We Dont Just Need More Money

1
We Dont Just Need More Money

• Visioning a New Child Care Financing Structure
• in Maine

Louise Stoney Alliance for Early Childhood
Finance
September 27, 2002
2
What Are We Financing?

• High-quality early care and education services
  that
• offer children opportunities for early learning
• support families with a range of year-round, full
  and part-day services
• provide comprehensive services to children and
  families who need them

3
What will it cost?

• Our charge today is to explore various financing
  systemsso we wont be spending time costing out
  the service
• But for purposes of discussion, lets assume we
  are talking about per child costs in the 6,000 -
  7,000 range for full-day early learning and
  10,000 - 12,000 range for comprehensive
  services.

4
Assume
Funding
5
The ECE Layer Cake
6
What can policy makers do to encourage and
support layered funding?

• Establish common funding standards and monitoring
  practices across all ECE funding streams

Coordinate or consolidate Requests for Proposals
and reporting requirements

• Assume that a program will have a single budget
  to which multiple funders will contribute, a
  single/coordinated audit, etc.

7
Combine
and direct financing.
8
What is a direct subsidy?
Funding that directly supports an institution or
industry

• Higher Education - government appropriations to
  public private colleges grants for research
  special projects endowment/investment income
  revenues from auxiliary services (food, housing,
  bookstore, sports..)

9
Funding that directly supports an
institution or industry
What is a direct subsidy?

• Housing Equity from the Low Income Housing Tax
  Credit, Federal Community Development Financial
  Institution Grants and Subsidized Loans, HUD
  Grants, Foundation and other private sector
  grants.

10
Funding that is tied to a specific child or
family follows them to the program/services
they select.
What is a portable subsidy?

• Higher Education - government grants to students
  (Pell, BEOG) scholarships, subsidized loans, tax
  credits.
• Housing - Section 8 vouchers, home mortgage tax
  deduction, housing subsidies from government or
  an employer.

11
In other fields, direct and portable subsidies
are designed to work in tandem.
Direct and portable subsidies work in tandem.
.but this is not the case in early childhood
care and education.
12
In early care and education

• Direct Subsidies - Head Start, state pre-k/school
  readiness grants, subsidy contracts, a few
  private sector grants, CACFP.

Portable Subsidies - child care certificates, the
dependent care tax credit, private scholarships.
13
Cost/price analysis in child care and higher
education.
100
90
Tuition
42
80
Fees
70
Institutional
87
Total Cost
Subsidy
60
50
40
58
30
20
13
10
0
All Child Care Centers 1993-
All private non-profit
94
colleges 1995-96
14
Early care and education policy needs to
recognize that direct and portable subsidies are
not substitutes for one another but should be
combined.
The moral of the story
15
Financing Approaches that Combine Direct
Portable Assistance

• Quality Improvement Grants
• Base Funding Contracts
• Grants for Specific Costs (wages, benefits,
  facilities)
• Industry Supports (economies of scale)
• Tax Benefits for Families and Programs

16
Quality Improvement Grants

• Texas Comprehensive Child Development Centers
• Wisconsin Quality Improvement Grants
• Mississippi Child Care Enhancement Grants
• Colorado Educare Differential Reimbursement

17
Base Funding Contracts

• Connecticut Child Care and School Readiness
  Contracts
• Georgia Prekindergarten
• The Military child care system

18
Grants for Specific Costs

• Wage Initiatives - stipends to providers (NC, WS,
  OK, IL, NY), grants to programs (WA), stipends
  grants combined (CA)
• Subsidized Benefits - RI and NC
• Facility Grants Subsidized Loans (CT, IL, RI,
  NC, MA, and others)

19
Industry Supports

• Tompkins County (Vision)
• Kansas City World-Class Early Education System
  payroll support

20
(No Transcript)
21
Tax Benefits

• Colorado School Readiness Tax Credit (proposed)
• Oregon Child Care Investment Tax Credit (modeled
  on LIHTC)
• Child and Dependent Care Credit (Maine et al)
• Additional industry-related tax benefits (new
  ideas)

22
(No Transcript)
23
Economic impact of child care subsidies.
Tompkins County gains 4 for every 1 invested in
child care subsidies
Total Direct Impact of Subsidies 1.3 Million
Average Children Enrolled Per Month 413
Average Annual Subsidy By Child 3,150
Total Economic Impact of Child
Care Subsidies 5.3 Million
Indirect Effect from CentersSuppliers Making
Purchases 416,017
Induced Effect from Child Care Staff Spending
Wages 364,015
Parents Receiving Subsidies 206
Average Wage of Parents 15,548
Productivity Impact from Parents Wages 3.2
Million
24
Child care subsidies support the services and
retail trade industries.
Employment among families who receive child care
subsidies.
25
A Case for Action
The services sector leads employment growth.
Georgia Industry Employment Growth, 1996-2006
50
44
45
40
35
30
27
25
25
22
Percent Change
20
17
16
14
15
12
10
5
0
Source Occupational Outlook, 1996-2006
26
Think outside the box.
some of the best ideas havent been tried yet.
27
Think Outside the Box.

• Fees, Surcharges Sin Taxes
• Arkansas a new surcharge on beer, earmarked
  for child care
• California imposed a surcharge on cigarettes
• The Military uses revenues from the PX
• Earmarks on Revenue
• Maine, Kansas and Kentucky earmarked tobacco
  settlement funds
• Georgia earmarked part of the lottery for pre-k
  
• Missouri earmarked a portion of the Gaming
  Commission Fund

28
Think Outside the Box.

• Tax Credits
• Maine doubled state DCTC for families who
  select quality child care and Employment
  Increment Tax Credit could be adapted to early
  care education
• Colorado School Readiness Tax Credit (proposal)
• New York greatly expanded its Dependent Care
  Tax Credit
• Oregon child care investment tax credit modeled
  on low-income housing tax credit

29
Think Outside the Box.

• Other Public Funds
• Rhode Island taps into health care funds to
  help pay the cost of health insurance for child
  care providers.
• Connecticut makes tax exempt bonds available
  to help finance facilities, then uses TANF funds
  to underwrite a portion of the debt.
• New York, D.C., Boston use criminal justice
  funds to help create child care centers in court
  buildings.

30
Think Outside the Box.

• Private Funds
• North Carolina, South Carolina and Kentucky set
  up public/private entities to raise and
  administer funds for child care
• Florida established a matching grants program
  for employer-supported child care
• Indiana and Pennsylvania Foundations are
  building child care endowment funds
• New Jersey, New York, California, Hawaii, Rhode
  Island Puerto Rico TDI provides partial wage
  replacement for maternity leave