More work needed on child care investments

Yesterday morning, a joint House/Senate conference committee approved a final budget for child care services for the 2019 budget year. At issue was how Michigan would allocate $65 million in new federal funds to improve access to high quality child care for families with low wages.

On the positive side, the committee approved a new payment system for child care providers—many of whom are small businesses operating at the margin. Child care providers have struggled with hourly payments for child care—a policy that doesn’t align with how they generally bill parents, which is for half-day or full-day care on at least a weekly basis. In addition to the burden of documenting hours of care, with hourly billing, providers could not count on a steady stream of income, making some less willing to care for children with state subsidies.

The final budget adds $15 million in new federal funding to establish biweekly payments with the following schedule: (1) providers caring for children up to 30 hours every two weeks are paid hourly; (2) those between 31 and 60 hours of care are paid at 60 hours; (3) between 61 to 80 hours receive payments for 80 hours; and (4) for 81 to 90 hours, payments are for 90 hours of care.

While this steadier stream of income is important to ensure a supply of child care for families working at low wage jobs, there is much that wasn’t achieved in the 2019 budget. First, the conference committee rejected a Senate-proposed increase in the rates paid to child care providers. Low rates make it difficult for providers to improve the quality of care, including hiring and retaining qualified staff and maintaining their facilities. In the end, low rates can force child care providers to make business decisions to not take children who are receiving state subsidies, or force families to pick up the difference between what the subsidy provides and what the provider charges other families.

Also not addressed in the final budget was Michigan’s restrictive income eligibility threshold for child care—the second lowest in the nation. In response to new federal requirements, Michigan raised its “exit” eligibility level to 250% of poverty so families could keep their child care even if they get more hours or a small pay increase. This 2015 policy change helped to stem the decline in the number of families receiving child care assistance, and the Legislature is now predicting a caseload increase in 2019 at a cost of nearly $25 million. However, all families entering the child care program must earn less than 130% of poverty, and caseloads remain well below those a decade ago.

Other gaps in Michigan’s child care system that must still be closed are the lack of high-quality care in many underserved communities; shortages of affordable infant care; and the scarcity of care for parents who work evenings, weekends or with uncertain schedules.

Michigan has a long way to go in building a high-quality child care system that meets the needs of working parents. The state is expecting an additional $65 million in federal child care funds in the current budget year and subsequent years, and must ensure that those funds are fully expended in ways that benefit the children and families most in need. Further, to make high-quality child care affordable for all working families, it is time to look at other sources of revenue. Michigan is third from the bottom of states in its use of federal Temporary Assistance for Needy Families (TANF) block grant dollars for child care, and state General Fund commitments are minimal.

Parents are struggling with the high cost of child care, and business leaders understand that the lack of child care affects their bottom line in terms of recruitment and retention. If Michigan lawmakers are serious about growing the state’s economy and encouraging work, they must rethink investments in child care.