FISCAL YEAR 1999 STATE SPENDING UNDER THE CHILD CARE

DEVELOPMENT FUND (CCDF)

*Overview:* Under the Personal Responsibility and Work Opportunity
Reconciliation Act (PRWORA) of 1996, States are required to submit
quarterly financial reports to HHS detailing how they are spending
Federal funds. This document provides information obtained from the
State financial reports submitted for the Fiscal Year 1999 (October 1,
1998-September 30, 1999).

Child care is a critical support for families moving from welfare to
work. In FY 1999, States increased their investments in child care by
expending a total (combined Federal and State) of \$8.200 billion. Of
that amount, \$5.224 billion were in Federal funds, including \$3.677
billion in FY 1999 CCDF funds and \$943 million in prior year (FYs 1996,
1997 and 1998) CCDF/CCDBG funds. In addition, direct spending under the
Temporary Assistance for Needy Families (TANF) program for child care
services totaled \$1.99 billion (\$1.38 billion of State Maintenance of
Effort (MOE) funds and \$604 million of Federal funds). States also
expended \$1.596 billion in State dollars (matching and MOE) under CCDF
in FY 1999.

As reported on the TANF financial reports, States transferred \$2.43
billion from TANF to CCDF in FY 1999, which is more than twice the \$914
million transferred in FY 1998 (transferred dollars spent in FY 1999 are
included in the \$3.677 billion above).

NOTE: The transfer amounts reported on the TANF financial reports
(\$2.43 billion) are different from the transfer amounts reported on the
CCDF financial reports (\$2.14 billion) because of the lag-time in
processing a transfer and reporting deadlines.

FY 1999 Highlights

*Maintenance of Effort (MOE)*. States are required to continue to spend
State funds for child care at a level equal to the greater of their FY
1994 or FY 1995 historic spending levels in the Title IV-A Child Care
programs. All States reported that they spent their own funds at the
required MOE level of \$887,607,151 in FY 1999. Six States reported
spending a total of \$130 million over the required MOE level.

*Non-Federal Match.* The Matching Fund must be matched by State
expenditures in excess of the amount required to satisfy the MOE
requirement and at the 1999 Federal Medical Assistance Percentage (FMAP)
rate. One State chose not to accept its matching allotment. All other
States met the required match for the CCDF Matching Fund. Total State
expenditures totaled \$1,596,305,203 which consisted of \$578,400,179 of
State match and \$1,017,905,024 of MOE expenditures or 30.2 percent of
total State and Federal expenditures.

*Temporary Assistance to Needy Families (TANF) Block Grant Transfers*.
PRWORA authorized States to transfer portions of their TANF grant to
either the Child Care Development Fund or the Social Services Block
Grant. Forty-three States reported transferring funds to child care in
amounts ranging from \$1 million to \$205 million. These States
transferred a total of \$2.14 billion of their Federal TANF funds to the
Child Care Development Fund. The transferred amounts equal 40.9 percent
of the total Federal funds made available to States for CCDF in

FY 1999.

Page 2 FISCAL YEAR 1999 STATE SPENDING UNDER THE CHILD CARE

DEVELOPMENT FUND (CCDF)

*Direct Services*. CCDF expenditures spent by States directly on child
care services was \$3.4 billion or 79.5 percent of the FY 1999 combined
Federal and State CCDF.

*Administrative Costs*. By law no more than 5 percent of the CCDF funds
may be used for administrative costs. State administrative expenditures
amounted to \$121 million, or 2.8 percent of FY 1999 total Federal and
State expenditures \-- well below the limit.

*Quality Services*. The statute requires a minimum of 4 percent of total
expenditures be spent on quality activities. States reported expending
\$233 million on improving the quality of child care services, which
equates to 5.5 percent of FY 1999 combined Federal and State
expenditures.

*Non-Direct Services*. States reported spending a total of \$517 million
in non-direct services or 12.2 percent of total State and Federal
expenditures. A breakout of non-direct services expenditures show that
roughly \$15 million was spent on child care computer information
systems, \$167 million on certification programs and \$285 million on
making eligibility determinations and other costs.

*Unobligated Balances*. States must obligate all of the mandatory fund
by the end of the fiscal year in order to be eligible for Federal
matching funds. In FY 1999, States obligated 100 percent of the Federal
mandatory funds. States also obligated 96.4 percent or \$907.2 million
of Federal matching funds awarded in FY 1999. One State chose not to
accept its matching allotment (3.6 percent). States were awarded \$974.6
million in discretionary funds and transferred \$2.14 billion from the
TANF program into the CCDF discretionary fund, making a total of \$3.11
billion of Federal funds available in the discretionary fund.

TABLE A - - Comparison of Expenditures in Federal Child Care Programs
[1]{.underline}/

(Dollars in millions)

<table>
<colgroup>
<col style="width: 15%" />
<col style="width: 9%" />
<col style="width: 9%" />
<col style="width: 9%" />
<col style="width: 9%" />
<col style="width: 9%" />
<col style="width: 9%" />
<col style="width: 10%" />
<col style="width: 10%" />
<col style="width: 9%" />
</colgroup>
<thead>
<tr class="header">
<th></th>
<th colspan="3">Expended in FY 97</th>
<th colspan="3">Expended in FY 98</th>
<th colspan="3">Expended in FY 99</th>
</tr>
<tr class="odd">
<th>Program</th>
<th>Federal Share</th>
<th>State Share</th>
<th>Total</th>
<th>FederalShare</th>
<th><p>State</p>
<p>Share</p></th>
<th>Total</th>
<th>Federal Share</th>
<th>State Share</th>
<th>Total</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td>CCDBG</td>
<td>844</td>
<td>-</td>
<td>844</td>
<td>353</td>
<td>-</td>
<td>353</td>
<td>157</td>
<td>-</td>
<td>157</td>
</tr>
<tr class="even">
<td>FFY 97 CCDF</td>
<td>1,681</td>
<td>514</td>
<td>2,195</td>
<td>397</td>
<td>-</td>
<td>397</td>
<td>98</td>
<td>-</td>
<td>98</td>
</tr>
<tr class="odd">
<td>FFY 98 CCDF</td>
<td>-</td>
<td>-</td>
<td>-</td>
<td>2,738</td>
<td>548</td>
<td>3,286</td>
<td>688</td>
<td>-</td>
<td>688</td>
</tr>
<tr class="even">
<td>FFY 99 CCDF</td>
<td>-</td>
<td>-</td>
<td>-</td>
<td>-</td>
<td>-</td>
<td>-</td>
<td>3,677</td>
<td>578</td>
<td>4,255</td>
</tr>
<tr class="odd">
<td>TANF <u>2</u>/</td>
<td>14</td>
<td>-</td>
<td>14</td>
<td>259</td>
<td>-</td>
<td>259</td>
<td>604</td>
<td>1,380</td>
<td>1,990</td>
</tr>
<tr class="even">
<td>State MOE</td>
<td></td>
<td>945</td>
<td>945</td>
<td>-</td>
<td>1,031</td>
<td>1,031</td>
<td>-</td>
<td>1,018</td>
<td>1,018</td>
</tr>
<tr class="odd">
<td>TOTAL</td>
<td>$2,539</td>
<td>$1,459</td>
<td>$3,998</td>
<td>$3,747</td>
<td>$1,579</td>
<td>$5,326</td>
<td>$5,224</td>
<td>$2,976</td>
<td>$8,200</td>
</tr>
</tbody>
</table>

[1]{.underline}/ Expenditures under CCDF program include TANF transfers.

[2]{.underline}/ Expenditures under the TANF program for child care.