Child care subsidies
Local governments can invest in this strategy using State and Local Fiscal Recovery Funds (SLFRF) from the American Rescue Plan Act (ARPA).
- This strategy provides assistance to households that can help mitigate the economic impacts of COVID-19. The U.S. Department of Treasury has indicated that strategies that help achieve this outcome are eligible for the use of Fiscal Recovery Funds.
- Investments in this strategy are SLFRF-eligible as long as they are made in qualified census tracts or are designed to assist populations or communities disproportionately impacted by COVID-19.
Program overview
Making quality child care accessible: Child care subsidies are a form of financial assistance to help low-income families afford child care. By helping more families access child care, subsidy programs aim to increase parents’ workforce participation and children’s safety, wellbeing, and school readiness.
Involvement from all levels of government: The primary source of funding for child care subsidies is the Child Care and Development Block Grant (CCDBG), provided to states by the federal government. States are responsible for administering the program, though local governments play a role in some states. In certain cases, state and local governments supplement or provide subsidies beyond those provided through the CCDBG.
Varied reimbursement rates: The size of the subsidy typically varies by type of child care program, with center-based programs receiving higher rates than home-based or relative child care arrangements. Reimbursement rates may also vary by other factors, like location, the age of the child, whether the child attends part- or full-time child care, and more.
Setting eligibility requirements: To receive a child care subsidy, a family must meet certain eligibility criteria. These may include income limits (e.g., 200% of the federal poverty line), a requirement that a parent must maintain employment or be in an approved educational program, or other criteria set at the federal, state, or local level.
Providing families with choice: Families are typically able to choose and move between participating child care providers in their area. These may include center-based, home-based, or relative child care programs. To be eligible to receive subsidies, programs must meet certain health and safety standards (e.g., conducting background checks).
- Cost per Participant
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Variable
Multiple studies with rigorous designs demonstrate that child care subsidies are a well-supported strategy for increasing parental employment and use of center-based child care programs.
- This assessment is based on evidence from a 2021 systematic review.
Simplify application, reporting, and verification processes: Complex or time-consuming requirements for documenting income, work schedules, and family circumstances can be a barrier to participation in a child care subsidy program. To minimize barriers, programs can give flexibility in which documents parents can provide, allow parents to self-report hours worked, or track total number of hours worked (as opposed to tracking specific hours).
Set a higher income eligibility threshold for reapplication: When a child care subsidy program has a single income eligibility threshold, it can prevent continuity of care when families’ incomes rise. To tackle this problem, programs can set a higher income threshold for families that are reapplying (e.g., 275 percent of the federal poverty line for reapplicants and 225 percent for new applicants).
Use reimbursement to enable choice and encourage quality: Child care subsidy programs should set their reimbursement rates at 100 percent of the market rate to allow families access to more providers in their area. When possible, programs can also set higher rates for child care providers that provide higher quality services, not only allowing participating families to access those programs, but incentivizing other providers to focus on quality improvement.
Coordinate with other assistance programs: Low-income families who are trying to access child care subsidies often access other social services as well (e.g., SNAP benefits). Creating cross-program documentation requirements or streamlined eligibility information systems can make it easier for families to navigate social service systems and reduce inefficiencies for agencies.