Innovative Strategies for Financing Quality Child Care

1. Innovative Strategies for Financing Quality Child Care Anne Mitchell Early Childhood Policy Research 2002

2. Outline of presentation • How we finance child care/early learning • Lessons from other fields • Innovative finance strategies • Crafting solutions that will work here

3. Child care is many things... • Child care centers • Family child care homes • Head Start or public pre-k programs • Nursery schools • School-age child care & recreation • Summer camps • “Informal” care (relatives, friends, and neighbors) • Partial wage replacement (e.g. paid parental leave) • Flex-time and other “family friendly” work policies

4. The Challenge... • Finding financing mechanisms that can… • educate & nurture children AND • support families AND • ensure a strong workforce overall AND • provide good jobs in child care • and are organized in a sensible framework

5. 3 fundamental premises • Nearly all families need help paying for child care/early education/out-of-school. • Services and infrastructure both need to be supported financially. • All the beneficiaries of quality care must contribute: not just families, but government and employers  the public and the private sectors.

6. How do we finance it now? • Families pay for most of it (60%) • Government pays for some (39%) • The Private Sector contributes about 1%

7. Government means... • Federal, state and local -- all have roles • Government generates revenue from • Taxes (income, sales and property) • Fees (permits, licenses, lotteries, etc.) • Other sources?? • Allocates revenue in its annual budget among many categories

8. Employers Unions Philanthropy, including United Way The faith community Business and civic leaders Deciding how to use their resources... space time money The Private Sector means...

9. Major federal govt. sources • Head Start = $6.7 Billion (all FY2002) • Child Care & Development Fund = $4.8B • Child & Dep. Care Tax Credit = $2.7B tax year 2000 • Child & Adult Care Food Program--$1.8B • TANF (Temporary Assistance to Needy Families) = $3.5B for child care transfer & direct • 21st Century Learning Centers = $1B

10. More federal sources... • Special Education (0-3s) -- $417 Million • Special Education (3-5s) -- $390 Million • Title I (preschool) -- $400 Million • Title I (Even Start) -- $250 Million • Early Reading First -- $75 Million • Early Learning Opportunities Act -- $25 Million • EC Educator Professional Development -- $15M

11. What other fields? • Transportation • Housing • Health care • Higher education

12. Lesson #1 from other fields #1 Public subsidies are available to all families, regardless of income • Transportation: fares are ‘subsidized’ for all riders • Housing: Sec. 8, Low-Income Housing Tax Credit, mortgage tax deduction • Health: all seniors get Medicare, poor also get Medicaid • Higher Ed: Tuition same for all, financial aid grants and loans

13. Lesson #2 from other fields #2 Public support is an economic development investment, not charity • Transportation & Housing: public subsidies are investments in the construction industry • Higher Ed: public support is investment in educated citizenry, financial aid has no stigma

14. Lesson #3 from other fields #3 Programs/projects receive BOTH direct financial assistance AND portable aid • Transportation: direct capital aid and low fares for riders • Housing: equity for building construction and rent subsidies for families • Higher Ed: direct appropriations to colleges and financial aid for students

15. Public support for all families Investment, not charity Direct and portable aid Nearly all public funds are for the poor So, it must be charity.. NO! that’s double-dipping! Other fields Child Care

16. How can we do a better job with financing?

17. Government Generate and allocate public funds in.. Social & Human Services Health Education Justice/Crime Prevention Higher Education Philanthropy Grants and donations Families Pay tuition and take advantage of Tax Credits Federal & state child care tax credits, EITC, Child TC Business & Unions Dependent Care Assistance Plans Direct tuition assistance First, know where the money for child care comes from...

18. MAXIMIZEcurrent sources, then consider creating new sources via... • Government • Private Sector • Public-Private Partnerships

19. Exemplary Finance Strategies • Government: Property, sales and income taxes, & general revenues • Private: Employers and philanthropy • State-Local government partnerships • Public-Private partnerships

20. Finance Strategy: Property Tax • Seattle, Washington • Families & Education Levy • raised property tax rate .23 mills per $1,000 of assessed value • generates average of $10 million per year • $3 million is dedicated to child care (ages 0-15) • tuition assistance to working families • program improvements (training, literacy projects)

21. Finance Strategy: Sales Tax • Pitkin County, Colorado (Aspen) • .45% tax generates $1.7 million per year • About $600,000 for child care each year • 40% to the Child Care Trust Fund • 60% for: • Child care resource and referral • Grants to child care programs for improvements • Tuition assistance to low-income working families

22. Finance Strategy: Sales Tax • California’s Prop 10 tobacco sales tax • Early childhood development, broadly defined: child care, health, family support, communication and research • $725 million annually • 80% to county commissions • 20% for statewide activities

23. Finance Strategy: Income Taxes • Federal DCTC and state DC tax credits • best practices: refundable, no income cap, allowed expenses match cost of quality, indexed for inflation, big enough to matter • Colorado’s child care contribution tax credit = 25% of contribution amount up to $100,000 for any taxpayer (1998 = $3 Million in contributions, when limited to Enterprise Zones)

24. Finance Strategy: State Government • Washington Child Care Career Development Wage Ladder • Pilot -- $4 million for 100-150 centers over 2 years • Raises of 50¢ to $4 an hour based on education and experience • Uses TANF reinvestment funds

25. Finance Strategy:State general revenue - Higher Ed • Campus Child Care Fund in New York • Grants to start, expand, renovate and operate centers (renewable) • $7.3 million annualfrom Higher Education budget for SUNY/CUNY campuses plus $2.5 million in CCDF funds (total=$10.8M)

26. Finance Strategy:State general revenue - Justice • Network of Children’s Centers in the Courts (New York) • Began 1994, now 22 centers offering free drop-in care for 47,000 children • Some also offer family support, comprehensive referrals (health, CHIP, WIC, Head Start, etc.) • $975,000 annuallyfrom Court budget plus $300,000 annually in CCDF funds

27. Finance Strategy: Education Early Childhood Program Aid (New Jersey) • established in 1996 due to school finance equity lawsuit Abbott v. Burke • School-day K and part-day preschool for 3- & 4-year olds in 105 districts and full-day preschool in 30 districts • $310 M for 99-00 school year -- $99 million for preschool Uses TANF reinvestment funds

28. Finance Strategy: State/local partnerships Smart Start (North Carolina) • 1 state and 100 county partnerships for children • child care, health, family support • Goal: All children ready for school • $220 million from state general revenue plus $19 million in private contributions

29. Finance Strategy: Private - Philanthropy Child Care Matters -- in 5 counties in SE Pennsylvania (Philadelphia area) • Community-wide initiative to improve quality of child care, increase public/civic engagement, enact public policy and increase state and local financing • $14.1 million from William Penn Foundation and $3.75 million from United Way of SEPA • Began 1997, renewed through 2003

30. Finance Strategy: Private - Employer Bank of America (nationwide) • Funded Dependent Care Assistance Plan • $152/child/month -- in addition to regular salary • $22 million annually • Benefit: Employee turnover 50% lower

31. Finance Strategy: Public-Private Partnership San Francisco Child Care Facilities Fund • City, business, and philanthropy contribute • Providian Financial Services -- $400,000 • Miriam & Peter Haas Fund -- $300,000 • City of San Francisco -- $200,000 • Since 1998, raised $4.8 million and leveraged $10 million more (HUD) to make no-cost/low-cost loans to child care programs and family child care providers

32. Finance Strategy: Public-Private Partnership Florida Child Care Partnership Act (1996) • State now budgets $10 million annually to help working families afford child care • Incentive for employer contributions • Public sector and business contribute equally • Generates additional $10 million (total=$20M)

33. Government State and federal child care funds, TANF Head Start, Early HS Education: State Pre-K Local districts (Title I, 21st Century Comm’ty Learning Centers) Higher Ed, Justice, Health departments Families Earned Income Tax Credit Federal & state child care tax credit & child tax credit Business and Unions Dependent Care Assistance Plans for employees Direct tuition assistance Philanthropy Grants and donations Solution #1: Maximize current sources

34. Government Tax strategies Budget strategies Endowment/Trust Funds Private Sector Scholarship Funds Foundations, United Way, employers Employers supporting their own employees Solution #2: Create new sources • Public-Private Partnerships • Scholarship/Facilities/Quality Funds • United Way-Foundation Community Initiatives

35. Solution #3: A better finance framework We need a framework that... • Encourages public AND private investment • ADDs to what families already pay • Works for ALL families • Handles funds from multiple sources • Advances quality in all programs • Supports infrastructure & services

36. Remember “other fields”?Compare reliance on user fees

37. Principles of finance • Maximize revenue • government, families, business, philanthropy • Expand/create new sources of revenue • government, employers, philanthropy • Diversify revenue sources • Leverage through partnerships • Invest so price to families doesn’t increase • Adopt new frameworks, e.g. other fields

38. Lessons on strategy • 1. Child care and… • 2. Politically feasible opportunities • 3. Long-term thinking • 4. Multiple approaches, multi-faceted solutions • 5. Leaders, partners, nontraditional advocates • 6. Community variation

39. The essential questions... • What are we financing? • Who is it for? • How much will it cost – how much more money do we need? • Who should pay for it? • What are the financing mechanisms? • How are we going to organize our finances?

40. Feasibility (is a new finance mechanism worth the effort?) • What is the revenue-generating potential (i.e., how much new money per year)? • Will the revenue increase or decrease over time? • Is it durable & sustainable? • Is it winnable politically?

41. Questions to consider... Given the examples, principles, and lessons: • What are the strengths and resources --in our state, in our community -- to build upon? • How can we take action here?