Patterns and Growth of Child Care Voucher Use by Families Connected with Cash Assistance in Illinois and Maryland

This is an excerpt from the full report.

For the growing numbers of low-income families making the transition from welfare to work, child care subsidies are an important source of support. This report focuses on children in Illinois and Maryland whose families used child care subsidies while receiving and after leaving cash assistance. These two states have made substantial commitments to help low-income families with their child care costs. The report describes characteristics of these children and the types of care they used in January 1998 and compares these with children who used child care vouchers a year earlier in January 1997. Drawing on data from the child care subsidy administrative systems developed to determine families’ eligibility and make payments to child care providers, the report depicts major growth in subsidy use in both states, but reveals very different patterns of care.

Although the federal and state governments have invested substantially in child care subsidies for low-income working families, lack of information has hampered state and local officials and program operators in making child care policy decisions. Little is known about how the level and operation of subsidies promote children’s well-being and parents’ ability to work. Policymakers and child care administrators grapple with questions of who should be eligible for subsidies, how much families should be required to contribute financially, and what level of payment is adequate for child care providers. Their answers to these and related questions influence how subsidies affect families, children, child care providers, and communities, yet policymakers often operate in an information vacuum about the effects of their decisions. A necessary first step in understanding the multiple effects of child care policies is to examine and describe the characteristics of children and families using child care subsidies and the types of care they use.

Enactment of the federal Personal Responsibility and Work Opportunities Reconciliation Act in August 1996 expanded states’ responsibilities for subsidized child care. The new law, often referred to as “welfare reform,” ended long-standing guarantees of financial support to low-income families through the Aid to Families with Dependent Children (AFDC) program and created a new program, Temporary Assistance for Needy Families (TANF), which instituted time limits on cash assistance. Low- income families can now receive cash assistance for a maximum of five years in their lifetimes and a maximum of two years without also working. States can adopt shorter time limits, can define “work” within federal guidelines, and can exempt certain families from the work requirement. The welfare reform legislation also combined funding for several major child care subsidy programs for low-income families into a single new Child Care and Development Fund2 and gave states a great deal of autonomy in designing their child care subsidy programs. Between the August 1996 enactment of the federal legislation and September 1998, families in welfare caseloads dropped by an average of 34 percent nationwide.

As implementation of state welfare reform strategies moves forward, policymakers are particularly interested in the child care experiences of families who are receiving or have received cash assistance through TANF or AFDC. Current TANF recipients use child care subsidies while participating in work readiness activities and until their employment earnings reach a level at which they no longer qualify for even partial cash assistance. Former recipients use child care subsidies while supporting themselves through employment. Policymakers and program operators want to understand the basic characteristics of these families, the types of child care they use, and the ways these family and child care characteristics change over time. With this information, they can begin to explore the implications of their subsidy policies for children and families, and for child care providers, and determine what works best to meet families’ child care needs.

Using data from the Illinois and Maryland subsidy systems, it is possible to develop a picture of children using child care subsidies who have current or past connections to cash assistance and to explore changes in the size and composition of these groups. This report examines the use of subsidies for families receiving TANF or whose records indicate that they have ever received cash assistance either through the Temporary Assistance for Needy Families program or through its predecessor, Aid to Families with Dependent Children.