of the needs of — about a quarter of the federally eligible children in the state. And at the low end is Texas meeting less than 9 percent. What if all 17 states — or 16 states — we actually left out California — what if all 16 states served 25 percent of the federally eligible population which, for some of them, would be a substantial jump? What that means is that, just for those 16 states, you would need an additional $2.3 billion so that total spending for the 16 states would rise from $4.1 billion to $6.4 billion.

If you say, well, demand hasn't stopped in Illinois. What if you try to raise that by 10 percent — you go to 35 percent of federally eligible children. What would that mean for our states — for our 16 states? When you do that you arrive at — if you hold everything else constant — you're holding the provider reimbursement rates, the copayments constant — we estimated that you would need an additional $5 billion, bringing total annual spending, just for these 16 states, to $9 billion. And that seemed to us a sobering thought as time — when we don't know whether TANF funds will continue to be available to pay for child care and when almost half the states now are reporting budget deficits.

MR. HASKINS: Thank you. Gina Adams.

MS. GINA ADAMS: Thanks, Ron.

I would like to talk to you today about some of the research that we have been doing on child care subsidies as part of assessing the new Federalism Project, and the implications that it has to the question that we are focusing on today.

You have some materials in your packets that detail a lot of my findings, as well as the research design and the other members of the research team. These findings come from some qualitative research that we did in 17 sites across 12 states — some overlap with Jean's states — where we interviewed state and local subsidy administrators and experts, as well as conducted focus groups of parents and providers and caseworkers, all of whom are involved with the subsidy system.

We have two kinds of findings that are relevant to this question. The first focuses on whether existing funds were sufficient to serve the eligible families who applied. I'm not going to go into those because they basically just confirm the things that Jean said; waiting lists, outreach issues, all of those same — we found the same kinds of findings. But what I'd like to focus on, a little bit more, is kind of the next level down which, of the families who come in to the system, do they have challenges accessing and retaining the subsidies?

We found several issues to focus on in this area. One is that when you look at what families have to do to get into the system, we found that actually entry into subsidies is more complex for some families that we realized so far. It involves an initial application, finding a provider if you don't have one, and getting that provider approved. Now, in some sites that can be very efficient. You can do it on the phone, determine eligible, and you're done. In other sites it involves multiple visits to the agency for those various steps. In some sites it involves as many as eight pieces of documentation. So it can be a big barrier. And the respondents in our sites talked about this as a deterrent for families to apply, particularly for working families who would have to take time off of work to do those multiple steps.

A second area concerns what families have to do to keep their subsidies once they get in. Now, I think it's really important that we focus more on the issue of retention because we focus a lot on access, which is clearly critical, but keeping families in the system once they get in is also a key part of the puzzle.

Now, there is a lot of steps involved in keeping a subsidy. First of all, families are given a time-limited authorization. It lapses if they don't renew it. The time ranges from three months to 12 months in our sites — most of them are about six. But this is an area where there is a big difference between policy and practice. A lot of the caseworkers talked about having families come in more often if they had irregular jobs, short-term jobs, any kind of fluctuations in their status, any suspicion of fraud, and shortened — one site it was four weeks the family could have to come in.

Another issue that's not, I think, received a lot of recognition is that families have to report to the state any time they experience any change that could change their eligibility or their subsidy level. That means a change in your job, a change in your hours, a change in your income, a change in your provider. If you think about low-income families and how often they experience those changes, if they have to report those to the state every single time, that can be a lot of steps.

Now, what families had to do for any of these steps — application, redetermination, or these interim reporting — could vary a lot. Sometimes it could be by phone, but a lot of times, in a number of sites, for at least some families, it involves an in-person visit and again producing a lot of paperwork. Now, if you think about the cumulative nature of those issues, it can be a little daunting.

We also found that families on TANF can face an additional layer of requirements, which I think adds another layer to this issue of TANF families being able to easily get subsidies. Two things that we found: one is, is a lot of states talked about families automatically being able to retain subsidies when they left welfare. That is actually not very automatic. In most of our sites it involved reapplication, going to a new agency, taking time off of work. There was something the family had to do to keep it.

We also found that families on TANF have to deal with more than one agency often because their eligibility for child care depends on their eligibility for TANF. So, depending on the site, they have to navigate both systems each time they're trying to retain their child care eligibility. That, in some sites, could be very easy because agencies would deal with it themselves. In one site we talked to, however — in a number of sites it was not. One mother drew us a diagram of the four caseworkers she had to notify every time she had a change in her employment situation. So I think there's more barriers and issues for TANF families than I think we've focused on so far.

There is also a number of structural administrative issues that families talked about, and I will go through them quickly. One was caseworker interactions; a lot of concerns, sometimes very positive, obviously, but a lot of concerns about not being able to get through to the caseworkers, inefficiencies, lost paperwork, long waits in the office, these kinds of issues; also a lot of conversation about having to go into the office in person. Even if it wasn't required in the law, parents would have to go in because the caseworkers would decide they needed to, because they couldn't get through by phone so they had no alternative, because they didn't trust that the system was going to work.

So, you put those two issues together with two other ones — one is how promptly are parents seen when they do go in? We heard a lot about long waits. Again, some sites operated quite efficiently but at a number of sites the families would have to wait, they would have to go back multiple days; along with a fourth issue which was office hours. Many of our sites did not have office hours that were extended significantly into the evenings or on the weekends. You put all those things together and you can see that a lot of families had to take time off work to meet the requirements of retaining a subsidy that was supposed to help them work. And I think it is important to recognize the cumulative nature of those issues. If you overlay them on top of each of those interactions I talked about, we have a number of issues that families are facing.

One thing I would like to point out is that while these issues face all families, depending on where they live, they seem particularly likely to be challenging for some of the families that we care about the most — families who face a lot of transitions, families who face particular challenges such as language barriers or transportation or disability, and as well as, ironically, low-income working families who are trying to stay in their jobs but have to take time off of work to do these.

One last point before I sum up — well actually, let me just — one quote from a parent. One mother told us, "It's almost like you have to be unemployed to be able to apply for all of these benefits, but if you are employed there is no way the nicest employer would forgive you all that come off." So this kind of summed up some of these issues.

I do want to make one really important point which is the parents that we talked to were all part of the subsidy system, so they clearly had managed to make it through. They were extremely clear about the value of the subsidies to them. They talked over and over again how much this made a difference to them in terms of their ability to choose care for the kids and be able to work. And I think it's impressive that as many families, given some of these barriers, are managing to overcome them to get the subsidy, I think it shows the value.

So in summary, I think this research suggests that the subsidy system may not be currently meeting the demand in two ways. One is that most of the states in our study were not able to serve all the eligible families who were already applying, which corresponds with Jean's findings. And second, it suggests that the way the subsidy system is currently being implemented may inadvertently present barriers to access and retention for some of those eligible families who do manage to get — qualify for the subsidies. So I think it's really important to note that if you put those two findings together, if we fix the access and retention issues without investing additional resources it's simply going to make the eligibility — the waiting list still higher because it means that there's going to be less turnover in the system, and so slots aren't going to be opening up for families to come in. So it's kind of the next level down of whether or not there are sufficient resources.

Thank you, Ron.

MR. HASKINS: Elaine Ryan.

MS. ELAINE RYAN: Thank you, Ron. With the introduction you gave me, I speak with some trepidation. But here I go. Be prepared for unbridled enthusiasm and passion in my remarks — (laughter) — maybe a pithy response to your questions, because I'm delighted that there actually is this forum today.

The real untold story of welfare reform has been the extraordinary growth in child care in this country. It is remarkable any way you slice it. The value of work as a centerpiece of welfare reform produced working moms more than ever before in this country, and those working moms need child care to be able to support them at work. We also have a little bit of research to prove that some child care provision actually adds to stability for mom's employment and entry and retention of her job. So I think there are other reasons to say that the linkage between work and child care is inextricable. But even more, I have to say that — just to answer your questions — how much funding is needed? Much more. Is there enough? No. (Laughter.) Allow me to elaborate.

Since 1996, all of the available Child Care and Development Fund — and I will use CCDF — some use CCDBG — follow us out there — but the Child Care and Development Fund, all of the dollars had been obligated or expended. All of the available federal matching funds have been drawn down by states. Every year, every state has made its Maintenance of Efforts for child care. And in addition, in the fiscal year 2000, $3.5 billion from the TANF Block Grant was transferred to the Child Care and Development Fund or spent directly out of TANF. That is important, I think, for a number of reasons. One is that states have a lot of choice on how to use those TANF funds. They chose, loudly and clearly, to make an investment in child care, even — (word inaudible).

Our study that we did, that's soon to be released, and it will be posted on our website, looked at state spending from 1996 to 1999 just to try to capture the kind of growth in spending. Based on the responses on the 43 states we looked at, in '99 there was already a 200 percent increase in the spending on child care. In addition, 13 states had separate state program allocations totaling almost $800 million to support child care, because we're talking about a broader group than welfare reform clients and TANF recipients. We're talking about low-income working-poor families. That's other fundamental change and a piece of information that we need in thinking about how much is necessary. And in our survey, 37 states say that they're serving 59 percent more children with those child care dollars.

Now, just to illustrate a point, when we talked to Florida, in 1987 and 1988 they were spending $52 million on child care. And in the current year, fiscal appropriation, they're spending $552 million on child care. Look, $3.5 billion out of TANF is being spent on child care. I think we can safely say that states can program at least $3.5 billion more than is in the Child Care and Development Fund. And then we have to think about the rest of the story; the access issues that you talked about, quality — quality isn't an idea, it's a cost — reimbursement rates, child care workforce issues, how much is enough, enrich early childhood education. These carry costs. And there are constant trade-offs between increasing accessibility and whether you enhance quality. We need to create a vision in this country for the next chapter in child care that answers some more fundamental questions to get to the number that I think you seek in this forum.

So let me just say what will happen this year if TANF funding or SSBG funding is cut. We know that TANF is a source of child care funding. In Alabama, for example, if they don't get the extension of the TANF supplemental grant to the state, they suggest that they will not be able to move 5,000 families who are on a waiting list into child care. And it the child care dollars that are usually provided to some states, really — if they choose to use them in the Title 20 Social Services Block Grant — that funding level was promised to states to be at $3.8 billion. This year it falls to $1.7 billion. I know it's hard to believe, but it was the federal government that used Title 20 funding to fund roads and bridges because it was the Transportation Act that actually cut SSBG. If those funding levels fall, also there will be fewer child care slots available. So there is this tenuous balance about how much, even in this current fiscal year; what the continuation of the investment looks like.

And let's think about TANF reauthorization. If the TANF Block Grant is cut, it is a direct cut in child care. And also, any proposed earmarking or set-asides for any purposes, any ideas that people have in their heads about what and how states should administer those funds, if there are not huge increases in the child care fund, that is going to result in fewer children getting services.

Look, we have to deal with eligibility issues, and the states have addressed them. These are not welfare clients anymore. These are, for the most part, targeted to low-income working families. And so we need to make that transition. States have made that transition a long time ago. Washington is just catching up. Nine states changed eligibility in 1997 to increase eligibility. In 2000, another 16 states increased eligibility for — to reach more families to support them at their work. Thirty-one states, since the passage of welfare reform, increased their eligibility levels at least once.

I think that there is a new think going on in the states, and we need to follow up and put our money where our mouth is. Now look at, there are studies that say one in 10 children eligible to receive child care funding are receiving this in the country. Some people have boldly decided that we should double funding. That means two in 10 children in America will be — that are eligible will receive funding. Is that what we should shoot for, or should we talk about their eligibility level? Is 85 percent median income the right target, or should it be something else?

And look at, quality matters. States are increasing reimbursement rates for providers. Twenty-two states increased rates for accredited care in 2000. More money is going into center-based care. But look at, we have a child care workforce crisis in this country. And that matters because we don't have people to watch the kids even if we could provide them the subsidy to get through the door. We've got to address that in child welfare, in long-term care, and child care. It's an undervalued part. It's inextricably tied to quality in this country.

Also I would say that we also have to respect parental choice. Infant and toddler care — some moms of means want to have their infants seen by one person. They don't want to put it in a center. That should be respected. But infant and toddler care costs money, and we need to figure out what subsidies should follow that.

We are pleased to be partnering with Child Trends in looking at quality investments, but let me just say this: we have a lot of rhetoric in this country about 0-3 early childhood brain development. And we seem to have this disconnect between enriched childhood education and how much we are willing to pay for child care. For example, the Dependent Child Tax Credit is a tax subsidy for upper-income people. We don't ask how much money is enough. If you spend it, we value it in this country, if you are of means. Then why are talking about a capped amount for the lowest-income Americans who are trying to enter in work?

I think we need to get our rhetoric right. How much money is enough? Who do we want to serve? How big should the subsidy be? What is quality? How should we invest in it? What about informal quality and care? We need to answer those questions. We are at a policy crossroads. That's why we named our transition document, available on our website, "Crossroads: New Directions in Social Policy," because we have a chance to really approach these fundamental questions in this country and march smartly into the future. You can have debates on the House and Senate floor about elementary and secondary education, preschool and enriched education, and then say, "But for these kids, it's 'slots for tots'; for them it's at 0-3." What are we talking about? We're talking about a blended system of child care support in this country because what's at stake is nothing less than supporting moms at work and supporting the development of our future child workforce; really the children of the future in this country.

So, with no passion, I conclude. (Laughter.)

MR. HASKINS: Thank you. Thank you.

Imagine the following ratio, and the dominator is the number of invitations to speak and then the numerator is the number of acceptances. We are fortunate to have Doug Besharov here who, along with George Will and E.J. Dionne, has the lowest acceptance ratio of anybody. So I feel especially privileged that Doug agreed to take time out from his schedule and come over here to Brookings.

So, Doug, what you think of all these remarks?

MR. DOUGLAS BESHAROV: First of all, he won't feel happy for long. No, no. (Laughter.)

Well, I have — the program says 7.5 minutes to respond, which means I have to cut all the pleasant things out of my response. (Laughter.)

Let me just say that I think all three presenters made some tremendously important points about what's happening. And the research, particularly that Jean and Gina have done, help, I think, shape — or should help shape our thinking about what's happening out there. But I would like to try to take all three presentations and bring them together to make two points, one about access and the other to answer the question before us: Enough — is there enough money? And then the question becomes, enough for what?

So let me start, though, by mentioning why we are having the kind of discussion we're having, and that is there is crummy data out there. We have too many child care funding streams and too little data from each one of them. So you'll notice that none of us have sat here and said, "Here's what the federal numbers say." If Ron had more time he would have told you how that spending figure that he put together was pieced together from here and from there. We don't exactly know how many kids are in care today. We don't know how many are part-time, full-time. We don't know the relationship between the CCDF and the TANF money that Elaine was talking about. So, partly what we're doing here is groping our way to feel what's happening. So, within that spirit, let me try to make two points.

One is about access. And here, I think we have to try to reconcile Jean Layzer's points with Gina Adams'. Jean says, big expansion in services, no waiting list for TANF recipients, they seem to be getting services but let's be careful about what "seem" means. Gina tells us about problems of access, of eligibility, finding a provider, and so forth. Let me tell you how I put that together after having read the longer versions of their papers and other people's papers.

I think what's going on is best summed up by a line in one of Jean Layzer's papers. "The best predictor of whether a TANF leaver gets child care subsidy is the identity of the provider of child care," which is to say that TANF leavers who are going to licensed child care, especially center-based care, are all but guaranteed child care. That seems to be a given. Some of the access problems that Gina talks about are lessened, not all, but lessened and so forth. But should a TANF leaver want to use an unlicensed provider, and the problems that Gina describes balloon. Should a TANF leaver want to use in-home care, in more than half the states — right, Elaine? — it's prohibited. She can't use her grandmother or aunt and get a subsidy because it's a violation of the Fair Labor Standards Act.

Every study I've seen comes to the following conclusion directly or indirectly: The TANF leavers who are using licensed care basically are getting their subsidies. The TANF leavers who are not using licensed care have a much more difficult time getting child care. And my calculation, by the way, is that as much as 50 percent of all leavers — 50 percent of all welfare leavers who are working are not getting federal subsidy. So that's the question of access. But the access problems — in addition to the ones that Gina talked about, the access problems are rules that make it very difficult to use a voucher or anything else for unlicensed care and make it almost impossible to pay your aunt, grandmother or sister to take care of your infant in your own home. It's a violation of federal law, and about half of the states are enforcing that rule.

Now, enough for what? And this is where I'll pickup on what Elaine said. And she said it quite clearly except I wish she had said, "But this is a big issue that we haven't debated in our society." She said that services — and so did Jean Layzer — services are going to, "a broader group of low-income working families." And that's exactly right. By my calculation, of those $6 (billion) or $9 (billion) or $18 billion that Ron talked about — of the amounts going from the CCDF and the TANF money, we calculate about $3 billion of that is going to non-TANF leavers, that is the low-income working poor. Now remember that's at the same time that half of all TANF leavers who are eligible for child care assistance don't get it. That money is going to higher-income families — higher-income, my apologies; somewhat higher-income because they are low-income working poor — but they're going those higher-income families that are using center-based care.

So before us here are two issues. One, should the current system, which can eat up all this money and more, continue to serve center-based and licensed-care families first, leaving behind 50 — leaving behind 50 percent of the TANF leavers, or should we first cover those leavers, making the access issues that Gina talked about — fixing them, or should we continue going up the income stream? Note what Elaine said. She said, "Thirty-one states have increased their eligibility guidelines." So, Ron, what you have here is a little bit like a game where the goalposts keep moving. The federal government publishes two figures on the percentage of CCDF-eligibles who receive care. Neither one is — sorry, Julie — neither one of them is — Julie Isaaks (sp), I think, is here — neither one of them is tremendously instructive. But what the federal government does is it shows the percentage of federal eligibles who get care, and then state eligibles.

Well, as the states keep increasing their eligibility provisions, the number of unserved — the gap continues to grow. We need to conclude. We need a debate about two issues: whether we continue to make it difficult for very low-income families to use informal care or we just make it difficult to subsidize that care, and number two, how high on the income stream we take these child care subsidies. I take no position about the latter, except to say I am troubled that we keep going up the income stream without dealing with welfare leavers, 50 percent of whom — 50 percent of whom are not getting a child care subsidy today.

MR. HASKINS: Let's begin with that question, because one of the biggest potential sources for new spending would be additional coverage. And of course, in policy analysis we always are concerned with equity issues. And clearly, based on both of your papers and Doug's comments and things that Elaine said, and I think everybody realizes this, that we have a big problem with, to use some jargon, horizontal equity. We have a lot of people who are earning, say, $10,000 a year and they went to welfare. When they left welfare they got a subsidy; according to Jean Layzer they all get a subsidy. They may work right alongside a mother who has the same number of children and so forth who did not go into welfare and they don't have a subsidy. So we have a major issue with horizontal equity. What are we going to do about this, what is our obligation, and how much would you like to spend to try to make sure that we serve all clients that have similar needs?

Anybody.

MS. ADAMS: (Laughs.) Don't look at me first. Let me think about that for a second.

MR. HASKINS: Okay, you first because you speak without passion.

MS. RYAN: Well, I can do it with no thought — without —

MR. HASKINS: No thought, that's good.

MS. RYAN: — no thought, I can do that. That's fine for me.

Look, I think that, respectfully, when Doug started to say that we have bad data, I think that some of that is rooted in some of the comments that you made, respectfully. I mean —

MR. BESHAROV: I always worry when someone says "respectfully."

MS. RYAN: We have leaver studies that, quite frankly, if you're basing that on that, they're done in different ways by different states at different times, so I don't know how we can support this 50 percent aren't being served. So, I just want to put that on the table. I'm not sure I accept that. But I also don't accept a vision where we have this welfare, working poor dialogue anymore, about child care. And we don't want to create or sustain a system in this country that says you have to go on welfare in order to get child care, but if you come in similarly situated, there is a 5,000 waiting list for you and your children. I think that that's the equity question that you pose.

So, I think that many of the social welfare programs that we've talked about in recent years — child support and Medicaid and CHIP and food stamps are all running away from TANF because it's no longer relevant. I mean, the TANF — the idea that there is a static TANF caseload is also another misperception. The fact is, the people who are the working poor knocking on the door might have been your TANF client three years ago, but how long do they carry the "former TANF client" tag around their necks? And how then do they opt into a system if we try to balance equity by whether or not they were once on welfare or never on welfare?

So, respectfully, that's old think. The new think is the fact that the great news about the economic expansion in the past several years is that there are more people at work engaged than ever before. We now need to figure out how we can support those families with some subsidies. How much is enough? But I would suggest that this idea of creating this "them and us" never worked in the past, and it surely is no guidepost for figuring out future policy directions.

MR. HASKINS: Doug?

MR. BESHAROV: I think Elaine misunderstands the point I'm trying to make, with all due respect. (Laughter.)

MS. RYAN: I'm similarly concerned.

MR. BESHAROV: The horizontal equity problem is as follows: Depending on the age of a child and the income of the family, between 30 and 60 percent of all child care in this country is provided free to the parent, not just by the government but by a relative — 30-60 percent. You'll notice I'm giving a big spread there because the data are kind of funny and it really depends on the age of the child and so forth.

Our current system doesn't know how to recognize that contribution of other members of the family to the well being of the family. When we use child care vouchers and say that when Grandma takes care of the infant there can be no subsidy, that is the horizontal equity problem, big-time, because that family then is contributing and subsidizing our process of providing child care further up the income stream. My position is not "us and them." My position is, come to grips with this problem for the lowest-income people, fix it before you keep moving up the income stream. I have not said don't do it. I was careful about that. So I don't have an — I really don't have an opinion yet, but I so see an injustice here and I'd like to see it fixed very fast because we are creating a system of vested interests and a very different kind of system; a system that is provider-oriented and not family-oriented.

Now, I can think of a lot of reasons why it's impossible to fix it, and if I were a state official I would tell you I'm scared to death of trying to deal with this because of that boogey-boo, fraud, and so forth. So I'm not saying that this is an easy fix, but I am saying it's a tremendous economic injustice to be leaving as much as half of the low-income families without subsidies.

MR. HASKINS: Jean Layzer.

MS. LAYZER: This complicated issue that Doug has sort of touched on, I think we behave as if the working poor are better off than TANF recipients. That's not the case. And the states are doing two things. They have established more generous cutoffs. They have allowed people, if they need to, to continue receiving subsidies longer, so that if you look at the eligibility cutoffs they are quite generous.

When you look at who they are serving — and we only have data from the Duration Study that the National Center for Children in Poverty is conducting on this — the figures are startling in terms of who those five states are serving verses who's eligible. Never mind whether these are TANF recipients or working poor, their median incomes are a third or half of the eligibility cut off — the state's eligibility cut off. So they are serving — whether these are TANF recipients or working poor, they are serving the very poorest families. They are not serving all of them, but they are not primarily serving — they are allowing for those families' incomes to grow over time, but it's almost irrelevant. Even their eligibility guidelines are irrelevant.

MR. BESHAROV: I would be happy — I'm going to interrupt — I'd be very happy if you said that's the case, and for the next $10 billion, which we want, we're going to fill in the gaps below. But the problem that I've described is that the system will take that next $10 billion and go up, not go down. That's my concern.

Sorry?sorry, Ron.

MS. LAYZER: I thought we were supposed to argue.

MR. HASKINS: No, no. (Laughter.)

MS. RYAN: I feel heartened that we have at least $10 billion more. (Laughter.) So that's a good starting point.

MR. HASKINS: Wait, we're coming to that — we're coming to that.

MS. RYAN: Okay.

MR. HASKINS: Do you want to add anything to this?

MS. RYAN: I just wanted to put that as a marker. I started only at $3.5 billion. (Laughter.)

MS. ADAMS: Let's keep on going.

MR. BESHAROV: See what happens with a Democratic?(off mike).

MS. ADAMS: How about $20 (billion), that's right. (Chuckles.)

MS. RYAN: It's a bidding war.

MS. ADAMS: I have a few comments. One is I think it's — I think states are focusing their resources on the lowest-income families and they are doing it an a lot of ways, some overtly through priority status. But another thing is that if you think about the barriers I talked about and you add in things like co-pays, the value of the benefit they're getting and how that trades off, those higher-income families — it becomes less and less worth it for them to jump through all of these hoops that I'm talking about, which is another reason I think we see less participation at the higher end. So that's one point. I think as states put these resources into place they're going to continue to be putting them into the system, prioritizing them in the way they are. And that's the way that they've been doing it; I don't think that's going to change.

I want to make two other points. One is that I think it's really important to clarify this a little bit. There are states where the majority of families are using unlicensed care. So how these barriers play out are very different across states. I think one of the things we have to realize is the incentive of the value of the subsidy is higher for a center.

MS. RYAN: Right.

MS. ADAMS: You're going to be getting the equivalent of $400 in subsidy if you use a center as opposed to your mom who may be willing to provide it for free. So again, if you think about the barriers to access, there is more reasons to jump over them if you want a center-based care or more formal arrangement. There's a lot of ways that these things play out that I think vary on the state, the site, what the families want. So, not to say there aren't some issues we need to be thinking about, and I think you're all — studies have shown some of these issues surrounding informal care. But I don't it's fair to say that, as a block, states are preventing families from using informal situations. I think a lot of places, that's a lot of what families are using.

I also just want to make one other point, which I think Elaine's comment — and I think Jean made it too — the focus of delinking this from welfare I think is critical. This really is now a support for low-income working families. And if you want to target it on the lowest-income working families as one priority, that's one thing to think about. But the movement away from this as a welfare service, I think, has not caught up with way that the system is administered; the focus on fraud and abuse rather than providing a service to families that provides a stable issue. This question of having families take time off of work to apply I think is a wonderful example. If this is seen as a support to working families, we wouldn't be having those kinds of requirements in place.

So I think it is a question of reshaping how we see the service, how do we deliver it? And there's a lot we can learn from Medicaid and other services that have tried to think differently about delivering service; continuous eligibility, those kinds of things, where it's a service — it's of value to support families in the workforce and kids, as opposed to simply being tied to every single change in the families life that's on and off, on and off, on and off.

MR. HASKINS: Well, in the end this is crucial to the equity issue because if we completely delink and states set up some system — we don't know what it is — but they set up some system where it's based exclusively on some assessment of your income and if you're below some level you get it, regardless if you came from TANF or not.

MS. ADAMS: And it's equitable.

MR. HASKINS: We could do a system like that. States could do a system like that under current law, I believe.

MS. ADAMS: Mmm-hm, yeah.

MR. HASKINS: I don't think that there are barriers —

MS. ADAMS: Yeah, Illinois is doing it right now.

MS. RYAN: Sure.

MR. HASKINS: Okay, we all agree with that.

MS. ADAMS: Right.

MR. HASKINS: Okay, let me ask you another question. I'm going to try to be like John McLaughlin here. One word answer, yes or no. (Laughter.)

Congress, within the next — by October 1, 2002, will vote, probably many times, on whether to put more money in child care, probably in the Child Care and Development Fund — the Child Care and Development Block Grant, primarily. Should they vote yes?

Doug?

MR. BESHAROV: One dollar more.

MR. HASKINS: One dollar?

MR. BESHAROV: I watch the Price is Right. I'm going to bid closest to the right number.

MR. HASKINS: Okay, so Doug is essentially no.

Elaine.

MS. RYAN: Yes.

MR. HASKINS: Yes?

MS. RYAN: Yes.

MS. ADAMS: Yes.

MR. HASKINS: Okay, yes. How much more? How much — I mean, Congress has to make this decision. How much more?

MS. RYAN: I'd say at least $3.5 billion.

MR. HASKINS: A year?

MS. RYAN: Yes.

MR. HASKINS: So they are going to vote — assuming its five years it will be, you know, $17 billion or $18 billion?

MS. RYAN: That's how much is in the system right now.

MR. HASKINS: $17 (billion) or $18 billion?

MS. RYAN: You haven't told me the other side of the picture though.

MR. HASKINS: Well, I'm coming — we're coming there.

MS. RYAN: The other picture is what's happening with TANF; what's happening with SSBG and other programs?

MR. HASKINS: Well, if I look at our calculation I'd say probably a third of the people who are federally eligible would like some help with child care. That seems conservative. And I look at our estimates — then we're talking about a whole lot more money, not $3 billion. If it's $4.5 (billion) or $5 billion dollars more for 16 states, then it's —

MR. HASKINS: Per year, so we're talking $25 billion.

MS. LAYZER: Per year, yes.

MR. BESHAROV: We calculate, just to cover the non — those people we can't call TANF leavers — just to cover the ones who are not getting subsidies now would be $6 billion more, just to cover the TANF leavers.

MR. HASKINS: So now we're at $30 (billion), over five years.

MR. BESHAROV: This is just the ones — this is the ones who are not receiving subsidies now. And if you go all the way up 85 percent of state minimum — median income, which is the federal standard, depending on whether you apply CCDF costs or Head Start costs, you spend between — additional money between $40 (billion) and $90 billion more.

MS. RYAN: (Off mike.)

MR. BESHAROV: Those are the numbers. And just to kind of — while I have the floor — I said no, but you didn't say why. I think the only way to fix the problem that I described in the horizontal equity problem is to think about other forms of income support for these families rather than just child care. If we have a problem with half of them — and it's going to be a problem whether they're TANF leavers or not — if we have a problem with the very poorest families not being able to use licensed care, and if we're spending a great deal of money on those — on licensed-care families and not for — and families that are not using licensed care are having difficulty, we might think about doing something in the EITC or someplace else to provide a cash supplement to help those families that have the same child care needs, they are just being met in a different way.

Now, that's a complicated argument, and there are issues about whether Grandma's contribution should be cashed out and so forth. But these are real issues. And that's why, Ron, I think the debate has to first be about what is the nature of the subsidy for low-income families? The comments that Gina made are being made exactly for food stamps. This has been exactly the same issue. And at some point we may have to rethink these assistance programs which were designed to sit together with AFDC eligibility. And I may need a new world for that.

MS. RYAN: But I had to say that there is, right now, under the law, a delinking from AFDC and TANF. I mean —

MS. LAYZER: Ever since 1990, actually.

MS. RYAN: There has been, and with the CCDBG — I mean it's always been targeted for low-income, working-poor families. So I just have to put on the table that, in terms of this regulated and unlicensed care and some of the points Doug's making, I have not heard that nor seen it supported anywhere. So I just want to put that on the table because I think it's important.

MR. HASKINS: Let's — I want to come back —

MS. RYAN: I want to answer the question you want to — to answer. I don't think it's the same question.

MR. HASKINS: You already did.

MS. RYAN: Thank you — sorry. (Chuckles.)

MR. HASKINS: $16 (billion) — $15 (billion) or $16 (billion) —

MS. RYAN: And I was the low-ball of the group.

MR. HASKINS: You're going to go up now?

MS. RYAN: I mean, now I'm a shrinking violet? (Laughter.)

MR. HASKINS: Yeah.

MS. ADAMS: Actually, I want to make two quick points. I actually don't have a number, but I do want to make two points. One is I think it's pretty misleading to include Head Start in the base because Head Start is a very different service. It goes through a very narrow income range; it's not targeted to families who are working. It provides — certainly provides some child care support to families, but to think of that as, kind of, in the big Head Start pot, I think is a pretty —

MR. HASKINS: Right.

MS. ADAMS: — I mean, the big child care pot, I think is a pretty problematic thing. And I think some of the other things that are included in that list — I didn't have a chance to look at all of it — may or may not be things that —

MR. HASKINS: Right.

MS. ADAMS: — I would say, as child care funding, that meet the needs that we're talking about today.

MS. RYAN: Well, I'd like to speak to that. I mean, the 21st Century Learning Center Program, for example, is a grant program. It started at about, I think, $25 million. It went to $400 million. Now in the current year it's $800 million, and they are debating an amendment that rise it — increase it to $4.5 billion. It is a grant program that's targeted to public schools for after-school care programming. Thirty-six hundred schools across America get some grant — no less than $50,000. It is like policy shrapnel. And to suggest that — (laughter) — those grants are being (less ?), in any context, of a continuity of child care, after-school care, in any way, I think is also misleading. So the idea of saying you have all these dollars; program them well, I don't think is the case. And I think, just like Head Start, we have the same dynamic where they are not within the state government's control to be able to leverage those funds effectively.

MR. HASKINS: As the audience can probably tell, this is a difficult panel to keep on track here — (laughter) — but I'm coming back to the major issue that I want to explore here which is money.

So, with the caveat that Doug Besharov says that it should be in a different form than just child care — and I happen to know from his writing and so forth that he would prefer cash subsidies like EIDC — everyone here, I believe, thinks that we should spend more money, and the bidding starts at — Elaine surprises us by only going for $15 (billion) or $16 (billion), but we are at least at $30 (billion), and maybe much higher than that. Against that background, there is a very real possibility — Elaine mentioned that states transferred in '99, I believe, about $3.5 billion out of — either transferred it into the Child Care and Development Block Grant from TANF or spent it right out of TANF.

So we're looking for new money, but there's a very real possibility that Congress will cut TANF. There's no question that there will be serious attempts to do it. They might fail, but there will be attempts. What will be the consequence of — not only if we don't have new money, but if one of the major sources of flexibility that funds child care is cut back? What's going to happen to state programs then?

Elaine.

MS. RYAN: Well, the reason why I choose $3.5 billion is exactly that. When you think about how much money is currently in the system now, so to speak, we're talking about the $3.5 billion plus all the Child Care and Development Fund dollars. So I think that that's a starting point just to keep going. If Timmy's in child care and he's one and a half, the likelihood Timmy's going to need it at two and a half is pretty great.

So I think that we need to think about this as a pipeline issue. But I also think that is TANF was ever cut — perish the words — we have come out for sustaining the baseline plus inflation. If we're going to be able to continue the promise of that program, I think it would have a devastating effect on child care in this country. I think it would — it would reverse eligibility expansions, it would limit quality investment, it wouldn't be able to address the child care worker deficit that I discussed. I mean, I think that it would hurt all over. And I think, similarly, if SSBG, the Title 20 Block Grant, is further whittled away this year or next, that also would have a serious impact on families.

MR. HASKINS: Gina Adams.

MS. ADAMS: I agree with all of those things. I also think it's really — if we think about this as being part of the larger goals of welfare reform, having families get off and stay off under the context of time limits, all of the other issues that changed in 1996 — getting rid of these issues — I think this is exactly the kind of system that supports families to keep them off and allow them to go back on — from keep going back on or going on in the first place.

If you start pulling those things back again, I think it's going to end up being targeted, again, just to the families on the current case load. You're going to end up with the families who just are above, trying to stay off, trying to get off, not being able to get it. And it has a serious undercutting effect, I think, of the larger goals of welfare reform.

MR. HASKINS: Doug, do you want to answer that?

MR. BESHAROV: Oh, God. You know, see, Ron just wants me to seem like the skunk who came to his dinner party.

First we were told that this is now a program for low-income working families. And then when there's a question about cuts, we hear about welfare families.

(Cross talk.)

MS. ADAMS: That's not what I was saying. I was saying the prevention of welfare reform, Doug. That's different.

MS. RYAN: (Off mike) — I spoke to child care generally.

MR. HASKINS: Let's let Doug finish.

MR. BESHAROV: I think there are two parts to the answer that I'd give you, Ron. First, there are some number of mothers, usually single mothers, who can only work if there is child care assistance. So we have one group for whom, without child care assistance, it won't pay to work or they will not be able to work. I don't know where the dividing line is, but there is another group of mothers for whom child care costs are a tremendous burden while working. We don't know where that line is in terms of the income differences. But we know the line exists because we know that the large expansion — the large increase in mothers working — mothers with young children — predates welfare reform, predates the expansion of child care assistance.

Therefore, for one group child care assistance is indispensable for avoiding welfare dependency. For another group, child care assistance is another form of income support to make their lives more decent, more livable and so forth. And the question will be, if there are cut backs, and I hope there will — Ron is closer to these things — if there are cut backs, will we have the policy wisdom to make the necessary distinctions between those two groups? And I guess I don't think we do.

MR. HASKINS: Okay, we —

MS. LAYZER: Ron, can I say something?

MR. HASKINS: Yeah, go ahead.

MS. LAYZER: We're sort of talking as if the subsidy system, because of this enormous expansion, has actually begun to meet the needs of the people for whom it's indispensable and stabilize their employment. But, again, the evidence from the Duration Studies suggests that we're talking about something that's a very transient phenomenon. People are getting subsidies for five to seven months. That's not what we were thinking about, I think, when we thought we were going to stabilize the work situations of families. If child care assistance is what's going to stabilize people's employment, then it's not working right now to do that because they're not getting it for long enough.

MR. HASKINS: With the caveat I mentioned about Doug Besharov, everyone here agrees there has to be more money. There's a potential that there could be less money, but let's look at other sources. States still have TANF surpluses, and indeed, states have enough TANF surpluses that they are supplanting very substantial amounts of money and using it for other purposes.

So if a member of Congress wants to vote no on additional child care money, I know that they are going to say, as they have been saying, "Wait a minute, we gave the states all that money, their caseloads are way down, they have big surpluses, we have CBO numbers to show that they have these surpluses. Even though they are supplanting dollars for other uses, why don't the states use some of this surplus for child care?"

You have a big smile on your face. I'll let you go first.

MS. RYAN: Well, I just — I was wondering — it was disciplined of you to only raise this issue so late in the program. But I have to say that I think that that's another misperception, that there are these huge TANF surpluses looking for things to fund.

If you look at dollars that are programmed, that are due to be unliquidated; even, quite frankly, some of the child care dollars that we know are obligated but not yet expended, there are pipelines for this funding and plans for future expansions. So to say that it's all up there saying, "Gee, what are we going to do today?" — I think is just wrong.

Secondly, I think that the unused — unused in people's minds — TANF funds are now restricted under federal regulation. So those surpluses can only be used for assistance, which means that unless you're providing child care to people who are receiving cash welfare, you cannot use those dollars for any other purpose.

So this idea that even if all states had transferred their maximum, and most did in terms of the 30 percent — 49 states transferred TANF dollars to child care funds — this apocryphal surplus is restricted in how those state funds could use.

And as to the supplantation discussion, I don't know where to begin. It's a longer discussion — perhaps another forum. But to say that states — quite frankly, I think we were speaking about this earlier, and I think Jean mentioned this in her remarks, that state budgets are getting tighter, in large measure because of Medicaid dollars, creating some deficits in some of the states, that there are — and then really, it's because of long-term care costs associated with prescription drugs for the elderly, and so that's crowding out other kinds of spending. Then there are choices that are made at the state and local level. And if the choice is to say that we're either not going to fund this program for poor families anymore with state dollars and we're not going to do it at all, even though we have TANF dollars to spend it on, I don't think that's the right choice.

MR. HASKINS: Gina.

MS. RYAN: If states made those choices, then I'd say good for the kids, good for the families.

MR. HASKINS: Gina.

MS. ADAMS: Just one very minor thing to add to that — the things that we've heard. There was also a fair amount of concern about building up the demand too much in child care if you couldn't count on having that money in the future. And so there was some concern in some of the states we went to about that issue; about continuing to take more TANF money when it might all disappear in reauthorization.

MR. BESHAROV: Let me go with Elaine here and say, I think — I would say almost the same thing but I'd say it a little differently, Elaine. I would say the money — the unspent TANF monies look very large. I think we generate $5 (billion) to $7 billion a year, something like that. But when you take a good look at that pot, there just isn't enough there to sustain major cuts in other parts of child care or welfare-related activities. It looks big for one year but if you try to carry that out for five years you just wouldn't have enough to maintain current spending.

Current spending right now is, in large measure — Elaine mentioned the $3.5 billion. Part of that is because we have unspent money from a few years back that's funding the expansions. I mean, we're a little bit in a Ponzi scheme here where — and I don't mean that in a negative way, but we're borrowing —

MS. ADAMS: It's never been used in a negative way. (Laughter.)

MR. BESHAROV: I guess.

We're spending money that built up in earlier years when we were able to save it. That money is now — the flow is now so large you can't go back and say, "Well, you've got this unspent TANF money," because the flow has increased. So there would have to be, Ron — any reasonable look at the way they would cut it would affect child care funding.

MR. HASKINS: So the conclusion of this panel — to bring this portion of the — (audio break) — need more money ranging from those — low opening bid of $16 (billion), but I'll bet you'd be willing to go higher, to at least $30 (billion) —

MS. RYAN: (Off mike.)

MR. HASKINS: — and that the other possible ways to get money, that I mentioned are — the panel does not think those are very good ideas. So if Congress doesn't vote for new funds for child care, there are going to be big problems out there in the countryside.

And on that happy note, let's open this up now to the audience. Let me make a few comments about this.

For those in the webcast audience, if you would like to ask a question, e-mail it. And the e-mail address is question@brookings.edu — question@brookings.edu. And for those of you in the audience, if you'd like to ask a question, raise your hand and we'll bring you a microphone and then state your name and where you are — where you work, and ask a question.

Now, we want to emphasize questions here. A very brief comment is okay, but let's not have any filibusters here.

Go ahead. This gentleman right here on the aisle.

Q: I'm with Fight Crime: Invest in Kids. My name is Bill Christesen (sp). We're all speaking primarily in terms of costs. Could you comment in terms of spending on child care as an investment — the number of kids that won't need remedial care, the number of kids that won't need to be arrested; in prison?

MR. HASKINS: In other words, the issue here is quality. If we spent more it would be an investment. We'd get the money back. Should we — we mostly just talked here about let the market be the way it is now. We just mentioned briefly new investments in quality so the average quality of care would increase, and the gentleman wants you to address that issue, especially in this context that we've established of somewhat tight funds. What are we going to do about quality? Are we going to make investments in quality? And if the money is fixed, that means fewer people get services and so forth. So what are we going to do about quality?

Jean Layzer.

MS. LAYZER: When we're talking about low-income families, in our survey of low-income families in the 25 communities, 73 percent of the mothers work non-standard hours; irregular hours every week with their schedules changing every week, evenings and weekends. And I think the challenge, if you are going to talk about quality, is what does quality mean in that context? It seems to me that we first need to deal with issues of the stability and continuity of care, which is important for kids, and make ourselves think harder than we have done so far about it's irrelevant to a lot of those families to have high-quality center care because it doesn't work for them; it doesn't work for their schedules. The centers can't accommodate — those kind of centers.

So I guess I would be looking at ways to make sure that families get — that more of the lowest-income families get subsidies, that they get them for a longer period of time, and that there's some continuity and stability in their care. That, to me, is an element of quality for the families that we are looking at.

MR. HASKINS: Doug Besharov, I have read your writing over the years. Do you think that if we make investments in quality there will actually be a return on the dollars, based on the evidence we have now?

MR. BESHAROV: I think we'd do better strengthening the families, as Jean said. I think that the most important thing for these kids is to have the best, most nurturing household that they can have. And the first step is to regularize the kind of care the kids get before we start talking about add-ons to quality. We have enough of a challenge providing some help for that irregular care, and I'd do that first.

MS. ADAMS: I guess I ?

MR. HASKINS: Gina?

MS. ADAMS: I think those issues are important. I think the bottom line is, though, that if we don't make sure that these kids are getting good quality care, because we know that it can make a difference for them, then we're going to be having a huge missed opportunity.

One of the challenges of the subsidy system, as it currently operates, is that it does operate solely on the private market. The private market in low-income communities does not sustain good quality care. So you have parent choice of the options available to them in their community, but they're not necessarily the best quality options.

One of the things I'd like to see is to look at the subsidy system, identify ways that we can actually sustain better quality in the market and use the subsidy system to help families access that. And then we'll be making sure that, for the families that aren't needing the evening and weekend care that may not necessarily need to be — same kind of issues coming out, then we'll have the kids getting what they need.

MR. HASKINS: Elaine.

MS. RYAN: Well, I would just say that I don't think it's necessarily — we have the luxury of sequencing, unfortunately, of how we make these investments. And so, I think it's important that whether they're informal situations for these children, that there are states that are thinking of new ways of setting up community centers where Grandma can bring the child down to an enriched reading program for a few hours then bring the child back and then provide that care at home. That is an enhanced quality, perhaps more than that child would ever get. I think it's a worthwhile investment.

I think that they are all trade-offs though. And I hope that we don't find ourselves managing what we — I think we've all discussed as a larger issue, in the zero-sum gain. You could do a little quality or you could do a little access or you could do a little subsidy or you could do a little this or that.

I think we have to figure out what is quality? What's the nature of the investment we want to make? We've got to squarely say that even if we had center-based subsidies, there aren't the workers and the continuity of the workers in the centers to provide quality care.

We also know, though, that in some of the studies like the Avis Adarian (ph) study that came out, you know, child care does matter. And the quality of it can enhance it. And I'm also thinking about special needs children, children in the child welfare system, children with disabilities, with multiple barriers.

MR. HASKINS: Okay, let me ask this question, then. Doug, again is —

MR. BESHAROV: See, he's doing it to me. I — (laughter).

MR. HASKINS: No, I'm not. I just — there is agreement on the panel, I think, that quality is an important issue. It's very clear, I believe, that the current system in which we basically leave it up to the states — the federal government has some investments that states can only spend for quality, but generally we leave it up to the states. And the states have gone to town, they've created a whole new system, greatly expanded the number of kids in it and so forth, but they don't deal in any very — certainly not a way that satisfy this gentleman, with quality.

So, if we are going to focus on quality and we want to increase quality, how are you going to do it? Are you going to recapture some of this system at the federal level and the federal government is going to make — impose various requirements on the states? How are we going to — how are we going to advance quality? What is the way to do it?

MR. BESHAROV: Well, while you guys are thinking about that, let me just put two numbers on the table.

The federal government's, quote, "non-investment" in quality is $585 million this year in the CCDF — can only be used for quality — $584 million. And the federal government's investment in quality in Head Start is $384 million this year. If you take a few other funding streams you're close to $1 billion in, quote, "quality," not slots. By the way, Gina, that's $1 billion off his — for slots. That's a lot of money.

So the first step, Ron, would be somebody in the federal government, looking at how that money was spent — there's a website that, kind of, says, "New York did this and New Jersey did that," — somebody could take a look at that billion dollars a year now and see what's being purchased and what the impact on the provider field is.

MR. HASKINS: Jean.

MS. LAYZER: Well, I suppose one easy — the one thing we know, and we've held onto it forever, is not that we know, unequivocally, that quality child care produces dramatic improvement in child outcomes. We know that high quality early childhood education produces dramatic improvement in child outcomes for low-income children. And the quality money is not targeted to those children or even to low-income communities. It is, by federal design, generally targeted. So the money is not necessarily, or even likely, to be reaching the children who — even the money that we're spending — it's a lot of money but it's being targeted broadly, as the states are instructed to target it.

I think we should want high-quality child care for any child because they should have a good experience day-to-day. We shouldn't want our children in unsafe and unnurturing environments. But if we think that a certain — if we can demonstrate with research that a certain level of quality is essential, particularly for low-income child care — for low-income kids, then the way the quality dollars are being spent now is not maximizing our opportunity to do that.

MR. HASKINS: Any one else want to comment on it?

MS. RYAN: I just want to say that the federal government ought not to regulate and prescribe what is quality and set standards to say what states should do in a fixed amount of funding.

I think, you know, respectfully, there are a lot of trade-offs that are made. Reimbursement rates, stable child care work force, as well as enriched child — early childhood education; they all cost money. And I think that states, and, by the way, local communities that are now programming these dollars more than ever before, may know best about the needs of their communities. We're certainly finding that in non-traditional off-hours where there are eight states targeting grants to ask employers what are the shift work, you know, schedules; whether there's available informal care provided — non-traditional care — in our community.

So the idea that the federal government should prescribe what's happening from community to community and family to family, I think is a mismatch. And in federal funding that's capped, it — when we move from a place where there was an individual entitlement to child care in this country to a fixed amount of block grant funds, the federal government opted out, smartly, in a directive role about how states should meet these needs in a community.

MS. ADAMS: Ron —

MR. HASKINS: Other questions.

MS. ADAMS: Actually, Ron, could I comment on that one?

MR. HASKINS: Yeah, go ahead.

MS. ADAMS: All right, just one quick thing.

I think — I agree with a lot of that. I think one thing that's really important to recognize — I think that there's a pretty profound ambivalence in the CCDF about the issue of quality. In the subsidy part, it's not necessarily clear that we want quality, yet there's a quality set-aside to do quality.

We have to recognize the billions of dollars going to subsidies are having as big an impact on the quality of care of kids, but not necessarily in the way we want it to; with caps, with the way the payments have operated in terms of providers not necessarily being willing to serve kids, et cetera, that I think that we have to start addressing — kind of reframe the way we think about it. Is this a subsidy program to provide quality care to low-income children and to help parents work, or is this a program to help parents work?

MR. HASKINS: Well, the question —

MS. ADAMS: (Off mike) — some quality set-asides.

MR. HASKINS: But the question —

MS. ADAMS: And I think that — let me just finish it — and I think if we think about it that way, then giving the states, kind of, that framework frees them up to think about how they want to invest the subsidy funds with making those own trade-offs which are going to happen in different ways and different places.

But I think it's really important to recognize that the feds have, I think, given a certain amount of incentive in a different direction. There is a 75th percentile. There are other things that say that states are going to have to put certain requirements into place that focus on work, not on quality within the subsidy funds.

MR. HASKINS: The question over here.

Q: I want to thank this group for what you've shared. It's been very, very, very inspiring, I think.

My name is Edna Ranck. I'm with NACRRA, the National Association of child care Resource and Referral Agencies, and we are working very diligently on the data collection issue, I assure you.

My question comes from Gina's comments about access and retention of subsidy, and then the third step, which would be — I guess if we have TANF leavers we also have child care subsidy leavers, and what happens to those people who are leaving? Two categories: one, for some reason their subsidy is taken away because they haven't met the requirements that they're supposed to fill out all the paper, et cetera, and it gets taken away, or they are leaving because their child has aged-out or in some ways they're incomed-out. What's the direction of that?

MS. ADAMS: We actually don't know a lot about that. I think the aging-out issue, the families who are simply no longer eligible because they don't need child care in that way, is different. There's two other ways you can lose. One is the inadvertent losing because you don't comply with requirements. And then it depends a lot on where you are and how easy it is to get back in. You may have a provider that allows your kid to stay while you deal with all the paperwork to come back, in which case the provider is out the subsidy money. You may lose your slot, in which case you've lost your child care and your subsidy and you have to deal with that while trying to retain your job. So that's fairly complicated.

The other thing I think is important is the families who lose subsidy because they get over-income eligible. The number of families that we talked to who were terrified of going over their income slot and not taking raises, not — you know, being freaked-out about, you know, "If I get this next promotion I'm not going to be able to stay in the subsidy system. Should I take it?" Those kinds of issues, I think, are fairy severe because even though they are higher-income, they're still fairly low-income, and the full cost of child care subsidies often, for a center that they're using or whatever, can be beyond their means.

MR. HASKINS: Jean Layzer.

MS. LAYZER: There's a very puzzling thing that we found in our community survey. About 16 percent of the low-income families that we talked to are actually currently receiving subsidies, but another 14 percent had some experience with the subsidy system. And we asked them, "What happened when you got a subsidy, in terms of whether you changed your provider, and what happened when you lost the subsidy?" And, interestingly enough, in neither case did the provider change.

Now, I think one of the reasons for that is that most of the families that we were talking to were not using center care. And when we asked them, "How did you manage that?" — for the people who lost subsidy but maintained their provider, it's an interesting — it's the kind of story that you must have heard in your focus groups — the provider carried them for a while. The provider was out-of-pocket until the family could put together resources from other family members, from friends, they bootstrapped in the interim. It's not a very satisfactory system, but I think we underestimate people's resilience and ingenuity. We shouldn't count on it, but we didn't have people — we didn't have anyone who said, "I lost my subsidy and it was a disaster."

So I think it's not an ideal situation where you have this frequent recertification or you fall off because you forget to do the paperwork or your income changes enough to take you off. But it doesn't seem to be the disaster that we thought it would be.

MR. BESHAROV: Ron, if I could make one point about this.

MR. HASKINS: Yes.

MR. BESHAROV: Here we are in total agreement, but I just want to take this another step further. Some states have cliffs, which is to say you earn a dollar more and all of a sudden you are hit with a big copayment or you are not eligible. Other states have different kinds of phase-outs of the subsidy or phase-ins of the copayment. Those phase-ins tend not to reflect other kinds of phase-ins, whether it's food stamps or EITC or whatever.

So what we're looking at — I want to come back to this point because I think I got a little short shrift on it — we are dealing with just one of a number of subsidies that go to families that work. And they are acutely aware — some of them are acutely aware of phase-ins, phase-outs, cliffs and so forth. It would behoove us — (chuckles) — all right, to put the food stamp, Medicaid, EITC people together — and I know I've mixed a couple of jurisdictions there — and make sure these phase-outs are — there ought to be some compromise so that the phase-outs look about the same because they really do create kind of oddball situations with constant recertification. We really could have — Gina, we could have this exact conversation about food stamps.

MS. ADAMS: We did, actually. (Chuckles.)

MR. BESHAROV: And it's the biggest predictor, right, of whether working poor will stay on food stamps or not. So there are these tremendous problems in terms of access which I really think we ought to be dealing with in this process, and I know many states are.

MS. RYAN: I just need to add to this to say two points. First of all, you know there's an emergency in reforming food stamps, so I look forward to that because that program is federally designed and a nightmare in terms of supporting families — working families.

Second, I think that in a lot of the modeling that's gone on about people leaving welfare and whether or not they are doing better or living above the poverty line or moving an inch, it's interesting to me that child care, the cash value of child care, is never included in that design. And yet, we know that the child care subsidy is probably two to three times, or more, valuable than a cash welfare subsidy ever was to a family. And even more, I think, that — just to give a sense, I think it's in West Virginia where they say that one year of child care subsidy — the cost of subsidizing, fully, child care, is more expensive than two years in their state university.

Those kinds of discussions we don't have here. We think about child care as — it's like a vanity you add-on. It is a cash transfer. There is a cash value. We should value it as such. And when families lose those, they are putting pieces together but may not be as — better off or even equally situated as they were prior to that.

MR. HASKINS: Joan — (off mike).

Q: Well, Ron, thanks for having this. There's many, many things that have been said here that I could comment on; obviously several policy points that were?where I think there's disinformation. But let me just say something about the quality issue; this notion that there's all this quality money out there or that the system is "provider-driven."

In your report, Jean, I think the highest state per child per — (audio break) — and that was Minnesota. Is that correct? That's pennies per day per child, to my way of thinking.

If you look at the jobs evaluation — the early jobs evaluation that we did — if you look in the Atlanta site, for example, and you look at the readiness levels of kids of former welfare — of welfare mothers in that report, you see high levels of kids that are not ready for school. We cannot have, in this city, debate going on down the street about education and ignore the fact that we've got millions of children in the child care system; hundreds of thousands — more than a million, I think — the 1.1 million, Jean — we're mixing apples and oranges when we use that number — and we can't ignore the fact that we're not doing anything for their literacy. Three National Academy of Science reports say we should look at this; it's time for us to look at this.

MR. HASKINS: Anybody want to comment on this?

MS. RYAN: Amen. I agree.

MR. HASKINS: (Chuckles.) Amen.

MS. ADAMS: Amen.

MR. HASKINS: Other questions? All the way in the back.

Q: Hi, I'm Christina Martin-Fervitum (ph) with The National Women's Law Center. And the panel has touched a couple of times on an issue about providers. There's a provider crisis, obviously. The majority of providers are women. They're grossly underpaid, yet clearly they're subsidizing the system. What does the panel think about the impact that the provider crisis is having on quality, and what we going to do about providers during reauthorization?

MS. RYAN: I certainly don't have any data — I don't know whether Jean or Gina does — about the provider crisis. I defer, but I'd certainly be happy to talk about what we should do moving forward.

MS. LAYZER: One of the questions we asked when we went out to the 17 states and 25 communities — one of the specific questions that the government asked us to ask was, "Is this expected pressure of welfare reform on the child care supply — can you see it in the shortage of providers?" And the answer was, "No. What we can see is a shortage of providers because of the booming economy. Women are moving into better-paying jobs." And so, in some of the poorest communities; in big cities like Minneapolis, there's a scarcity of child care centers, whether or not you have a subsidy because of the women who had staffed those centers can find better-paying jobs elsewhere.

So I think — it seems as if that's not going to be as much of a problem. If the economy is going to take a downturn then we're going to have more people flowing back. But we wouldn't wish to solve the problem that way.

MS. RYAN: I just want to speak to the fact that there is a larger human services workforce issue going on in this country where we have, in long-term care, personal care attendants, child welfare frontline workers, child care workers, really in the fundamental human service issues, there is a shrinking group of people available. And I think form follows function in some ways. It is low salaries, it is high stress, turnover, credentialing; discussions that we have of whether or not you need to have somebody with an advanced degree or whether or not we're just managing those arrangements.

So I think that we need to look at this as a cross-program issue. And certainly we have a lot of at stake with the people directly working with children and something needs to be done, I think, systemically.

MR. HASKINS: Gina.

MS. ADAMS: I'd like to add one other thing to that which is one of the other studies that we're coming out with this summer is similar kinds of issues I've talked about, in terms of parents and their experience with the system, was our conversations with providers. And though we focus a lot on the cap of the rate, which is clearly a critical issue in terms of who's even willing to serve low-income kids, the problem that we found a lot is for those providers that are in the system, there's enormous ways that those rates are actually undercut in terms of late-starting times, in terms of not getting there for several weeks, not being advised of the termination so you serve children for several weeks after it's over, not being paid for things like absent days, going to part-time subsidies as a parent loses a job.

All of those issues mean that those rates aren't even — the provider is not getting what they're charging to a private-paying parent for a subsidized child. All of those things, I think, seriously undercut the quality of the care that providers are getting because — able to provide because they're getting less resources. But also, I think, it's having an impact on who's willing to come into the system. There's clearly a lot of providers that simply serve low-income children who have no other choice. But in terms of some of the higher-end providers that might be willing to serve low-income kids, if the system was operating in a way that allowed them to run a good business, I think we'd have some pretty serious changes.

So one of the things I'd like to see is some — looking at how we actually pay providers, are we being responsive, are we actually paying what we say we're paying, which is the rate that private-paying parents — that they are charging private-paying parents?

MR. HASKINS: Now we come to the moment — oh, Helen Blank (sp).

Q: I think the most tragic thing about all of this — and, you know, some of this relates to Joan's comment — is that the subsidy system is not designed at all with children in mind or with — you know, we say it's designed to meet families' needs, but it isn't even designed to meet low-income families' needs. And as long as we keep thinking about this as an interim — intermittent service to meet the needs of families related to their particular income and work schedule, that we will never provide quality care to children. And I think it's almost a joke, unless we turn around the whole subsidy system with a different focus, to talk about providing quality.

Also, to up the ante, we need to think about how to provide stable, decent care to children whose mothers work odd hours and on the weekends that doesn't switch all the time. In addition, provide these same children, who are low income whether they're on TANF or not, with a high-quality early education if we are interested in early literacy. And I'm upping the ante because I think families need a double subsidy. They need care whether parents are working these odd hours, and that — when they're sleeping they're not going to be able to get their early education. And we need to figure out how they're also going to get that early experience that will help them go to school ready to succeed.

MR. HASKINS: Thank you.

Now we come to the moment in the program you've all been waiting for. It's where our brilliant panelists crystallize all of these issues in dazzling one-minute statements.

Doug Besharov.

MR. BESHAROV: I'm glad to go first because I wanted to agree so much with Helen Blank (sp). (Laughter.)

What I've tried to say today is we have a child care system that is trying to do two things. One is provide, really, income support for very low-income families, mainly leaving welfare, and the other is to provide, sort of a nascent national child care system, whether it's early childhood education or whatever. The two don't mix, and that's what I've been trying to say.

We ought to deal with the problems of the very low-income who need financial help to work, and we ought to deal with the problems of early education. We ought to see whether that can be done in one system or two. And that ought to be the discussion, because, Helen, I totally agree with you. We won't get to what you want unless — unless, in my opinion — now, I know you won't necessarily agree — unless we resolve that dual purpose of the current system.

MR. HASKINS: Elaine, one minute.

MS. RYAN: We're at a policy crossroads. We can either continue a system of trade-offs and choices of what we'll choose to fund, or whether we'll move forward smartly to a new vision in this country of what a child care system should look like.

And so we need to look at who's eligible, how big is the subsidy, what is quality, how much are we willing to invest in it for how long? And unless we have that discussion in this country, we'll continue this badinage of subsidy versus quality that really doesn't produce, in the long term, a direction — a policy direction in this country that's sorely needed.

MR. HASKINS: Jean.

MS. LAYZER: Well, I want to agree with Helen and with Doug because I think that it will make it simpler to define what we mean by quality if we think about a system that is supporting parents' work, then quality may be responsive and stable support in a safe and nurturing environment.

If we think about quality in an early childhood setting, then we're talking about a program that readies children for school and is really focused on the needs of that child. I mean, from the child's point of view, child care isn't necessarily the most desirable or developmental experience the child can have. If we really thought about what was best for a child, we might say that we want very young children to be home with their mothers or with their primary care givers.

So we have to think about child care, it seems to me, as a support for a working parent who absolutely has to work and to make that as safe and as stable as we can, and then to think about, educationally, what kind of system we can put in place that will provide those children with the experience they need to succeed in school.

MR. HASKINS: Gina.

MS. ADAMS: Remarkable consistency, I think. We all agree that we're kind of in the stage of moving forward now on a point of transition.

I'd have two points, I guess. One is that we have the concept of having a system that's based on parental choice. I don't think we have the reality. And so, one of the questions, I think, facing us is, "Are we going to develop a system that is truly based on parent choice?" — which means that low-income parents have access to good quality options, including Grandma if that's what they want, or including a really good center in their community if that's what they want. Hopefully, Grandma would have access to something to help her do a job so that we can meet some of their early literacy needs, or whatever. So I think real parent choice is a very different issue. And it includes quality and work; it includes developing an infrastructure in communities that actually supports access to different options.

The other thing is related to the work that we've been doing which is I think we have to start paying attention to how we're doing it. We can't simply be — I mean it's really important for us to have these broad policy parameters but if we're not looking at how these things are implemented in local communities; how caseworkers are dealing with families, then a lot of these big policy goals are not actually working out because the case workers still may the welfare system mentality that focused on fraud and abuse. And it doesn't matter what we change up here if that's what's going on in the locality. So it's really a double focus of moving forward and trying to do what we're doing better.

MR. HASKINS: I thank our panelists for a very nice discussion. Let's give them a nice round of applause. (Applause.)

And I want to inform our audience that our next public event will be on August 2nd. We've invited some mothers who have left welfare to come and be on the program, and also some journalists who have focused on welfare stories. So that will be on August 2nd. We'll look forward to seeing you then. Thank you very much for coming.

END OF EVENT