Innovative Strategies
for Financing
Quality Child Care
Anne Mitchell
Early Childhood Policy Research
2002
Outline of presentation
How we finance child care/early learning
Lessons from other fields
Innovative finance strategies
Crafting solutions that will work here
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Child care is many things...
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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
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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
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3 fundamental premises
1. Nearly all families need help paying for child
care/early education/out-of-school.
2. Services and infrastructure both need to be
supported financially.
3. All the beneficiaries of quality care must
contribute: not just families, but government
and employers  the public and the private
sectors.
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How do we finance it now?
 Families pay for most
of it (60%)
 Government pays for
some (39%)
 The Private Sector
contributes about 1%
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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
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The Private Sector means...
Employers
Deciding how
to use their
Unions
resources...
Philanthropy, including
space
United Way
time
The faith community
money
Business and civic leaders
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Major federal govt. sources
Head Start = $6.7 Billion
Child Care & Development Fund = $4.8B
Child & Dep. Care Tax Credit = $2.7B
Child & Adult Care Food Program--$1.8B
TANF (Temporary Assistance to Needy
Families) = $3.5B for child care
21st Century Learning Centers = $1B
(all FY2002)
tax year 2000
transfer & direct
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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
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What other fields?
Transportation
Housing
Health care
Higher education
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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
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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
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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
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Other fields
 Public support for all
families
 Investment, not
charity
 Direct and portable
aid
Child Care
 Nearly all public funds
are for the poor
 So, it must be
charity..
 NO! that’s doubledipping!
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How can we
do a better
job with
financing?
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First, know where the money
for child care comes from...
Government
 Generate and allocate
public funds in..
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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
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MAXIMIZE current sources,
then consider creating new
sources via...
 Government
 Private Sector
 Public-Private Partnerships
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Exemplary
Finance Strategies
Government: Property, sales and
income taxes, & general revenues
Private: Employers and philanthropy
State-Local government partnerships
Public-Private partnerships
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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)
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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
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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
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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)
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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
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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 annual from Higher Education
budget for SUNY/CUNY campuses plus
$2.5 million in CCDF funds (total=$10.8M)
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Finance Strategy:
State general revenue - Justice
 Network of Children’s Centers in the Courts
(New York)
 Began 1994, now 22 centers offering free dropin care for 47,000 children
 Some also offer family support, comprehensive
referrals (health, CHIP, WIC, Head Start, etc.)
 $975,000 annually from Court budget plus
$300,000 annually in CCDF funds
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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- & 4year 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
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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
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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
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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
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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/lowcost loans to child care programs and family
child care providers
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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)
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Solution #1:
Maximize current sources
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
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Solution #2:
Create new sources
Government
 Tax strategies
 Budget strategies
 Endowment/Trust
Funds
Private Sector
 Scholarship Funds
 Foundations, United
Way, employers
 Employers supporting
their own employees
Public-Private Partnerships
 Scholarship/Facilities/Quality Funds
 United Way-Foundation Community Initiatives
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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
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Remember “other fields”?
Compare reliance on user fees
100%
87%
80%
60%
40%
Child Care
Centers
41%
35%
Public
Transportation
Higher Education
20%
0%
Revenue from user fees
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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
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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
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The essential questions...
1. What are we financing?
2. Who is it for?
3. How much will it cost – how much more
money do we need?
4. Who should pay for it?
5. What are the financing mechanisms?
6. How are we going to organize our finances?
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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?
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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?
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