To amend the Child Care and Development Block Grant Act of 1990 to provide incentive grants to improve the quality of child care.

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Child Care Quality Incentive Act of 
2001''.

SEC. 2. FINDINGS AND PURPOSES.

    (a) Findings.--Congress makes the following findings:
            (1) Recent research on early brain development reveals that 
        much of a child's growth is determined by early learning and 
        nurturing care. Research also shows that quality early care and 
        education leads to increased cognitive abilities, positive 
        classroom learning behavior, increased likelihood of long-term 
        school success, and greater likelihood of long-term economic 
        and social self-sufficiency.
            (2) Each day an estimated 13,000,000 children, including 
        6,000,000 infants and toddlers, spend some part of their day in 
        child care. However, a study in 4 States found that only 1 in 7 
        child care centers provide care that promotes healthy 
        development, while 1 in 8 child care centers provide care that 
        threatens the safety and health of children.
            (3) Full-day child care can cost $4,000 to $10,000 per 
        year.
            (4) Although Federal assistance is available for child 
        care, funding is severely limited. Even with Federal subsidies, 
        many families cannot afford child care. For families with young 
        children and a monthly income under $1,200, the cost of child 
        care typically consumes 25 percent of their income.
            (5) Payment (or reimbursement) rates, which determine the 
        maximum the State will reimburse a child care provider for the 
        care of a child who receives a subsidy, are too low to ensure 
        that quality care is accessible to all families.
            (6) Low payment rates directly affect the kind of care 
        children get and whether families can find quality child care 
        in their communities. In many instances, low payment rates 
        force child care providers to cut corners in ways that lower 
        the quality of care for children, including reducing number of 
        staff, eliminating staff training opportunities, and cutting 
        enriching educational activities and services.
            (7) Children in low quality child care are more likely to 
        have delayed reading and language skills, and display more 
        aggression toward other children and adults.
            (8) Increased payment rates lead to higher quality child 
        care as child care providers are able to attract and retain 
        qualified staff, provide salary increases and professional 
        training, maintain a safe and healthy environment, and purchase 
        basic supplies and developmentally appropriate educational 
        materials.
    (b) Purpose.--The purpose of this Act is to improve the quality of, 
and access to, child care by increasing child care payment rates.

SEC. 3. INCENTIVE GRANTS TO IMPROVE THE QUALITY OF CHILD CARE.

    (a) Funding.--Section 658B of the Child Care and Development Block 
Grant Act of 1990 (42 U.S.C. 9858) is amended--
            (1) by striking ``There'' and inserting the following:
    ``(a) Authorization of Appropriations.--There'';
            (2) in subsection (a), by inserting ``(other than section 
        658H)'' after ``this subchapter''; and
            (3) by adding at the end the following:
    ``(b) Appropriation of Funds for Grants To Improve the Quality of 
Child Care.--Out of any funds in the Treasury that are not otherwise 
appropriated, there are authorized to be appropriated and there are 
appropriated, $500,000,000 for fiscal year 2002, and such sums as may 
be necessary for each subsequent fiscal year, for the purpose of making 
grants under section 658H.''.
    (b) Use of Block Grant Funds.--Section 658E(c)(3) of the Child Care 
and Development Block Grant Act of 1990 (42 U.S.C. 9858c(c)(3)) is 
amended--
            (1) in subparagraph (B), by striking ``under this 
        subchapter'' and inserting ``from funds appropriated under 
        section 658B(a)''; and
            (2) in subparagraph (D), by inserting ``(other than section 
        658H)'' after ``under this subchapter''.
    (c) Establishment of Program.--Section 658G(a) of the Child Care 
and Development Block Grant Act of 1990 (42 U.S.C. 9858e(a)) is amended 
by inserting ``(other than section 658H)'' after ``this subchapter''.
    (d) Grants To Improve the Quality of Child Care.--The Child Care 
and Development Block Grant Act of 1990 (42 U.S.C. 9858 et seq.) is 
amended by inserting after section 658G the following:

``SEC. 658H. GRANTS TO IMPROVE THE QUALITY OF CHILD CARE.

    ``(a) Authority.--
            ``(1) In general.--The Secretary shall use the amount 
        appropriated under section 658B(b) for a fiscal year to make 
        grants to eligible States in accordance with this section.
            ``(2) Annual payments.--The Secretary shall make an annual 
        payment for such a grant to each eligible State out of the 
        allotment for that State determined under subsection (c).
    ``(b) Eligible States.--
            ``(1) In general.--In this section, the term `eligible 
        State' means a State that--
                    ``(A) has conducted a survey of the market rates 
                for child care services in the State within the 2 years 
                preceding the date of the submission of an application 
                under paragraph (2); and
                    ``(B) submits an application in accordance with 
                paragraph (2).
            ``(2) Application.--
                    ``(A) In general.--To be eligible to receive a 
                grant under this section, a State shall submit an 
                application to the Secretary at such time, in such 
                manner, and accompanied by such information, in 
                addition to the information required under subparagraph 
                (B), as the Secretary may require.
                    ``(B) Information required.--Each application 
                submitted for a grant under this section shall--
                            ``(i) detail the methodology and results of 
                        the State market rates survey conducted 
                        pursuant to paragraph (1)(A);
                            ``(ii) describe the State's plan to 
                        increase payment rates from the initial 
                        baseline determined under clause (i); and
                            ``(iii) describe how the State will 
                        increase payment rates in accordance with the 
                        market survey results.
            ``(3) Continuing eligibility requirement.--The Secretary 
        may make an annual payment under this section to an eligible 
        State only if--
                    ``(A) the Secretary determines that the State has 
                made progress, through the activities assisted under 
                this subchapter, in maintaining increased payment 
                rates; and
                    ``(B) at least once every 2 years, the State 
                conducts an update of the survey described in paragraph 
                (1)(A).
            ``(4) Requirement of matching funds.--
                    ``(A) In general.--To be eligible to receive a 
                grant under this section, the State shall agree to make 
                available State contributions from State sources toward 
                the costs of the activities to be carried out by a 
                State pursuant to subsection (d) in an amount that is 
                not less than 25 percent of such costs.
                    ``(B) Determination of state contributions.--State 
                contributions shall be in cash. Amounts provided by the 
                Federal Government may not be included in determining 
                the amount of such State contributions.
    ``(c) Allotments to Eligible States.--The amount appropriated under 
section 658B(b) for a fiscal year shall be allotted among the eligible 
States in the same manner as amounts are allotted under section 
658O(b).
    ``(d) Use of Funds.--
            ``(1) Priority use.--An eligible State that receives a 
        grant under this section shall use the funds received to 
        significantly increase the payment rate for the provision of 
        child care assistance in accordance with this subchapter up to 
        the 100th percentile of the market rate survey described in 
        subsection (b)(1)(A).
            ``(2) Additional uses.--An eligible State that demonstrates 
        to the Secretary that the State has achieved a payment rate of 
        the 100th percentile of the market rate survey described in 
        subsection (b)(1)(A) may use funds received under a grant made 
        under this section for any other activity that the State 
        demonstrates to the Secretary will enhance the quality of child 
        care services provided in the State.
            ``(3) Supplement not supplant.--Amounts paid to a State 
        under this section shall be used to supplement and not supplant 
        other Federal, State, or local funds provided to the State 
        under this subchapter or any other provision of law.
    ``(e) Evaluations and Reports.--
            ``(1) State evaluations.--Each eligible State shall submit 
        to the Secretary, at such time and in such form and manner as 
        the Secretary may require, information regarding the State's 
        efforts to increase payment rates and the impact increased 
        rates are having on the quality of, and accessibility to, child 
        care in the State.
            ``(2) Reports to congress.--The Secretary shall submit 
        biennial reports to Congress on the information described in 
        paragraph (1). Such reports shall include data from the 
        applications submitted under subsection (b)(2) as a baseline 
        for determining the progress of each eligible State in 
        maintaining increased payment rates.
    ``(f) Payment Rate.--In this section, the term `payment rate' means 
the rate of reimbursement to providers for subsidized child care.''.
    (e) Payments.--Section 658J(a) of the Child Care and Development 
Block Grant Act of 1990 (42 U.S.C. 9858h(a)) is amended by inserting 
``from funds appropriated under section 658B(a)'' after ``section 
658O''.
    (f) Allotment.--Section 658O of the Child Care and Development 
Block Grant Act of 1990 (42 U.S.C. 9858m) is amended--
            (1) in subsection (a)--
                    (A) in paragraph (1), by striking ``this 
                subchapter'' and inserting ``section 658B(a)''; and
                    (B) in paragraph (2), by striking ``section 658B'' 
                and inserting ``section 658B(a)'';
            (2) in subsection (b)(1), in the matter preceding 
        subparagraph (A), by inserting ``each subsection of'' before 
        ``section 658B''; and
            (3) in subsection (e)--
                    (A) in paragraph (1), by striking ``the allotment 
                under subsection (b)'' and inserting ``an allotment 
                made under subsection (b)''; and
                    (B) in paragraph (3), by inserting 
                ``corresponding'' before ``allotment''.

Summary: Child Care Quality Incentive Act of 2001 - Amends the Child Care and Development Block Grant Act of 1990 to establish a program of incentive grants to States to improve the quality of, and access to, child care by increasing child care payment rates. Sets the maximum Federal share of activity costs at 75 percent. Authorizes the Secretary of Health and Human Services to make an annual payment to an eligible State only if: (1) the Secretary determines that the State has made progress, through the assisted activities, in maintaining increased payment rates. And (2) the State updates an initial child care services market rate survey at least once every two years. Requires an eligible State that receives such a grant to make priority use of its funds to increase significantly the rate of reimbursement to providers for subsidized child care.