OCTOBER 2016

THE COUNCIL OF STATE GOVERNMENTS

CAPITOL RESEARCH
HUMAN SERVICES

The Child Care Dilemma: Potential Solutions

There are multiple challenges to the question of child

care in the states. Early childhood education can be
viewed through multiple policy area lenses, including
workforce development, education, health care and
economic development. What is at stake for families
with young children needing child care?
Family living arrangements for children under the
age of 6 vary by state; one-third of children under
age 6 are not living in married-couple homes
nationally. Single mothers with young children are
much more likely to live in poverty.1
Children growing up in economically insecure
homes face unique hurdles that can impact their
ability to succeed in the future, both at school
and in adulthood.

The Council of State Governments

Mothers of young children sometimes struggle to

balance responsibilities at home with those at work.2
While gainful employment is a key for economic
mobility, many families with young children, particularly those in poverty, are faced with the high cost
of child care and a lack of flexibility on multiple
fronts, making it difficult to maintain both full-time
employment and have access to reliable, high-quality
and affordable child care options.3, 4

THE COUNCIL OF STATE GOVERNMENTS

As an intervention, early childhood education programs have a relatively high return on investment.5
Diverse stakeholders have recognized that these
programs are not only a workforce development
opportunity for future workers, but also decrease
the chances that a low-income child will need public
social supports in the future.6 These programs also
enable guardians to work outside the home.
While child care represents a large expense for both
low-income and middle class families, child care
workers themselves often receive wages that would
qualify them for public assistance.7 There is a gap
in many instances between the pay earned by child
care workers and early childhood educators, and
that of kindergarten teachers in all states, contributing to the obstacles faced by programs to attract
and retain experienced, educated providers.8
Policymakers have worked at the federal, state and
local levels of government with nonprofits and those
in the private sector to devise policy solutions to
enable caregivers to work while sending their young
children to child care facilities.

Nonprofits & Businesses: Leaders in both the public

and private sector are working to engage their communities and stakeholders on the topic of early childhood education.9 States have put together commissions
and advisory groups to create awareness among business leaders and policymakers and build partnerships
across levels of government. Nonprofits and religious
organizations continue to support working parents
through offering child care and programming for very
young children.
Many businesses view child care as an important
piece of their benefits package.10 Some employers
offer subsidies, on-site child care or agreements
with providers to offer discounted slots locally. However, a new practice is emerging that may be of
particular interest to smaller employers that may not
be able to provide the aforementioned on-site child
carea business-supported consortium model.11
yy In Vermont, the Permanent Fund is working with
groups of businesses to pilot this model, where
businesses pool resources to offer child care to
employees.12 Looking to benefits policies of higher
education universities in the region as a guide,
the nonprofit plans to build a facility that will be
supported by member companies that are guaranteed slots through an annual fee schedule.13
The Permanent Fund also is considering creative
ways corporate members of the consortium
can contribute so that their employees can benefit
from the availability of affordable child care
for instance, they may look at ways one corporate
member could provide food products in exchange
for secured slot(s).14
PNC Banks PNC Grow up Great campaign has
provided grant dollars to nonprofits targeting early
childhood education; they estimate that the program
has impacted approximately 2.3 million children
throughout 19 states and the District of Columbia.15

THE COUNCIL OF STATE GOVERNMENTS

Tax Credits: The federal government helps families

with the cost of child care in two ways.16 The Child
and Dependent Care Tax Credit reduces federal
income tax liability by between 20 and 35 percent of
up to $3,000 in child care costs a year, based on family
income. Guardians also can spend pretax dollars set
aside in a Dependent Care Account set up through
participating employers on child care up to a certain
amount.
Twenty-two states have expanded on the federal
child care tax credit for families and added benefits.17
For example, in New York, the tax credit is refundable to parents, alleviating the cost of child care
further for those who do not have a tax burden due
to low income, and the state credit is calculated as
a percentage of the federal tax credit.18
In Colorado, citizens who donate money to promote
child care in the state can claim the Colorado Child
Care Contribution Tax Credit, receiving 50 cents to
every dollar spent as a tax credit.19
Louisiana has implemented a number of credits not
only targeting families but also businesses and child
care providers. The Louisiana School Readiness Tax
Credits include tax credits for families based on the
quality rating of the facility; tax credits for providers,
also based on the quality of the facility; and refundable tax credits for construction expenses of a center
and/or payments to child care facilities for services
reserved for employees.20

Professional Development Programs

Partnerships & Innovative Funding Models

In Montana, aspiring early childhood educators can

take advantage of apprenticeship programs, scholarships and professional development incentives.21
In the Montana Early Childhood Apprenticeship
Program, participants are paired with a mentor as
they earn college credit and the Child Care Development Specialist credential over the course of two
years; sponsoring organizations also have a financial incentive to host apprentices.22

Smart Start North Carolina Partnership for Children

Inc., is a public-private partnership between all
North Carolina counties that acts by giving communities local control to deliver services for children
and their families.27 Funding comes from the state
and private donors to power the organizations activities, and local partnership boards decide how to
spend it to improve the quality of child care and
make child care more affordable and accessible
for working families.28 Smart Start and the states
public pre-kindergarten program work in tandem;
30,000 4-year-olds each year from families whose
income is 75 percent or less of state median income
attend full-day pre-K.29

California, one of the many states offering professional development opportunities for child care
providers, provides Career Incentive Grants for
students at four-year universities to cover educational expenses up to $1,500 a year.23
The Georgia Department of Early Care and Learning provides scholarships and incentives for aspiring
and current early childhood educators.24 Georgia
provides a salary bonus for early childhood educators
designed to reward educational attainment and job
retention, up to $1,250 for up to four payments,
depending on qualification earned.25 Students pursuing technical certificates, associate degrees, bachelors
degrees and masters degrees can receive 80 percent
of tuition and a stipend through the scholarship
program.26

Michigan, Washington and West Virginia fund

public pre-kindergarten programs that utilize
blended funding streams and provide wrap-around
services.30 In Washington, the public preschool is
similar to Head Start and also has income requirements (families cannot make more than 110 percent
of the federal poverty line).31 In Michigan, income
eligibility is a bit more complex. To participate in
the Great Start Readiness Program, 90 percent of
families must fall below 250 percent of the federal
poverty line; ten percent of families can make more
than that, but have to pay tuition.32 While the states
Department of Education houses the office that
manages this program in Michigan, it is the local
school district that directly administers it.33 West
Virginia does not have income-dependent eligibility
requirements for its pre-kindergarten offering; it is
estimated that 75 percent of West Virginian 4-yearolds attended in the 20142015 school year.34 In
terms of funding, the universal early education
program in West Virginia is baked into the overall
public education funding stream; it is managed by
an interagency team with representatives from
early learning, preschool special needs, child care
and Head Start.35
There are 275 community programs across the
country that received federal grant dollars for
Early Head StartChild Care Partnerships that
are coordinating child care service delivery.36 As
of April 15, 2016, more than 1,300 child care centers and 800 family child care providers were
participating in the grant program, which allows
providers to layer funding to provide comprehensive services and high-quality early learning
environments for low-income working families
with infants and toddlers.37

THE COUNCIL OF STATE GOVERNMENTS

 The Race to the Top Early Learning Challenge,

which is a federal grant program to increase enrollment of low-income children with high needs in
high quality programs, has seen success in its efforts.
From 2011 to 2015, the 20 states participating in the
program have seen an 86 percent increase in enrollment in high-quality child care programs with child
care subsidy funding.38
There are a number of organizations that currently
use or are exploring projects that utilize social
impact bonds to power early childhood education
innovations.
yy In Utah, the United Way of Salt Lake City entered
into a pay-for-success contract with Goldman
Sachs, J.B. Pritzker and StriveTogether to fund
preschool programs in areas identified as highneed.39 Goldman Sachs and J.B. Pritzker provided $7 million in funding; if the program could
keep children that otherwise would have needed
special education services in elementary school
from needing them through high quality early
childhood education, then Utah would repay the
investors with interest (like a bond).40
yy In Illinois, the city of Chicago is currently implementing a program that will repay private investors
if quality early childhood education offered at
select Chicago public schools reduces the need for
special education, increases kindergarten readiness
and increases third-grade literacy levels.41
Researchers, nonprofits, policymakers and businesses
agree that early childhood education is important. The
benefits of high-quality child care run two ways. Engaging learning through child care and into kindergarten
is important to success later in life. It also allows parents
to more fully participate in the workforce. The federal
government and states have implemented some policies
to lessen the financial burden of child care. However,
it would appear there are opportunities for policymakers
and community leaders to find new creative solutions
to provide for the needs of young children and their
parents as they pursue health, productivity and stability.

In the budget proposal for 2017, President Barack

Obama is recommending that Congress increase
funding for early childhood education programs,
including expanding access to affordable care for
1.1 million more children in the next 10 years, making
the child care tax credit more accessible to middleclass families, providing more dollars for Head Start,
and championing universal preschool in all states.42
Both presidential candidates, Hillary Clinton and
Donald Trump, have recognized the challenges of
providing affordable child care; they both have made
proposals to tackle the issue if elected.43 Regardless
of who is elected, we can assume early childhood
education will continue to be a focus as the federal
government seeks to support state and local efforts.
RESOURCES
Analysis of U.S. Census ACS 2014 estimates. For a full discussion of the demographics of families with young children, see the first CSG research brief in this
series, The Child Care Dilemma: Overview. URL TO BE SET UP.
1

Cohn, DVera; Parker, Kim; Livingston, Gretchen; Rohal, Molly. After Decades of
Decline, A Rise in Stay-at-Home Mothers. Pew Research Center. April 8, 2014. Pg 29.
http://www.pewsocialtrends.org/2014/04/08/after-decades-of-decline-a-rise-instay-at-home-mothers/. According to a Pew Research Center survey conducted in
2013, women were more likely than men to cut back on their work hours, take time
off, quit their job, or turn down a promotion to fulfill caregiving needs for their
family. For more information, see the first research brief in this series, The Child
Care Dilemma: Overview.
2

Sawhill, Isabel; Rodrigue, Edward; Joo, Nathan. The Brookings Institution. One
Third of a Nation: Strategies for Helping Working Families. May 2016. According to
this report, there is a work gap for those in the bottom third of income earners
many are not working full-time or at all, often citing family responsibilities in the
case of women. https://www.brookings.edu/research/one-third-of-a-nation-strate
gies-for-helping-working-families/.
3

According to authors analysis of average child care costs presented in the research
brief The Child Care Dilemma: Affordability, the average cost of infant care at a
child care center could represent at least 17 percent of the income of a single
mom with two kids living at 150 percent of the poverty rate in Mississippi, and up
to almost 60 percent in Massachusetts and 79 percent in the District of Columbia.
4

Wein, Harrison. NIH Research Matters. National Institutes of Health. Early Childhood Program Has Enduring Benefits. 2011. https://www.nih.gov/news-events/
nih-research-matters/early-childhood-program-has-enduring-benefits. Center on
the Developing Child (2007). Early Childhood Program Effectiveness (InBrief).
Retrieved from www.developingchild.harvard.edu. Most of those returns, which
can range from $4 to $9 per dollar invested, benefit the community through reduced
crime, welfare, and educational remediation, as well as increased tax revenues on
higher incomes for the participants of early childhood programs when they reach
adulthood.
5

U.S. Chamber of Commerce Foundations Institute for a Competitive Workforce.

Starting Smart & Finishing Strong. October 2010. https://www.uschamberfoun
dation.org/sites/default/files/publication/edu/Starting_Smart_Finishing_Strong_
Brief.pdf.
6

U.S. Department of Health & Human Services, U.S. Department of Education.

High-Quality Early Learning Settings Depend on a High-Quality Workforce: Low
Compensation Undermines Quality. June 2016. https://www.acf.hhs.gov/sites/
default/files/ecd/ece_low_compensation_undermines_quality_report_june_10_
2016_508.pdf.
7

THE COUNCIL OF STATE GOVERNMENTS

Ibid.

The U.S. Chamber of Commerce has published a series of reports making the
business case for early childhood education, and providing business owners concrete ways they can support and advocate for early childhood education that are
both affordable and accessible. https://www.uschamberfoundation.org/blog/post/
13-things-business-can-do-support-early-childhood-education/41710.
9

Niethammer, Carmen. The World Bank. Voices: Perspectives on Development.

Caring about employer-supported childcare: Good for business, good for development. June 14, 2016. http://blogs.worldbank.org/voices/caring-about-employersupported-childcare-good-business-good-development.
10

11
The Permanent Fund for Vermonts Children. Business-Supported Child Care.
March 24, 2016. http://www.permanentfund.org/business-supported-child-care/.
12

Ibid.

Authors correspondence with Susan Elliot, Business Liaison for the Permanent
Fund for Vermonts Children. July 26, 2016.
13

14

Ibid.

The PNC Financial Services Group, Inc. A Focus on Early Learning. https://www.
pnc.com/en/about-pnc/corporate-responsibility/grow-up-great/our-great-story.html.
15

Fishman, Stephen J.D.. Nolo. Tax Relief for Child Care Expenses. http://www.nolo.
com/legal-encyclopedia/child-care-expenses-tax-breaks-29505.html.
16

17
The Hatcher Group. TaxCreditsforWorkingFamilies.org. States with CDCTCs.
http://www.taxcreditsforworkersandfamilies.org/state-tax-credits/.

New York Department of Taxation and Finance. Empire State Child Credit. https:
//www.tax.ny.gov/pit/credits/empire_state_child_credit.htm.

18

19
Oregon Office of Child Care. Oregons Child Care Contribution Credit. https://
www.oregon.gov/OCC/docs/CC%20TX%20Flyer.pdf.

Louisiana Department of Revenue. School Readiness Tax Credit. http://revenue.

louisiana.gov/IndividualIncomeTax/SchoolReadinessTaxCredit.

20

Montana Early Childhood Project. Incentives and Awards. http://www.mtecp.

org/incentives.html.

21

Montana Early Childhood Project. Montana Early Childhood Apprenticeship

Program: Child Care Development Specialist. http://www.mtecp.org/pdfs/Christy/
One%20Page%20Information.pdf.
22

California Department of Education Early Education and Support Division, Child

Development Training Consortium. Career Incentive Grant (CIG) 20152016. https:
//www.childdevelopment.org/cs/cdtc/print/htdocs/services_ci.htm.
23

24
Georgia Department of Early Care and Learning. Scholarships & Incentives.
https://www.decalscholars.com/.
25

Ibid.

Smart Start, the North Carolina Partnership for Children, Inc. Frequently Asked
Questions. http://www.smartstart.org/about-smart-start/faqs/.

28

29
Wechsler, M., Kirp, D., Tinubu Ali, T., Gardner, M., Maier, A., Melnick, H., & Shields,
P. (2016). The road to high-quality early learning: Lessons from the states. Palo
Alto: Learning Policy Institute. Pg ix. https://learningpolicyinstitute.org/sites/default/
files/product-files/Road_to_High_Quality_Early_Learning_REPORT.pdf.
30

Ibid. Pg viiix.

31

Ibid. Pg viii.

32

Ibid. Pg vii.

33

Ibid.

34
35

Ibid. Pg viii.

Ibid.

U.S. Department of Health & Human Services Administration for Children &
Families Office of Early Childhood Development. Early Head StartChild Care
Partnerships. June 24, 2016. http://www.acf.hhs.gov/ecd/early-learning/ehs-ccpartnerships.

36

37
The National Center on Early Head StartChild Care Partnerships. Early Head
StartChild Care Partnerships: Growing the Supply of Early Learning Opportunities for More Infants and Toddlers. April 15, 2016. http://eclkc.ohs.acf.hhs.gov/
hslc/tta-system/ehs-ccp/docs/ehs-ccp-brochure.pdf.
38
U.S. Department of Education, U.S. Department of Health & Human Services.
Race to the Top Early Learning Challenge 2015 Progress Update. August 2016.
http://www2.ed.gov/programs/racetothetop-earlylearningchallenge/2015apr/201
5progressfinal.pdf.
39
Edmondson, Jeff; Crim, Bill; Grossman, Allen. Stanford Social Innovation Review.
Pay-For-Success is Working in Utah. October 27, 2015. http://ssir.org/articles/
entry/pay_for_success_is_working_in_utah.
40

Ibid.

Golden, Megan; Nagendra, Brian; Seok-Hyun Mun, Kevin. Institute for Child
Success. Pay for Success in the U.S.: Summaries of Financed Projects. February
2015. http://www.payforsuccess.org/sites/default/files/pfs_summary_chicago.pdf.
41

White House Office of Management and Budget. The Presidents Budget for
Fiscal Year 2017: Overview. Accessed August 9, 2016. https://www.whitehouse.
gov/sites/default/files/omb/budget/fy2017/assets/fact_sheets/The%20Presidents
%20Fiscal%20Year%202017%20Budget%20Overview%20.pdf.
42

43
Kurtzleben, Danielle. National Public Radio. Child Care Plan is a Change in
Rhetoric for Donald Trump. August 9, 2016. http://www.npr.org/2016/08/09/
489314346/child-care-plan-is-a-change-in-rhetoric-for-donald-trump.

Georgia Department of Early Care and Learning. DECAL Scholars. Scholarships

for Academic Credit. http://www.decalscholars.com/content/accredscholarships
page.cfm.
26

27
Smart Start, the North Carolina Partnership for Children, Inc. About Smart Start.
http://www.smartstart.org/about-smart-start/.

THE COUNCIL OF STATE GOVERNMENTS

Sarah Smith, CSG Graduate Fellow, ssmith@csg.org