ESSENTIAL but OFTEN IGNORED: CHILD CARE PROVIDERS in the SUBSIDY SYSTEM Executive Summary

Essential but Often Ignored Child Care Providers in the Subsidy System Gina Adams Kathleen Snyder The Urban Institute with the assistance of Kathryn Tout Child Trends Occasional Paper Number 63 Assessing the New Federalism An Urban Institute Program to Assess Changing Social Policies Essential but Often Ignored Child Care Providers in the Subsidy System Gina Adams Kathleen Snyder The Urban Institute with the assistance of Kathryn Tout Child Trends Occasional Paper Number 63 The Urban Institute 2100 M Street, NW Washington, DC 20037 Assessing Phone: 202.833.7200 the New Fax: 202.429.0687 Federalism E-mail: [email protected] An Urban Institute http://www.urban.org Program to Assess Changing Social Policies Copyright © February 2003. The Urban Institute. All rights reserved. Except for short quotes, no part of this paper may be reproduced in any form or utilized in any form by any means, electronic or mechanical, including photocopying, recording, or by information storage or retrieval system, without written permission from the Urban Institute. This report is part of the Urban Institute’s Assessing the New Federalism project, a multiyear effort to monitor and assess the devolution of social programs from the federal to the state and local levels. Alan Weil is the project director. The project analyzes changes in income support, social services, and health programs. In collaboration with Child Trends, the project studies child and family well-being. This paper received direct funding from The John D. and Catherine T. MacArthur Foundation and the David and Lucile Packard Foundation. The Assessing the New Federalism project is currently supported by The Annie E. Casey Foundation, The Robert Wood Johnson Foundation, the W.K. Kellogg Foundation, The John D. and Catherine T. MacArthur Foundation, and The Ford Foundation. The nonpartisan Urban Institute publishes studies, reports, and books on timely topics worthy of public consideration. The views expressed are those of the authors and should not be attributed to the Urban Institute, its trustees, or its funders. Analysis for this report was completed by the authors along with Kathryn Tout. The research presented in this report is based on the site visits and data collection of a larger team of researchers, which includes the authors, James Barsimantov, Jeffrey Capizzano, Patricia McMahon, Deborah Montgomery, Stefanie Schmidt, Freya Sonenstein, and Kathryn Tout. The authors are grateful for the assistance of N’Kenge Gibson and Cynthia Andrews. The authors would also like to thank Matthew Stagner, Alan Weil, Helen Blank, Brenda Coakley, Stephanie Curenton, Pia Divine, Mark Greenberg, Anne Goldstein, Joan Lombardi, Ivelisse Martinez-Beck, Deborah Montgomery, Monica Rohacek, Susan Russell, Rachel Schumacher, Karen Tvedt, and Lynn White for their helpful comments on earlier versions of the report. A special thanks to the many state and local child care administrators who participated in the interviews and reviewed an earlier draft of this report, as well as the many child care caseworkers, providers, and parents who participated in our focus groups. About the Series Assessing the New Federalism is a multiyear Urban Institute project designed to analyze the devolution of responsibility for social programs from the federal government to the states, focusing primarily on health care, income security, employment and training programs, and social services. Researchers monitor program changes and fiscal developments. In collaboration with Child Trends, the project studies changes in family well-being. The project aims to provide timely, nonpartisan information to inform public debate and to help state and local decisionmakers carry out their new responsibilities more effectively. Key components of the project include a household survey, studies of policies in 13 states, and a database with information on all states and the District of Columbia, available at the Urban Institute’s web site. This paper is one in a series of occasional papers analyzing information from these and other sources. Contents Executive Summary vii Introduction 1 Understanding the Policy Context for Providers and the Subsidy System 2 Why Providers Matter 4 The Research Approach 5 What Is in This Report 8 Part I. What Affects How Much Providers Are Paid to Serve Subsidized Children? 9 Chapter 1. What Affects How Much Providers Receive from the Subsidy Agency? 11 Policies that Affect the Maximum Amount that Agencies Will Pay in Theory 11 Policies and Practices that Shape What Providers Actually Receive from Subsidy Agencies in Practice 17 Conclusions 25 Chapter 2. Policies and Practices that Shape How Much Providers Receive from Parents 26 Parent Fee 27 Other Parent Fees 29 Collecting the Entire Payment from Parents 29 Conclusions 30 Part II. Other Policies and Practices that Affect How Providers Experience the Subsidy System 31 Chapter 3. Policies and Practices that Affect the Payment Process 32 Getting Authorized for Payment 32 What Providers Have to Do to Get Paid 34 The Timing and Reliability of Payments 36 Conclusions 42 Chapter 4. Factors that Shape Providers’ Overall Interactions with the Subsidy System 43 Number of Programs or Agencies 43 Staffing Responsibilities within the Agency 45 Interactions with Caseworkers 46 Extent to which Providers Are Viewed as Partners 47 Conclusions 49 Part III. Summary and Implications 50 Major Findings and Their Implications 50 Strategies to Address Providers’ Needs 57 Opportunities and Challenges in Improving Provider Policies and Practices 62 Issues for Future Research 64 Conclusions 65 Appendix 1. Study Methodology 67 Appendix 2. Provider Focus Group Participants 70 Appendix 3. How Much a Hypothetical Provider Receives under Three Scenarios 71 Notes 74 References 78 About the Authors 80 vi L ESSENTIAL BUT OFTEN IGNORED: CHILD CARE PROVIDERS IN THE SUBSIDY SYSTEM Executive Summary Child care subsidies are an essential component of welfare reform, as they help low- income parents work. Subsidies also pay for the care of about 2 million low-income children, and thus can play a role in their development. However, we know rela- tively little about the child care providers upon whom the subsidy system depends. Understanding more about the role of policies and practices in affecting whether providers are willing to serve subsidized children and the kind of care they are able to provide, is central to ensuring that the subsidy system achieve its goals of sup- porting parental work and children’s development. These issues are also important in terms of whether families receiving subsidies have “equal access” to child care that is comparable to the care available to nonsubsidized children, one of the major principles of the Child Care and Development Fund. This report takes an initial step toward filling this gap in our knowledge of child care providers. It relies on data gathered from subsidy agency administrators, key child care experts, child care caseworkers, parents, and providers in 17 sites across 12 states in 1999 as part of the Urban Institute’s Assessing the New Federalism case study project. The report examines the subsidy policies and practices that can shape the experiences of providers serving subsidized children—in particular, those that affect G how much providers are paid to serve subsidized children (part I). How much providers are paid is a reflection of the policies and practices that determine maximum reimbursement levels, what fees are covered by the state, and how the process of receiving payment works (chapter 1), as well as issues around collecting payments from parents (chapter 2). G how providers experience the subsidy system (part II). How providers experience the subsidy system is influenced by policies and practices that affect when providers receive payments and the requirements providers need to complete to receive payment (chapter 3), as well as administrative issues that affect how many different agencies they have to interact with and the ease of these interactions (chapter 4). Part III of the paper summarizes the major findings, discusses some key implications for providers and policymakers, describes some promising strategies in this area, and discusses future areas of research. According to this study, a number of policies and practices can affect how much child care providers receive and the ease of their interactions with the subsidy system. In some cases policies and practices appeared to support providers, while in other cases policies and practices appeared to undercut the amount providers receive or make it more difficult for providers to interact with the subsidy system. Respondents suggested that these issues may also ultimately affect the THE URBAN INSTITUTE ESSENTIAL BUT OFTEN IGNORED: CHILD CARE PROVIDERS IN THE SUBSIDY SYSTEM vii L willingness and ability of providers to participate in the subsidy system—which means they could affect whether children receiving subsidies have equal access to the range of providers available to nonsubsidized children. These policies and practices may also have implications for the financial stability of providers and the qual- ity of care they provide. While the research in this report highlights a number of policies that can be difficult for providers, it also highlights a range of more supportive practices. Imple- menting some of these more supportive strategies may be challenging within the current context of inadequate funding for children. However, taking steps in this direction is likely to result in policies that better support low-income working parents and ensure that subsidized parents have equal access to the child care market. viii L ESSENTIAL BUT OFTEN IGNORED: CHILD CARE PROVIDERS IN THE SUBSIDY SYSTEM Introduction Child care subsidies are an essential component of welfare reform, as they support parents moving from welfare to work as well as low-income working parents who are trying to keep their jobs. Child care assistance can also play an important role in the achievement of many other important social goals—in particular, keeping low- income children safe and helping them develop—as it helps parents access child care while they work.

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