Child Care: States Exercise Flexibility in Setting Reimbursement Rates and Providing Access for Low-Income Children

Federal welfare legislation passed in 1996 placed a greater emphasis on helping low-income families end dependence on government benefits by promoting job preparation and work. To reach this goal, the legislation gave states greater flexibility to design programs that use federal funds to subsidize child care for low-income families. Under the Child Care and Development Fund, this flexibility includes the freedom to largely determine which low-income families are eligible to receive child care subsidies. These maximum rates consist of two parts--a state subsidy and family co-payment. States also establish maximum reimbursement rates for child care. States reported considering market rate survey and budget and policy goals in setting maximum reimbursement rates. All states reported conducting market rate surveys in the past 2 years that obtained data on providers' fees, but 10 states reported that they did not base the reimbursement rates for child care providers on their most recent market rate surveys. In the nine communities visited, GAO calculated that hypothetical families' access to child care centers and family home providers varied widely as a result of the different subsidies and family co-payments established by each state.