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[House Hearing, 106 Congress]
[From the U.S. Government Publishing Office]

 
               FEDERAL RESOURCES AVAILABLE FOR CHILD CARE

=======================================================================

                                HEARING

                               before the

                    SUBCOMMITTEE ON HUMAN RESOURCES

                                 of the

                      COMMITTEE ON WAYS AND MEANS
                        HOUSE OF REPRESENTATIVES

                       ONE HUNDRED SIXTH CONGRESS

                             FIRST SESSION

                               __________

                             MARCH 16, 1999

                               __________

                             Serial 106-34

                               __________

         Printed for the use of the Committee on Ways and Means

                     U.S. GOVERNMENT PRINTING OFFICE
65-629 CC                    WASHINGTON : 2000
_______________________________________________________________________
            For sale by the U.S. Government Printing Office
Superintendent of Documents, Congressional Sales Office, Washington, DC 
                                 20402

                      COMMITTEE ON WAYS AND MEANS

                      BILL ARCHER, Texas, Chairman

PHILIP M. CRANE, Illinois            CHARLES B. RANGEL, New York
BILL THOMAS, California              FORTNEY PETE STARK, California
E. CLAY SHAW, Jr., Florida           ROBERT T. MATSUI, California
NANCY L. JOHNSON, Connecticut        WILLIAM J. COYNE, Pennsylvania
AMO HOUGHTON, New York               SANDER M. LEVIN, Michigan
WALLY HERGER, California             BENJAMIN L. CARDIN, Maryland
JIM McCRERY, Louisiana               JIM McDERMOTT, Washington
DAVE CAMP, Michigan                  GERALD D. KLECZKA, Wisconsin
JIM RAMSTAD, Minnesota               JOHN LEWIS, Georgia
JIM NUSSLE, Iowa                     RICHARD E. NEAL, Massachusetts
SAM JOHNSON, Texas                   MICHAEL R. McNULTY, New York
JENNIFER DUNN, Washington            WILLIAM J. JEFFERSON, Louisiana
MAC COLLINS, Georgia                 JOHN S. TANNER, Tennessee
ROB PORTMAN, Ohio                    XAVIER BECERRA, California
PHILIP S. ENGLISH, Pennsylvania      KAREN L. THURMAN, Florida
WES WATKINS, Oklahoma                LLOYD DOGGETT, Texas
J.D. HAYWORTH, Arizona
JERRY WELLER, Illinois
KENNY HULSHOF, Missouri
SCOTT McINNIS, Colorado
RON LEWIS, Kentucky
MARK FOLEY, Florida
                     A.L. Singleton, Chief of Staff

                  Janice Mays, Minority Chief Counsel
                                 ------                                

                    Subcommittee on Human Resources

                NANCY L. JOHNSON, Connecticut, Chairman
PHILIP S. ENGLISH, Pennsylvania      BENJAMIN L. CARDIN, Maryland
WES WATKINS, Oklahoma                FORTNEY PETE STARK, California
RON LEWIS, Kentucky                  ROBERT T. MATSUI, California
MARK FOLEY, Florida                  WILLIAM J. COYNE, Pennsylvania
SCOTT McINNIS, Colorado              WILLIAM J. JEFFERSON, Louisiana
JIM McCRERY, Louisiana
DAVE CAMP, Michigan

Pursuant to clause 2(e)(4) of Rule XI of the Rules of the House, public 
hearing records of the Committee on Ways and Means are also published 
in electronic form. The printed hearing record remains the official 
version. Because electronic submissions are used to prepare both 
printed and electronic versions of the hearing record, the process of 
converting between various electronic formats may introduce 
unintentional errors or omissions. Such occurrences are inherent in the 
current publication process and should diminish as the process is 
further refined.

                            C O N T E N T S

                              ----------                              

                                                                   Page

Advisory of March 9, 1999 announcing the hearing.................     2

                               WITNESSES

U.S. Department of Health and Human Services, Hon. Olivia A. 
  Golden, Assistant Secretary, Administration for Children and 
  Families.......................................................    30
Congressional Research Service, Library of Congress, Gene Falk, 
  Specialist in Social Legislation, Domestic Social Policy 
  Division.......................................................    47
Congressional Budget Office, Paul Cullinan, Unit Chief, Human 
  Resources Cost Estimates Unit, Budget Analysis Division........    54
                                 ------                                
Children's Defense Fund, Helen Blank.............................    67
Long, Sharon K., Urban Institute.................................    63
Maloney, Hon. Carolyn B., a Representative in Congress from the 
  State of New York..............................................    19
Tauscher, Hon. Ellen O., a Representative in Congress from the 
  State of California............................................    15
Virginia Department of Social Services, Clarence H. Carter.......    78

                       SUBMISSIONS FOR THE RECORD

American Fathers Alliance, Bill Harrington, statement and 
  attachments....................................................    95
Men's Health Network, Cory J. Jensen, statement..................    95
National Women's Law Center, Cristina S. Firvida, statement......    97
NOW Legal Defense and Education Fund, New York, NY, Kathryn J. 
  Rodgers, statement.............................................   104
Zero to Three: National Center for Infants, Toddlers, and 
  Families, Matthew E. Melmed, statement.........................   111

               FEDERAL RESOURCES AVAILABLE FOR CHILD CARE

                              ----------                              

                        TUESDAY, MARCH 16, 1999

                  House of Representatives,
                       Committee on Ways and Means,
                           Subcommittee on Human Resources,
                                                    Washington, DC.
    The Subcommittee met, pursuant to notice, at 1:05 p.m., in 
room B-318, Rayburn House Office Building, Hon. Nancy L. 
Johnson (Chairman of the Subcommittee), presiding.
    [The advisory announcing the hearing follows:]

ADVISORY

FROM THE 
COMMITTEE
 ON WAYS 
AND 
MEANS

                    SUBCOMMITTEE ON HUMAN RESOURCES

                                                CONTACT: (202) 225-1025
FOR IMMEDIATE RELEASE

March 9, 1999

No. HR-3

                      Johnson Announces Hearing on

               Federal Resources Available for Child Care

    Congresswoman Nancy L. Johnson (R-CT), Chairman, Subcommittee on 
Human Resources of the Committee on Ways and Means, today announced 
that the Subcommittee will hold a hearing on Federal resources 
available for child care. The hearing will take place on Tuesday, March 
16, 1999, in room B-318 Rayburn House Office Building, beginning at 
1:00 p.m.
      
    In view of the limited time available to hear witnesses, oral 
testimony at this hearing will be from invited witnesses only. 
Witnesses will include a representative from the Administration, 
researchers, State policymakers, and child care administrators. 
However, any individual or organization not scheduled for an oral 
appearance may submit a written statement for consideration by the 
Committee and for inclusion in the printed record of the hearing.
      

BACKGROUND:

      
    The 1996 welfare reform law (P.L. 104-193) consolidated several 
overlapping child care programs, created a unified child care block 
grant, and provided an additional $4 billion for child care for poor 
and low-income working families. Since enactment of welfare reform, 
about 1.5 million families have left welfare. In every State, adults 
who leave welfare for work are provided with some child care 
assistance, often for a year or more. In addition, most States provide 
child care subsidies for low-income working families who have not been 
on welfare, although few States provide subsidies to all eligible 
families. States have had nearly two years of experience with the child 
care block grant and are now in a position to inform Congress about 
whether the block grant permits adequate flexibility in the use of 
Federal child care dollars, the extent to which families leaving 
welfare use child care, and whether barriers exist to funding a 
sufficiently broad array of services (off-hour care, family day care, 
and the use of vouchers) to meet the unique needs of families.
      
    States currently have about $3 billion in obligated and $3 billion 
in unobligated funds remaining in the Temporary Assistance for Needy 
Families (TANF) block grant. These funds could be used to purchase 
additional child care. In addition, the Congressional Budget Office is 
projecting that states will have an additional $15 billion in unspent 
TANF funds over the next five years. And yet, the President's budget 
included a request for $10.5 billion in additional spending for child 
care programs.
      
    In announcing the hearing, Chairman Johnson stated: ``The President 
wants to spend additional subsidies to provide child care over the next 
five years. But States already have significant funds built-up from 
existing welfare block grants. While we must address child care needs 
to help people move from welfare to work, those of us responsible for 
maintaining budget targets are trying to understand why the President 
wants to increase Federal spending even more when the States already 
have big block grant surpluses available for child care.''
      

FOCUS OF THE HEARING:

      
    The hearing will focus on two issues. First, the Subcommittee will 
examine the President's request for additional spending for child care 
programs, and seek to determine whether the substantial surplus TANF 
funds already available to States are adequate to meet the Federal 
responsibility for helping poor and low-income working families pay for 
child care. Second, the Subcommittee will examine how the substantial 
reforms in Federal child care programs enacted in 1996 are working at 
the State and local level.
      

DETAILS FOR SUBMISSION OF WRITTEN COMMENTS:

      
    Any person or organization wishing to submit a written statement 
for the printed record of the hearing should submit at least six (6) 
single-spaced copies of their statement, along with an IBM compatible 
3.5-inch diskette in WordPerfect 5.1 format, with their name, address, 
and hearing date noted on a label, by the close of business, Tuesday, 
March 30, 1999, to A.L. Singleton, Chief of Staff, Committee on Ways 
and Means, U.S. House of Representatives, 1102 Longworth House Office 
Building, Washington, D.C. 20515. If those filing written statements 
wish to have their statements distributed to the press and interested 
public at the hearing, they may deliver 200 additional copies for this 
purpose to the Subcommittee on Human Resources office, room B-317 
Rayburn House Office Building, by the close of business the day before 
the hearing.
      

FORMATTING REQUIREMENTS:

      
    Each statement presented for printing to the Committee by a 
witness, any written statement or exhibit submitted for the printed 
record or any written comments in response to a request for written 
comments must conform to the guidelines listed below. Any statement or 
exhibit not in compliance with these guidelines will not be printed, 
but will be maintained in the Committee files for review and use by the 
Committee.
      
    1. All statements and any accompanying exhibits for printing must 
be submitted on an IBM compatible 3.5-inch diskette in WordPerfect 5.1 
format, typed in single space and may not exceed a total of 10 pages 
including attachments. Witnesses are advised that the Committee will 
rely on electronic submissions for printing the official hearing 
record.
      
    2. Copies of whole documents submitted as exhibit material will not 
be accepted for printing. Instead, exhibit material should be 
referenced and quoted or paraphrased. All exhibit material not meeting 
these specifications will be maintained in the Committee files for 
review and use by the Committee.
      
    3. A witness appearing at a public hearing, or submitting a 
statement for the record of a public hearing, or submitting written 
comments in response to a published request for comments by the 
Committee, must include on his statement or submission a list of all 
clients, persons, or organizations on whose behalf the witness appears.
      
     4. A supplemental sheet must accompany each statement listing the 
name, company, address, telephone and fax numbers where the witness or 
the designated representative may be reached. This supplemental sheet 
will not be included in the printed record.
      
     The above restrictions and limitations apply only to material 
being submitted for printing. Statements and exhibits or supplementary 
material submitted solely for distribution to the Members, the press 
and the public during the course of a public hearing may be submitted 
in other forms.

      
    Note: All Committee advisories and news releases are available on 
the World Wide Web at `HTTP://WWW.HOUSE.GOV/WAYS__MEANS/'.
      

    The Committee seeks to make its facilities accessible to persons 
with disabilities. If you are in need of special accommodations, please 
call 202-225-1721 or 202-226-3411 TTD/TTY in advance of the event (four 
business days notice is requested). Questions with regard to special 
accommodation needs in general (including availability of Committee 
materials in alternative formats) may be directed to the Committee as 
noted above.
      

                                

    Chairman Johnson of Connecticut. The hearing will come to 
order. Good afternoon, everyone. The purpose of today's hearing 
is to examine the Clinton administration's request for about 
$17 billion additional spending on child care, $7.5 billion of 
which is funding for the Child Care and Development Block 
Grant.
    Assuring sufficient funding for child care is absolutely 
crucial to the success of welfare reform. Both the Federal and 
State governments have a role to play in child care. The 
Federal role is to provide the broad framework for supporting 
child care, to provide part of the money to pay for child care, 
especially for low-income working families, and to provide for 
program accountability. The State role is to establish and 
conduct the actual subsidy programs, to pay for part of the 
costs, and to regulate child care. Government shares two of 
these roles with parents: Paying for care and ensuring 
accountability and quality.
    In the 1996 Welfare Reform bill, Congress made a huge and 
unprecedented commitment to child care. We created a block 
grant that gave States great flexibility in designing and 
coordinating their day-care programs and in addition we 
increased Federal subsidies for child care for low-income 
families by $4.5 billion over 6 years.
    I am pleased that according to testimony from today's 
witnesses, including Helen Blank of the Children's Defense Fund 
and Clarence Carter, who is commissioner of Social Services in 
Virginia, the block grant created by Congress in the 1996 
welfare reform law is an innovation that has worked well. We 
can take good credit for providing States with many fewer 
Federal rules, much greater flexibility in their use of Federal 
dollars, and very significant new resources.
    As we expected, States have done a fine job of developing 
and coordinating their programs and using their child care 
dollars wisely. But problems remain as women move into 
unconventional jobs.
    In 1996, we also provided States with a substantial sum of 
money, $16.5 billion per year, through the Temporary Assistance 
for Needy Families Block Grant to help needy families avoid 
dependency and for other purposes. This money can be spent 
directly on child care or up to 30 percent of it can be 
transferred to the child care block grant. Thus, we have 
already given States a number of tools to use in helping low-
income families purchase child care. In addition, Federal funds 
to support child care are provided through the Child Care Food 
Program, Head Start, title XX, the Welfare-to-Work Grant, and 
the Tax Code. In total, the Federal Government will spend this 
year about $13 billion on child care.
    Clearly, the States already have far more Federal dollars 
for child care than ever before. In addition, they have 
substantial sums at their disposal that could be used to pay 
for child care. The Congressional Research Service will testify 
in a few minutes that States already have $6.2 billion in 
unspent funds from 1997 and 1998 in the TANF block grant. In 
addition, the Congressional Budget Office will testify that 
they project surplus TANF funds of more than $17 billion over 
the next 5 years. Thus States already have or are projected to 
have as much as much as $24 billion in surplus Federal funds to 
pay for child care over the next 5 years.
    Why aren't States using this money? Why aren't solutions 
for women employed at night or on weekends being developed? How 
could Congress justify cutting other programs or increasing 
taxes to give States yet more money when so much is going 
unused? I am very concerned that as we begin to work with 
mothers who have been on welfare for a long time, there is such 
clear evidence that we are not using all available resources to 
help them gain their independence.
    I want Members of this Subcommittee and our guests at this 
hearing to know that I have sent a letter to all the Governors 
urging them to use their TANF resources to help both people 
working their way off welfare as well as the working poor with 
work-related issues including day-care. Members will find a 
copy of this letter in their folders. And without objection, I 
would like to put a copy in the official record of this 
hearing.
    [The opening statement follows:]

Statement of Hon. Nancy L. Johnson, Chairman, a Representative in 
Congress from the State of Connecticut

    The purpose of today's hearing is to examine the Clinton 
Administration's request for around $17 billion in additional 
spending on child care, $7.5 billion of which is funding for 
the Child Care and Development Block Grant.
    Assuring sufficient funding for day care is crucial for the 
success of welfare reform. Both the federal and state 
governments have a role to play in child care. The federal role 
is to provide the broad framework for supporting child care, to 
provide part of the money to pay for child care, especially for 
low-income working families, and to provide for program 
accountability. The state role is to establish and conduct the 
actual subsidy programs, to pay for part of the costs, and to 
regulate child care. Government shares two of these roles with 
parents--paying for care and ensuring accountability and 
quality.
    In the 1996 welfare reform bill, Congress made a huge and 
unprecedented commitment to child care. We created a block 
grant that gave states great flexibility in designing and 
coordinating their day care programs. In addition, we increased 
federal subsidies for child care for low-income families by 
$4.5 billion over 6 years.
    I am pleased that according to testimony from today's 
witnesses, including Helen Blank from the Children's Defense 
Fund and Clarence Carter who is Commissioner of Social Services 
in Virginia, the block grant created by Congress in the 1996 
welfare reform law is an innovation that has worked very well. 
We can all take credit for providing states with many fewer 
federal rules, much greater flexibility in their use of federal 
dollars, and significant new resources. As we expected, states 
have done an exemplary job of developing and coordinating their 
programs and using their child care dollars wisely--though 
problems remain as women move into unconventional jobs.
    In 1996 we also provided states with a substantial sum of 
money--$16.5 billion per year--through the Temporary Assistance 
for Needy Families Block Grant to help needy families avoid 
dependency and for other purposes. This money can be spent 
directly on child care or up to 30 percent of it can be 
transferred to the child care block grant. Thus, we have 
already given states a number of tools to use in helping low-
income families purchase child care. In addition, federal funds 
to support child care are provided through the Child Care Food 
Program, Head Start, Title XX, the Welfare-to-Work grant, and 
the tax code. In total, the federal government will spend 
around $13 billion this year on child care.
    Clearly, states already have far more federal dollars for 
child care than ever before. In addition, they have substantial 
sums at their disposal that could be used to pay for child 
care. The Congressional Research Service will testify in a few 
moments that states already have $6.2 billion in unspent funds 
from 1997 and 1998 in the TANF block grant. In addition, the 
Congressional Budget Office will testify that they project 
surplus TANF funds of more than $17 billion over the next 5 
years. Thus, states already have or are projected to have as 
much as $24 billion in surplus federal funds to pay for child 
care over the next 5 years. Why aren't states using this money? 
Why aren't solutions for women employed at night or on weekends 
being developed? How could Congress justify cutting other 
programs or increasing taxes to give states yet more money when 
so much money is going unused?
    I am very concerned that as we begin to work with mothers 
who have been on welfare a long time, there is such clear 
evidence that we are not using all available resources to help 
them gain independence. I want members of the Subcommittee and 
our guests at this hearing to know that I have sent a letter to 
all the governors urging them to use their TANF resources to 
help both people working their way off welfare as well as the 
working poor with work-related issues including day care. 
Members will find a copy of the letter in their folder. Without 
objection, I order that a copy of the letter be included in the 
official record of this hearing.
    The major purpose of today's hearing is to provide 
witnesses with an opportunity to offer their perspective on the 
efforts states are making to meet the day care requirements of 
TANF and other low-income working families. With so much 
accomplished already, we must not fail in our oversight 
responsibility to assure that welfare reform succeeds for all. 
Furthermore, any new spending must be funded so I hope that 
those advocating new spending will be specific on how they 
recommend we fund it.

    Example of letter individually sent to all 50 Governors:

                                Committee on Ways and Means
                                     Washington, DC, March 17, 1999
The Honorable John G. Rowland,
Governor of Connecticut,
Hartford, CT.
    Dear John:

    Most states have not been spending all the federal dollars that 
have been allocated to them under the Temporary Assistance for Needy 
Families (TANF) block grant. According to our budget analysts, states 
have about $6 billion in unspent funds left over from fiscal years 1997 
and 1998. My colleagues and I on the Committee on Ways and Means are 
fighting to save this money from those who would like to spend it on 
other priorities, but I want you and all the other governors to 
understand that unless states begin spending more of this money, we 
will eventually lose the battle to protect it here in Washington.
    The most surprising thing about the growing TANF reserves is that 
there are so many fruitful ways states should be spending this money. 
Based on the hearings we have conducted in our Committee, as well as on 
numerous research studies, many of which have been conducted by states 
themselves, it is becoming clear that many states are now working with 
the clients who will have a more difficult time achieving independence 
from welfare. Many of the adults remaining on the welfare rolls seem to 
have lower levels of education, less work experience, or more difficult 
transportation problems than those who have already left the rolls; 
further, many have mental health problems or addictions. In short, 
those remaining on the rolls need more services and more assistance to 
enter employment and succeed than those who have been placed thus far. 
States should be doing everything possible to be certain these more 
disadvantaged parents get the help they need to achieve independence.
    Another issue that has repeatedly come to our attention is that 
some lower-
income families, especially those who have never been on welfare, need 
child care subsidies if they are to escape or avoid welfare. Apparently 
some states, by focusing their child care resources on families leaving 
welfare, are putting other low-income, working families at a 
disadvantage by not helping them pay for child care. This policy could 
place low-income families without child care assistance at risk of 
falling into welfare. When Congress created the TANF block grant and 
revamped the Child Care and Development Block Grant in the 1996 welfare 
reform legislation, we allowed states to transfer up to 30 percent of 
their TANF funds into their child care block grant. Thus, states have 
lots of flexibility in employing their TANF dollars to subsidize child 
care--including child care for low-income families who have not been on 
welfare. States should rise to the challenge and use their TANF money 
to help as many of these families as possible.
    Integration of employment and training programs is another 
productive use of TANF dollars. For several years now, Congress has 
been working toward a vision of national employment policy that calls 
for the integration of TANF, the U.S. Employment Service, and the block 
grants under the Workforce Investment Act. This policy is embodied in 
the concept of one-stop career centers in which all these programs are 
co-located and work together to share resources while serving a wide 
range of young people and adults who need jobs or job training or both. 
Given the greater flexibility of TANF dollars than those of the 
Workforce Investment Act, TANF could play a particularly central and 
vital role in creating and operating one-stop facilities.
    Yet another issue is that the success of welfare reform with 
mothers previously dependent on welfare has served to underline the 
relative lack of programs for poor fathers. Research shows that 
children need the active support of two parents if they are to develop 
properly. Because many fathers in poor communities are uninvolved in 
their children's life, and because many of these fathers have 
difficulty meeting their financial obligations to their family, state 
and local government, working cooperatively with the private sector, 
must lead the way in developing programs that help poor fathers both 
play their vital role in family life and achieve the economic potential 
that is so central to their parenting role.
    Finally, some states are setting aside TANF funds to handle future 
caseload increases that may be caused by an economic downturn. Although 
the substantial decline in the TANF caseloads, which has now reached 
more than 40 percent in the average state, means that states have what 
amounts to an annual built-in savings account in the block grant, the 
idea of setting aside a specific amount for a rainy day is wise policy. 
We are trying to produce an estimate of how much of the annual TANF 
surplus is actually money that has been set aside in a rainy day 
account because this information will help us explain at least part of 
the surplus amounts now building up in state accounts. However, unless 
states take formal legislative action, we will not be able to 
accurately estimate the money set aside in rainy day accounts.
    These suggestions are certainly not exhaustive. But they provide 
some concrete ways that TANF money can be used productively to move 
welfare reform to a new level of accomplishment.
    In closing, let me assure you that Congress is deeply grateful for 
the superb job states have done in directing welfare reform. As shown 
by the enclosed study of 12 states, nothing even remotely like the 
present ferment and accomplishment has occurred in the history of the 
federal-state welfare partnership. To continue this achievement, 
however, we must protect the resources states now control. The time is 
rapidly approaching when it will not be possible to protect these funds 
unless states begin to demonstrate that all the funds can be 
productively employed. Spend the money.
            Sincerely,
                                           Nancy L. Johnson
                                                           Chairman

                                

    Chairman Johnson of Connecticut. The major purpose of 
today's hearing is to provide witnesses with an opportunity to 
offer their perspective on the efforts States are making to 
meet the day-care requirements of TANF and other low-income 
working families. With so much accomplished already, we must 
not fail in our oversight responsibility to assure that welfare 
reform succeeds for all. Furthermore, any new spending must be 
funded. So I hope that those advocating new dollars will be 
specific as to how they recommend we raise them.
    Mr. Cardin, would you like to make an opening statement?
    Mr. Cardin. Thank you, Madam Chair. And let me thank you 
first for your leadership on this issue during your 
congressional career. You have made a priority dealing with 
affordable, quality day-care and I applaud you for that effort. 
And I also want to thank you for holding a very early hearing 
in this Congress on the issue of child care. It's a very 
important subject and in your opening statement, you've raised 
many challenges that I hope that this hearing will help us 
start to answer so that we can move forward in a bipartisan way 
to deal with the issue of affordable, quality day-care for our 
communities.
    There's no doubt that in welfare reform, without day-care 
you can't succeed. We're asking parents to go to work and get 
off of cash assistance. And, obviously, that becomes academic, 
becomes problematic if you don't have affordable day-care for 
the parent to be able to utilize. And that's been part of our 
efforts on welfare reform. But the success of welfare reform is 
only part of the reason why we should be re-evaluating our 
commitment to child care. Just as important it is in the daily 
struggle to find affordable, quality day-care that confronts 
millions of low- and moderate-income working families that have 
never been on welfare. And, Madam Chair, they're caught in a 
real hard place. They're caught between a rock and a hard place 
as to being able to get any assistance. Normally, their income 
is too high too qualify for the State programs. And, yet, their 
tax liability is low and they don't get any benefit from the 
Dependent Care Credit. So they're basically being asked to take 
on the burdens of day-care through their own resources.
    Let me just give you the example from my State of Maryland 
where currently we are only able to assist those families below 
36 percent of the State median income or about $18,000 a year. 
When you consider that the average cost of placing a 4-year-old 
child in day-care in Baltimore is more than $4,500 a year and 
is double that for an infant, you quickly understand the 
precarious position that a moderate-income family just above 
the State subsidy level must confront.
    I think the question is very simple for us. And that is are 
we going to help these families meet their dual challenges of 
going to work and raising a family? I believe the answer should 
be yes. And I, therefore, introduce today the legislation 
proposed by President Clinton to provide increased child care 
subsidies for low-income parents and expanded child care tax 
cuts for middle-income parents. The bill also includes tax 
credits for parents who stay at home to care for a young child 
and new resources to improve child care quality.
    And I hope we will have a substantive debate on these 
issues. Madam Chair, before I conclude, I do want to respond to 
the point that you made about States having plenty of resources 
because of unspent TANF funds. Today, in the Baltimore Sun 
there's an article about the ``GOP Asks Why Clinton Wants to 
Raise Spending if the Money Isn't Used?'' And, quite frankly, I 
think it's--we're responding to that. Mr. Kasich has indicated 
that he will propose cutting welfare money because caseloads 
have dropped so fast. And I just really want to take issue with 
those statements. I think we made a commitment to the States 
when we passed welfare reform that we give them maximum 
flexibility to meet the challenges of getting people off of 
welfare. Some States think that they should preserve a little 
bit of money for a rainy day fund. That's not a bad idea. Some 
States believe it's going to be more difficult to deal with the 
current individuals that are on cash assistance and those that 
have been able to successfully leave welfare, that we have the 
more difficult cases yet to be confronted. And they want to 
make sure that they have the resources to deal with that. I 
don't think that that is such a bad judgment by the States to 
reserve some of these funds for either rainy days or for the 
difficult times ahead. And it's worth remembering that the 
current unobligated TANF surplus is sufficient to pay only 1.5 
months of cash benefits during a recession.
    States have actually obligated 90 percent of their 1997 to 
1998 TANF funds. And 19 States have obligated all of their 
funds. I don't quarrel with those States. One happens to be the 
State of Connecticut. They may be doing a very good job using 
those funds, but they certainly don't have the resources to 
expand opportunities for child care. And that's what this 
hearing is about.
    So I don't think it's fair to tell the States since you've 
been having a successful time getting people off welfare since 
the economy is doing so well, you handle this problem on your 
own. It should be a partnership with the Federal Government, 
and we should be finding ways in order to expand opportunities, 
particularly now that we have the budget resources to do that.
    So, Madam Chair, I applaud you for this hearing where we 
can start the debate and figure out how we can move together in 
a bipartisan way to advance our common goal of affordable day-
care. And I'm very pleased that two of my colleagues, 
Congresswomen Tauscher and Maloney are here today. Both have 
been leaders in this area for many years in the Congress of the 
United States. I look forward to their testimony and working 
with the other Members of Congress on a successful way to deal 
with this issue.
    Chairman Johnson of Connecticut. Thank you.
    Mr. Stark. Madam Chair.
    Chairman Johnson of Connecticut. Yes?
    Mr. Cardin. I yield whatever time I have remaining to Mr. 
Stark.
    [The opening statement follows:]

Statement of Hon. Benjamin Cardin, a Representative in Congress from 
the State of Maryland

    Madame Chair, I want to thank you for calling this hearing 
on child care. There certainly should be little doubt that 
welfare reform will not succeed without adequate resources for 
day care. We are, after all, attempting to move mothers with 
young children into the workforce--meaning someone has to care 
for their children.
    But the success of welfare reform is only part of the 
reason we should evaluate our commitment to child care. Just as 
important is the daily struggle to find affordable, quality day 
care that confronts millions of low- and moderate-income 
working families who have never been on welfare. These families 
are caught between a rock and a hard place. They often don't 
receive direct subsidies because States are focusing their 
child care funding on the welfare population, and they don't 
benefit from the Dependent Care Tax Credit because they do not 
have enough tax liability.
    For example, in my home State of Maryland, day care 
subsidies are available to only those families below 36 percent 
of the State Median income, or about $18,000 a year. When you 
consider the average cost of placing a four-year-old child in 
day care in Baltimore is more than $4,500 a year (and almost 
double that for an infant), you quickly understand the 
precarious position of those moderate-income families just 
above the State subsidy level.
    The question before us is very simple--are we going to help 
these families meet the dual challenges of going to work and 
raising a family?
    I believe the answer should be YES, and I therefore today 
introduced legislation proposed by President Clinton to provide 
increased child care subsidies for low-income parents and 
expanded child care tax cuts for middle-income parents. The 
bill also includes tax credits for parents who stay at home to 
care for a young child and new resources to improve child care 
quality. I look forward to having a substantive debate on this 
legislation and other approaches to improving access to day 
care.
    Before I conclude, I would like to address one final 
issue--the contention that States now have plenty of resources 
to address all of their citizens' child care needs. This 
premise rests on the fact that States have not spent all of 
their TANF welfare funding, some of which is allowed to be 
transferred to child care.
    I have three quick responses. First, the magnitude of our 
Nation's welfare caseload decline--35% over the last 2 years--
has exceeded many States' expectations. This created TANF 
surpluses for some States, which may now be considering how 
best to utilize those funds.
    Second, States may feel it necessary to reserve some of 
their TANF allocation in so-called ``rainy day funds'' to 
prepare for a future economic downturn, when the number of 
welfare recipients will go up, but Federal funding under the 
TANF block grant will remain flat. It is worth remembering that 
the current unobligated TANF surplus is sufficient to pay only 
1\1/2\ months of cash benefits during a recession (according to 
the Congressional Research Service).
    And third, States have actually obligated 90% of their 1997 
and 1998 TANF funding, and 19 States have obligated all of 
their TANF funds. Therefore, while I agree with those who would 
like to see States do more to increase the availability of day 
care, I don't think it is accurate to suggest the current 
status of TANF funding indicates no Congressional action is 
needed on child care.
    Madame Chair, let me once again thank you for holding this 
hearing. I look forward to hearing the testimony of our 
witnesses. Thank you.

                                

    Mr. Stark. Could I take a long and eloquent statement and 
ask that it be placed in the record?
    Chairman Johnson of Connecticut. Of course.
    Mr. Stark. And be given 30 seconds or so to summarize it?
    Chairman Johnson of Connecticut. You certainly may.
    Mr. Stark. Because I, too, want to thank you for holding 
this hearing. I will during it, as you and perhaps your staff 
and others know, talk about the quality issue not in terms, and 
I recognize the nervousness that people have about setting 
regulations and standards, but by the same token, I know that 
you and Congresswoman Maloney, and Congresswomen Tauscher and 
Morella and Norton all sent a letter to Speaker Gingrich some 
time ago. And in your Women's Caucus statement, the third item 
in supporting or promoting child care was a very strong 
paragraph on promoting quality child care. And I would like to 
insert that letter by the six of you in the record because 
that's my little hope that we can, in addition to the fund 
question and whatever you decide to do with the funds and 
however you decide to use them, I think we make an oversight if 
we do not keep the pressure on even if it isn't regulation. 
Perhaps you are just demanding from the administration that 
they report back. If they're going to give money for quality, 
then I know because I know you're doing it in Head Start now, 
we've sat and heard Congressman Goodling say, ``How can you 
prove that Head Start is any good?'' Well, I hate to tell you 
but I know that the gentleman from Louisiana is going to be at 
me in about 3 or 4 years saying, ``How do we know this is doing 
any good?'' So I want 3 or 4 years from now, unless he's 
Senator from Louisiana----
    Mr. Camp. Governor.
    Mr. Stark. Governor. All right. But I want to be able to 
answer that question. So I would like to put these in the 
record, if you will?
    Chairman Johnson of Connecticut. You certainly may.
    Mr. Stark. And I look forward to the rest of the hearing. 
Thank you for indulging me.
[GRAPHIC] [TIFF OMITTED] T5629.001

[GRAPHIC] [TIFF OMITTED] T5629.002

    [The opening statement follows:]

Statement of Hon. Fortney Pete Stark, a Representative in Congress from 
the State of California

    Madam Chairwoman, thank you for calling this hearing to 
address the problem of funding for child care services in our 
country. I also thank the Administration for proposing what I 
believe is the first step toward making child care services 
accessible to poor and low-income families. I am particularly 
aware of the work of the First Lady on the issue of child care, 
and I commend the Administration and Ranking Member Ben Cardin 
for their proposal, which I have co-sponsored.
    As more and more families with infants and young children 
are forced to send both parents to work, the need for child 
care--especially infant care and care at non-traditional 
hours--continues to expand. As the need for care grows however, 
startling findings in a study on the cost and quality of child 
care by the University of Colorado at Denver's Department of 
Economics report that more than 80% of child care services in 
the U.S. is thought to be of poor or average quality (summary 
of study attached).
    I want to make sure we're not missing the mark. Although it 
is true that child care is in short supply and is too expensive 
for many families to afford, we must not allow the demand for 
child care services to override the need for quality. It is 
critical that children receive care that promotes their healthy 
growth and development. We cannot allow them to be placed in 
substandard conditions.
    I will reintroduce the Child Care Quality Improvement Act 
of 1999, to help states increase and meet their child care 
quality goals. My bill would provide funding for Quality 
Improvement Grants to be transferred to local child care 
collaboratives under the Child Care Development Block Grant 
(CCDBG).
    Grants would be made to states which have established goals 
for child care quality improvements in six areas: increased 
training for staff, enhanced licensing standards, reduced 
numbers of unlicensed facilities, increased monitoring and 
enforcement, reduced caregiver turnover, and higher levels of 
accreditation.
    My bill takes a benchmarking approach that helps states 
define quality targets and measures the states' progress toward 
meeting their long-term quality goals. States would be required 
to report to the U.S. Department of Health and Human Services 
on their progress in meeting their quality goals in order to 
remain eligible for future funding.
    Congress has wrongly refused to require significant quality 
standards for the child care dollars we allocate each year. The 
federal government should give states the resources to raise 
state quality standards and improve child care quality at the 
local level, but only through a system of measurable indicators 
of desired outcomes. We must allocate these funds with the 
guarantee that incentive grants will continue to raise 
standards and improve the quality of care.
    As the father of a young son, I know the difficulty 
families face when choosing a caregiver for their children. My 
bill gives families peace of mind by encouraging the states and 
local facilities across the country to provide the high quality 
of care every child deserves.
    I look forward to working with the members of this 
Subcommittee and with the Administration to ensure that quality 
improvement remains a priority in this and any future child 
care initiative.
[GRAPHIC] [TIFF OMITTED] T5629.009

    Chairman Johnson of Connecticut. Though we don't normally 
have opening statements for everyone on the Committee, since 
Mr. Stark has made an opening statement, would either of the 
other gentlemen like to make an opening statement?
    Mr. McCrery. Well, Madam Chair, I appreciate the 
opportunity. I just say to my good friend from California if 
the Federal Government continues to give the States so much 
money to spend, then I might be inclined to run for Governor. 
[Laughter.]
    Chairman Johnson of Connecticut. Mr. Camp.
    Mr. Camp. Thank you, Madam Chairman. As delightful as it is 
to discuss this among ourselves, I would like to hear from our 
distinguished Members of Congress on this issue.
    Chairman Johnson of Connecticut. Thank you.
    Mr. Camp. So I'll forego an opening statement. Thank you.
    Chairman Johnson of Connecticut. Thank you. And it is a 
great pleasure to me personally to have with us today two of 
the women Members of Congress who have been particularly 
interested in this subject and done a lot of good work on it. 
Congresswoman Maloney, you are listed here first but you don't 
appear to be prepared to go first. Congresswoman Tauscher.

   STATEMENT OF HON. ELLEN O. TAUSCHER, A REPRESENTATIVE IN 
             CONGRESS FROM THE STATE OF CALIFORNIA

    Mrs. Tauscher. Thank you. Thank you, Mrs. Johnson. I want 
to thank you, as the Chair of the Subcommittee for your 
leadership and your continued leadership. I just want to remind 
everyone that in 1998 as the Chair of the House Women's Caucus, 
you actually had the first Women's Caucus hearing and it was on 
child care and it was enormously successful. And I want to 
thank you for your continued leadership. And, Ranking Member 
Cardin, thank you for your leadership. And my colleague from 
California, Mr. Stark, good afternoon. How are you?
    Gentlemen, good day and I'm happy to be here. And I would 
like to thank you all for this opportunity. I have a longer 
statement that I will submit for the record. I just want to 
summarize why it is so important for us to discuss the 
importance of quality child care for the American working 
family.
    Since coming to Congress, I have repeatedly heard from my 
constituents that finding affordable high-quality child care is 
virtually impossible. Parents can find either affordable child 
care or they can find high-quality child care. But for many of 
them, they have a hard time finding a combination of both in 
one provider or one center and an opening for their child when 
they need it. The fact is that 77 percent of American families 
have made the decision that both parents will work at least 
part time. Many times these families have no other option. 
Single parents must work to provide for their families and low-
income families must have two parents working just to keep one 
step ahead of poverty. Ultimately, the transition to full-time 
work at a livable wage happens only if parents know that their 
children are in a safe and quality child care environment.
    Many argue that States are not taking advantage of the fact 
that they can move Temporary Assistance to Needy Families, TANF 
funds, to the Child Care Development Block Grant to provide 
child care to low-income working families. In fact, some States 
are doing this but there is still substantial need. My home 
State of California, for example, has already committed 100 
percent of its TANF funds and has no means of providing child 
care assistance for additional low-income working families.
    When families cannot afford quality child care, their 
children suffer. They suffer not only physical health risks 
because of unsafe environments, but their cognitive development 
can also suffer.
    Numerous studies show us that high-quality child care 
predicts better school readiness and higher language scores. 
Unfortunately, high-quality child care is the exception rather 
than the rule.
    Today, I will introduce the Affordable Child Care Education 
Security and Safety Act, known as the ACCESS Act on behalf of 
the Democratic Caucus. I would like to thank the Ranking 
Minority Member of the Human Resources Subcommittee, Mr. 
Cardin, for introducing the sections of the bill that fall 
under the jurisdiction of the Ways and Means Committee.
    The ACCESS Act is a comprehensive bill which makes 
significant investments to improve the affordability, 
availability, and quality of child care. ACCESS provides an 
additional $1.5 billion per year in mandatory CCDBG funds which 
can be used to help low-income families after States have used 
their existing CCDBG funds. ACCESS also provides tax relief to 
millions of working parents and stay-at-home parents through 
the expansion of the Dependent Care Tax Credit. The ACCESS bill 
would provide a tax credit to businesses who build or expand 
their existing child care facilities or for 25 percent of their 
qualified costs. Small businesses which often cannot afford to 
provide child care on their own can form consortia with other 
small businesses to start quality child care centers and 
receive Federal and State matching funds.
    In addition to business partnerships, we need to use 
existing infrastructure such as schools. The ACCESS bill 
increases funding for the highly successful 21st century 
Community Learning Center program that helps schools develop or 
expand after school programs that improve academic performance 
and reduce the incidence of juvenile crime.
    While we need to make financial investments in increasing 
the affordability of child care, we also need to specifically 
target the issue of quality, as Mr. Stark has brought up. The 
access bill establishes a Model States Early Learning Fund, 
which would provide challenge grants to States that are 
interested in specifically improving their quality of child 
care.
    American families do not need one-size-fits-all child care. 
Every family is unique in make-up and circumstance and we need 
to address the issues that every one of them faces. The ACCESS 
bill represents a variety of common sense proposals that ensure 
that parents do not have to make the choice between food and 
quality child care, that school-age children do not have to 
come home to an empty home, and that all American families get 
financial support for the costs of child-rearing.
    The ACCESS bill puts children and families first. I would 
like to thank the Committee on Ways and Means for recognizing 
the importance of child care and holding this hearing on this 
very important issue. I'm happy to answer whatever questions 
you may have. And I look for support from both sides of the 
aisle on this bill.
    Thank you, Mrs. Johnson.
    [The prepared statement follows:]

Statement of Hon. Ellen O. Tauscher, a Representative in Congress from 
the State of California

    I would like to thank the committee for this opportunity to 
discuss the importance of quality child care to the American 
working family. Since coming to Congress, I have repeatedly 
heard from my constituents that finding affordable, high-
quality child care is virtually impossible. Parents can find 
either affordable child care or they can find high-quality 
child care; but they have a hard time finding a combination of 
both in one provider. This problem is not only evident to me as 
a Member of Congress, but as a parent. Before I came to 
Congress, I founded a company that provides comprehensive 
background checks on potential child care workers because I 
realized that it was almost impossible to verify that the 
person that I was entrusting my child to, was actually 
qualified. I realized that other parents were facing the same 
difficulties I was. So I wrote a book which explained how 
parents should go about finding quality child care providers 
and settings. My degree in Early Childhood Education and my 
prior profession where I dealt with numerous child care 
workers, made me aware of the child care problem. Millions of 
families deal with a child care crisis on almost a daily basis 
and struggle to cope. Our job as legislators should be to make 
the lives of American working families just a little bit 
easier. While it is not our duty to make decisions for these 
families, we can help them implement the decisions they have 
made for themselves.
    The fact is that 77% of American families have made a 
decision that both parents will work at least part-time. Many 
times, these families have no other option. Single parents must 
work to provide for their families and low-income families must 
have two parents working just to keep one step ahead of 
poverty. While we can hope that families will have the 
financial means that allow one parent to stay home with young 
children, we, as legislators, should never take the position of 
criticizing families for making the choices they do. The fact 
is that, for whatever reason, only 23% of all families with 
children younger than 6 have one parent who stays at home. 
Parents need help dealing with the financial burden that child 
care poses.
    Child care expenses range, on the average, from $4,000 to 
$10,000 per year. Infant care costs are $1,000 higher, on 
average. Parents can easily spend more on child care than they 
do on a year of tuition at a public university. The often 
insurmountable cost of care, unfortunately, often forces 
parents to choose between quality day care now or saving for a 
college education later. This is a terrible choice for parents 
to have to make. Low-income families are faced with a more 
stark picture--the choice between quality child care or 
clothes, shelter, and food. For these parents, low-quality 
care, where they continually risk their children's health and 
safety, is a fact of life.
    The Federal Government's commitment to child care, in a 
sense, indicates its commitment to promoting work and a strong 
economy. The TANF program requires able-bodied recipients to be 
engaged in work or a work-related activity; yet these parents 
cannot become reliable, productive, full-time workers if they 
are constantly worried about their child care situation. 
Ultimately, the transition to full-time work at a livable wage 
happens only if parents know that their children are in a safe 
and quality child care environment.
    States, for the most part, have focused their CCDBG funding 
on helping TANF families who are the poorest of the poor. Left 
neglected are the low-income working families who make too much 
to be eligible for TANF and are left to contend with the high 
cost of child care on their own. Continually underfunding the 
CCDBG will turn low-income working families into TANF families. 
The CCDBG allows states to help families with incomes up to 85 
percent of the state median income, but 44 states disqualify 
families before they even reach this level! In many states, 
there aren't even funds for families who do qualify for a child 
care subsidy--in California, 200,000 eligible children are on 
the waiting list and have been there for two years. Two years 
is a lifetime for young children. Two years of unsafe, low-
quality care can produce a lifetime of problems. Quality child 
care stimulates brain activity, promotes reading and math 
skills, and prepares children for success in school. An 
investment in quality child care produces a lifetime of 
benefits for a child.
    Many argue that states are not taking advantage of the fact 
that they can move TANF funds to the CCDBG to provide child 
care to low-income working families. In fact, some states are 
doing this, but there is still substantial need. Florida, for 
example, has transferred $117 million to CCDBG, yet families at 
200 percent of poverty must pay about 28% of their gross income 
to provide child care for two children. According the Florida 
Department of Children and Families, providing child care for 
children from birth to age five for working families at 200% of 
poverty and providing child care for the school-age population 
would cost an additional $293 million. My home state of 
California has already committed 100% of its TANF funds and has 
no means of providing child care assistance for additional low-
income working families.
    When families cannot afford quality child care, their 
children suffer. They suffer not only physical health risks 
because of unsafe environments, but their cognitive development 
can suffer as well. Numerous studies show us that high quality 
child care predicts better school readiness and higher language 
scores. Unfortunately, high quality child care is the exception 
rather than the rule. Studies indicate that 35% of family-based 
and 40% of center-based infant and toddler care is inadequate 
or even potentially harmful to children's safety and 
development. This unacceptably low standard of care results 
from numerous factors such as high child/staff ratios, 
inadequate training for staff, and a lack of health protection 
and promotion guidelines.
    We cannot continue to place our children at the bottom of 
the priorities list. An investment in child care is an 
investment in our children's future and an investment in 
American families. Today I will introduce the Affordable Child 
Care, Education, Security, and Safety or ACCESS Act on behalf 
of the Democratic Caucus. I would like to thank the ranking 
minority member of the Human Resources subcommittee, Mr. 
Cardin, for introducing the sections of the bill that fall 
under the jurisdiction of the Ways and Means committee. I would 
like to thank a number of my colleagues for their efforts in 
the creation of this bill. Representatives Cardin, DeLauro, 
Maloney, Lofgren, Slaughter, Tom Allen, Woolsey, Moran, and 
Weygand along with many others have been invaluable in the 
crafting of the ACCESS bill. This bill has 81 co-sponsors and 
has the support of the Administration. The ACCESS bill makes 
significant investments in child care to benefit all parents, 
regardless of income or family structure. Every family deserves 
access to quality child care and our bill ensures that no 
family needs to shortchange their children.
    The ACCESS act is a comprehensive bill which makes 
significant investments to improve the affordability, 
availability, and quality of child care. ACCESS provides an 
additional $1.5 billion per year in mandatory CCDBG funding 
which can be used after states have used existing CCDBG funds. 
Seventy percent of the funds must be used to help low-income 
working families so that they can stay off welfare for good. 
ACCESS also provides tax relief to millions of Americans 
through expansion of the Dependent Care Tax Credit, providing 
an annual tax cut of $345 to 3 million families. Stay-at home 
parents, who often sacrifice a second income for the sake of 
their children, can also get relief because of the ACCESS bill 
which would allow parents with children under the age of 1 to 
claim at least $1500 in child care expenses under the DCTC.
    In addition to government funding, we must also encourage 
public private partnerships in developing innovative child care 
solutions. The ACCESS bill would do just that by providing a 
tax credit to businesses who build or expand their child care 
facilities, for 25% of their qualified costs. Small businesses, 
which often cannot afford to provide child care on their own, 
can form consortias with other small businesses to start 
quality child care centers, and receive federal and state 
matching funds under the ACCESS bill. In addition to business 
partnerships, we need to use existing infrastructure such as 
schools. School buildings often stand empty from 3 pm, when the 
last bell rings, until the next morning. The ACCESS bill 
increases funding for the highly successful 21st Century 
Community Learning Center Program that helps schools develop or 
expand after school programs. Under the ACCESS bill, an 
additional half a million children would be able to participate 
in quality, after-school programs that could improve academic 
perfomance and reduce the incidence of juvenile crime. The 
ACCESS bill also allows the Secretary of Housing and Urban 
Development to insure mortgages to build new child care 
facilities or renovate existing facilities.
    While we need to make financial investments in increasing 
the affordability of child care, we also need to specifically 
target the issue of quality. The ACCESS bill establishes a 
Model States Early Learning Fund which would provide challenge 
grants to states that are interested in specifically improving 
their quality of child care. Quality is directly related to 
staff and teacher training and the ACCESS bill provides 
scholarships to students who make a demonstrated commitment to 
working in a licenced child care facility upon completion of 
their education. Children require continuity and the ACCESS 
bill would ensure that they are cared for by a trained and 
familiar adult.
    American families do not need one-size-fits-all child care. 
Every family is unique in make-up and circumstance and we need 
to address the issues that every one of them faces. The ACCESS 
bill represents a variety of common sense proposals that ensure 
that parents do not have to make the choice between food and 
quality child care, that school-age children do not have to 
come home to empty houses, and that all American families get 
financial support for the costs of child rearing. Raising 
children is an individual, family, and community effort, and 
our society as a whole benefits when our children are cared for 
in a safe and nurturing environment. The ACCESS bill puts 
children and families first. I would like to thank the 
Committee on Ways and Means for recognizing the importance of 
child care and holding a hearing on this very important issue. 
Thank you.

                                

    Chairman Johnson of Connecticut. Thank you.
    Congresswoman Maloney.

   STATEMENT OF HON. CAROLYN B. MALONEY, A REPRESENTATIVE IN 
              CONGRESS FROM THE STATE OF NEW YORK

    Mrs. Maloney. Thank you very much, Madam Chairman. And I 
join my colleague in wanting to be associated with the remarks 
with Congressman Stark and Mr. Cardin. And I compliment you on 
your strong leadership on affordable and available child care 
and the Quality Child Care Statement that was part of the 
Women's Caucus agenda under your chairmanship.
    When we talk about the need for child care, and we talk 
about moving welfare recipients to work, and we talk about 
helping working families, men and women, it is really simply 
words unless we put behind it a comprehensive child care 
national child care strategy to turn our words into the reality 
of affordable and available quality child care.
    I would like to have my remarks put in the record. And 
would just like to summarize two proposals, one of which is 
before the Banking Committee, which I co-authored with my 
Republican colleague. And I compliment Ellen Tauscher, the 
President's program and proposal, and am totally supportive of 
it. But I would like to just focus on these two bills.
    The first one is the Child Care Infrastructure Act, H.R. 
389. It is a bipartisan bill introduced by Ileana Ros-Lehtinen 
and myself and it is in the President's budget. This bill would 
give a 25 percent tax credit to employers who provide on-site 
child care and/or provide the building, build it, and/or 
subsidize it. And it also is flexible in that it would allow 
smaller businesses to come together as a unit and pool their 
resources, not only to get the tax credit but to provide the 
day-care.
    I might add that this is not in the bill, but from the 
great city of New York that I represent a report was just 
issued by our State comptroller that in our city there is a 
waiting list of 61,000 families trying to get into child care. 
And I would add to it that residential buildings, large 
residential buildings could also use this for on-site or 
subsidized child care if they're willing to do it for the 
people who live there.
    As I said, it has bipartisan support. Deborah Pryce does 
not believe that our bill goes far enough, and she has 
introduced a bill that would provide a 50 percent tax credit.
    The second bill that I just absolutely like a great deal is 
called Kiddie Mac and this was authored with Representative 
Richard Baker, who is the chairman of the Capital Markets 
Subcommittee on Banking and myself and Sue Kelly, also on 
Banking. Kiddie Mac the Children's Development Commission Act, 
is modeled after Fannie Mae and Freddie Mac. Fannie Mae and 
Freddie Mac have made affordable housing a reality for 70 
percent of American families. Why can't we do the same thing 
for day-care? Why can't we take the same innovative approach 
that was cost-effective, leveraging the private markets, to 
build day-care facilities? Granted it's only one of many blocks 
that you need to solve the problem, but it's an important 
block. The most important block. You can't have child care 
unless you have the infrastructure, the site. This takes care 
of that first stumbling block, the infrastructure.
    It is flexible in that the loans could be given to say a 
welfare mother who has family day-care network, who wants to 
open up her home for her neighbors and have day-care in her 
home. She needs money to get it up to code, to start. This 
could help a family day-care network site or a large business 
that is providing it on-site or a site in a Public Housing 
Authority or in a church or in a synagogue.
    So it is very, very flexible. It would provide a 
government-backed guarantee loan for loans going into child 
care facilities certified by State standards. The premiums and 
the interests on the loan would go into a pool much like Fannie 
Mae and Freddie Mac. It would become self-sustaining, would not 
cost any money. Actually, Fannie Mae and Freddie Mac make 
money, but our bill says any money that is made goes into child 
care research and into really studying better ways we can take 
care of our children.
    So I would just like to add these two initiatives, one from 
the Banking Committee, in a bipartisan effort to the total 
ACCESS proposal that the Democratic party has put forward. And, 
hopefully, your members will consider it. It is cost-effective 
and it is creative and a sure fire winner.
    So I see our time is up and thank you for this opportunity.
    [The prepared statement follows:]

Statement of Hon. Carolyn B. Maloney, a Representative in Congress from 
the State of New York

    Chairman Johnson, Ranking Member Cardin and the rest of the 
Committee members, thank you for allowing me to testify before 
you. Today we are discussing the role of the government in the 
area of child care, an issue I have been working on all of my 
political life.
    Before I came to Congress, I was a member of the New York 
City Council. A little over ten years ago, one hour after a 
Council meeting, I gave birth to my youngest daughter. I 
quickly understood the problems a working mother with a young 
child has.
    Finding quality care for my child while both myself and my 
husband pursued our careers was difficult--and I am sure that 
for many parents it is daunting. With this first hand knowledge 
I introduced a series of child care bills before the City 
Council which I called the ``Virginia Plan,'' after my young 
daughter.
    Ten years later, the collective child care problems of 
America's families are turning into a national dilemma.
    In 1970 the Department of Labor found that 30 percent of 
married mothers were in the workforce . . . by 1994 that number 
was 62 percent--and it is expected to continue to rise.
    Whether we are discussing two-earner families or single 
mothers, their young children deserve a safe, stimulating 
environment while their parents are working. Welfare reform has 
also greatly affected the care of many of our nation's 
children. With each state determining how best to implement 
welfare reform, often children are forgotten in the equation.
    The New York State Comptroller, Carl McCall, completed a 
study which reported that due to welfare reform 60,000 children 
in New York City would be in need of child care by the year 
2001. But the city will only have places for about half of 
them. This is a pattern which I am sure is repeated across the 
country.
    So with these realities, what should the government do?
    I believe that the issues and problems surrounding child 
care are diverse, and that there is not one, single solution. 
What is needed is a comprehensive strategy which can tackle 
different parts of the problem in different ways:
    We need to address the single parent on welfare who faces 
the dilemma of losing their check by staying home with their 
children, or leaving their children in substandard care, or 
worse, home alone.
    We need to address a child's need for a safe, stimulating 
environment which is most crucial in the early years of 
development. We need to address nutrition, after-school care 
and the quality of care workers.
    As you see, there are many issues and no one solution--or 
even two solutions--will solve them all.
    There are many interesting proposals which have been 
submitted on both sides of the aisle, and I have a few of my 
own.
    The Child Care Infrastructure Act, H.R. 389, a bipartisan 
bill I introduced with Rep. Ros-Lehtinen, is in the President's 
budget. This bill would give a 25% tax credit to employers who 
engage in activities such as: Building and subsidizing an 
entire child care facility on or near the site of the company; 
Participating with other businesses in setting up and jointly 
running a child care center; contracting with a child care 
facility to provide a set number of places for employers--
giving centers the steady cash flow they need to survive.
    This bill gives employers may options, but in the end both 
the employers and employees are winners. The employees know 
that their children are in good care. Employers have discovered 
that these employees are more productive, have less absenteeism 
and are more loyal to the company.
    In a related issue, today I will be introducing the 
Breastfeeding Promotion and Employers' Tax Incentive Act. This 
bill will encourage employers to set up a safe, private, and 
sanitary environment for women to pump breast milk through a 
tax credit. This is a cutting-edge issue--and many companies 
are beginning to understand the importance of allowing their 
mothers to pump milk.
    --For example, Mr. Cardin, in your district RWD 
Technologies, an information and technology company of 1,000 
people in Columbia, Maryland has a lactation room for its 
employee-mothers. Not surprising is that many insurance 
companies, Aetna, CIGNA, etc, have lactation rooms because they 
recognize the potential in savings for health care costs from 
having healthier children.
    The last piece of children's legislation is ``Kiddie 
Mac''--the Children's Development Commission Act, which I will 
also be reintroducing later today.
    While market forces should respond to demand, the obvious 
need for quality, affordable child care is not being fully met.
    This bill would make it easier for child care providers to 
get the financing they need in order to build or rehabilitate a 
child care facility.
    This is how it works: The Children's Development 
Commission, or ``Kiddie Mac,'' would receive a loan application 
from a bank for a child care facility. The Commission would 
then certify the loan, allowing HUD to issue a guarantee to the 
bank. With the guarantee, the bank will be more willing to 
provide a loan--and it should also result in more favorable 
financing terms which means better cash flow for the facility.
    The Commission will also provide smaller, special purpose 
loans for bringing existing facilities up to local licensing 
standards. It will also provide access to fire and liability 
insurance and create a foundation to do research into child 
care.
    After a one-time appropriation, the Commission would pay 
for itself through the premiums paid by the banks for the 
guarantees.
    Thank you for listening to my views and my proposals, and I 
thank the Committee for recognizing the need to focus on child 
care.
[GRAPHIC] [TIFF OMITTED] T5629.003

    Chairman Johnson of Connecticut. Thank you. It's a pleasure 
to have you both here and it's a pleasure to have you bring 
forward so many ideas. I would just point out to my friend, 
Mrs. Tauscher, Congresswoman Tauscher from California that 
actually your State is a good example of the problems in this 
area because they have basically $1.5 billion that they have 
not used this year. They have obligated it for next year, but 
they did not use it this year. So next year, they will get 
their $3.7 billion again plus the $1.5 billion for a total of 
$5.7 billion. What I don't understand is why aren't they using 
it this year? Why didn't they obligate it this year?
    When I look at the problems of women who get jobs that are 
on weekends or at night and the lack of day-care available in 
those areas and the lack of infant day-care that's available 
and the lack of accountability in the States for the kinship 
care programs that they've developed, I mean there are so many 
ways to have spent that money constructively, both to expand 
options and slots and to do better oversight that it is 
distressing to me.
    Mrs. Tauscher. I agree with you.
    Chairman Johnson of Connecticut. Thank you for the ideas 
that you've all brought forward. In Connecticut, frankly, we 
really have spent all our money. We have zeros in both columns.
    Mrs. Tauscher. Well, if I could just respond. I think----
    Chairman Johnson of Connecticut. We are a smaller State 
with a much more integrated system.
    Mrs. Tauscher. One of the reasons why we're happy to have a 
new Governor is that we had some very significant shortfalls in 
planning for our child care problems and programs in the State 
of California. For example, one of the first things that was 
cut when Governor Wilson arrived 8 years ago in Sacramento was 
the money to go inspect day-care centers throughout the State 
of California. And if you care at all about peace of mind and a 
parent believing that we have State laws that say that we're 
meant to be visiting day-care centers and we're supposed to be 
checking not only the safety and quality issues but ratios and 
cleanliness, those inspections--that budget was drastically 
cut.
    And I think that you're right. We need to make sure that 
the States are accountable. I believe that we should not create 
any kind of Federal bureaucracy for this, but that is why the 
Model States portion of this bill is important. It takes 17 of 
the 50 States and says, ``You've got good programs. You seem to 
be spending your money wisely. You seem to be accountable.'' 
Let's give flexibility and grants both through the CCDBG and 
other opportunities to States so that they can rise themselves 
up and make choices, spend their money better, be more 
accountable and deliver the things to their constituents.
    Chairman Johnson of Connecticut. And do you make those 14 
States----
    Mrs. Tauscher. Seventeen.
    Chairman Johnson of Connecticut. Do you make those 17 
States the measure for others?
    Mrs. Tauscher. Right. They're model States.
    Chairman Johnson of Connecticut. By ``model,'' that's 
generally a flexible term? That they are models and the States 
can use this money?
    Mrs. Tauscher. Right.
    Chairman Johnson of Connecticut. If they have a better idea 
for quality, I suppose they're free to use the money that way?
    Mrs. Tauscher. Exactly. I mean I think this clearly is 
about having people do what they're meant to be doing, 
enforcing the laws they have on the books, spending money in an 
accountable way and in a good investment way, and delivering 
the services to the constituents. I believe that it is 
important for us in the Federal Government to recognize this is 
a problem, to lay out the opportunities, to provide matching 
funds, but to do it in a way that is once again in the context 
of a balanced budget.
    Chairman Johnson of Connecticut. I think the goal of this 
hearing really is to try to find what the problem is. How 
serious is the problem? And where are the barriers? In visiting 
not only providers but job training programs and so on in my 
district, the answers we're getting are surprising and totally 
contradictory.
    Mr. Cardin.
    Mr. Cardin. Thank you, Madam Chair. And I really do think 
both of my colleagues for their leadership in this area, but 
also coming forward with some workable recommendations, some 
changes in Federal policy to deal with the problems that we are 
confronting in a changing community. Our work force is 
changing. Our families are changing. And the programs need to 
be modernized in order to deal with the realities of the 
current frustrations and difficulties that are faced by 
American families.
    I just really want to throw out and if you have comments, 
I'll be glad to listen, I'm not so sure we should be looking at 
a State and saying just because they have a positive balance on 
their TANF funds, they haven't done everything they should be 
doing. I would be curious as to compare those States that have 
a balance of funds with those that do not as to how well 
they're meeting the child care needs. I don't think they'll be 
a direct relationship. And the reason, quite frankly, is that 
we've had Federal programs to help the States on child care and 
States are using those funds, some more efficiently than 
others, using the program and are meeting with some success. 
But there is need for greater resources.
    TANF was always meant to be flexible to the States, this 
new concept, but wasn't meant to be the bank for day-care 
expenses. It had a broader objective to deal with getting 
people off of welfare to work. We have lots of people who 
aren't on welfare that aren't able to meet their day-care 
needs, their child care needs, and if we start taking TANF 
money in order to deal with those problems, what happens when 
we start really coming up against the more difficult clientele 
that are currently on cash assistance or if the economy starts 
to slow down a little bit, it becomes more difficult. So just 
because a State has reserved 1.5 months on the average benefits 
or TANF, I'm not sure that that's a sign that the State hasn't 
used all of its resources to deal with this problem.
    Mrs. Maloney. I think the gentleman is absolutely correct. 
The TANF funds should stay where they are because the 5-year 
limit has not been met yet and when it is met, there will be 
more and more women who will have to go to work or be out on 
the street basically and we will need those funds for that.
    And also child care is a problem not just for welfare 
recipients, but for everyone. It's a problem for me. It's a 
problem for absolutely every working man and woman to find 
affordable, available, quality child care. And instead of 
looking at how we can scale back a national commitment, when 
you look and compare the efforts of the United States, we're a 
disgrace compared to all western industrialized countries. Most 
of them have a national standard and 
nationally-backed child care. And I can't tell you how many of 
my friends and people I know, I can't tell you how many days 
myself, I face the crunch of not having a drop off center or 
some place I can take my child without taking her to work with 
me. Fortunately, I can take my child to work. Most women 
cannot. If their provider is not there or if there's something 
not there, they could lose their jobs because there's no place 
to take that child. So we need many options: drop off centers, 
more spaces.
    In New York City, we're not even talking about welfare 
recipients. We're talking about working, moderate-, low-income 
women and men and there are 61,000 families looking for the 
slot to pay their money to provide the child care for their 
child.
    And so I certainly join Mr. Cardin's comments in that this 
is not a time to be retreating, but looking at new ways that we 
can be more supportive and put more reality behind our rhetoric 
in support of working men and women.
    Chairman Johnson of Connecticut. I would like to just 
comment to the rest of the Committee that we do have quite a 
few witnesses that have quite substantial testimony. And since 
we do get time to talk to our colleagues at other times, I 
would urge----
    Mr. Cardin. I'll yield back the balance of my time.
    Chairman Johnson of Connecticut [continuing]. You to keep 
your questions short. And possibly defer them to other times. 
Mr. Watkins?
    Mr. Watkins. Thank you, Madam Chair. I've about lost my 
voice. I have three grandchildren and we had a big snow in 
Oklahoma. And Papa was out helping build a snowman, so I'll be 
very short in my comments.
    You said 15 States or something like that----
    Mrs. Tauscher. Seventeen.
    Mr. Watkins [continuing]. A while ago. How many States are 
giving tax cuts? They have surpluses in their TANF, but they're 
giving tax cuts and not using them where they have some 
responsibility? I think they have responsibility of providing a 
lot of the State care, not just the Federal Government. And I 
see some of them are giving tremendous tax cuts. I know a 
number of States don't exactly follow what Oklahoma has done, 
but have transferred some money into child care. I know there 
are other needs along the way also. And that's one of the 
beautiful things about a lot of the things helping some of the 
programs or working some--a great benefit that should give us 
some flexibility.
    And I'll be moving to try to do some things to provide 
greater flexibility to the States, it's not just necessary for 
them to be giving tax cuts back. Many of us do a lot up here to 
try to help out back home with those States and I think our 
State Governors need to be looking at how to utilize that money 
as wisely as they can and the savings they have as wisely as 
they can. So I will be working on trying to with that surplus 
money be able to provide greater opportunities. The child 
care--I have a lot of working mothers that need additional 
help, not just with child care but the Displaced Homemakers 
Program is not being funded by this administration. I think 
Displaced Homemakers is very much of a place--it should fit 
somewhere here to help the mothers be trained in something that 
would allow them to have a job.
    I have to say I try to understand New York, but I grew up 
in a little town of less than 200 people. Everyone in town knew 
everyone else and everyone took care of everybody else. And 
that's a way of life that I think that a lot of people have 
never experienced. And I think we did a disservice after World 
War II, everybody going into the big cities. But it's a way of 
life that I think we find out there, that our mothers and 
fathers are able to have jobs and stay there and work, that is 
one of the greatest things we have, those jobs.
    So I appreciate listening and hearing what you're saying. 
So, Madam Chair, I don't have an additional question at this 
time at all.
    Chairman Johnson of Connecticut. Thank you.
    Mr. Watkins. Just know we've got to do some things a little 
different.
    Chairman Johnson of Connecticut. Thank you. Mr. Foley.
    Mr. Foley. Yes, I don't want to get into a ``My Governor is 
better than yours,'' or ``Thank God we got a good Governor,'' 
Congresswoman Tauscher. But I will tell you Florida had a great 
Governor, Lawton Chiles, and his advocacy was for children, for 
day-care and other things. And Florida has an unobligated 
balance of $252.9 million. CBO estimates by the year 2003, we 
will have $24.4 billion of unspent dollars in these programs.
    Mrs. Tauscher. In TANF.
    Mr. Foley. But we gave the flexibility to the States 
through TANF to use money for child care. So I'm not so certain 
we all should be sitting up here trying to demand more 
resources. We should get the States to pay some attention to 
the funding formulas and implement the policies. I don't think 
the Federal Government can sit here throwing money in the wind 
and praying somehow that some day these Governors wake up 
because our examples in Florida would contradict yours, if you 
will, negative perception of Pete Wilson.
    Mrs. Tauscher. Well, this shouldn't be about Pete Wilson, 
Lawton Chiles, or Jeb Bush. This should be about the fact that 
working American families shouldn't have to choose between 
their two most precious values: Work and family. And you cannot 
dispute the fact that we have a major supply and demand problem 
in child care. Once you get pass the supply and demand problem, 
you have an affordability, availability, and a quality problem. 
So these are the problems.
    Now if there are resources in TANF in States around and 
people have surpluses, that's just great. I think that we 
should do as much as we can to work cooperatively with the 
States to have them be accountable and responsible. But at the 
same time, we cannot turn our backs on American working 
families and say not us, put it off to them because we have as 
much of a responsibility to make sure that there are quality 
programs, and that money is spent, and that we use the bully 
pulpit of the Federal Government to talk about what is 
necessary for American working families to be successful. There 
are a lot of programs, Mr. Watkins, in your communities like 
there are in my communities. I grew up in a small town too, but 
that was 47 years ago with all due respect. And I can't go 
back. I can't go back.
    Chairman Johnson of Connecticut. Thank you.
    Mrs. Tauscher. And I don't want to go back.
    Chairman Johnson of Connecticut. Thank you. We do want to 
move on to Mr. Stark, please?
    Mr. Stark. Well, just to follow-up to Mr. Foley's 
observation and to make note of the Chair's comment about 
California. The California money is, that billion and a half is 
all obligated. We devolve or ``devolute,'' or whatever the hell 
you call it, the money from the State on to the counties. And 
so technically when the State turns the money on down the 
pipeline to the counties who run in our State, the social 
welfare programs. That money is obligated. And the unobligated 
or the unspent, there's an awful lot of checks. It's like the 
old House bank. You don't remember that, but where our checks 
don't always catch up with our paycheck as quickly as they 
might have. So I think a lot of the States have committed this 
money beyond what the numbers would show.
    But, second, I do agree and it's the one thing that you 
will hear me suggest, for just the reasons you raise, to our 
administration, you're going to have to reauthorize this in 
2002, that's 3 years. And if we don't know, and I think both 
Ellen and Carolyn would agree with me, if New York and 
California and Florida can't come back and show us what they've 
done with this money, you go right ahead and don't give it back 
to California. But in seeing that, we then have to tell the 
States or ask the States to tell us, either way, what are you 
going to do? Give us something to measure your results by. I'm 
not suggesting--Florida may want to do something different from 
California, from New York, that's OK. But I think then we ought 
to have something so that you and I and Wes, the chairwoman, 
can sit down and say, ``Wait a minute.'' And I hate to keep 
this bringing this up again. We're right up against that now in 
Head Start. And I'm not so sure that Goodling doesn't have the 
better side of the argument. I don't agree with him, but he's 
saying, ``Prove to me what Head Start has done?''
    Mr. Foley. Would the gentleman yield?
    Chairman Johnson of Connecticut. I really appreciate----
    Mr. Stark. So I'm done. I mean that's my point.
    Chairman Johnson of Connecticut. I appreciate the concern 
of the gentleman from California about quality, but I do urge 
you----
    Mr. Stark. No, I'm just saying results, even ACCESS, Madam 
Chairman.
    Chairman Johnson of Connecticut. Please question those 
before us so that we can move on because we have so many others 
to speak. Let's see now I've got----
    Mr. Stark. That would go for ACCESS as well.
    Chairman Johnson of Connecticut. Thank you. Yes, fine. Mr. 
McCrery.
    Mr. McCrery. Ms. Tauscher, in your bill, would you 
enumerate for us the provisions that get to the supply side of 
the problem? You said there's a demand and supply problem?
    Mrs. Tauscher. Sure.
    Mr. McCrery. What provisions get to the supply problem?
    Mrs. Tauscher. Tax incentives specifically for businesses 
to--there are both tax incentives and flexible matching grants 
to create for small business, for example, consortia of no less 
than five businesses to buy slots in day-care centers, to build 
a day-care center, to be partners in a day-care center, to go 
to the local AME church and acquire part of their program so 
that they could offer that as incentives to the employees that 
they're attempting to hire.
    As you so well know, small business have a very, very 
difficult time recruiting and retaining employees. In 
California, the big game is to give stock options, but they're 
only worth the paper that they're printed on. And it's very 
difficult to compete against large companies that are offering 
their own beautiful day-care center or slot. So this would be a 
way to do that. It also provides the opportunity to work with 
Kiddie Mac as part of it to create the opportunity to build.
    So this is a very comprehensive bill. What it attempts to 
do is be flexible and creative, to use existing State and local 
community, public and private partnerships, to leverage on what 
already exists, not to create a big Federal bureaucracy, not to 
create new programs specifically, but to make investments for 
things that are working, that have quality and affordability.
    Chairman Johnson of Connecticut. Thank you. Mr. Coyne. 
Excuse me, Mr. McCrery.
    Mr. McCrery. I beg your pardon?
    Chairman Johnson of Connecticut. Excuse me, sorry.
    Mr. McCrery. Ms. Maloney, do you have a cost estimate for 
the Kiddie Mac proposal?
    Mrs. Maloney. Yes, I do and I would like to put an article 
that was in The Washington Post about Kiddie Mac into the 
record. The original startup cost is $20 million. But that is 
your only cost. Much as we had startup costs for Fannie Mae and 
Freddie Mac. After that, the premiums go in, the interest goes 
in and it's a self-revolving loan and it's one central place 
where if you are welfare mother who wants to open up a day-care 
center in your home or say you're some captain of industry who 
says, ``Gee, I would like to do this but I really don't know 
how to do it, and I don't want to get in trouble in any way,'' 
it's a unit you can go to that would help put the thing 
together and help you meet your State standards.
    Mr. McCrery. So over 5 years, you think the total costs are 
less than $100 million?
    Mrs. Maloney. There would be no other taxpayer moneys going 
in.
    Mr. McCrery. So it would be less than $50 million?
    Mrs. Maloney. Just the $20 million.
    Mr. McCrery. OK, good.
    Mrs. Maloney. It's $20 million period. That's it.
    Mr. McCrery. OK.
    Mrs. Maloney. Twenty million dollars period.
    Mr. McCrery. Great. Ms. Tauscher, in California have the 
welfare rolls been reduced since 1994?
    Mrs. Tauscher. Yes.
    Mr. McCrery. Do you know by how much?
    Mrs. Tauscher. No, I can tell you in my county and in Mr. 
Stark's county, they have been significantly reduced in Contra 
Costa County.
    Mr. McCrery. The average per State is 43 percent since 
1994. And you also may recall that we gave the States the 
option to choose the most favorable formula for funding. They 
could choose 1994, 1995, or the average of their rolls between 
1992 and 1994.
    Mrs. Tauscher. Right.
    Mr. McCrery. So I think it's safe to say that each State 
probably chose the formula that was most advantageous.
    Mrs. Tauscher. Right.
    Mr. McCrery. Giving them probably more money than they 
needed to satisfy their rolls when welfare reform was passed. 
We also gave them the flexibility to use that money, 30 percent 
of the total, to use for child care or a number of other needs, 
State by State. So while I agree with you that there is 
probably a supply problem, and I commend you for trying to give 
us some innovative ways to get at that problem, I really 
question the need for the Federal Government at this time to 
plow in $20 billion more over 5 years to get at something that 
I think the States have the wherewithal under the existing TANF 
block grant to do.
    So I appreciate you both bringing your concerns and your 
solutions to our Committee and I promise you we'll take a look 
at them, but I have to say I have my doubts as to the need for 
the money.
    Mrs. Tauscher. Well, let me just remind you. This is not 
about TANF. And this is not about Welfare to Work. This is 
about low-income working families and middle-income working 
families. We essentially have done as best we can to provide 
through the Welfare to Work 1996 bill, and to work with the 
States to attack the problem of Welfare to Work. We have a 
great problem with low-income families and middle-income 
families.
    Mr. McCrery. Well, perhaps we should give the States even 
more flexibility to use those moneys?
    Mrs. Tauscher. That's what this bill attempts to do.
    Mr. McCrery. Well, you add a big cost though.
    Chairman Johnson of Connecticut. For the record, let me 
just clarify that under TANF, the States do have the right to 
transfer up to 30 percent of their TANF day-care dollars into 
the Child Care and Development Block G which has the right to 
provide vouchers for low-income families. They have so far 
chosen to transfer only 4 percent. They are also using only 2 
percent of their TANF dollars for direct day-care spending and 
while they could have transferred 10 percent to the Social 
Services Block Grant, which is the other day-care option, 
they've only transferred 7 percent. So I think it is important 
to try to look at the facts here of what the States' needs are 
and what their resources are.
    And I do want to put squarely on the record because my 
colleague from New York used the term ``scaled back,'' there is 
absolutely no intent to scale back the resources. In this 
Committee, I and several from this Committee have signed 
letters to the leadership, have long ago written, including 
Clay Shaw, who formerly chaired this Committee, how strongly we 
oppose any reduction by the Senate or the House in TANF 
funding. The real issue is having to put more money out there 
for day-care and family support programs than we have ever put 
in this Nation's history and with pretty clear evidence that 
it's not all being used, we need to ask are the needs of people 
coming off welfare and low-income families being met? And what 
are the real barriers? And if more money is needed, where is it 
to come from and how is it to be funded?
    Mr. Coyne.
    OK. Thank you very much. We appreciate your being with us 
and all your ideas.
    Mrs. Tauscher. Thank you.
    Mrs. Maloney. Thank you.
    Chairman Johnson of Connecticut. And now I would like to 
call forward Hon. Olivia Golden, Assistant Secretary for the 
administration for Children and Families in the Department of 
Health and Human Services. Welcome, Secretary Golden. You may 
proceed? Your entire statement will be inserted in the record, 
and you may make any remarks that you care to make and then 
we'll proceed to questions.

   STATEMENT OF HON. OLIVIA A. GOLDEN, ASSISTANT SECRETARY, 
 ADMINISTRATION FOR CHILDREN AND FAMILIES, U.S. DEPARTMENT OF 
                   HEALTH AND HUMAN SERVICES

    Ms. Golden. Thank you. Madam Chairman and Members of the 
Subcommittee, I'm delighted to appear before you today to talk 
about one of the administration's highest priorities: Child 
care. In particular, as many of you have said, we believe it is 
time to focus on the child care needs of low-income working 
families who are struggling to hold on to their jobs and care 
for their children. Parents tell us, as in the words of one 
working mother from Rhode Island:

    It is becoming almost impossible for me to hold down a 
full-time job and pay my child care on my small salary, but I 
don't want to stop working. I need to take care of my family 
and show my children the importance of work.

    In my oral testimony, I would like to focus on the huge 
need for affordable care for working families, with a brief 
summary of the administration's proposal. My written testimony 
provides more detail on the importance of care that is healthy, 
safe, and of high-quality, as Mr. Stark has emphasized, and on 
the President's initiative to provide affordable child care for 
working families.
    An enormous and growing number of children spend time every 
day in child care. This fact is not surprising when you 
consider the high, and growing labor force participation of 
parents. In 1996, 96 percent of fathers and 63 percent of 
mothers with children under the age of six worked. For many of 
these working families the cost of child care is a crushing 
burden. A family earning less than $14,000 a year and paying 
for the care of a child under age five without State or Federal 
assistance typically spends 25 percent of its income on child 
care.
    Today, the primary source of help for low-income families 
who cannot afford child care is the Child Care and Development 
Block G or CCDBG. However, it is reaching far too few families. 
Nationally, there are approximately 10 million children 
eligible for assistance under CCDBG, but only about one and a 
quarter million of these children received help from these 
funds in 1997.
    Low-income families miss out on CCDBG assistance for two 
main reasons. Forced into a tradeoff between scarce dollars and 
enormous need, many States have chosen to focus on families on 
welfare, families leaving welfare, and families at the very 
lowest income levels--leaving out parents who are struggling to 
hold on to a modest job without turning to welfare for help. 
State child care plans show that in 12 States a family of three 
with an income of just $20,000 a year is not eligible for any 
help with child care. Only 16 States provide assistance to 
working families of three earning over $27,000. Second, even 
with these eligibility restrictions, States are unable to meet 
the enormous demand for child care. States across the country 
report extensive waiting lists and unmet needs. In California, 
for example, waiting lists are estimated to total between 
100,000 and 200,000 slots.
    States cannot meet this huge demand for child care without 
a major Federal investment, one that is large enough to make a 
dent in meeting the needs of working families by being 
dedicated to child care and reliably available over time. 
Currently, States have obligated fully 100 percent of the funds 
available to them through the CCDBG, including the 
appropriation of $1.6 billion in State money, maintenance of 
effort, and matching funds.
    While States have the authority to transfer Temporary 
Assistance for Needy Families funds to CCDBG as well, as has 
been discussed here, and about 28 States did so in 1998, States 
are not in a position to solve the child care needs of the 
working poor by trading off dollars that may well be critical 
to meeting the intensive needs of families remaining on 
welfare. In fact, 17 States have already committed every penny 
of their TANF dollars for fiscal year 1997 and 1998, while 
others are reserving some of their TANF resources for rainy day 
funds to protect themselves from possible future downturns. 
Given the importance of stable child care, it doesn't make 
sense to ask States to use potentially unstable funding sources 
to provide for child care.
    The President's child care initiative addresses these 
issues by providing subsidies to low-income families and by 
expanding the Child and Dependent Care Tax Credit to help 
families with moderate incomes afford the high cost of safe and 
healthy care. It improves the safety and quality of care and 
promotes early learning by enabling States and communities to 
invest in staff training and recruitment, and improves linkages 
to health care, and other proven approaches to make sure that 
our youngest and most vulnerable children are healthy and safe, 
while offering them the opportunity to learn and develop.
    The President's initiative expands after school programs so 
that over one million children can be safe and supervised after 
school hours and their parents can have peace of mind on the 
job. And, because the President believes that parents should be 
supported in whatever choice they make for care of their 
children, his initiative also provides new tax relief for 
parents who stay home with children under age one.
    In closing, I would like to express my gratitude to this 
Committee, to you, Mrs. Johnson, to Mr. Cardin and others here, 
for your leadership on this critical issue. I am convinced that 
with our mutual commitment, we can make a difference to the 
millions of families who are struggling to find and pay for 
decent care for their children and hold on to their jobs. We 
cannot ignore child care as both a support to the current work 
force and a crucial component in the development of a school 
ready, work ready new generation. The President's initiative 
makes an investment for the future, an investment which 
supports the economy, families, and most important, our 
children.
    Thank you, and I would be happy to answer questions.
    [The prepared statement follows:]

Statement of Hon. Olivia A. Golden, Assistant Secretary, Administration 
for Children and Families, U.S. Department of Health and Human Services

    Madam Chairman and members of the Subcommittee, I am 
pleased to appear before you today to talk about one of the 
Administration's highest priorities, child care. Child care is 
extremely important to the wellbeing of our Nation's children 
and to their parents' ability to work and maintain employment. 
For this reason, I welcome the opportunity to outline President 
Clinton's historic child care initiative. First, I would like 
to express my gratitude for your leadership on this issue--
demonstrated both by the hearing today and by the important 
legislation introduced by Chairman Johnson in the last 
Congress, as well as bills that have been sponsored by Mr. 
Cardin, Mrs. Tauscher and others this year. I am convinced that 
with our mutual commitment to this issue, we can make a 
difference to the millions of working families who are 
struggling to find and pay for decent care for their children.
    The Clinton Administration is dedicated to providing 
support and resources to ensure healthy, safe, affordable child 
care settings that are so desperately needed to help families 
work and help children grow strong and become ready for school. 
In particular, we believe it is time to focus on the child care 
needs of low-income working families who are struggling to hold 
onto their jobs and care for their children. We need to focus 
on their struggles to find safe and affordable care for three 
reasons: for the sake of our economy, our parents, and our 
children. Employers tell us over and over that the struggle to 
find affordable child care is a major obstacle to recruiting 
and retaining a stable workforce. Parents tell us, in the words 
of one working mother from Rhode Island: ``It is becoming 
almost impossible for me to hold down a full-time job and pay 
my child care on my small salary, but I don't want to stop 
working. I need to take care of my family and show my children 
the importance of work.'' And from the perspective of children, 
as President Clinton said in his State of the Union address 
last year, ``Not a single American family should ever have to 
choose between the job they need, and the child they love.''
    The President's child care initiative makes a commitment to 
America's families that they do not have to make this choice. 
It helps working families pay for child care that they trust--
whether with a neighbor, in a family child care home, or in a 
child care center--by providing subsidies to low-income 
families and by expanding the Child and Dependent Care Tax 
Credit to help families with moderate incomes afford the high 
cost of safe and healthy care. It improves the safety and 
quality of care and promotes early learning by enabling States 
and communities to invest in staff training and recruitment and 
improves linkages to health care, enforcement of standards, and 
other proven approaches to make sure that our youngest and most 
vulnerable children are in homes and centers that are healthy 
and safe, and offer them the opportunity to learn and develop. 
It expands after-school programs, so that over one million 
children can be safe and supervised after school hours and 
their parents can have peace of mind on the job. And, because 
the President believes that parents should be supported in 
whatever choice they make for care of their children, it also 
provides new tax relief for parents who stay home with children 
under age one.
    In the past several years, we have worked with Congress in 
a bipartisan manner to build a solid foundation for child care. 
In enacting welfare reform, Congress and the Administration 
made a commitment to help families on welfare move to work by 
increasing the resources for child care subsidies so parents on 
welfare and leaving welfare could find, afford, and keep child 
care. It is now time to provide the same commitment to working 
families who are struggling to hold onto their jobs and afford 
child care. Last year, the Administration and the Congress made 
a modest down-payment on this commitment, including an 
investment in research and evaluation and increased funding for 
child care quality activities. This year, it is time to build 
on that down-payment to enact the President's initiative, so 
that millions of low- and moderate-income working families can 
find child care, afford child care, and trust child care, 
without going on welfare to get the help they need.
    In the remainder of my testimony, I would like to address 
the huge need for affordable care for working families; the 
importance of care that is healthy, safe, and of high quality; 
and the way the President's initiative responds to these 
critical needs.

Affordable Child Care for Working Families: The Critical Need

    An enormous and growing number of children spend time every 
day in child care--whether with a neighbor, in a family child 
care home, in a child care center, or in an after-school 
program. Since the cost of child care, particularly care of a 
quality parents can trust, is so high, parents who work for 
modest wages face unacceptable choices--sometimes having to 
choose between makeshift arrangements for their children at the 
cost of their own peace of mind or to stop working.
    According to the National Center for Education Statistics 
(NCES), in 1995 more than half of the approximately 21 million 
infants, toddlers and preschool children under the age of six 
in the U.S., or 12.9 million children, were in care. Forty-five 
percent of infants under age one were in child care on a 
regular basis. And according to a recent report on the National 
Institute of Child Health and Human Development (NICHD) study 
of child care, only about 14 percent of children were home 
full-time with their mothers throughout their first three 
years. These very young children are the most vulnerable to 
care that is not high quality, yet high quality care for them 
can be especially costly, creating difficult dilemmas for 
parents with modest incomes.
    Second, these statistics are not surprising when you 
consider the high, and growing, labor force participation of 
parents. In 1996, 96 percent of fathers and 63 percent of 
mothers with children under the age of six worked. And during 
this same time, nearly 74 percent of mothers with children 
between the ages of six and 17 were in the paid labor force. 
Mother's participation in the work force has increased 
dramatically in recent years. For single mothers with incomes 
under 200 percent of poverty, the percent employed as of the 
Census Bureau's March current population survey rose from 44 
percent in 1992 to 54 percent in 1997, driven by the culture 
change of welfare reform, and the consistently strong and 
growing economy.
    Looking ahead, the continued strength of the economy, along 
with the continued effectiveness of welfare reform and the 
increases in work participation required under the welfare 
reform legislation, suggests continued increases in parents' 
work participation and the need for child care. To take just 
one example, Michigan has identified the growth in the need for 
child care as the principal issue it expects to face in the 
near future. The increased number of TANF families who are 
working and the increased hours of work have resulted in a much 
greater demand for child care services. At the same time, the 
availability of child care for working families is critical to 
allowing them to retain their jobs and avoid having to seek 
cash assistance.
    Third, for many of these working families, the cost of 
child care is an enormous burden. A family earning less than 
$14,000 a year, and paying for the care of a child under age 
five, without State or Federal assistance, typically spends 25 
percent of its income on child care. But even families earning 
twice the minimum wage, with modest wages of $20,000 to $30,000 
a year, face incredible challenges in paying for care, 
particularly if they have more than one child. In California, 
the average cost of full-time care for a child under two years 
in a licensed center is $7,020--68 percent of minimum wage 
earnings, and almost one quarter of the annual gross income for 
a family earning $30,000 a year. In Boston, the average annual 
child care costs for one 4-year old is $7,900 and in Seattle 
$6,140. The National Women's Law Center reports that the cost 
of child care can range from $4,000 to $10,000 annually.
    Disproportionately high child care costs can force families 
to make difficult choices essentially, whether to put together 
makeshift child care arrangements that risk compromising the 
quality and safety of their children's care, to skimp on 
fundamental living expenses such as food, clothing, shelter and 
health insurance, or to stop working entirely. At the White 
House Conference on Child Care in October 1997, a child care 
provider spoke eloquently about a mother who made the first 
choice: she was leaving her 6-year-old alone on the school 
playground after school because she was afraid that she would 
lose her new job if she asked her employer for a more flexible 
schedule and her earnings left her unable to come up with an 
alternative. When the school principal realized what was 
happening and told her he would have to report her for child 
neglect if she did not come up with an alternative, she was 
referred to a child care provider who was eventually able to 
come up with an emergency scholarship slot for her--but who 
said emphatically that not every story has such a happy ending.
    The second and third choices, to skimp on basic necessities 
like food or clothing or to leave work entirely, also are made 
far too frequently, as the mother from Rhode Island I quoted 
earlier said so eloquently. Employers as well as parents report 
on the unacceptable choices facing families. At a recent child 
care resource and referral leadership forum, a Massachusetts 
employer told the story of a single mother employed by her 
medical clinic, who came to her when her family day care 
provider gave two weeks notice that she could no longer care 
for the woman's child. The woman needed affordable child care 
in order to work and would have to quit her job if care could 
not be found. The employer's Work and Family office worked in 
partnership with her and frantically searched for another 
provider but on the last day of the first provider's notice, 
had come up with no prospects.
    A recent GAO study demonstrates the pervasiveness of these 
issues by analyzing the trade-offs low-income mothers face when 
they want to work, but face high child care costs. According to 
the study, child care subsidies are often a strong factor in a 
parent's ability to work, and reducing child care costs of a 
family increases the likelihood that poor and near-poor mothers 
would be able to work. GAO observed that affordable child care 
is a decisive factor that encourages low-income mothers to seek 
and maintain employment.

What Help Is Out There for Working Families: Far Too Little

    Today, the primary source of help for low-income families 
who cannot afford child care is the Child Care and Development 
Block Grant (CCDBG). CCDBG funds flow to the states, who 
provide help for parents by subsidizing care of the parent's 
choice--with a family member, neighbor, family child care home, 
child care center, or after-school program. The key strength of 
CCDBG is that the flexibility of providing subsidies directly 
to parents supports parents' ability to choose the care that is 
best for their child.
    However, while CCDBG is a flexible and effective way of 
getting critically needed help to parents, it is reaching far 
too few families. Nationally, there are approximately 10 
million children who are income eligible for assistance under 
the Child Care and Development Block Grant. Even with increased 
funding provided for child care program under the Personal 
Responsibility and Work Opportunity Reconciliation Act of 1996, 
our data show that only about 1.25 million of these children 
received help from the Block Grant's fund in 1997. In reaching 
only a little over 10 percent of the eligible families, the 
Child Care and Development Block Grant offers many low-income 
families scant hope of access to good, affordable child care 
arrangements.
    Low-income working families miss out on CCDBG assistance 
for two main reasons. First, forced into a trade-off between 
scarce dollars and enormous need for child care, many states 
have made policy and eligibility choices that focus assistance 
on families on welfare, families leaving welfare, and families 
at the very lowest income levels--leaving out parents who are 
struggling to hold onto a modest job without turning to welfare 
for help. While the CCDBG Act allows States to serve families 
with incomes up to 85 percent of the State median, only nine 
States actually set their eligibility levels that high. Due to 
the high demand for child care assistance and limited funding, 
State child care plans currently show that in 12 States, a 
family of three with an income of just $20,000 a year is not 
eligible for any help with child care. Only one-third (16) of 
the States can afford to assist the child care needs of working 
families earning 200 percent of the poverty level--that's only 
$27,300 for a family of three. In Maryland CCDBG eligibility is 
limited to families making less than $22,440. Further, a report 
issued by the Department's Office of the Inspector General 
found that in order to maximize dollars, States often set high 
family co-payment rates, which limit parental choice of type of 
child care.
    Second, in practice, states are unable to meet the enormous 
demand for child care even given the low eligibility levels 
that they have adopted. As a result, states across the country 
report extensive waiting lists and unmet need. Iowa has 
subsidized child care slots for almost 75,000 children from 
birth to age 5--less than half of the reported need. In 
California, waiting lists are estimated to total between 
100,000 and 200,000 slots. And in Florida, there were 25,000 
children on waiting lists in September 1997 and the State froze 
intake except for families on welfare or for children at risk 
of abuse or neglect. Similarly, in December 1997, Massachusetts 
reported 12,500 children--including 600 in the child protective 
system--on waiting lists. A recent article in a Texas newspaper 
reported that ``on an average day, the Texas Workforce 
Commission, using federal and State funds, pays for about 
81,000 day-care slots for low-income families and will have up 
to 40,000 names on a waiting list for such help.'' The article 
goes on to report that program officials say this is only the 
tip of the iceberg of unmet need among low-income families.
    Finally, even though states have access to several funding 
sources to meet child care needs, there is no way for them to 
meet these demands without a major Federal investment. This 
investment must be large enough to make a dent in meeting the 
needs of working families by being dedicated to child care and 
reliably available over time so that families can depend on 
receiving the modest assistance they need to get and keep 
steady work. Currently, the states have obligated 100 percent 
of the funds available to them through the Child Care and 
Development Block Grant, including the matching funds which 
require them to appropriate their own money to draw them down. 
To draw down the full amount of funds in FY 98, states 
appropriated $1.6 billion in maintenance of effort and matching 
funds, and a number of states report additional appropriations 
of state resources.
    While States have the authority to transfer Temporary 
Assistance for Needy Families' funds to CCDBG as well, and 
about 28 states did so in 1998, states are not in a position to 
solve the huge unmet child care needs of the working poor by 
trading off dollars that may well be critical to meeting the 
intensive needs of the families who still remain on welfare 
caseloads as they continue to make their transition to work. In 
fact, 17 states have already committed every penny of their 
TANF dollars for FY97 and FY98 and have no additional resources 
available for transfers to child care. States are making the 
understandable choice of reserving some of their TANF resources 
for -rainy day funds--which show up in the expenditure data as 
if they were uncommitted--thus using the option that Congress 
provided for states to protect themselves from possible future 
economic downturns. Given how important stable child care 
arrangements are to working families who are seeking to 
maintain their employment, it doesn't make sense to ask States 
to use a potentially unstable source of funds to expand the 
available child care for these families. By, for example, 
risking rainy day funds for child care, States risk a major 
upset in the lives of families if economic difficulties down 
the road were to force dollars to be shifted back from child 
care to cash assistance.
    Besides the Child Care and Development Block Grant, the 
other major source of help for families in paying for child 
care costs is the Child and Dependent Care Tax Credit. 
Unfortunately, many low and moderate working families fall into 
a gap, with incomes not low enough to be eligible for a 
subsidy, yet too low to get an appreciable amount of help from 
the tax credit. As I indicated earlier, due to the pressing 
need for child care assistance, only nine States provide child 
care assistance at the maximum income level set by Congress in 
the CCDBG Act, so that families with incomes as low as $20,000 
or $25,000 are not eligible for assistance in many states and 
in many other states, they may be eligible but at the end of a 
long list of families waiting for help. At these income levels, 
families are often caught in a gap, with no help from the 
subsidy and little or no help from the tax credit. Such working 
families, that cannot benefit from subsidies or tax credits, 
have needs that are not being addressed under current law.
    The Administration's proposal addresses these needs through 
an expanded subsidy and a strengthened tax credit. But before I 
go on to discuss the proposal in detail, I would like to 
address the other critical aspect of child care need: the 
importance of care that is safe, healthy, and of high quality.

Quality

    We know that quality matters to children's healthy and safe 
development and that the lack of affordable child care options 
for many families greatly reduces their ability to find quality 
care they can trust. There are serious concerns, supported by 
an extensive body of research, about the quality of care many 
children receive. Recently, even the basic health and safety of 
children in child care has become a national concern. 
Fortunately, as I will discuss later, we also know what to do 
to improve quality so that children can grow, thrive and enter 
school ready to learn.
    We are concerned that far too many children receive care 
that is unsafe, unhealthy, and potentially damaging to their 
development. For example, a four-State study by the University 
of Colorado found that only one in seven centers was rated as 
good quality. The Families and Work Institute also reported 
that 13 percent of regulated and 50 percent of unregulated 
family care providers offer care that is inadequate.
    Just as the national school lunch and child health programs 
were enacted to help develop strong bodies for low-income 
children, recent advances in knowledge about brain development 
in very young children argue for improving our country's 
ability to build strong minds. With more and more very young 
children in child care regularly at an early age--often for 
long hours, child care is a crucial linkage for comprehensive, 
healthy child development to prepare children to be successful 
in school.
    Research shows that when children are in quality child care 
programs, they develop stronger language, pre-mathematics, and 
social skills. Quality child care also promotes school 
readiness by enhancing nurturing relationships between children 
and their care givers, thus strengthening the child's self-
esteem. The NICHD recently reported that higher caliber child 
care for young children was consistently related to high levels 
of cognitive and language development. Such programs ensure 
that children are safer, healthier, and intellectually 
stimulated. Quality programs provide responsive care by 
consistent, knowledgeable, and experienced care givers.
    I'd like to now turn to our initiative and explain how we 
believe it provides the best solution to these issues.

Our Solution--The President's Historic Initiative

    The President's initiative responds to these issues by 
helping people pay for care in two ways: subsidies for the 
lower income working families through the CCDBG and tax credits 
for families at a moderate income level. The time is ripe for 
using dedicated child care funds to improve both the quality 
and availability of care for young children through age 5 and 
the affordability of child care for all eligible children.

                      Support for Working Families

    As I've already stated today, the financial impact that 
child care costs have on low-income working families is great 
and we believe that additional subsidy funds are needed. Our 
proposal includes an expansion of the Child Care and 
Development Block Grant of $7.5 billion over five years for 
increased support for working families. This support, when 
combined with funds provided in PRWORA will enable the program 
to make child care more affordable for an additional 1.15 
million children by 2004, for a total of 2.4 million children 
in low-income working families. These 1.15 million children and 
their families deserve a chance to have the means to purchase 
care without sacrificing life's other basic needs. This funding 
will make a significant difference to the hundreds of thousands 
of families currently on waiting lists.
    In addition to the new CCDBG funds, the President has 
proposed a tax initiative that will help bolster both the 
affordability and availability of care. The proposal would 
increase the Child and Dependent Care Tax Credit for families 
earning under $59,000, providing an additional average tax cut 
of $345 for these families. The President's budget includes $5 
billion over five years to expand this tax credit for 3.3 
million working families paying for child care.

                          Early Learning Fund

    Because child care is becoming routine for so many very 
young children, we must ensure that the quality and educational 
nature of that early care is such that parents are comfortable 
with their choice and that the care enables children to be 
ready to learn when they arrive at school. To this end, we are 
also proposing to expand the CCDBG by $3 billion over five 
years to support an Early Learning Fund. The Early Learning 
Fund will, for the first time, specifically devote funding to 
communities to enhance the quality of care, with a focus on 
promoting school readiness for children through age five.
    Services under the Fund will be delivered at the community 
level to enable communities and parents to take action based on 
their assessment of what's needed and what will work best. 
Importantly, the proposal would require that a significant part 
of the funds be used to serve low-income communities, where the 
need for, and the impact of, improvements would be greatest. In 
addition, the proposal requires that performance measures be 
established to assess progress towards meeting goals 
established by the community.
    The Early Learning Fund would directly support activities 
to improve quality outcomes. For example, provider training, 
licensing/accreditation assistance and salary/benefit 
enhancements allowed under the Fund would increase the number 
of qualified and experienced staff caring for our children. 
Standards enforcement and the linking of providers to health 
professionals and services would lead to safe, clean and 
stimulating child care environments. The Early Learning Fund 
would also be used to improve staff ratios and reduce group 
size--long recognized as important indicators of quality and 
enhancements to a learning environment.
    The end result of this investment will be young children 
who are healthy, safe and eager to learn, and arrive at school 
better prepared for the challenges ahead.

     Support for Parents at Home, Employers, and After School Care

    In addition to assisting working families, we recognize 
that parents should be supported in whatever choice they make 
for care of their children. Thus, the President's initiative 
also provides tax relief for with children under the age of 
one. Under the initiative, parents who choose to stay at home 
with their infants would be eligible, for the first time to the 
Child and Dependent Care Tax Credit. The President's proposal 
will benefit 1.7 million families and will provide an average 
tax credit of $178 at a cost of $1.3 billion over five years.
    Second, the initiative also includes a new tax credit for 
businesses that provide child care services for their employees 
by building or expanding child care facilities, operating 
existing facilities, training child care workers, or providing 
child care resource and referral services. The President's 
budget includes approximately $500 million over five years for 
these tax credits that will be of much help in expanding the 
availability of quality care.
    Finally, we also propose to expand after-school 
opportunities for over one million children. Experts agree that 
school-age children who are left unsupervised at home after 
school are far more likely to use alcohol, drugs, and tobacco; 
commit crimes; receive poor grades; and, drop out of school 
than those who are involved in supervised, constructive 
activities. That is why President Clinton is committed to 
tripling funding for the 21st Century Community Learning 
Centers Program, which supports the creation and expansion of 
after-school and summer school programs throughout the country. 
The program increases the supply of after-school care in a cost 
effective manner, primarily by funding programs that use public 
school facilities and existing resources. The program will 
target funds toward school districts that have programs in 
place to end social promotion. The President's budget includes 
$600 million in FY 2000 to help roughly 1.1 million children 
each year participate in after-school and summer school 
programs.

Conclusion

    As we move into the 21st century with our new knowledge 
about active brain development in very young children, and as 
our economy moves deeper into the technology age, we cannot 
ignore child care as both a support to the current workforce 
and a crucial component in the development of a school-ready, 
work-ready new generation. The Early Learning Fund will support 
quality at the community level in a way that ensures 
accountability for good performance. Expanding the Child Care 
and Development Block Grant by adding to the dedicated child 
care funds is a good investment for the future--an investment 
which supports the economy, families, and, most importantly, 
our children. The additional matching funds will allow States 
to help many more working families.
    We look forward to working with you to enact legislation to 
make quality child care more affordable and available for 
working families.
    Thank you. I would be happy to answer your questions.

                                

    Chairman Johnson of Connecticut. Thank you. It seems to me, 
Ms. Golden, that the President's initiative focuses mostly on 
low-income working families, is that correct?
    Ms. Golden. It focuses on low and moderate working families 
primarily. The subsidy portion of the proposal would be most 
useful to families, for example, earning in the teens and 
$20,000 range, the tax credit for moderate income working 
families earning a bit more than that, and with the Early 
Learning Fund, communities will be able to use resources to 
improve the quality of care, sort of like North Carolina Smart 
Start, a focus on low-income communities, but it will make a 
difference more broadly.
    Chairman Johnson of Connecticut. Is there any impediment to 
States using Child Care Block Grant funds now to encourage 
after school care programs?
    Ms. Golden. The basic impediment right now is the enormous 
demand and the scarce resources. Seventeen States including 
Connecticut, California, and Texas, have committed every penny 
of their TANF dollars and every State has committed 100 percent 
of their child care dollars, and still, States have large 
waiting lists. Also, parents and employers are still telling us 
about the unacceptable choices. So, the biggest impediment 
right now is the scarcity of resources.
    Chairman Johnson of Connecticut. And what about in the 
other States, the majority of the States that haven't spent all 
their TANF dollars, do you see them transferring their money to 
the Block Grant which is very flexible in terms of supporting 
working families?
    Ms. Golden. About 28 States in total have transferred 
dollars and, as I noted, all the States have spent all their 
child care dollars.
    Chairman Johnson of Connecticut. But they have not 
transferred the maximum dollars that they could have 
transferred from TANF to----
    Ms. Golden. States are facing enormous tradeoffs and they 
can't meet the huge needs of working families for stable child 
care at the expense of the success of welfare reform. And I 
think there are two particularly big issues here, one is the 
issue which I think several people on the panel mentioned, 
which, is that when Congress developed the welfare reform 
legislation, one of the things that legislation did was enable 
States to hold on to dollars for a rainy day, since, the Block 
Grant wouldn't go up if the economy changed. And many States 
are making the choice that it would be prudent to reserve some 
resources. The other issue is I think, that forcing those 
States to try to pay for child care for working families in a 
situation where if something went bad, you might have to pull 
those dollars back and a family would lose the child care.
    Chairman Johnson of Connecticut. I certainly appreciate 
that argument, but it really avoids the fact that the majority 
of the States have not drawn down all their money nor have they 
set it aside for a rainy day. So there is a lot of money out 
there. And I think we really have to understand not only is the 
money out there, but it legally can be moved into the very 
vehicles that can reach the working families. Now I'm concerned 
as you are, but when I go back into the neighborhoods, I am 
finding an odd decrease in the demand for day-care subsidies in 
certain areas. People are choosing neighbors. The way we've 
structured this grant, you can only get the subsidy if you have 
a licensed provider. Well, that's the way it's boiling out in 
some States.
    Ms. Golden. In Connecticut, really?
    Chairman Johnson of Connecticut. And so this is the kind of 
thing I want to get at. I hear your generic argument. The facts 
simply, as CBO will spell them out, raise a lot of concern 
about whether money is the problem or other barriers are 
preventing it from getting out to the people who need the day-
care subsidies.
    But I do want to ask you specifically that apparently in 
your proposal there are three new set asides in the Child Care 
Development Block Grant. And we will hear later from the 
commissioner of the Virginia Department of Social Services that 
this kind of set aside hinders his flexibility and will 
actually make it harder for him, not easier for him, to address 
the needs that he sees in his State. Do you have a comment on 
that?
    Ms. Golden. Yes, let me talk a little bit about the 
flexibility of our approach which, as you know, builds on the 
Child Care and Development Block G, which is I think a proud 
bipartisan achievement in part because of its flexibility, as 
well as building on the accomplishment in the welfare 
legislation. I think, Madam Chair, as you noted in your opening 
statement, consolidating multiple funding streams into one was 
a very important accomplishment of the welfare reform 
legislation. And what the administration is proposing here is 
to invest additional dollars into that funding stream, in part 
because it offers flexibility to parents as well in the way you 
noted, they can use those dollars to subsidize care with a 
neighbor or in a center.
    Chairman Johnson of Connecticut. But what are the three new 
set asides?
    Ms. Golden. I would guess you are probably referring to the 
Early Learning Fund, which are resources to support quality for 
young children. Beyond that, it's possible that it could refer 
to the provisions already made by the Congress. But the new 
part of the proposal is for the Block Grant and then for the 
Early Learning Fund.
    [The following questions submitted by Chairman Johnson, and 
Hon. Olivia A. Golden responses are as follows:]

    When legislation is passed by our Subcommittee and by the 
Full Committee, we must have an offset for any spending 
increases. Thus, I would like to ask you and your colleagues in 
the Administration how would you propose to finance the 
Administration's child care proposal?

Effects of Proposed Legislation

    The President's budget does not include an appropriations 
request for FY2000. AFDC expenditure claims for the period 
prior to States transition to TANF have been lower than 
anticipated. As a result, unobligated balances remain, which 
are sufficient to cover expected States needs for activities 
through fiscal year 2000. The expected obligations of 
$3,216,800,000 reflects current law of $3,290,800,000 adjusted 
by -$74,000,000 assuming Congressional action on proposed 
legislation as follows:
    Impact of legislative changes:
    Current law obligations: $3,290,800,000
     State Child Support administrative cost savings 
from reducing laboratory match rate: -$9,000,000
    Description: Conforming match rate for laboratory costs 
associated with paternity establishment with the basic match 
rate, (lower obligations in President's budget in FY2000 by $9 
million). This change simplifies the child support funding 
structure, increases incentives to control costs, and still 
provides sufficient funds for States to achieve their goals in 
paternity establishment.
     Offsetting collections reduction from the 
elimination of hold harmless provision: -$65,000,000
    Description: Eliminating the provision in statute which 
holds States harmless from receiving less than the FY 1995 
State share of collections (increases total child support 
collections retained by the Federal government). Assuming 
Congressional action on this proposal lowers spending authority 
from $419,000,000 to $345,000,000.
     Reinstatement of mandatory review of orders: $0
    Description: Reinstating, beginning in FY2001, the pre-
welfare reform policy of mandatory review and adjustment of 
child support orders for families receiving cash assistance. 
Under welfare reform, periodic review of child support orders 
are no longer required. This change will likely help families 
and/or reduce reliance on food stamps, medical, emergency or 
other public benefits. In order to eliminate conflicts with 
problems related to Year 2000 computer compliance, this 
proposal will start in FY2001, and the five year savings will 
be approximately $160 million.
    Proposed Law Obligations: $3,216,800,000
    The budget will seek legislation to require the Department 
of Health and Human Services to match data from the National 
Directory of New Hires against the Department of Education's 
delinquent debtor database. Education would be required to use 
this information to improve debt collection from delinquent 
borrowers in default on Federal student loans. Education would 
fully reimburse HHS costs.

                                  B-15

Effects of Legislation

    The President's Budget for FY2000 includes current law 
levels adjusted by -$83,440,000 assuming Congressional action 
on proposed legislation as follows:
    Current law: $17,087,335,000
     The budget proposes to freeze the Supplemental 
Grants for Population Increases at the FY 1999 level. In FY 
2000, seventeen States are eligible for this grant based on 
population growth and/or State welfare spending per low-income 
person.
    Adjustment: -$83,440,000
     Under current law, in FY 2000, States may transfer 
up to 10 percent of TANF Funds to the SSBG program, and in FY 
2001, the transfer cap is reduced to 4.25 percent. The budget 
proposes to reduce the transfer cap amount to 4.25 percent 
beginning in FY 2000, rather than FY 2001.
    Total, appropriation request in President's budget: 
$17,003,895,000

                            Continency Fund for State Welfare Programs--Justification
                                                  [Obligations]
----------------------------------------------------------------------------------------------------------------
                                                                      FY 1999         FY 2000       Increase Or
                         FY 1998 Actual                           Appropriations     Estimate        Decrease
----------------------------------------------------------------------------------------------------------------
$2,102,000......................................................              $0     $11,000,000    +$11,000,000
----------------------------------------------------------------------------------------------------------------

                           General Statement

    Title I of P.L. 104-193, the Personal Responsibility and 
Work Opportunity Reconciliation Act of 1996 (PRWORA) 
establishes a ``Contingency Fund for State Welfare Programs'' 
to assist those states which, due to economic hardships, need 
additional funds above their basic TANF grant to allow them to 
provide assistance to all needy families in the state. For FYs 
1997-2001 the total appropriation for this account cannot 
exceed $1,960,000,000.

Effects of Legislation

    The President's Budget proposes legislation to replace the 
current Contingency Fund authority contained in Sec. 403(b) of 
PRWORA with a new uncapped fund that could more effectively 
respond to State needs.
    Current law, unobligated balance, start of year: 
$1,957,898,000
    Proposed law, unobligated balance rescinded: 
-$1,643,898,000
    Expected obligations to meet state needs, FY 2000-2004: 
$314,000,000

                                

    Chairman Johnson of Connecticut. Well, I think it is 
important that your proposal is perceived as reducing the 
flexibility of States rather than maintaining the flexibility. 
And that would be a point of real concern to us.
    Let me just inquire, are we voting? Mr. Watkins, how much 
time do we have? About 8 minutes. Well, then why don't you 
proceed, Mr. Watkins and Mr. Coyne.
    Mr. Watkins. I've just got a quick observation, comment. A 
while ago, a couple of my colleagues were here and they kind of 
missed the point I was trying to make. I represent a rural 
area. Most of the people have to travel quite a distance to 
work. However, that doesn't mean there's any less need in a 
rural area. And I would like to see if I can get a breakdown on 
percentage of dollars being utilized in the rural areas 
compared to the urban?
    One of the things that Chairman Johnson and I have a keen 
interest in, are enterprise communities. I would like to look 
at the transferring of money to enterprise communities that are 
in desperate need because they are a priority as far as the 
economic conditions. And I would like to see what we could do 
about trying to get some of that TANF money moved into either 
child care or maybe moved on into the enterprise communities 
also?
    Ms. Golden. Let me just note, Mr. Watkins, that both of 
those issues I think are related to what Mrs. Johnson and 
others have talked about in terms of the need States have for 
their TANF funds. I agree with you completely that 
transportation is an enormous need. And a number of the States 
that are showing uncommitted dollars are telling us that their 
State legislatures right now are deliberating over putting 
those dollars into transportation for just the reason you cite.
    Mr. Watkins. I'm not just saying transportation needs, I'm 
talking about there is a time period from going from a small 
rural community to an urban area, to work and then coming back, 
there's a time period there even of taking care of children in 
those rural areas while the parents are off working. It's not 
just transportation.
    Ms. Golden. No, I think that's absolutely right. At least 
the way I think about that in terms of what I hear when I 
travel to States is that those rural communities both are going 
to need more TANF funds and their child care needs are 
particularly acute. So they're caught in this pinch that to 
meet child care needs of low-income working families, you would 
have to trade them off against these really urgent TANF needs. 
And I have the sense when I travel to rural areas that those 
needs are very real and very urgent for the reasons that you 
describe.
    Mr. Watkins. I yield back my time, Madam Chairman.
    Chairman Johnson of Connecticut. OK. Mr. Coyne.
    Mr. Coyne. Thank you, Madam Chairman. I wonder if you would 
describe how the Administration's proposal improves the quality 
of child care?
    Ms. Golden. That is a really important issue and I really 
appreciate your raising it since, as my written testimony lays 
out in more detail, we know that quality matters enormously, 
especially for young children in terms of their ability to be 
healthy and safe and to reach school ready to learn.
    The administration's proposal commits $3 billion over 5 
years to an Early Learning Fund, which would be resources that 
would go to States and they would pass them on to communities. 
It would be built on some of the kinds of approaches that some 
of the States have been able to do in a modest experimental 
way. Those dollars could go into proven approaches to making 
sure that care for very young children is healthy and safe and 
good for them. For example, a State might work with people who 
care for children in their homes to make sure they have books 
and the children aren't watching TV all day, to make sure they 
have training, to make sure they have safe equipment.
    They might put dollars into training providers. Florida has 
a wonderful study showing that when you put the commitment into 
training providers and having better ratios, you can see the 
improvements in children's cognitive abilities and their 
readiness for school. So that's the kind of thing that those 
dollars would do.
    Mr. Coyne. Is there any part of the proposal that addresses 
itself to safer child care?
    Ms. Golden. Well, the Early Learning Fund does in part 
because among the ways that communities could use the resources 
would be for health and safety. Just one example that comes to 
mind is that sometimes people who care for children in their 
homes don't have safe highchairs and other kinds of basic 
equipment and you need to fix those problems.
    There are other ways of focusing on safety as well. The 
Administration proposed, and I believe it passed last year, 
legislation that will enable States to go to the FBI to do 
better checks of criminal records of providers. So that's an 
available tool for States as well. But I think the most 
important thing is investing in the training, in the quality of 
providers, and in the equipment and books, and so forth.
    Mr. Coyne. Thank you.
    Ms. Golden. Thank you.
    Mr. McCrery [presiding]. Secretary Golden, I've looked at 
the Administration proposal. I've added up the numbers. Is it 
about $22 billion or so that the Administration proposes to 
spend over the next 5 years?
    Ms. Golden. Over 5 years.
    Mr. McCrery. And could you share with us the details of how 
you pay for that?
    Ms. Golden. The whole administration budget is paid for so 
this is in the context of a balanced budget. We didn't identify 
specific offsets that paid for specific pieces of the budget.
    Mr. McCrery. Well, in your whole budget, do you utilize 
some of the payroll tax receipts for Social Security over the 
next year to pay for this and other new spending items?
    Ms. Golden. I don't think I can be specific about the 
entire array of saving steps that are in the Administration's 
budget proposal, but it's a range of saving steps of all kinds, 
so that the budget is paid for without entering into the 
surplus.
    Mr. McCrery. Are there some tax increases that would help 
pay for these provisions?
    Ms. Golden. Well, I do have someone with me from Treasury 
if you need specific discussion of the tax provisions in the 
proposal.
    Mr. McCrery. I think you were here when I questioned our 
two colleagues earlier, and I have not yet heard anything from 
you in your testimony or responses to questions that convinces 
me that in light of the $24 billion that CBO estimates States 
will have in excess for their welfare needs over the next 5 
years that we need to put on top of that any more money. Why 
shouldn't we expect the States to utilize that money for child 
care and other needs of getting their low-income people the 
tools they need to stay in the workplace?
    Ms. Golden. Let me say a little bit both about that number 
and what our concerns about the number are, but also why I 
don't think it makes sense to ask States to meet the enormous 
needs of working families by trading off dollars that are 
needed for welfare families.
    Mr. McCrery. What do you mean by--if they're not using the 
money now for welfare families, what's the tradeoff?
    Ms. Golden. I think the tradeoffs are several. First of 
all, in many of those cases, States are reserving dollars for 
rainy day funds and those show up as unobligated dollars. 
States have committed about 90 percent of the dollars that 
they've had so far, about 10 percent total across the country 
are being reserved, and 17 States have committed every penny of 
their dollars.
    Mr. McCrery. But they have committed those dollars, but do 
we know how much of those dollars that they have committed to 
child care and other needs? There's been no testimony here 
today as to the percentage of their funds that those States who 
have obligated all of their funds, not spent them, just 
obligated them, have set aside for child care, for example.
    Ms. Golden. States have committed those dollars for cash 
benefits, for employment and training, for intensive services 
for families, for child care and for transportation. There's a 
wide array of commitments that they're making. Some of the 
money that they haven't yet committed, is for rainy day funds. 
Because that shows up as not yet committed; you can't tell it 
from the other unobligated. In addition, I expect increased 
commitments over the coming months and years because as we get 
closer to the 5-year time limit, those families now on the 
caseload are the ones with more intensive needs. So States 
around the country are looking at substance abuse treatment 
needs, and at transportation.
    Mr. McCrery. Excuse me?
    Ms. Golden. Sure?
    Mr. McCrery. I've got to go vote and if I could, let me 
just recess very quickly. And one of us will be back in just a 
moment. And if I get back in time, I would love to pursue this 
questioning a little bit more. Thank you.
    Ms. Golden. Thanks.
    Mr. McCrery. The Committee stands in recess.
    [Recess.]
    Chairman Johnson of Connecticut [presiding]. There is 
another vote, but there are 15 minutes in between the votes. So 
Jim and I came back and I'm going to recognize Mr. McCrery to 
continue his questioning?
    Mr. McCrery. Thank you, Madam Chair. Secretary Golden, we 
were talking about the costs of your proposals over the next 5 
years and how they're paid for and didn't get too many details 
on how they're paid for. And then I expressed concern that 
we're throwing new dollars at a perceived problem when there 
are existing dollars that could be used to solve those problems 
if and to the extent that they do exist. The States have had on 
average a 43-percent reduction in their welfare rolls since 
1994. As you know, the funding formula for 5 years for each 
State was based on the most favorable formula, giving three 
options to the States. So just thinking about it in common-
sense terms, doesn't it seem to you that the States have a lot 
of money, a lot of extra money that they could use for 
innovative approaches to transportation, to get people to work 
and back, for child care, a number of things that we perhaps 
didn't traditionally do in trying to get people from welfare to 
work and keep them at work? Just intuitively, doesn't it just 
make sense that the States have a lot of money there to use for 
these purposes?
    Ms. Golden. I believe that if States commit all the TANF 
money they've got, which 17 of them have, and a whole set of 
others are in the process of working on this legislative 
session, then they have enough dollars to make welfare reform 
succeed. What they don't have is the dollars to meet the needs 
of the working poor families on child care.
    Mr. McCrery. So that's part of the problem. That's part of 
the problem, Madam Secretary, part of the problem. Welfare 
reform was intended to look at not just those currently on 
welfare, but those leaving welfare and going to work, those who 
were likely to leave work and go to welfare. It was a way to 
get the States the means by which they could use innovative 
approaches to solving the welfare problem in toto, not just the 
current rolls but certainly a 43-percent reduction in the rolls 
indicates that they got a lot of money left over to use for 
low-income families that were not on welfare at the time and we 
hope will not return to welfare, if they were ever on welfare.
    I just challenge you to show me that there's insufficient 
funds coming from the Federal Government right now and over the 
next 5 years to address this problem, if there is a problem. 
And I've heard no data yet today except the anecdotal evidence 
from New York about the waiting list to say that there is a 
problem. We're going to hear from the Urban Institute later and 
they did a study back in 1990, which was a long time ago, and I 
hope maybe they've got some updated information, but that study 
indicated that 96 percent of those surveyed, parents that were 
surveyed across the Nation, were satisfied with their day-care.
    I hope in this hearing we can finally get some hard data to 
prove that there is a problem, what the extent of the problem 
is, how much it costs, and why there's this necessity for this 
huge infusion of new money when we thought, when we passed 
welfare reform and agreed to give the Governors such a generous 
funding formulas, that these things were going to be solved?
    Ms. Golden. My written testimony is full of that data. Let 
me summarize as much as I can of it really quickly now. We're 
serving about 1 in 10 of the eligible families under the Child 
Care and Development Block G. States all over the country have 
enormous waiting lists. We've talked about 200,000 in 
California.
    Mr. McCrery. But that doesn't mean they don't have day-
care.
    Ms. Golden. Yes, it means that sometimes parents have had 
to leave a job because they don't have child care. Sometimes 
they've left a child alone. Sometimes they've taken an older 
child out of school to care for an infant.
    The CBO dollars we think are not the right ones to use to 
look at available dollars. They're about money actually spent, 
not about dollars committed. So the commitments that States 
have made in order to do TANF, they can't pull away in order to 
meet child care needs. In addition, we expect much greater 
State spending than CBO has estimated because we think that 
States want welfare reform to succeed. As they get closer to 
the 5-year time limit, they're going to be making those 
investments in transportation, in substance abuse, in 
employment and training.
    The aim of welfare reform was to meet the needs of welfare 
families. There's an enormous separate continuing need that 
working families have for child care which enables them to keep 
their jobs. We can't put States in the position of having to 
undercut the success of welfare reform or undercut prudent 
rainy day funds, pull dollars away to meet the child care needs 
of working families and then find themselves having to pull 
back those dollars if in a few months they need them over on 
the welfare side. There's a lot of other State-by-State data, 
again, not only on waiting lists, but on the choices States 
have had to make about what income levels to support. In many 
cases, a family making as little as $20,000 or $22,000 a year, 
facing costs of $4,000 or $6,000 or $8,000 a year for child 
care, doesn't have any access to support those costs.
    Mr. McCrery. Well, Madam Secretary, I'm anxious to look at 
all the data that's in your testimony. But the waiting lists 
are a very poor indicator of the need. I have two children. We 
were on a couple of waiting lists because we preferred another 
provider. But that doesn't mean we were without day-care. We 
had our children in a day-care center. We were satisfied but we 
thought the other one was closer to home and it was more 
convenient so we would rather be in that one. Waiting lists are 
a very poor indicator of the need that is out there. I don't 
think you can translate----
    Ms. Golden. Based on what we hear from the States, the 
waiting lists for State subsidies tend, if anything, to often 
understate need because families get scared or just believe 
it's impossible. They hear 2 years. I heard that the last time 
I was in Georgia.
    Mr. McCrery. So you are defending that those waiting list 
numbers are not only illustrative of the problem but they 
understate the problem?
    Ms. Golden. Yes, we're only serving a million and a quarter 
of 10 million children who are eligible. So we have enormous 
needs.
    Mr. McCrery. But then you conclude from that that all those 
children are not getting any day-care?
    Ms. Golden. No, some of them are in care that's risky to 
their safety or health. Sometimes they're in settings where 
parents are choosing to tradeoff food or rent or health care in 
order to afford child care. There's a lot of different choices 
that low-income working parents have to make and sometimes it's 
without child care, sometimes it's child care that just makes 
them nervous because it's not good enough, and sometimes it's 
trading off other expenses. Sometimes it's having to leave a 
job. I hear a lot from employers, as I've been traveling around 
the country, who say to me that in today's job market, child 
care and stable child care is critical because their entry 
level employees often find themselves forced to leave.
    Mr. McCrery. Thank you. Thank you, Madam Chair.
    Chairman Johnson of Connecticut. Thank you. Secretary 
Golden, if other members have questions, I will encourage them 
to submit them in writing so that you don't have to wait 
through yet another vote. Thank you very much for being with 
us.
    Ms. Golden. Thank you. And thank you for the opportunity.
    Chairman Johnson of Connecticut. I have one more question.
    Ms. Golden. Oh, OK.
    Chairman Johnson of Connecticut. I think that the kind of 
discussion that you were having with Mr. McCrery is a very 
important one. It is very hard to see that the statistics 
indicate that money is the problem right now. I hear what 
you're saying. I don't think that your data yet really deals 
with the rest of the data. And my own anecdotal evidence 
indicates to me that there are some barriers down there that 
we're not dealing with. The one you mentioned about State 
eligibility requirements is a serious one. I don't know what 
the history of those things is.
    I would have to say two things. First of all, I do have 
concerns with the President's proposal getting into what are 
clearly educational issues. As a State Senator, I worked 
through many a controversy at the State level about who 
regulates, when does day-care become education? And, generally, 
the Education Committee has done the after school care and the 
preschool education, including Head Start. So I think 
jurisdictionally that's something of a problem for us. But I 
just wondered whether in your budget, in the whole HHS budget, 
are you aware of any program that's being funded at a lower 
level next year than this year?
    Ms. Golden. In the President's budget proposal, yes, I 
think there are a variety of proposals, a variety of programs.
    Chairman Johnson of Connecticut. In HHS?
    Ms. Golden. In HHS.
    Chairman Johnson of Connecticut. I would be interested in 
your getting back to me about whether or not they offset the 
spending in this particular program?
    Ms. Golden. In other words, the approach that the 
Administration took was to offset within the entire budget 
rather than necessarily within each department.
    Chairman Johnson of Connecticut. I want to look more 
narrowly because--
    Ms. Golden. OK.
    Chairman Johnson of Connecticut [continuing]. Generically, 
the way the President's new spending is offset is with $80 
billion in new taxes and new fees. And it would be very hard 
for me to go home at a time of surplus and justify $80 billion 
in new taxes and new fees. I think it's actually $82 billion. 
So I'm much more interested in--I know there always are lots 
and lots of micro-changes in a budget, and I'm very interested 
in whether or not he did recommend some changes in the Health 
and Human Services budget that would fund an increase in day-
care spending. So if you would respond to that, have one of 
your experts look at that?
    Ms. Golden. Sure.
    Chairman Johnson of Connecticut. I would appreciate that.
    Ms. Golden. I would note two things I think overall in 
response to those and then I will get you the specific 
information. I really believe that the reason that the 
President focused so intensely on child care as a proposal in 
the context of a balanced budget even though it was hard to do 
is really the same reasons that I think you've highlighted in 
your opening statement and throughout your career, which is 
that child care is so central because it matters both to the 
economy, to work and to children's well-being. And so I really 
believe that that's why it was so central.
    Chairman Johnson of Connecticut. Well, I certainly do 
appreciate that. And there are many, many things that HHS does 
that are not nearly so central. There are some things that 
every government agency does that are downright unsuccessful. 
And so I'm just interested in as they went through, they 
weren't going through with the intent of funding this, I just 
want to see if you can give me some help on what cuts they did 
choose to make in that budget because the way our process 
works, you have to do these things within a budget envelope. 
And if we were to put more money into day-care, we're going to 
have to get it from somewhere, and I can tell you there are not 
a lot of members that are interested on either side of the 
aisle in going back and espousing $80 billion in tax increases.
    And you may remember, actually most of the people in this 
room, I don't know whether they know or not, but staying within 
the budget agreement which the President supports would mean 
freezing spending and cutting $15 billion in addition. So the 
budget caps are extremely difficult to adhere to and not having 
been one who really frankly believes we should adhere to them, 
since both sides have decided to do that, including the 
Administration, I would have to say that I don't see any 
support on either side of the aisle for $80 billion in new 
taxes.
    Ms. Golden. We'll do that.
    Chairman Johnson of Connecticut. So I'm more interested in 
the practicality of what changes in spending did they find 
within the HHS budget because that may give me some leeway?
    Ms. Golden. Thank you.
    Chairman Johnson of Connecticut. Thank you.
    After we return from this vote, we'll continue with the 
next panel so that you don't need to hang around. This is a 5-
minute vote. So I would assume that we will reconvene in 8 to 
10 minutes.
    Ms. Golden. Thank you.
    [Recess.]
    Chairman Johnson of Connecticut. Mr. Falk and Mr. Cullinan 
will join us. Thank you, gentlemen. Sorry there have been so 
many delays, but here we are and we should have no more delays 
this afternoon.
    Mr. Falk, I would like you to go first. Mr. Falk is a 
specialist on Social Legislation, Domestic Policy Division of 
the Congressional Research Service. Mr. Falk.

   STATEMENT OF GENE FALK, SPECIALIST IN SOCIAL LEGISLATION, 
    DOMESTIC SOCIAL POLICY DIVISION, CONGRESSIONAL RESEARCH 
                  SERVICE, LIBRARY OF CONGRESS

    Mr. Falk. Thank you, Madam Chairman, Members of the 
Subcommittee. It is an honor to appear here this afternoon to 
discuss the finances of the Child Care and Development Fund, 
the Temporary Assistance for Needy Families, or TANF program 
and the Welfare to Work program.
    Though the Child Care and Development Fund specifically 
provides Federal funds for child care, States may also fund 
child care services using TANF and, to a limited degree, 
Welfare to Work funds. States also have the option to transfer 
up to 30 percent of the TANF block grant to the Child Care and 
Development Fund.
    TANF and the Child Care and Development Fund are new 
programs, therefore, the available information that we have 
shows only early trends. To quickly summarize two points that 
are shown on the charts and tables that are contained in your 
handout, Chart 1 shows spending for the Child Care and 
Development Fund and TANF and compares them to their 
predecessor programs. Child Care and Development Fund spending 
has increased; most notably a 35-percent increase in outlays 
between fiscal year 1997 and fiscal year 1998. In contrast, 
expenditures in the TANF program have declined. Table 1 on the 
next page shows that States have used only a small part of 
their authority to fund child care from TANF. Direct Federal 
TANF expenditures were 1\1/2\ percent of the fiscal year 1998 
block grant. Transfers to the Child Care and Development Fund 
were about 4 percent of the block grant.
    I will focus the remainder of my discussion on the funds 
that remain in the TANF program and the Child Care and 
Development Fund programs that are unspent. Both programs make 
available fixed grants to States. However, a grant is not a 
transfer of cash to the States. What a grant does is permit a 
State to draw cash from the Federal Treasury when it is needed 
to pay the State for actual expenditures in its program. 
Essentially, a grant award is like a line of credit to the 
State. It establishes an amount that the State may draw from 
the Federal Government, but actual cash is drawn only when 
needed.
    Table 2 summarizes TANF, Child Care and Development Fund 
and Welfare to Work program grants and expenditures. All three 
programs had unspent funds as of September 30, 1998. Unexpended 
TANF funds totaled over $6 billion. Almost all Welfare to Work 
funds remained unspent. The child care program also had some 
unexpended funds. However, it should be noted that having 
unspent grants at the end of a fiscal year is not, in itself, 
unusual. Each program has a different deadline for the 
expenditure of funds. The Child Care and Development Fund has 
different deadlines for the expenditure of discretionary, 
mandatory and matching grants. The Welfare to Work program 
allows 3 years for the expenditure for funds, and TANF has no 
deadline for the expenditure of grants.
    States have obligated some of the grants that have yet to 
be spent. Generally, a State obligation is a commitment to 
spend. The definition of obligation varies from program to 
program. Further, what constitutes an obligation may vary from 
State to State. States have obligated all of their fiscal year 
1998 mandatory Child Care and Development Funds. Additionally, 
States have obligated more than one-half of all unexpended TANF 
funds. Thus, the amount of TANF grants that are unexpended and 
unobligated total $3 billion.
    In conclusion, there are three points I would like to make 
about unspent TANF funds. First, in passing TANF, Congress gave 
the States the flexibility to reserve TANF grants and accrue 
balances without a fiscal year limit. Congress also permitted 
States to use TANF directly for child care, or to transfer 
funds to the Child Care and Development Fund or to the Social 
Services block grant. States were thus given choices and faced 
tradeoffs between making current TANF expenditures, hedging 
against unexpected increases in TANF expenditures, or using 
TANF funds for other purposes such as child care or transfers 
to the Social Services block grant.
    Second, there is a great deal of variation in the amount of 
TANF funds remaining unspent by States. Some States such as 
Connecticut, Illinois and Maine have spent all, or nearly all, 
of their TANF funds. Other States have considerable balances of 
unspent funds. This variation is shown in Table 3.
    Third, $6 billion or $3 billion is a lot of money, but TANF 
is also a relatively large Federal program. In fiscal year 
1998, TANF Federal expenditures were made at a rate of just 
under $1 billion a month. Therefore, as shown on Table 4, the 
total unexpended balance represents about one-half year's of 
Federal expenditures at the fiscal year 1998 rate. The 
obligated balance and the unobligated balance each represent 
about one-quarter year's of expenditures. Moreover, if one 
examines a worse-case scenario, where TANF cash benefits 
returned to their historic peak levels of fiscal year 1994, the 
unobligated balance represents only 1\1/2\ months of cash 
benefits.
    Thank you for the opportunity to appear before the 
Subcommittee and I would be happy to answer any of your 
questions.
    [The prepared statement follows:]

Statement of Gene Falk, Specialist in Social Legislation, Domestic 
Social Policy Division, Congressional Research Service, Library of 
Congress

    It is an honor to be asked to appear before this 
subcommittee to discuss the finances of the block grant program 
of Temporary Assistance for Needy Families, (TANF), the Child 
Care and Development Fund (CCDF), and the Welfare-to-Work grant 
program. Though the CCDF specifically provides federal funds 
for child care, states and localities may also fund child care 
services directly from the TANF and welfare-to-work programs. 
Additionally, states have the option to transfer up to 30% of 
the TANF block grant to the CCDF.
    TANF and CCDF are relatively new programs, created in the 
1996 welfare reform law, and the information we have is based 
on only their first 2 years. The Welfare-to-Work grant program 
was added to TANF in the Balanced Budget Act of 1997. 
Therefore, the available information shows early trends in 
these programs.

                     CCDF and TANF Spending Trends

    Chart 1 shows the trends in federal spending for CCDF and 
TANF, and compares them with spending in their predecessor 
programs in FY1995 and FY1996. The 1996 welfare reform law 
significantly increased federal funding for the programs 
consolidated into the CCDF. Federal outlays for CCDF did not 
rise significantly in FY1997 from the FY1996 level. However, in 
FY1998, CCDF outlays did rise, a full 35% from FY1997 levels, 
from $2.3 billion to $3.1 billion.
    The 1996 law fixed TANF's basic block grant at $16.5 
billion, an amount based on historically high expenditures made 
under Aid to Families with Dependent Children (AFDC) between 
FY1992 and FY1995. Since the spring of 1994, the welfare 
caseload has declined by 43%. Generally, expenditures have 
declined with the fall in the caseload. FY1998 federal TANF 
expenditures totaled $11 billion--down from $16 billion in its 
predecessor AFDC and related programs (excluding child care) in 
FY1995.
    Fiscal year 1998 was the first year of the Welfare-to-Work 
program, added to TANF by the Balanced Budget Act of 1997. 
Total outlays in the welfare-to-work programs were $16 million 
in FY1998.

                       Use of TANF for Child Care

    TANF allows states to use its block grant funds for child 
care in two primary ways:
     Up to 30% of the TANF block grant may be 
transferred to the CCDF. This amount is reduced by any amounts 
transferred to the Social Services Block Grant (SSBG). Up to 
10% of TANF may be transferred to the SSBG, a percentage that 
is scheduled to be reduced to 4.25% in FY2001.
     Child care is an allowable activity that may be 
funded directly by the TANF block grant.
    Table 1 shows how much of the TANF block grant was used for 
child care in FY1998. States used only 1.5% of the FY1998 TANF 
block grant to directly fund child care expenditures. States 
also transferred only 4% of the FY1998 TANF block grant to the 
CCDF.
    There are two additional ways that TANF can help finance 
child care. First, some states have continued a practice from 
the AFDC program that allows recipients with earnings to deduct 
out-of-pocket child care expenses from their earned income when 
computing benefits. This often increases the cash benefit paid 
to the family. Second, proposed regulations allow states to 
count toward their TANF maintenance of effort requirement 
state-funded child care expenditures made in excess of those 
required to receive the maximum amount of CCDF matching funds. 
In FY1998, states reported at least $140 million of such 
``excess'' child care expenditures. Since states must make 
progress toward meeting their TANF maintenance of effort 
requirement to draw down block grant funds, the ability to 
count these ``excess'' child care expenditures can help states 
access their TANF block grant funds.

                     Welfare-to-Work and Child Care

    Funds from the welfare-to-work grant program may also be 
used for child care, but in limited circumstances. Child care 
may be funded as a job retention and support service only once 
a participant has been placed in a job readiness or employment 
activity and only if child care is not otherwise available. The 
welfare-to-work program is also targeted to long-term TANF 
recipients with additional barriers to employment. Moreover, it 
should be noted that most welfare-to-work funds are not 
controlled by the states, but by localities. The Department of 
Labor is not collecting data on child care expenditures 
separately from data on overall expenditures for job retention 
and post-employment services.

                          Grants and Spending

    TANF, CCDF, and the welfare-to-work grant program make 
quarterly grants to the states. However, a grant is not a 
transfer of cash to the states. A grant permits a state to draw 
cash from the federal treasury when it is needed to pay the 
state for actual expenditures in its program. Essentially, a 
grant award is like a line of credit to the state. It 
establishes an amount that the state may draw from the federal 
government, but actual cash is drawn only when needed.
    Table 2 summarizes TANF, CCDF, and welfare-to-work program 
grants and expenditures. TANF and CCDF grants represent the sum 
of FY1997 and FY1998 grants; the welfare-to-work program made 
grants beginning in FY1998.
    As of September 30, 1998, all three programs had some 
unexpended funds. Almost all welfare-to-work funds were 
unspent. However, it should be noted that having unspent grants 
at the end of a fiscal year is not unusual. In federal grants-
to-state programs, the time when grants are converted into 
actual spending is determined by both federal deadlines for 
states to obligate and expend grant funds, and by state 
decisions about obligating and expending funds. Each of the 
three programs has different rules setting deadlines for 
obligating and expending grant funds. The CCDF has different 
deadlines for the obligation and expenditure of discretionary, 
mandatory, and matching funds. The welfare-to-work program 
allows 3 years for the expenditure of mandatory grant funds. 
There is no deadline for the expenditure of TANF funds.
    Additionally, TANF and the welfare-to-work grant program 
require states to expend some of their own funds in order to 
draw cash from federal grants. Though TANF is a block grant, 
states must make progress toward meeting the program's 
maintenance of effort (MOE) requirement to draw federal funds. 
The welfare-to-work grant program is a matching grant program. 
CCDF also requires states to expend their own funds in order to 
draw matching grants. In FY1997 and FY1998, all states 
participated in the CCDF matching grant program.
    States have ``obligated'' some of the grants that have yet 
to be spent. Generally, a state obligation is a commitment to 
spend. The definition of obligation varies from program to 
program. The types of commitments that constitute an obligation 
may also vary from state to state. According to the Department 
of Health and Human Services (HHS), states obligated all of 
their FY1998 mandatory CCDF funds. Additionally, states have 
obligated more than half of all unexpended TANF funds.

                             TANF Balances

    The presence of billions of dollars in ``unused'' TANF 
funds has aroused interest. However, the TANF program is new, 
so there is little history available to assess the magnitude of 
the balances. There also are no norms to help indicate whether 
the TANF balances are abnormally large.
    The obligated balance will finance future expenditures that 
are anticipated and reflects commitments already made by the 
states. Since federal law imposes no time deadline for states 
to draw cash from their TANF grants, obligations can represent 
long-term contracts or commitments that will provide benefits 
and services to TANF families for several years into the 
future.
    In TANF, about $3 billion remained at the end of FY1998 
that was both unexpended and unobligated. These are funds 
states have available from FY1997 and FY1998 grants for new 
commitments, new TANF spending, or additional transfers to CCDF 
or SSBG. These are also the balances available to help finance 
future unanticipated expenditures, such as increased benefits 
paid if the caseload rises in response to a recession. There 
are three points I would like to make about the TANF balances:
     First, in passing TANF, Congress anticipated that 
TANF grants might be insufficient in a given fiscal year to 
meet program costs and provided several sources of federal 
funding to meet extra costs. One such source is the flexibility 
provided to ``reserve'' TANF grants from previous fiscal years 
and accrue balances without fiscal year limit, by setting no 
deadline on the obligation and expenditure of TANF grants. (The 
other sources are the TANF loan and contingency funds.) Also in 
passing TANF, Congress permitted states to use TANF directly 
for child care or to transfer funds to CCDF or the SSBG. States 
were thus given choices, and implicitly asked to make tradeoffs 
between making current TANF expenditures, planning for future 
TANF expenditures, hedging against unexpected increases in 
future TANF expenditures, or using TANF funds for other 
purposes, such as child care.
     Second, there is a great deal of variation in the 
amount of TANF funds remaining unexpended by state. Some 
states, such as Connecticut, Illinois, and Maine, have spent 
all or nearly all of their TANF funds and have no unspent 
balances. Other states have considerable balances of unspent 
funds. Table 3 shows the state-by-state variation in TANF 
balances.
     Third, the TANF program is a relatively large 
program. Federally-financed TANF expenditures were made at a 
rate of just under $1 billion per month in FY1998. Therefore, 
it might be illustrative to compare these balances with 
spending in the program.
    Table 4 addresses the question: How many months of 
expenditures could these balances finance? This is done by 
dividing the TANF balance (as of September 30, 1998) by average 
monthly expenditures. The table looks at different categories 
of expenditures and expenditures at different rates to put the 
$6.3 billion in perspective.
    The table first shows the unexpended balances divided by 
average monthly federal expenditures during FY1998. The total 
unexpended balance represents about one-half year (6.7 months) 
of federally-financed expenditures. The obligated balance and 
unobligated balances each represent approximately one-quarter 
year of expenditures.
    The unobligated balance can be used to help defray 
unexpected increases in expenditures that might exceed both 
federal and state funding for a given fiscal year. An 
unexpected caseload increase (for example, during a recession) 
would likely directly increase expenditures on cash benefits. 
Therefore, the table relates the unobligated balance to total 
cash benefit payments. Two measures are shown to provide a 
range of how long the unobligated balance would last in the 
event of an unexpected increase in expenditures. The 
unobligated balance is related to cash benefits paid at the 
FY1998 rate, showing that 2\1/2\ months of cash benefits at the 
FY1998 expenditure rate could be paid using the unobligated 
balance. An additional measure showing the balance related to 
cash benefits paid at a ``recessionary rate'' of their 
historical peak (FY1994) is also shown. The unobligated balance 
represents about 1\1/2\ months of cash assistance paid at the 
historical peak rate of benefit payments.
    A Congressional Research Service report Welfare Reform: 
Unspent TANF Funds (Report Number RL30082) goes into greater 
detail about TANF balances. Thank you for the opportunity to 
appear before this committee. I would be happy to answer your 
questions.
[GRAPHIC] [TIFF OMITTED] T5629.004

  Table 1.--Use of Federal TANF Grants: Expenditures for Child Care and
                       Transfers: Fiscal Year 1998
               [$ in millions, through September 30, 1998]
------------------------------------------------------------------------
                                                              Percent of
                                                  Dollars     total TANF
                                                                grants
------------------------------------------------------------------------
Total Grants..................................      $16,562       100.0%
  TANF federally-funded child care                      247         1.5%
   expenditures...............................
Transfers:
  Child Care Delvelopment Fund................          652         3.9%
  Social Services Block Grant.................        1,079         6.5%
------------------------------------------------------------------------
Source: Table prepared by the Congressional Research Service (CRS) based
  on data from the Department of Health and Human Services (HHS).

 Table 2.--Welfare Reform Block Grant Programs: Cumulative Grants, Expenditures, and Unexpended Balances through
                                               September 30, 1998
                                                 [$ in millions]
----------------------------------------------------------------------------------------------------------------
                                                                    Grants   Transfers  Expenditures  Unexpended
----------------------------------------------------------------------------------------------------------------
CCDF (combined FY1997 & FY1998)..................................     4,938          -       4,131          807
TANF (combined FY1997 & FY1998)..................................    29,942      2,392      21,200        6,276
Welfare-to-Work (FY1998).........................................     1,240          -          16        1,224
----------------------------------------------------------------------------------------------------------------
Source: Table prepared by the Congressional Research Service (CRS) based on data from HHS and Federal budget
  documents.

  Table 3.--TANF Obligated and Unobligated Balances by State: September
                                30, 1998
                             [$ in millions]
------------------------------------------------------------------------
                                             Unexpended balance
                                  --------------------------------------
              State                              Obligated   Unobligated
                                      Total       balance      balance
------------------------------------------------------------------------
Alabama..........................         37.4            -         37.4
Alaska...........................         16.7         16.7            -
Arizona..........................         79.6         31.7         47.9
Arkansas.........................         29.3         29.3            -
California.......................      1,472.9      1,472.9            -
Colorado.........................         81.2            -         81.2
Connecticut......................            -            -            -
Delaware.........................          1.0          1.0            -
District of Columbia.............         42.6          7.5         35.1
Florida..........................        395.8        142.9        252.9
Georgia..........................         68.8         17.1         51.7
Hawaii...........................          8.1          1.1          6.9
Idaho............................         31.1            -         31.1
Illinois.........................            -            -            -
Indiana..........................        195.3        195.3            -
Iowa.............................         35.3          6.4         28.9
Kansas...........................         21.6            -         21.6
Kentucky.........................         44.9            -         44.9
Louisiana........................        129.8            -        129.8
Maine............................            -            -            -
Maryland.........................        146.9            -        146.9
Massachusetts....................         28.3         28.3            -
Michigan.........................        103.4         14.1         89.3
Minnesota........................        136.9            -        136.9
Mississippi......................         33.2         33.2            -
Missouri.........................         63.2         63.2            -
Montana..........................         30.0         30.0            -
Nebraska.........................         36.7            -         36.7
Nevada...........................         14.8          8.0          6.8
New Hampshire....................          6.0            -          6.0
New Jersey.......................        223.1            -        223.1
New Mexico.......................         60.1          4.9         55.2
New York.........................        689.1            -        689.1
North Carolina...................         93.1            -         93.1
North Dakota.....................          8.1          5.8          2.3
Ohio.............................        554.9        544.9            -
Oklahoma.........................        110.2            -        110.2
Oregon...........................         51.7         51.7            -
Pennsylvania.....................        282.9         37.9        245.0
Rhode Island.....................         15.7            -         15.7
South Carolina...................         34.7            -         34.7
South Dakota.....................         11.3          3.4          8.0
Tennessee........................         91.5         14.5         77.0
Texas............................        211.4        211.4            -
Utah.............................         13.6            -         13.6
Vermont..........................         11.1            -         11.1
Virginia.........................         32.3         32.3            -
Washington.......................        142.4          0.9        141.5
West Virginia....................         80.7            -         80.7
Wisconsin........................        240.5        191.5         49.0
Wyoming..........................         37.0         37.0            -
  Total..........................      6,276.4      3,235.2      3,041.3
------------------------------------------------------------------------
Source: Table prepared by the Congressional Research Service (CRS) based
  on data from HHS.

Table 4.--TANF Balances Related to Expenditures: FY1998 Expenditures and
                  Balances Through  September 30, 1998
                             [$ in millions]
------------------------------------------------------------------------
                                                              Potential
                                                 Average      months of
               Ratio                 Balance     monthly    expenditures
                                              expenditures    from the
                                                               balance
------------------------------------------------------------------------
Total balance to federally-           $6,276        $941           6.7
 financed expenditures............
Obligated balance to federally-        3,235         941           3.4
 financed expenditures............
Unobligated balanced to federally-     3,041         941           3.2
 financed expenditures............
Unobligated balance to total           3,041       1,218           2.5
 (federal and state) cash
 benefits, FY1998.................
Unobligated balance to total           3,041       1,892           1.6
 (federal and state) cash
 benefits, peak year, FY1994......
------------------------------------------------------------------------
Source: Table prepared by the Congressional Research Service (CRS) based
  on data from (HHS).

    Chairman Johnson of Connecticut. Thank you very much. Mr. 
Cullinan.

 STATEMENT OF PAUL CULLINAN, UNIT CHIEF, HUMAN RESOURCES COST 
ESTIMATES UNIT, BUDGET ANALYSIS DIVISION, CONGRESSIONAL BUDGET 
                             OFFICE

    Mr. Cullinan. Thank you, Madam Chair. Madam Chair and 
Members of the Subcommittee, given the interest of time here, I 
will skip over most of my written statement and ask that it be 
submitted in full in the record.
    Chairman Johnson of Connecticut. Absolutely. I should have 
mentioned that you are the head of the Human Resources Cost 
Estimate Unit of the Congressional Budget Office.
    Mr. Cullinan. Thank you. As has been stated before, the 
block grants of the states have been largely above what state 
needs have been in recent years, with substantial declines in 
caseloads resulting in the buildup of unspent balances. The 
amount of those balances varies widely among states.
    The Congressional Budget Office (CBO) basically projects 
that spending for the Temporary Assistance for Needy Families 
(TANF) program over the next few years will be flat, at about 
$12.5 billion, and rise somewhat slowly thereafter, reaching 
$14.2 billion in 2002, and $19.4 billion in 2009. TANF 
spending, in our projections, does not exceed the level of the 
block grant until 2006. According to the Administration's 
numbers, that year would be 2003. So they are projecting a 
spending rate that is somewhat faster than CBO is projecting.
    As a result, surpluses or unspent balances will accumulate 
further over the next several years, peaking in 2005, according 
to our forecasts. Of course, any projection of spending in 
these and other federal programs are subject to considerable 
uncertainty. There was a very rapid and unexpected rise in 
spending for means-tested programs in the early 1990s and a 
very rapid decrease from 1994 to 1998. The factors that caused 
the rapid rise and decline in spending are not yet fully 
understood. So there is a lot of uncertainty involved in the 
projections.
    If caseloads begin to rise as a result of economic factors 
or other conditions, much of the spending will, in essence, be 
federal spending because many of the states have surpluses that 
they will use before they start digging further into their own 
pockets. So we could see very substantial fluctuations in 
federal spending if economic conditions or attitudes toward the 
programs changed.
    Child care spending was a major focus in 1995 and 1996 as 
the Personal Responsibility and Work Opportunity Act (PRWORA) 
was being considered. A total of $4.5 billion was basically 
added to the program over the 1997-2002 period. The spending of 
those funds started off a little more slowly than we had 
expected but went very quickly once the second-year moneys were 
available. States had basically spent their entire amount for 
that year. CBO therefore projects that the moneys specifically 
dedicated for child care will be expended over the next few 
years. There is no significant surplus in that source of funds.
    In addition to the mandatory moneys that are funded under 
TANF and the child care entitlement to states, about a billion 
dollars in discretionary funds is being provided annually for 
the Child Care and Development Block Grant.
    CBO projects that under current law, states will continue 
to accumulate sizable surpluses under the TANF program, 
overall. Meanwhile, the states will exhaust federal funds 
provided exclusively for child care services. Although States 
have great latitude in directing TANF surpluses toward child 
care, so far they are not doing so on a wide scale. Whether 
states' priorities concerning TANF funds will change now that 
the federal child care funding has been fully tapped is not 
known.
    [The prepared statement follows:]

Statement of Paul Cullinan, Unit Chief, Human Resources Cost Estimates 
Unit, Budget Analysis Division, Congressional Budget Office

    Madame Chairman and Members of the Subcommittee, thank you 
for the opportunity to discuss the Congressional Budget 
Office's (CBO's) spending projections for the Temporary 
Assistance for Needy Families (TANF) program and for the 
federal child care programs. The projections, which have been 
revised slightly since the release of CBO's budget outlook in 
January, will be published in a forthcoming report on CBO's 
reestimate of the President's fiscal year 2000 budget.

                      Projected Spending For TANF

    As you know, TANF funding was established as a block grant 
to states under the Personal Responsibility and Work 
Opportunity Reconciliation Act of 1996 (PRWORA), replacing the 
open-ended funding for Aid to Families with Dependent Children 
(AFDC). The basic block grant totaled $16.5 billion annually 
through 2002, with the amount allocated to each state based on 
the state's spending history. The grant provided additional 
funding for several other purposes such as bonuses for good 
performance and reduced illegitimacy, grants to the territories 
and Indian tribes, supplemental grants, and a contingency 
reserve. Funds allocated to states remain available to the 
states until spent.
    The block grant amounts for most states have proved to be 
more than the states could spend in the near term as AFDC and 
TANF caseloads dropped by 40 percent from 1994 to 1998. 
Consequently, many states have accumulated sizable unspent 
balances that are expected to grow in the next several years, 
although more slowly than in the past. As of the end of 1998, 
states had not spent about 25 percent of the overall TANF 
grants. States' unspent balances varied widely. For example, 
Illinois, Connecticut, and Maine had spent all or almost all of 
their TANF funds, but Wyoming and Idaho had spent less than 20 
percent of theirs.
    PRWORA gave states much flexibility in determining how to 
use the block grant funds. In addition to funding traditional 
cash welfare benefits, states received the authority to 
transfer up to 10 percent of their TANF grant to the Social 
Services Block Grant and up to 30 percent for child care 
programs (no more than 30 percent of the total for both 
programs can be transferred). In addition, states could use 
TANF funds for providing child care services under the TANF 
program activities.
    According to preliminary reports from the Department of 
Health and Human Services, in 1998 states transferred 4 percent 
of their TANF grant to the Child Care and Development Block 
Grant and 7 percent to their Social Services Block Grant. In 
addition, states spent 1.5 percent of overall TANF funding 
directly on child care, with individual states spending between 
0 and 30 percent of their 1998 TANF grant on child care.
    CBO projects that TANF outlays will total $12.6 billion in 
fiscal years 1999 and 2000, grow to $14.2 billion by 2002, and 
reach $19.4 billion by 2009. As indicated in Table 1, annual 
federal outlays for TANF are not expected to exceed annual 
funding until 2006, at which time the states as a whole will 
begin to spend portions of their balances accumulated from 1997 
to 2005. CBO estimates that total unspent balances will grow 
from $7.1 billion at the end of 1998 to $25.4 billion at the 
end of 2005.
    Of course, any spending projection involves considerable 
uncertainty. CBO and other forecasters did not anticipate the 
rapid escalation of spending in programs such as AFDC, Food 
Stamps, and Medicaid from 1989 to 1992 nor the speed at which 
spending in those programs (or their successors) would 
decelerate or even decline from 1994 to 1998. Given that 
history, policymakers should weigh any particular forecast 
cautiously before acting. Sharp changes in economic conditions 
like those of the early 1980s and 1990s can quickly render any 
spending projections obsolete because unemployment can increase 
application rates for such programs and the rate at which 
recipients leave the programs. Most states have large unspent 
TANF balances; therefore, a sharp turnaround in the number of 
caseloads would, in all likelihood, initially show up almost 
entirely as additional federal spending.

    Table 1.--Temporary Assistance for Needy Families, CBO March 1999
                                Baseline
                [By fiscal year, in billions of dollars]
------------------------------------------------------------------------
                                              Annual
   Year          Budget         Outlays       Unspent       Cumulative
               Authority                      Balance    Unspent Balance
------------------------------------------------------------------------
1997a       13.4             9.7           3.7            3.7
1998a       16.7             13.3          3.4            7.1
1999        17.1             12.6          4.5           11.6
2000        17.1             12.6          4.5           16.1
2001        17.2             13.2          4.0           20.1
2002        16.8             14.2          2.7           22.8
2003        16.8             15.3          1.6           24.3
2004        16.8             16.0          0.9           25.2
2005        16.8             16.6            0.2         25.4
2006        16.8             17.3          -0.4          25.0
2007        16.8             18.0          -1.1          23.9
2008        16.8             18.7          -1.8          22.1
2009        16.8             19.4          -2.6          19.5
------------------------------------------------------------------------
Source: Congressional Budget Office.
a Actual.

               Projected Spending for Child Care Programs

    Deliberations about welfare reform in 1995 and 1996 raised 
concern about the adequacy of funding for the child care 
services required by welfare recipients and other low-income 
families as welfare programs focused increasingly on work 
activities. Consequently, PRWORA included a substantial 
increase--$4.5 billion--in mandatory funding for child care 
services during the 1997-2002 period. Although child care 
outlays in 1997 fell $237 million short of CBO's original 
estimates, spending in 1998 slightly exceeded the PRWORA 
estimates. CBO now projects that the states will fully absorb 
all of the budgetary resources provided explicitly for child 
care services beginning in 1999 (see Table 2).
    In addition to the Child Care Entitlement to States 
program, the federal government annually provides states with 
$1 billion in discretionary child care funding through the 
Child Care and Development Block Grant. The block grant funds, 
originally authorized in 1990, are directed toward providing 
services to low-income families and supporting quality child 
care activities. Although spending under the block grant grew 
slowly in the early 1990s, in more recent years the states have 
essentially drawn the entire amount of the block grant--a 
pattern that CBO expects will continue.

   Table 2.--Child Care Entitlement to States, CBO March 1999 Baseline
                [By fiscal year, in billions of dollars)
------------------------------------------------------------------------
         Year               Budget Authority              Outlays
------------------------------------------------------------------------
1999                    2.2                       2.4
2000                    2.4                       2.4
2001                    2.6                       2.5
2002                    2.7                       2.7
2003                    2.7                       2.7
2004                    2.7                       2.7
2005                    2.7                       2.7
2006                    2.7                       2.7
2007                    2.7                       2.7
2008                    2.7                       2.7
2009                    2.7                       2.7
------------------------------------------------------------------------
Source: Congressional Budget Office.

    The President's fiscal year 2000 budget includes several 
proposals to expand child care funding. One proposal would 
provide supplemental matching funds under the Child Care 
Entitlement to States program, allowing states to offer 
additional child care subsidies and activities to improve the 
quality of child care. Another proposal would create an early-
learning fund that would provide grants to communities for 
activities aimed at improving the quality of child care for 
children under age 6. Assuming that the states would have to 
contribute 20 percent of the total funding for each program, 
CBO estimates that outlays would be $1.0 billion in 2000 and 
$9.4 billion from 2000 to 2004.

                           Concluding Remarks

    CBO projects that under current law, states will continue 
to accumulate sizable surpluses under the TANF program overall. 
Meanwhile, the states will exhaust federal funds provided 
exclusively for child care services. Although states have great 
latitude in directing TANF surpluses toward child care, so far 
they are not doing so on a wide scale. Whether state priorities 
concerning TANF funds will change now that the federal child 
care funding has been fully tapped is unknown.

                                

    Chairman Johnson of Connecticut. Thank you very much. I 
appreciate your full statements. I appreciate your testimony. I 
want to get this a little clearer. Mr. Falk, you said that the 
States have obligated more than half of the TANF funds.
    Mr. Falk. Of what is unspent--unspent TANF funds. Of the $6 
billion, States have obligated a little more than $3 billion.
    Chairman Johnson of Connecticut. I see, of the unspent TANF 
funds. So there is $3 billion that is not obligated or spent?
    Mr. Falk. Correct.
    Chairman Johnson of Connecticut. Does your work bring you 
into any contact as to why that might be?
    Mr. Falk. Why that may be? First of all, Congress did give 
States the choice to reserve TANF grants. I think we have to 
think that some of these unspent balances result from the 
States taking that choice, and choosing to reserve some TANF 
grants for the future.
    Chairman Johnson of Connecticut. Is there any requirement 
that they notify you if they are doing that? Or do we have any 
way of knowing that that's what they are thinking?
    Mr. Falk. No. Actually, in terms of explicit rainy-day 
funds, the information is somewhat sketchy. We did have 
something from the National Governors' Association, last year, 
that talked about a few States committing some funds explicitly 
to a rainy-day fund; but as I said, the information there was 
quite sketchy. They don't have to report it, nor do they have 
to explicitly do it. They could just leave it as unobligated if 
they wish and that becomes implicitly a rainy-day fund.
    Chairman Johnson of Connecticut. Are there other instances 
in other departments or other programs where they can 
explicitly, in a sense, obligate funds for a rainy-day fund?
    Mr. Falk. I don't know whether even in TANF, given the 
definition of obligation, putting money aside or earmarking 
money for a rainy-day fund would constitute an obligated fund.
    Chairman Johnson of Connecticut. I don't think it does now. 
I think that would be an improvement in our law, if we have a 
chance to make it. Are there other programs you know about that 
allow states to count money saved for a rainy day as obligated?
    Mr. Falk. To my knowledge, I don't know of any.
    Chairman Johnson of Connecticut. So we don't know how much 
of the $3 billion that is unobligated and unspent has been 
identified by State bodies as being reserved.
    Mr. Falk. Earmarked specifically for rainy-day funds? No.
    Chairman Johnson of Connecticut. OK. Thank you. Mr. 
Cullinan, I think, the way I understand your testimony, you are 
saying that the States are spending all of their specifically 
child care funds under TANF.
    Mr. Cullinan. Yes. That is correct.
    Chairman Johnson of Connecticut. I want to get the names of 
the funds right. You believe that the States will exhaust the 
TANF child care funds, regularly, in the years ahead?
    Mr. Cullinan. As they are explicitly specified, not 
considering any transfer authority.
    Chairman Johnson of Connecticut. Just the explicitly child 
care funds. Then they have the right to transfer up to 30 
percent, but they have only transferred on average 4 percent or 
a total of 4 percent?
    Mr. Cullinan. A total of 4 percent.
    Chairman Johnson of Connecticut. Have some States 
transferred a lot more and some States transferred none?
    Mr. Cullinan. Yes. That is correct.
    Chairman Johnson of Connecticut. What is the most any State 
has transferred from their TANF funds into child care funds? I 
mean, you would think a State like Wisconsin that has dropped 
its welfare rolls so dramatically would have an equally 
dramatic demand for day care subsidies for low-income working 
families and, therefore, would have been motivated to transfer 
the 30 percent.
    Mr. Cullinan. Several states have transferred quite a bit. 
Michigan is one state that has transferred, I believe, 15 
percent.
    Mr. Falk. Nineteen.
    Mr. Cullinan. No, it was 19 percent in 1998 to child care, 
and basically very close to the rest of their 30 percent limit 
to the Social Services Block Grant (SSBG).
    Chairman Johnson of Connecticut. So no State has 
transferred the 30 percent?
    Mr. Falk. Michigan came close, 29-percent.
    Chairman Johnson of Connecticut. What is the relationship 
between the 29-point-something percent and the 19 percent that 
we just talked about in Michigan?
    Mr. Falk. Nineteen and ten percent.
    Mr. Cullinan. Right. It was the distinction between the 
transfer for child care and the transfer for the SSBG program. 
Michigan came very close to transferring the entire 30 percent, 
but two-thirds of that was for child care and a third was for 
SSBG.
    Chairman Johnson of Connecticut. I see. Mr. Cardin.
    Mr. Cardin. Thank you, Madam Chair. First, let me thank 
both of you for your testimony. I think it is very, very 
helpful. It seems to me what you are saying is that in regards 
to the direct Federal programs for day care, the States are 
utilizing 100 percent of those funds, basically. As it relates 
to TANF, we have unobligated funds of about $3 billion that 
have not been spent, which would be equivalent to somewhere 
between 1\1/2\ to 2\1/2\ months of cash assistance, depending 
on where we are in the economy.
    Mr. Falk. Right.
    Mr. Cardin. I think it is very useful. Why don't we go back 
to when we created this program. When we passed this program 
we, for some reason, wanted to allow States to carry from one 
fiscal year to another--to have the flexibility. That is not 
unusual for a Federal Program. We wanted to give the States 
maximum flexibility in handling this program to plan from one 
year to the other.
    Looking at the CBO projections, when we passed this bill, 
did you project that we were going to have this of declining 
welfare on cash assistance by now?
    Mr. Cullinan. No, we didn't. That is absolutely correct. At 
the time of the legislation, we expected that the states would 
come very close to spending the entire block grant each year.
    Mr. Cardin. The major reason is that we have had much more 
success in getting people off of cash assistance. Do we know 
where we are going to be 2 years from now? I know you have a 
projection where we are going to be 2 years from now. But isn't 
it very possible that we could be off again by a significant 
number?
    Mr. Cullinan. Absolutely.
    Mr. Cardin. Now if you are a State administrator trying to 
plan programs for the next 2 years, would it be prudent to 
spend every dollar?
    Mr. Cullinan. I am not sure whether I would make a 
judgment.
    Mr. Cardin. I understand. Your hesitation is all I really 
needed.
    [Laughter.]
    We have put the burden on the States. We have given them 
flexibility. Now we are starting to say, ``Well, gee, we've 
done better than we thought we would on cash assistance, so 
let's use that money for other purposes or to deny other 
program advancements because there are cash surpluses 
available.'' You have a real dilemma. Suppose, as a State 
administrator, you used this money--transferred it, or 
whatever--to help provide more child care and then you have a 
turn in the economy. What do you do? Do you all of a sudden 
take the money away from child care and put it back into this 
program, affecting people who are already trying to make it in 
the workplace? What do you do?
    These are some rhetorical questions. If you have good 
advice, please let me know. I think the program is working, the 
way we anticipated, with the States. I don't find the 
surpluses--the unencumbered balances--to be that large, 
considering the magnitude of the assignment that the States 
have to deal with. Am I seeing something I don't see?
    Mr. Falk. Mr. Cardin, the reserved funds or the unobligated 
balances are one of three sources that States could turn to in 
the event that they have unexpected increases in TANF 
expenditures. The two other are the contingency fund and the 
loan fund. This is one of three routes that States can go.
    Mr. Cardin. One of the things I found--well, let me ask you 
this question. If you were setting up a reserve fund, how many 
months would you like to have available in a reserve fund? Does 
1\1/2\ or 2\1/2\ months seem reasonable for a reserve fund? 
Would either one of you like to venture an opinion on that?
    Mr. Falk. We don't make policy recommendations to Congress.
    Mr. Cardin. I understand. But you are giving us analysis as 
to what the current status is. You know the numbers better than 
we know numbers. You know the historical fluctuations of people 
needing cash assistance. If you are a State administrator, 
would it be reasonable for you to reserve 1\1/2\ to 2\1/2\ 
months of cash benefits for a change in the economy, from the 
TANF money, when the economy is booming and your employment 
rates are at historically high levels and your cash assistance 
and people on welfare are at a historically low level?
    Mr. Cullinan. That would certainly be one way to approach 
it. There are other programs that have, in essence, built up 
far greater reserves than you described. The unemployment 
compensation program would be one.
    Mr. Cardin. Unemployment compensation helps people who are 
working. It's interesting. I understand your point. Even though 
the welfare rolls will go back up, it is amazing that many of 
these people are not going to be qualified for unemployment. Or 
they will exhaust their unemployment and have to come back on 
welfare. We have seen it happen over and over again with 
unemployment being an unacceptable substitute.
    You need unemployment compensation to keep people off of 
welfare, but it is not going to be a substitute for the rolls 
going back up in bad times. The last point I would just like to 
make. I understand the flexibility in the programs and that you 
can transfer the funds. But if the States were to develop day 
care programs within TANF and then provide assistance directly 
within TANF it would count toward the 5-year limits, would it 
not? Which is a dangerous position to put the States in if they 
wanted to use the money directly within the TANF program.
    Mr. Falk. The Department has proposed regulations and child 
care would count as assistance, under those proposed 
regulations. We do not have final regulations, yet.
    Mr. Cardin. Well, I don't agree with those regulations, but 
if we have to live by them, it is another danger the States 
have in trying to deal with this problem directly within TANF. 
Thank you, Madam Chair.
    Chairman Johnson of Connecticut. Just for the record, in 
your experience with these programs--looking back--have you 
ever seen a period of 1, 2 or 3 years in which there has been a 
43-percent decrease in the caseload?
    Mr. Cullinan. I would have to go back and look at the 
record on that. Certainly in the 1989-1993 period, we had a 
substantial increase, but it was not as large as the subsequent 
decrease we have seen since then.
    Chairman Johnson of Connecticut. Was it 43 percent a year?
    Mr. Cullinan. No. Absolutely not.
    Chairman Johnson of Connecticut. One other point I think it 
is important to make is that the States are getting the same 
money they had when they had a 43 percent, on average, higher 
caseload. So every year we are giving them 43 percent more than 
they need, in a sense, to make cash payments. Now we did it on 
purpose and we need to do it. We need to keep doing it because 
of all the service needs people have.
    But if people move from a working situation where they need 
more services back onto welfare, in a sense the money is still 
being paid as if they needed that grant. Isn't that true?
    Mr. Cullinan. Yes.
    Chairman Johnson of Connecticut. So I think we have to be 
very careful about how we define things as we move through 
this. I think having $3 billion of unobligated and unspent 
dollars is very much more significant when in a sense the 
dollars are there. Should the whole caseload come back on, then 
we would do what we used to do. We would pay benefits. That is 
what we used to do with this money. We are figuring out how not 
to pay benefits, how to pay services instead. That is better.
    So I think it is particularly telling. I mean the thing 
that impresses me the most about your testimony is that this 
whole issue of flexibility, with a 43-percent decline on 
average, and it is only on average. There are some States that 
are 15 and 20 percent, and some that are much deeper. But that 
the States have elected to transfer so little of their TANF 
money into the very child care block grant you would think they 
would need to pump up. As the numbers go down, then of course 
they don't need as much daycare for their own TANF population, 
but they need a lot more for the working poor.
    I find it really quite buffaloing why that money hasn't 
expanded. But personally, I think it is very, very important 
for the States to get credit for putting money into a rainy day 
fund, and if we have a chance, to clarify the law to 
acknowledge that kind of reserve. If action is taken by a State 
legislature to reserve some of their unobligated money, to 
count that as obligated and sort of off of our table. So I 
think that would go a long way to at least stabilize the 
resources of the States. But this is a very difficult problem.
    Mr. English.
    Mr. English. Thank you, Madam Chair.
    Mr. Cullinan, in going over your table 1, I would like to 
seek one point of clarity. In your fourth column, you have the 
annual unspent balance. Do I understand through 2003, at a time 
when the Administration has proposed to add an extra $20 
billion to child care, the unspent balance by the States would 
be in the range of $24.4 billion, based on your current 
projections?
    Mr. Cullinan. That is correct. Or, alternatively, they 
would add $17.2 billion over the next 5 years on top of what 
they currently have not spent.
    Mr. English. Historically, have the States ever had more 
Federal dollars available for child care than at this time?
    Mr. Cullinan. I'm not absolutely certain about that, but 
the level of Federal dollars has probably never been higher, at 
least in nominal terms.
    Mr. English. Is that your impression?
    Mr. Falk. That is my impression as well, yes.
    Mr. English. I am curious, Mr. Falk, what were the 
assumptions that you made to determine that the TANF balance 
represents less than 3 months of cash benefits at the 1998 
expenditure rate?
    Mr. Falk. Basically what I did was I divided the 
unobligated balance, the $3 billion, by total cash benefits 
that were paid in fiscal year 1998.
    Mr. English. Are you assuming then that the program is 
guaranteed another $16.5 billion each year?
    Mr. Falk. No. That is just the balances. That is what is in 
reserve, and the States would receive their next year's grant 
as well. This is from just past grants.
    Mr. English. Madam Chairman, I know you probably have some 
more questions. I want to thank these gentlemen for their 
excellent analysis. This is a very helpful addition to our 
deliberations. I yield back the balance of my time.
    Chairman Johnson of Connecticut. Thank you, Mr. English.
    Thank you both for your analysis. It really is helpful to 
be able to get very specific information about what has been 
spent and what hasn't been spent, because this is a very 
important time for us to assure that the States have the money 
and the flexibility to meet the needs of the people moving off 
welfare, and of those low-income working families who never 
became dependent, but are in the same income category. Thank 
you very much for your help.
    Again, if other Members of the Committee have questions, 
they will submit them in writing. Thank you.
    Now I welcome Sharon Long, the senior research associate 
for the Health Policy Center of the Urban Institute; Helen 
Blank, the director of Child Care and Development of the 
Children's Defense Fund, and Clarence Carter, the commissioner 
of the Department of Social Services, from Richmond, VA.
    Thank you all three for being here. Thank you for your 
patience. I always regret it when people have to wait during 
the voting process, but after all, that is our primary 
responsibility.
    Ms. Long, would you like to start?

 STATEMENT OF SHARON K. LONG, SENIOR RESEARCH ASSOCIATE, URBAN 
                           INSTITUTE

    Ms. Long. Thank you for the opportunity to appear here 
today. My comments are drawn from an Institute project that 
analyzes the shift of responsibility for social programs from 
the Federal Government to the States. I will address two 
issues. First, State responses to the increased opportunity for 
innovation under welfare reform, and second, the adequacy of 
child care funding to meet the needs of low-income working 
families.
    The 1996 welfare reform legislation gave States increased 
flexibility for designing and targeting their child care 
assistance programs. The changes I am reporting on today are 
early responses by the States. We should expect to see further 
changes over time as States gain more experience both with TANF 
and the child care block grants. Nevertheless, a number of 
States have already taken the opportunity under welfare reform 
to improve the administration of their child care systems.
    Before welfare reform, child care assistance was a complex 
system that was difficult for States to administer, and 
difficult for families to access. Many States sought to develop 
an integrated or seamless system of care to try to minimize 
those problems. A key first step in developing a seamless 
system is to consolidate the administration of child care 
within a single State agency. With the increased flexibility in 
program design under welfare reform, several States that have 
not achieved a seamless system before welfare reform, have been 
able to move in that direction. For example, California, 
Massachusetts, New Jersey, and Washington, have all moved to 
consolidate child care assistance within a single State agency. 
As part of the Institute's study, we will look to see what the 
impacts of that consolidation are on families over time.
    For States that had made more progress toward achieving a 
seamless system prior to welfare reform, welfare reform 
provides an opportunity to further streamline child care 
assistance. For example, Florida is making an effort to 
establish a single point of entry for all child care and child 
development programs.
    In addition to the opportunity to simplify the 
administration of child care, welfare reform has given States 
more flexibility in program design. However, States have 
generally made only very narrow changes in the designs of their 
child care programs. Program administrators report that they 
expect that welfare reform will over time increase the demand 
for child care assistance among current and former welfare 
recipients, and concerns about the costs for that potential 
increase in demand, along with concerns about what happens in a 
financial downturn have made some States hesitant to expand 
child care much beyond the welfare population.
    Wisconsin is one State in our study that did undertake a 
more radical change in its child care system. They are 
providing help to all eligible families, without regard to 
their welfare status. However, to accomplish that goal, 
Wisconsin had to do two key things. First, they increased State 
funding for child care, and transferred TANF funds to child 
care. Second, they reduced the income standards for eligibility 
to reduce the number of families who would be eligible for 
assistance.
    I would like now to turn to the adequacy of funding for 
child care assistance. In many working families, child care 
ranks as the single largest expense after housing and food. The 
increased funds for child care assistance under welfare reform 
have increased the number of families who are receiving help. 
However, there are still gaps among the low-income working 
families.
    In Minnesota, for example, State officials report that 
working poor families who had been served before welfare 
reform, are now losing out to welfare families, despite an 
increase in State funding for child care. Both Florida and 
Wisconsin have provided additional funding targeted 
specifically to the low-income working poor, in an effort to 
reduce this crowding out. Massachusetts and New York 
transferred TANF funds to child care. Yet both States still 
report long waiting lists for families seeking subsidies.
    In an early analysis of the adequacy for funding under 
welfare reform, we estimated that the increased funds for child 
care would serve at a maximum less than half of the low-income 
children with working parents who were in need of assistance. 
It is important to recognize that this is an upper bound on the 
share of children who could be served, since we did not 
incorporate family responses in our estimates. We would expect 
that the availability of assistance would induce some parents 
who are not working to go to work, and induce some parents to 
go from part-time to full-time work, and allow some families 
with children who are home alone or in unpaid care to move 
their children to other child care arrangements that they could 
not afford on their own.
    While there is little research on the size of these family 
responses, we do know that they would all lead to higher levels 
of demand for child care assistance, and therefore, to a 
smaller share of families being served with the available 
funds. The share of children who could be served would also be 
lower if we used a different level of eligibility. In our 
tabulations, we used 150 percent of poverty. Eleven of the 13 
States in our study have established eligibility levels that 
are above that. Those children would not be captured in our 
estimates.
    We know that the working poor are less likely than the non-
working poor to receive child care subsidies. We also know that 
they are less likely than higher-income families to receive a 
tax credit for child care. Basic equity would suggest that low-
income working families should not be penalized because they 
have not relied on the welfare program. Basic equity would also 
suggest that we not subsidize child care for higher-income 
working families, when we do not provide child care support for 
low-income working families.
    Thank you for the opportunity to appear here today. I would 
be happy to answer questions.
    [The prepared statement follows:]

Statement of Sharon K. Long, Senior Research Associate, Urban Institute

    The views expressed are the authors and do not necessarily 
reflect those of the Urban Institute, its trustees, or its 
funders.
    My name is Sharon Long. I am a senior research associate at 
the Urban Institute, a nonpartisan public policy research 
institution in Washington, D.C. I would like to address two 
issues related to the recent changes in child care assistance 
programs: (1) state responses to the increased opportunity for 
innovation under welfare reform and (2) the adequacy of child 
care funding to meet the needs of low-income working families.
    My comments are drawn from a multi-year Urban Institute 
project analyzing the shift of responsibility for social 
programs from the federal government to the states. That 
project--Assessing the New Federalism--aims to inform public 
debate and to help state and local decision makers carry out 
their responsibilities more effectively.\1\ The project focuses 
on 13 states, home to half of the nation's population. The 
states are Alabama, California, Colorado, Florida, 
Massachusetts, Michigan, Minnesota, Mississippi, New Jersey, 
New York, Texas, Washington, and Wisconsin.
---------------------------------------------------------------------------
    \1\ Funding for the Assessing the New Federalism project is 
provided by the Annie E. Casey Foundation, the Henry J. Kaiser Family 
Foundation, the W. K. Kellogg Foundation, the Robert Wood Johnson 
Foundation, the Ford Foundation, the John D. and Catherine T. MacArthur 
Foundation, the Charles Stewart Mott Foundation, the David and Lucile 
Packard Foundation, the Commonwealth Fund, the Stuart Foundation, the 
Weingart Foundation, the McKnight Foundation, the Fund for New Jersey, 
the Rockefeller Foundation, and the Joyce Foundation and the Lynde and 
Harry Bradley Foundation.
---------------------------------------------------------------------------
    The 1996 welfare reform legislation made significant 
changes in the federal child care assistance programs for low-
income families. It eliminated federal child care entitlements 
to families and consolidated the major sources of federal child 
care subsidies for low-income children into a single block 
grant to states. At the same time, welfare reform transformed 
the Aid to Families with Dependent Children (AFDC) program into 
a block grant and expanded its work participation requirements, 
thereby increasing the need for child care among families newly 
entering the workforce.
    In this new world, states gain increased flexibility for 
designing and targeting their child care assistance programs. 
They also assume additional responsibilities for addressing the 
need for child care assistance. Child care administrators in 
many states reported that they do intend to make changes in 
their child care systems but, thus far, their first priority 
has been to get the Temporary Assistance for Needy Families 
(TANF) program up and running. The changes that I'm reporting 
on today are early responses by the states. We should expect to 
see further changes in state child care programs over time.

      States Are Developing Seamless Child Care Assistance Systems

    Already a number of states have taken advantage of the 
opportunities under welfare reform to improve the 
administration of child care assistance, making significant 
progress toward establishing seamless systems of care. Before 
welfare reform, federal child care programs were frequently 
criticized for the plethora of laws, rules, regulations, and 
accounting practices across the different funding streams. 
These resulted in a complex system that was difficult to 
administer and difficult for families to access. All too often, 
families needed to apply for assistance with multiple agencies 
or providers, perhaps completing multiple applications and 
placing their names on multiple waiting lists. Many states 
sought to develop a system of child care that integrated the 
different funding streams to minimize these problems. Despite 
these efforts, state administrators reported that the 
complexity of the pre-welfare reform child care system 
interfered with their ability to meet the needs of children and 
their families.
    A key first step in developing a seamless child care system 
is to consolidate the administration of child care funding 
streams within a single state agency. Other elements of 
seamlessness that often follow include a single point of entry 
for families seeking assistance; standardized applications, 
policies, and procedures across different programs; and a 
single waiting list for low-income families needing assistance. 
These characteristics all serve to make the child care system 
more efficient and more accessible for families.
    With the increased flexibility in program design under 
welfare reform, several states that had not achieved a seamless 
child care system before welfare reform are making significant 
strides in that direction. For example, California, 
Massachusetts, New Jersey, and Washington have all moved to 
consolidate child care assistance within a single state agency. 
In California, the administration of child care funding was 
split between the Department of Education and the Department of 
Social Services before welfare reform. Under welfare reform, 
the state has combined all child care funds in a single state 
agency--the Department of Education. In Massachusetts, where 
interactions between multiple child care agencies were often 
contentious before welfare reform, consolidation within a 
single state agency has simplified child care assistance in the 
state.
    For states that had already established substantially 
seamless child care systems, the greater flexibility in design 
under welfare reform provides the opportunity to address gaps 
that remain in the system. For example, Florida's goal is to 
establish a single point of entry for all child care and early 
childhood education programs and to unify the waiting lists for 
all child care assistance.

States Have Made Few Changes in the Design of Their Child Care Programs

    Although welfare reform has given states much more 
flexibility in program design, it has also created strong 
incentives for states to focus on serving the welfare 
population. As a result, most states have made relatively 
narrow changes in their child care programs (e.g., limited 
changes in eligibility rules, benefit levels, and priority 
groups). The entitlement for child care assistance that existed 
before welfare reform has been replaced by a de facto guarantee 
of assistance for welfare families.
    By eliminating the entitlement to child care assistance to 
families, welfare reform gave states greater flexibility in 
allocating child care funds across both the welfare and non-
welfare populations. However, many of our study states have 
been reluctant to take advantage of that flexibility. Program 
administrators reported that they expect that, over time, 
welfare reform will increase the demand for child care 
assistance among current and former welfare families, 
particularly among families with very young children (for whom 
child care is quite expensive). Concerns about the potential 
costs of that increased level of demand, along with concerns 
about the implications of future economic downturns, have made 
some states hesitant to expand their child care programs much 
beyond the welfare population.
    One state in our study that has undertaken a more radical 
change in its child care system is Wisconsin. Wisconsin has 
established a child care program that assists all eligible 
families. To accomplish its goal of supporting families without 
regard to their welfare status, Wisconsin made two key changes 
in its child care program. First, it increased state funding 
for child care significantly and has transferred TANF funds to 
child care. Second, it reduced the pool of eligible families by 
lowering the maximum income level for eligibility.

  Funding for Child Care Assistance Eludes Low-Income Working Families

    In many working families, child care ranks as the single 
largest expense after housing and food. The increased funds for 
child care assistance under welfare reform, combined with many 
states' investment of their own funds, have increased the 
number of families who are receiving help with child care. 
However, there are still large gaps in coverage among the low-
income working families.
    The federal government provides substantial support for 
child care through a variety of avenues. Middle-and upper-
income families receive support through the non-refundable 
Dependent Care Tax Credit. Of more relevance to low-income 
families is the funding available under TANF and the child care 
block grant. However, as noted earlier, the vast majority of 
that funding appears to be targeted to welfare families and 
former welfare families, raising concerns about the equity of 
the child care system for non-welfare families and the perverse 
incentives of the welfare system.
    In Minnesota, for example, state officials report that 
working poor families who would have been served before welfare 
reform are now losing out to welfare families, despite an 
increase in state funding for child care. Both Florida and 
Washington have provided additional child care funding targeted 
specifically to the non-welfare low-income population to reduce 
such crowding out. Massachusetts provided both additional state 
funds and transferred TANF funds to child care, yet still has a 
waiting list for low-income families. New York also transferred 
TANF funds to child care, yet still has long waiting lists for 
low-income families.
    In an early analysis of the adequacy of funding for child 
care under welfare reform, we estimated that, if states drew 
down all the federal dollars available under the block grant, 
the share of low-income children with working parents who could 
be served would increase significantly. We also estimated that 
those increased funds would serve at a maximum less than half 
of the low-income children in need of child care assistance in 
1997.
    It is important to recognize that this estimate represents 
an upper bound on the share of children who could be served 
since the estimate does not incorporate family responses to the 
availability of child care assistance. In particular, the 
availability of assistance will induce some parents who are not 
working to go to work, induce some parents to go from part-time 
to full-time work, and allow some families with children who 
are home alone or in unpaid child care arrangements to place 
their children in arrangements that they could not afford on 
their own. While there is little research to support estimates 
of the size of those family responses, we do know that they 
will lead to higher levels of demand for child care assistance 
and, therefore, to a smaller share of low-income children being 
served with the available funds.
    The share of children who could be served would also be 
lower if the definition of low-income children was expanded 
from the measure that we used--children in families with income 
below 150 percent of the poverty level. Eleven of the 13 states 
in our study have established income eligibility levels for 
child care assistance under the child care block grant that are 
above 150 percent of poverty. Our estimates do not capture the 
child care needs of those children.
    We know that the working poor are less likely than the 
nonworking poor to receive child care subsidies and less likely 
than higher income families to receive a tax credit for child 
care expenses. Basic equity would suggest that low-income 
working families should not be penalized because they have not 
relied on the welfare system. Basic equity would also suggest 
that we should not subsidize child care for higher income 
working families, when we do not provide that same support for 
low-income working families.
    With falling caseloads and increased funds available under 
welfare reform, the states have more than adequate funds to 
provide child care assistance to their welfare populations. 
However, the funds are not adequate to serve the non-welfare 
low-income working families seeking help paying for child care. 
The challenge remains to provide enough child care assistance 
to meet the demands of welfare reform without abandoning non-
welfare working poor families.
    Thank you for the opportunity to appear before this 
subcommittee. I would be happy to answer any questions.

                                

    Chairman Johnson of Connecticut. Thank you. That was very 
helpful.
    Ms. Blank, it is a pleasure to have you.

STATEMENT OF HELEN BLANK, DIRECTOR, CHILD CARE AND DEVELOPMENT, 
                    CHILDREN'S DEFENSE FUND

    Ms. Blank. We are delighted to be here today. We deeply 
appreciate the leadership role that this Committee has played 
for the last decade on child care, especially the role that 
you, Mrs. Johnson, have played on behalf of children and 
families needing child care.
    From families, children, and child care workers' 
perspective, child care resources are just not doing it. Child 
care costs can be a staggering burden for parents. The average 
annual cost of child care in an urban child care center exceeds 
the average annual cost of public college tuition in almost 
every State. But one out of three families with young children 
earn less than $25,000 a year. They are making extraordinary 
choices.
    We can't lower the cost of child care, because the largest 
portion is devoted to salaries. The lowest-paid level teachers 
earn on average $13,000 a year, which is lower than the poverty 
level. More than one in four teachers left their jobs over the 
course of the year. This creates an untenable situation for 
programs, which all across the country can't find teachers to 
fill their jobs. It is also untenable for young children, who 
need stable relationships, especially low-
income children who face tremendous instability in their lives. 
Yes, we have seen tremendous progress over the last 10 years, 
thanks to increased Federal and State investments in child 
care. The new funds that were put in the welfare bill 
definitely made a difference. But every day in this country, 
too many low-income families are still left making painful 
choices between working and the safety of their children. These 
parents can't wait.
    To make welfare reform succeed, we have to ensure that 
families don't fall back on welfare, and that families already 
on welfare can stay off. Low-income families live precariously. 
Any mishap can cause them to lose their fragile balance. An 
unstable child care arrangement that falls through can easily 
catapult into a lost job.
    The number of working poor families continues to grow. 
There are 9.6 million in 1998. Families leaving welfare don't 
become doctors and lawyers. I wish they did. Most remain in 
low-wage jobs, and they are likely to stay in these low-wage 
jobs. They can't make it without child care help.
    Unfortunately, only a handful of States have joined 
Wisconsin, like Illinois and Rhode Island, to ensure the child 
care help is equally available to both families on welfare, and 
low-income working families. In many other States, child care 
dollars are focused mainly on welfare dollars. State also have 
income cutoffs that limit eligibility for many low-income 
families.
    Parents on the waiting lists are poor families. They are 
making enormous financial sacrifice or they are placing the 
health and safety of their children in jeopardy. They are not 
simply finding another child care slot. A recent study of 
parents on the waiting lists in Santa Clara County, CA, found 
that over one-third of parents were earning $10,000 a year and 
spending on average $300 a month on child care. They were 
putting their jobs at risk in order to just make it. Where are 
the children? In Florida, a mother on the waiting list had her 
three children with a provider who spoke no English, in her 
barren apartment, with no toys or books, just a television set 
all day long. How is education reform going to succeed if that 
is where our youngest children are?
    In Minnesota, they did a similar study of families on the 
waiting list. One mother talked about her 6-month old being in 
three horrible day cares in the course of 6 months. Over 70 
percent of Minnesota families on the waiting list had gone 
bankrupt or experienced severe financial difficulty.
    The waiting lists aren't the only reflection of the demand. 
Forty three States told CDF that if all eligible families knew 
they were eligible for assistance, they couldn't help them. 
Child care is a well-kept secret because States are very 
concerned about the huge demand. In Iowa, there are 11,000 
children receiving child care assistance, and 90,000 are 
eligible for help. Florida just transferred $117 million to 
CCDBG. They have 11,000 children under five eligible for child 
care help, and 95,000 school-age children who will not be able 
to get it, even with this transfer. Their eligibility cutoff is 
only 150 percent of the poverty level.
    It is not just a matter of who gets help. It is that States 
make painful choices between who gets help and how much 
providers make. Only 18 States set rates for child care 
providers based on current market rate surveys. Connecticut and 
Maine, two States which have obligated all their TANF funds, 
use market rate surveys that are 5 to 7 years old. That means 
if low-income communities have to serve low-income families, it 
is a terrible sacrifice for providers.
    High co-payments are also an issue. In Virginia, families 
making $10,000 a year have to pay 10 percent of their income 
for child care, that is 70 percent of the poverty level. 
Pennsylvania just raised their co-payments to 14.5 percent of 
income.
    We don't think that that current usage reflects demand. 
Administrative barriers are also keeping families from child 
care assistance. In Maryland, child care eligibility workers 
were sent a State memo telling them to encourage use of cheaper 
informal care. This is happening in other States as well.
    I wish transferring funds to CCDBG would fill the gap. 
Arizona, which reports that it is close to its 30 percent 
limit, still has huge gaps. It raised its eligibility this 
year. It is still limited to $22,000 for a family of three. 
They improved their rates making their rates go from the 75th 
percentile of the 1989 market rate, to the 50th percentile of 
the 1996 market rate. Parents still can't afford half the 
providers in their community. California and Texas have 
obligated all their TANF funds. Two hundred thousand on the 
waiting list in California, 36,000 in Texas.
    Will the DCTC expansion help working families? Many 
families will be left at the gate if Congress only looks at tax 
strategies. A single head of household with two children 
earning just over $25,000, would receive no actual benefit from 
the President's DCTC tax proposals. Even if the DCTC were 
refundable, it would be difficult for families to manage 
because they wouldn't receive their refunds until the end of 
the year, and they have to pay weekly or biweekly child care 
bills.
    The question we have to ask as a country is how are we 
going to ensure that families can work and support their 
children, and avoid dependence on TANF, keep their children 
safe, and help them go to school ready to read. In 1996, this 
Committee took important steps to help families move off TANF. 
In 1990, the Nation made a commitment to working poor families 
when President Bush signed the Child Care and Development Block 
G. Increasing the CCDBG by $7.5 billion over 5 years is the 
next step to take.
    If we are to increase child care options, we can not hold 
working families hostage to the TANF surplus. We can't depend 
on a patchwork approach, transferring funds from one block 
grant designed to help our very neediest families to another 
with similar goals. We need a stable base in this country to 
ensure that every parent who needs it have the child care 
choices that they need to start to work and to stay working, 
and their children have the quality of child care they need to 
succeed in school.
    [The prepared statement follows:]

Statement of Helen Blank, Director, Child Care and Development, 
Children's Defense Fund

    I am Helen Blank, Director of Child Care and Development at 
the Children's Defense Fund. The Children's Defense Fund 
welcomes the opportunity to testify today on child care. CDF is 
a privately funded public charity dedicated to providing a 
strong and effective voice for America's children, especially 
poor and minority children.
    Child care is an important issue affecting working parents 
and their children. Everyday, American parents go to work to 
support their families and must trust their children to the 
care of others. An estimated 13 million children younger than 
age six are regularly in child care and millions of school-age 
children are in after-school activities while their parents 
work. Every working parent wants to be sure that his or her 
children are nurtured and safe.
    Quality child care is also critical to helping children 
enter school ready to succeed. Child care matters not just for 
parents but also for their children. The nation cannot proceed 
successfully on its track towards improving educational 
outcomes unless it focuses on the developmental needs of young 
children. Research is clear about the importance of the first 
three years of life to brain development. The process of 
learning to read begins well before a child enters elementary 
school. Early childhood experiences that include exposure to 
language-rich environments are building blocks for school 
success. A new report, ``Preventing Reading Difficulties in 
Young Children,'' released by the National Research Council in 
1998, also notes that the majority of reading problems faced by 
today's adolescents and adults could be avoided or resolved in 
the early years of childhood. Children must arrive in the first 
grade with a strong basis in language and cognitive skills and 
be motivated to learn in order to benefit from classroom 
instruction.
    While every working parent wants the best environment and 
outcome for his or her children, child care costs can be a 
staggering burden for many low-income working parents; costs 
consuming over a quarter of their income.

                        High Cost of Child Care

    The average annual cost of care for a four-year-old in an 
urban child care center exceeds the average annual cost of 
public college tuition in almost every state. But one out of 
three families with young children earn less than $25,000. One 
out of three children of working mothers either is poor despite 
the fact that their mothers work, or would be poor if their 
mothers did not work. Their parents constantly must choose 
between paying the rent or mortgage, buying food, and being 
able to afford the quality care their children need.
    Unfortunately, the cost problem cannot be remedied by 
asking child care providers to lower their price. Most 
providers already operate on exceptionally tight budgets. The 
largest portion of a family child care home or a child care 
center budget is dedicated to staff salaries, which are already 
unacceptably low. The lowest paid level teachers earn on 
average $13,125 a year while teaching assistants earn an 
average of $10,500 annually. As a result, more than one in four 
child care teachers and 39 percent of assistants left their 
jobs over the course of a year. Child care programs across the 
country report that they have had great difficulty replacing 
staff and finding qualified staff.
    Providers who want to stay in the field do it at enormous 
sacrifice:

          Lori, a 29-year-old mother and child care provider from 
        Philadelphia writes of her reasons for leaving the child care 
        field: ``I will soon be leaving my job as a child care 
        provider. I enjoy the center I work with, the children, and the 
        intelligent, caring people I work with. I am leaving because I 
        am making $5.15 an hour to do a job worth at least $10.00 an 
        hour. Of course you can't put a worthy price on caring for our 
        nation's greatest resource, its children, but at least a fair 
        working wage would be justice. I fear for the next generation. 
        They deserve quality care, security, and to have their young 
        minds stimulated. But that's just not going to happen at this 
        rate. You can't expect hard working decent women to keep 
        plugging away with endless energy, when they are insulted every 
        week at the sight of their paychecks.''

                       Families Face Locked Doors

    Our existing child care investments fall far short of 
meeting the needs of parents or their children, despite 
increases in the Child Care and Development Block Grant (CCDBG) 
included in the Personal Responsibility Act. Inadequate federal 
and state funding prevents millions of children from low-income 
working families from being able to get the help they need. 
These families face a series of locked doors. Many hard working 
low-income families are not even eligible for help due to low 
state eligibility cutoffs for child care assistance. Many who 
are eligible cannot get it -either because they are put on 
waiting lists or are turned away due to inadequate funds or 
because no effort has been made to let them know they are 
eligible to get the help they need to succeed. Those fortunate 
enough to actually qualify for child care assistance face 
additional locked doors. In some cases, the amount the state 
will pay for care is so low that parents cannot find quality 
providers who can afford to serve their children, and in other 
cases parents have to pay so much in parent fees or copayments 
that child care expenses still are a staggering financial 
burden.
    New federal child care funds have enabled most states, at 
least temporarily, to meet the increased child care needs of 
families on welfare generated by the initial stages of the 
implementation of the new welfare law. They have also allowed a 
number of states to help more nonwelfare, low-income working 
parents with their child care expenses. In addition, they have 
given some states the opportunity to raise the amount they 
reimburse providers so that more providers are willing to 
accept children receiving CCDBG subsidies.

                Low-Income Working Families Need a Boost

    Yet, enormous gaps still remain in our efforts to help low-
income parents work and take care of their children. Much more 
needs to be done to ensure that families on welfare have the 
child care assistance they need to get and keep jobs, without 
sacrificing low-income working families who are struggling to 
keep their jobs and stay off welfare.
    If our country is serious about promoting work, than it 
must address the real needs of low-income working families who 
are often one unreliable child care arrangement away from 
welfare. Low-income families live precariously, balancing 
competing basic needs with very limited resources. Any mishap 
can cause these families to lose their fragile balance. For 
example, unstable child care arrangements that fall through can 
easily catapult into a lost job.
    The number of poor children in working families has 
escalated since 1989 from 7.5 million to almost 9.6 million in 
1998. As welfare reform proceeds, this trend can be expected to 
continue. Families leaving welfare will likely remain in low-
wage jobs and need child care assistance beyond a limited 
transitional period of one or two years. Wage growth is very 
slow. For example, median wages for families who exited welfare 
grew by only 9 cents an hour in their first five years 
according to a study by Meyer and Concian concerning women's 
work efforts in the five years after leaving welfare.
    Additional investments in child care are critical if the 
country is to promote both work and family--not only by helping 
welfare parents leave welfare but also by ensuring that low-
income, working parents have the child care assistance they 
need to stay employed and to help their children thrive. Some 
states such as Rhode Island, Illinois, and Wisconsin understand 
that welfare reform will have a better chance of succeeding if 
child care assistance is readily available to both families on 
welfare and low-income working families. These states have 
focused significant new child care resources on working 
families. However, too many other states continue to focus a 
large portion of their new child care funds on TANF families, 
neglecting the needs of low-income working families.
    State child care subsidy programs are so underfunded that 
they cut off eligibility at family income levels far below what 
is allowed by federal law and what is needed by families--with 
the result that families earning as little as $20,000 a year 
for a family of three are not eligible for help in many states. 
The CCDBG allows states to help families with incomes up to 85 
percent of state median income (``state median income''--or 
SMI--is the income level in each state below which half of all 
families fall). However, across the country all but five states 
disqualify families for help before they reach this level. In 
some states, the income eligibility cutoffs are so low that 
only the poorest of the working poor can qualify. West 
Virginia, for example, cuts off income eligibility at $15,000 
per year for a family of three (barely above the 1997 federal 
poverty level of $13,330), whereas South Carolina cuts off 
eligibility at $16,700. As of January 1998, three out of five 
states would not have provided any help to a family of three 
earning $25,000 (slightly over 185 percent of federal poverty) 
who applied for child care assistance.
    Even those low-income working families who do meet state 
income guidelines frequently cannot get help they need. Low 
state income cutoffs keep demand for state child care subsidy 
help artificially low. Yet even with low income cutoffs, many 
states face demand they simply cannot meet. These states are 
turning away eligible low-income working families or putting 
them on waiting lists for help.
     Texas has 36,000 children on a waiting list
     California has over 200,000 children on a waiting 
list
     Massachusetts has 17,200 children on a waiting 
list
     Pennsylvania has 12,600 children on a waiting list
     Alabama has close to 19,000 children on a waiting 
list and
     Georgia has 44,500 children on a waiting list
    In many counties in California, the wait for child care 
assistance is over two years for low-income working families. 
These waiting list numbers often underrepresent the real need 
because many families do not put themselves on the list because 
they feel that it is futile. In addition, many states do not 
keep lists; they simply turn families away. Parents without 
help in paying for child care face many hardships. A mother 
from Pensacola, Florida says:

          I have two children and their child care costs are $120 a 
        week. I work a full-time job, but after I pay taxes and 
        insurance I bring home $230 a week. That leaves me $110 a week 
        to take care of my children. It is almost impossible for me to 
        survive. I make too much money to receive food stamps so my 
        children have to go hungry for us to get by. If I had some help 
        with child care, I would have more money to buy food for my 
        children. I have worked at my job for seven and a half years, 
        but I almost had to go back to part-time because I could not 
        afford care. If I went part-time, my pay would be reduced and I 
        would lose all my benefits.

    Studies of low-income working families on waiting lists for 
child care assistance clearly paint a picture of the 
difficulties these families face without the child care help 
they need. The Day Care Services Association of North Carolina 
surveyed families on the state's waiting list for child care 
help and found that 78 percent experienced financial problems. 
For those families fortunate enough to eventually receive help, 
it made a significant difference. Eighty-three percent of 
respondents who did receive a child care subsidy said that the 
subsidy improved either the quality or reliability of their 
children's care.
    A similar study of parents waiting for child care 
assistance in Santa Clara County by the Policy Analysis for 
California Education found that a large number of families on 
the waiting list are living at or below the poverty level but 
paying high amounts for child care. Over one-third of parents 
interviewed earn less than $10,000 annually. Yet, employed 
parents were on average spending about $300 a month for care. 
While waiting for help, parents were forced to make significant 
adjustments in their lives. About 40 percent reported that they 
gave up looking for work because they could not find affordable 
care.
    Most families never get to the waiting list or to the point 
of applying for child care help because they do not even know 
child care assistance is available. Few states have made 
serious efforts to reach out to these families. In 1998, 43 
states told the Children's Defense Fund that if all eligible 
families sought services, the states were not confident they 
would have the resources to serve these families. Only eight 
states reported that they would be able to serve all eligible 
families if they knew they were eligible, and most of these 
eight states had severely restricted the number of eligible 
families by setting very low-income cutoffs. Many potentially 
eligible families never apply for help because states do not 
publicize the availability of child care assistance as they 
know they cannot meet even the existing demand.
     Texas estimated that it is only serving 4 to 5 
percent of all families who are eligible under the income 
guidelines, which restrict eligibility to families earning only 
about $20,000 a year or less for a family of three.
     Vermont is currently serving 7,000 children. Their 
state child care administrator estimates that there are about a 
third to a half again as many eligible families who need child 
care who are not being served.
     Florida, which recently transferred more than $100 
million in TANF to the CCDBG, still has an estimated 11,000 
children from birth to age 5 eligible for child care assistance 
as well as 95,000 school-age children in working families with 
incomes below 150 percent of the federal poverty level who need 
child care help.
     In Iowa, only about 11,000 children have families 
who have applied for child care assistance but 90,000 children 
are eligible for help.

              Low Rates and High Fees Limit Parent Choice

    State child care resources are stretched so thin that even 
parents fortunate enough to get help do not get the relief they 
need. Low subsidy rates for child care may mean that good 
quality, affordable child care that helps children learn is 
beyond parents' reach even with a child care subsidy. In many 
states, child care subsidy rates are so low that many providers 
are unwilling to accept children who have subsidies or limit 
the number of children with subsidies they are willing to 
accept. Some providers may take subsidies, but only if parents 
pay them the difference between what the subsidy rate will 
cover and the provider's actual rate (in addition to the 
copayment the parent is already required to pay). The effect of 
these practices is that parents often have little choice of 
caregivers. They are driven to choose the lowest-cost, often 
lower-quality care, since that is what the state subsidy rate 
will pay for. Or parents have to pay providers the difference, 
spending extra money on child care that their very eligibility 
for a child care subsidy indicates they cannot afford. A 
February 1998 report by the Inspector General of the Department 
of Health and Human Services emphasized that both low provider 
payment rates and high copayments restrict parents' access to 
care and limit their ability to choose the child care they want 
for their children.
    Providers that serve a high concentration of children with 
subsidies may be unable to continue if rates fall below the 
real cost of providing care. In Des Moines, Iowa, for example, 
three inner-city child care centers closed in 1997 because they 
could not make ends meet under the state's reimbursement rates. 
Keeping rates low and failing to update them directly affects 
what kind of care children get and whether their parents can 
even find care in their neighborhoods.
    In 1998, only 18 states set rates that were based on a 
recent survey of local market costs and that would enable 
parents to afford the rates charged by three-quarters of local 
providers.
     Connecticut and Maine use market surveys that are 
five to seven years old and have not increased their rates to 
reflect that their information is outdated.
     While Arizona raised rates in 1998, it was only 
from the 75th percentile of the 1989 market rate to the 50th 
percentile of the 1996 market rate--still far below the level 
needed to guarantee parents adequate choice, as they won't be 
able to afford half the providers in their community.
    Child care subsidy programs also close doors to families 
when they ask parents to pay such high parent fees that child 
care remains unaffordable. In a number of states, low-income 
working families who do manage to get child care help are 
facing such high copayment levels that their child care costs 
remain prohibitive. For example, although experts recommend 
that low-income families above poverty pay no more than 10 
percent of their income as parent fees, some states require 
three-person families at $20,000 a year (150 percent of 
poverty) to pay child care fees as high as 20 to 30 percent of 
their income:
     In South Dakota, the parent fee would be $500 per 
month, or 30 percent of the family's income of $1670 per month.
     In Oregon, a family at 150 percent of poverty 
would be required to pay $365 in parent fees--22 percent of 
family income.
     Nevada charges such parents about 18 percent of 
income in parent fees; Utah requires parents to pay 13 percent, 
Iowa, Maryland, and North Dakota require parents to pay 12 
percent.

   Program Administration Can Be a Barrier to Getting Child Care Help

    Fear of being overwhelmed by requests for child care help 
also encourages administrators to set up administrative 
barriers that deter both TANF and low-income working families 
from taking advantage of child care subsidies. For example:
     A study in Washington State found that 23 percent 
of former TANF families did not use a child care subsidy 
because they feared using up their five-year limit on 
assistance.
     In Utah, families are told they must seek free 
care before being offered a subsidy.
     In Maryland, child care eligibility workers were 
sent a state memo telling them to encourage use of cheaper, 
informal care. This policy was rescinded, but workers were 
never told.
     In Milwaukee, Wisconsin up to 60 percent of child 
care placements begun by one agency were canceled by a second 
agency due to bureaucratic snafus.
    Caseworkers may give families confusing information. A 
study done of the application process by Child Care Inc in New 
York reports that caseworkers receive limited training on 
providing child care assistance, and the information they are 
given as guidelines are often incomplete and outdated. 
Caseworkers are usually a parent's first, and in many cases, 
only source for obtaining information about child care. Because 
parents receive limited information on their child care 
choices, they believe that they have limited options and may be 
forced to use informal care. Caseworkers, anxious to move 
parents into a work activity, advise them to continue to use 
the person who is caring for children at the time of the 
appointment as an ongoing care giver, not taking into 
consideration that this may be a temporary situation. The 
parent may prefer a different arrangement in the long-term or 
the provider may be unable to offer a permanent arrangement.

               TANF Funds Cannot Fill the Child Care Gap

    Many states are moving forward to fill their child care and 
early education gaps. They are taking advantage of TANF funds 
and transferring substantial amounts to CCDBG. Some of this 
activity is not yet reported in FY 1998 data from the 
Department of Health and Human Services concerning unspent 
funds. For example, a recent CDF survey found that a number of 
states transferred or plan to transfer significant funds from 
TANF to CCDBG, including $66 million in North Carolina, $56 
million in Indiana, $38.2 million in Arizona, and $117 million 
in Florida. Yet, these states and others continue to face large 
unmet child care needs. For example, across Florida, families 
with incomes of $32,900 (200 percent of poverty for a family of 
four) who do not receive child care help must pay about 28 
percent of their gross income for two children in care. To 
serve children birth to age 5 from working families earning up 
to 200 percent of poverty would require an additional $77 
million and providing child care to the school-age population 
would require an additional $216 million according to the 
Florida Department of Children and Families.
    Indiana continues to limit eligibility to families earning 
150 percent of the poverty level or less while Arizona cuts off 
assistance at 165 percent of the poverty level. States such as 
California, Texas, and Maine that have obligated all of their 
TANF funds, also show little evidence of being able to meet the 
child care needs of working families. Both Texas and California 
have long waiting lists for child care assistance. While Maine 
uses a 1993 market rate survey to determine their payment rates 
to providers. States cannot fill all their child care gaps with 
TANF dollars. They also have other important uses for these 
funds. They may justifiably be concerned about the impact that 
an economic downturn will have on their TANF caseloads and be 
anxious to conserve funds to preserve a safety net for 
families. Despite declining caseloads, states are also facing a 
challenge as they try to help the families who remain on 
welfare, since it is these families who face the most 
significant barriers to work, such as substance abuse, domestic 
violence, disability, and mental health problems, to employment 
and self-sufficiency. Research also indicates that children in 
families having the most trouble entering the workforce also 
have more acute physical or emotional problems and need more 
enriched child care settings.
    If we are to increase child care options that meet the 
needs of parents and children, we cannot continue to depend on 
a patchwork approach. Transferring funds from one block grant 
designed to help needy families to another with similar goals 
will not assure the stable base needed to ensure that parents 
have the child care choices they need to work and their 
children need to enter school ready to succeed.

     Improved Tax Credits Must Be Paired With Expanded CCDBG Funds

    How do we provide more relief to these millions of 
families? Expanding the Dependent Care Tax Credit would 
definitely provide more help to some configuration of lower-
middle and middle-income families who struggle to pay for child 
care out of very tight budgets. However, there are large groups 
of low and lower-middle income families that an expanded DCTC, 
unless it is made refundable, simply will not benefit. For 
these families, it is essential that more help be made 
available through the Child Care and Development Block Grant. 
For example, a single head of household with two children 
earning $25,252 (185 percent of the federal poverty level) 
would receive no actual tax benefit from the President's 
proposal to expand the DCTC, after applying the per child tax 
credit and the Earned Income Tax Credit. In fact, families of 
this configuration (single head of household, two children) 
would realize a net tax benefit under this proposed DCTC 
expansion only at incomes of $27,000 and higher. Similarly, a 
married couple family with two children at 185 percent of the 
poverty level -earning just over $30,000 a year--would receive 
only a very small net benefit, about $55, from the proposed 
changes; larger net benefits would be realized only at incomes 
above that level. A single head of household with two children 
earning $27,000 (approximately 200 percent of the poverty 
level) would receive a net gain of only about $89 from the 
proposal, with larger gains at incomes above that level.

     Increase Funds For the Child Care and Development Block Grant

    Without child care assistance, it is difficult to 
comprehend how low-income families manage. The Department of 
Labor's report on Consumer Expenditures in 1997 found that a 
family with one parent and at least one child under age 18 
spends $21,303 on housing, food, apparel, transportation, and 
personal insurance and pensions alone. On average, they make 
$24,185 a year according to the same survey, leaving $2,882 for 
everything else they must buy, including health insurance and 
child care. Although for technical reasons these numbers should 
be taken as a rough guide rather than as precise figures, they 
do make it easier to see why so many American families are 
going into debt. A mother from Manchester, Connecticut earning 
approximately $24,000 a year talks about how difficult it is to 
work, raise her family, and ensure that her children are in a 
safe and supportive environment:

          I would like to see affordable, quality child care. I have an 
        infant and a 3-year-old, and currently pay over $1,000/month in 
        child care. This is 50 percent of my salary. There must be a 
        better way for us to work and still feel safe about where our 
        children are during the day without paying out half of our 
        salary every month.

    In 1996, this committee took important steps to help 
families move off TANF. It is equally important in 1999 to take 
further steps forward to ensure that low-income working 
families have the means to access the stable child care 
arrangements they need to continue working and moving towards 
independence. Increasing the Child Care and Development Block 
Grant by $7.5 billion over five years is the next step to take. 
This would not only provide essential help to these families, 
but would also provide new resources to strengthen the quality 
of child care. Moving on to improve the Dependent Care Tax 
Credit would give lower-middle and middle-income families the 
resources they need to expand their child care choices. 
However, it is essential that any DCTC expansion be paired with 
a substantial increase in the Child Care and Development Block 
Grant to help ensure the success of welfare reform, not just 
for this generation of workers but also for the next.
[GRAPHIC] [TIFF OMITTED] T5629.005

[GRAPHIC] [TIFF OMITTED] T5629.006

    Chairman Johnson of Connecticut. Thank you, Helen. That was 
a lot of information to go through. I appreciate your 
presentation.
    Mr. Carter.

 STATEMENT OF CLARENCE H. CARTER, COMMISSIONER, DEPARTMENT OF 
              SOCIAL SERVICES, RICHMOND, VIRGINIA

    Mr. Carter. Madam Chair, as I look at your agenda, it seems 
that I am the last presenter this afternoon. So I will adhere 
to the three B's of public presentation, be brief, be 
insightful, and be gone.
    Chairman Johnson of Connecticut. Well, we do keep these 
hearings short so that we can hear everybody. So please don't 
be intimidated by being the last person, because you are also 
the most hands-on person that will have testified today.
    Mr. Carter. Thank you. I am pleased to have this 
opportunity to represent the Commonwealth of Virginia and my 
human services colleagues across the Nation, and sharing with 
you some of our concerns about the provision of child care 
services in this era of welfare reform.
    There are three points I would like to bring to your 
attention today. The first is State flexibility. The Personal 
Responsibility and Work Opportunity Reconciliation Act of 1996 
ushered in an era of innovation and creativity with regard to 
public assistance programs. The Child Care and Development Fund 
was an important augment to PRWORA as it streamlined funding 
sources for child daycare, enabling States to combine the 
provision of daycare services with its work-based self-
sufficiency focus cash assistance programs. States have enjoyed 
this new-found flexibility, and continue to use it to create 
impressive results. However, there are some ominous clouds on 
the horizon.
    Since the enactment of PRWORA, Congress has created three 
new set-asides in the Child Care Block Grant, a $19 million 
fund for resource and referral and school-age child care, a $50 
million infant and toddler care fund, and a new $172 million 
fund for quality enhancements. These categorical set-asides 
hinder the flexibility of States to address the child care 
needs.
    The quality enhancement dollars provide a particularly 
instructive example. Currently, the Child Care and Development 
Fund require States to set aside up to 4 percent of their grant 
for quality enhancements. The $172 million is an additional 
quality enhancement set-aside. In Virginia, we have made the 
determination to put as many dollars in the hands of parents as 
possible. The set-aside dictates that Virginia must dedicate a 
particular percentage of its grant to quality enhancements. 
Thus, limiting our flexibility to put more dollars into direct 
purchase of services.
    We happen to subscribe to the theory that if parents are 
armed with all the relevant information to make an informed 
decision on the child care option that best suits that family, 
the dollars they will use to purchase services will set the 
standard for quality. Clearly, every State will not make that 
determination, but if flexibility is maintained by limiting 
set-asides, States can make whatever determination is in the 
best interest of its residents.
    Additionally, in the past few years, Congress has funded an 
expanded Head Start, Early Head Start, and 21st century 
Learning Centers. Each of these initiatives are separate 
Federal funding streams, with no requirement for coordination 
with the Child Care Development Fund. These programs serve the 
same children, yet the resources are fragmented by separating 
funding streams that could achieve far more if they were 
effectively leveraged together.
    As I move across the Commonwealth of Virginia talking about 
the future of human service programs into the next century, I 
talk about an organization that operates under one 
comprehensive vision for healthy families and healthy 
communities, an organization that manages multiple programs and 
funding streams directed toward one common vision. Each new 
categorical human services spending initiative makes it more 
difficult to realize that vision. We urge Congress to require 
that future funding for these and any other contemplated child 
care initiatives to be coordinated with the Child Care and 
Development Fund.
    One final point on flexibility has to do with the Federal 
regulations for the CCDF. The final Federal regulations on the 
CCDF reversed the actions taken by Congress to repeal onerous 
and outdated restrictions on State child care administration. 
For example, in PRWORA, Congress specifically repealed the 
requirements on States to conduct market-rate surveys to set 
child care rates, as well as the use of the 75th percentile 
standard to guarantee access to child care. Despite the repeal 
in PRWORA, HHS wrote those very requirements back in the final 
regulations for the implementation of the CCDF.
    I would commend to your attention a full description of the 
State's concerns over the Federal child care regulations 
compiled by the American Public Human Services Association, 
attached to my written testimony.
    Next, I would like to talk briefly about principles of the 
provision of child daycare. As the Nation struggled to settle 
on foundation principles for welfare reform, in Virginia, we 
struggled with setting the guiding principles for the provision 
of child care services. The debate in Virginia has been between 
two schools of thought. On the one hand, there is a belief that 
with our emerging knowledge of brain development in the early 
years of life, it is incumbent upon us as a society to develop 
a highly regulated, prescriptive child care structure. This 
structure would include basic health and safety provisions, 
while ensuring that children and parents are introduced to a 
universal set of child development standards that government 
has deemed appropriate.
    On the other hand, there is a belief that it is the role of 
government to maintain rigorous health and safety standards 
while fostering a free-market environment conducive to the 
creation of multiple options for the provision of child care 
services. The thought continues that arming parents with the 
information to make informed decisions about the options for 
child care and providing public dollars were economically 
necessary to assist in their purchase of services is the best 
public policy option.
    The difference, quite frankly, is simple. On the one hand, 
we trust parents to make decisions in the best interests of 
their children. On the other hand, we believe the Government 
knows what is in the best interest of children and families. I 
am pleased to report that under the leadership of Governor Jim 
Gilmore and former Governor George Allen, the Commonwealth of 
Virginia has chosen the side of parents. From that perspective, 
I would implore Congress to aggressively oppose any legislative 
initiatives that would encumber the ability of parents to 
choose the child care option that they believe is in the best 
interests of their children or limit dollars for direct 
purchase of services.
    If the State flexibility, we spoke to earlier, is 
maintained and maximized, Virginia can continue to pursue its 
vision for the provision of child care, while our colleagues in 
other States be free to pursue their own.
    The final point I would like to leave you with speaks to 
the financial foundation of our child care system. Child care 
expenditures over the past 5 years have grown geometrically. I 
have provided for you a chart which shows the increase in 
expenditures. Since 1995, Virginia has increased daycare 
spending by more than $63 million or 112 percent. It is far and 
away the fastest growing program the department administers. We 
would, however, encourage Congress to pay close attention to 
the financial foundation of this burgeoning program. States 
have done exceedingly well, and should be commended for their 
ability to expand their child care capacity to make full use of 
the dollars allocated. According to the most recent data 
available, States expended 100 percent of Federal mandatory 
funds, 99 percent of Federal matching funds, 90 percent of 
discretionary funds, and achieved 100 percent maintenance of 
effort. Thirty-three States spent $630 million in State 
maintenance of effort funds for child care, and $190 million 
was transferred from TANF to the Child Care and Development 
Fund, with even more States using TANF funds for child care.
[GRAPHIC] [TIFF OMITTED] T5629.007

    The TANF block grant allows for a transfer of up to 30 
percent to child care expenditures. In Virginia, we use a 
portion of our TANF transfer to child care to fund our low-
income subsidized daycare system. This program provides dollars 
to families after their public assistance eligibility and for 
those that have never been on public assistance, but whose 
income still requires some financial assistance for daycare.
    Just 2 years ago, we had a waiting list of more than 10,000 
families to receive the daycare subsidy. We have used a 
combination of the Child Care and Development Fund and TANF 
transfer to reduce that waiting list to 2,300 families. While 
we continue to have an unmet child care subsidy system need, we 
have transferred only 15 percent of the allowable 30 percent 
from TANF to child care. I am hesitant to recommend to the 
Governor transferring a greater portion of the TANF block grant 
due to the uncertainty of TANF funding.
    The Senate has proposed a $350 million cut in the TANF 
block grant. I would like to commend the chairperson and some 
of her colleagues in the House who have sent a letter to the 
Senate rejecting that proposed cut. If States expand their 
child care services using the TANF block grant, and the dollars 
are reduced, we will have thousands of families all dressed up 
with no place to go, with regard to child care. The same 
scenario exists if an economic downturn would increase the TANF 
caseload.
    Last year in the appropriations process, the title XX 
social services block grant was reduced from $2.38 billion to 
$1.9 billion for the current Federal fiscal year 1999. Then 
during the last quarter of 1998, the future funding for title 
XX was reduced to $1.7 billion in fiscal year 2001 and beyond, 
and transfer of TANF funds would be reduced from the current 10 
percent to 4.25 percent. Title XX funds critical working poor 
child care services, and this cut has presented some 
significant challenges to States. Furthermore, President 
Clinton proposes to reduce States' ability to transfer TANF 
funds to title XX from 10 percent to 4.25 percent in fiscal 
year 2000.
    All of these actions threaten to weaken the financial 
foundation of child care. The Nation has rightly deemed that 
work-based self-sufficiency directed public assistance is 
compassionate public policy. To help public assistance 
recipients transition from welfare to work, and to assist 
working poor families to continue to work, child care is 
essential. We urge Congress to reject any cuts or so-called 
deferrals in the TANF block grant, any cuts to the title XX 
social services block grant, or reductions in the percentage of 
TANF funds that States can transfer to the Child Care and 
Development Fund or title XX.
    In closing, the States have made remarkable strides in 
reconstituting the social safety net. The work-first, self-
sufficiency model has returned that safety net to its original 
intended purpose of being a trampoline instead of a hammock. 
While we are encouraged by our collective success, it is not 
time to declare victory and go home. Congress has some tough 
decisions ahead to protect funding and State flexibility. We 
have proven we are up to the task. We need your help to ensure 
the necessary resources are available.
    Thank you for this opportunity to share my thoughts with 
you on this topic.
    [The prepared statement follows:]

Statement of Clarence H. Carter, Commissioner, Virginia Department of 
Social Services, Richmond, Virginia

    Madam Chairperson and members of the Subcommittee my name 
is Clarence H. Carter, I am the Commissioner of the Department 
of Social Services for the Commonwealth of Virginia. I am 
pleased to have this opportunity to represent the Commonwealth 
and my human service colleagues across the nation in sharing 
with you some of our concerns about the provision of child care 
services in this era of welfare reform.
    There are three points I would like to bring to your 
attention today.

                           State Flexibility

    The Personal Responsibility and Work Opportunity 
Reconciliation Act (PRWORA) of 1996, ushered in an era of 
innovation and creativity with regard to public assistance 
programs. The Child Care and Development Fund (CCDF) was an 
important augment to PRWORA as it streamlined funding sources 
for child day care enabling states to combine the provision of 
day care services with its work-based, self-sufficiency 
focused, cash assistance programs. States have enjoyed this 
newfound flexibility and continue to use it to create 
impressive results. However, there are some ominous clouds on 
the horizon.
    Since the enactment of PRWORA, Congress has created three 
new set-asides in the child care block grant: a $19 million 
fund for resources and referral and school age child care; a 
$50 million infant and toddler care fund; and a new $172 
million fund for quality enhancements. These categorical set-
asides hinder the flexibility of states to address the child 
care needs.
    The quality enhancement dollars provide a particularly 
instructive example. Currently the CCDF requires states to set-
aside up to 4% of their grant for quality enhancements. The 
$172 million is an additional quality enhancement set-aside.
    In Virginia, we have made the determination to put as many 
dollars in the hands of parents as possible. The set-aside 
dictates that Virginia must dedicate a particular percentage of 
its grant to `quality enhancements', thus limiting our 
flexibility to put more dollars into direct purchase of 
service. We happen to subscribe to the theory that if parents 
are armed with all of the relevant information to make an 
informed decision on the child care option that best suits that 
family, the dollars they will use to purchase services will set 
the standard for quality. Clearly every state will not make 
that determination, but if flexibility is maintained by 
limiting set-asides, states can make whatever determination is 
in the best interest of its residents.
    Additionally, in the past few years Congress has funded and 
expanded Head Start, Early Head Start and 21st Century Learning 
Centers. Each of these initiatives are separate federal funding 
streams with no requirement for coordination with the CCDF. 
These programs serve the same children, yet the resources are 
fragmented by separating funding streams that could achieve far 
more if they were effectively leveraged together.
    As I move about the Commonwealth talking about the future 
of human service programs into the next century, I talk about 
an organization that operates under one comprehensive vision 
for healthy families and healthy communities; an organization 
that manages multiple programs and funding streams directed 
towards one common vision. Each new categorical human services 
spending initiative makes it more difficult to realize that 
vision. We urge Congress to require that future funding for 
these and any other contemplated child care initiatives to be 
coordinated with CCDF.
    One final point on flexibility has to do with the federal 
regulations for the CCDF. The final federal regulations on the 
CCDF reversed the actions taken by Congress to repeal onerous 
and outdated restrictions on state child care administration. 
For example, in PRWORA Congress specifically repealed the 
requirements on states to conduct market rate surveys to set 
child care rates as well as the use of the 75th percentile 
standard to guarantee access to child care. Yet despite the 
repeal in PRWORA, HHS wrote those very requirements back into 
their final regulations for the implementation of the CCDF. I 
would commend to your attention to a full description of the 
state's concerns over the federal child care regulations 
compiled by the American Public Human Services Association 
attached to the written test of my testimony.

         Principals of the Provision of Child Day Care Services

    As the nation struggled to settle on the foundation 
principals of welfare reform, in Virginia we struggled with 
setting the guiding principals for the provision of child care 
services.
    The debate in Virginia has been between two schools of 
thought. On one hand, there is a belief that with our emerging 
knowledge of brain development in the early years of life, it 
is incumbent upon us (as a society) to develop a highly 
regulated, proscriptive child care structure. This structure 
would include basic health and safety provisions while ensuring 
that children and parents are introduced to a universal set of 
child development standards that government has deemed 
appropriate. On the other hand, there is the belief that it is 
the role of government to maintain rigorous health and safety 
standards while fostering a free market environment conducive 
to the creation of multiple options for the provision of child 
care services. The thought continues that arming parents with 
the information to make informed decisions about the options 
for child care and providing public dollars where economically 
necessary to assist in their purchase of services, is the best 
public policy option.
    The difference quite frankly is simple. On one hand, we 
trust parents to make decisions in the best interest of their 
children. On the other, we believe that government knows what 
is in the best interest of children and families. I am pleased 
to report that under the leadership of Governor Jim Gilmore and 
former Governor George Allen, the Commonwealth of Virginia has 
chosen the side of parents. And from that perspective, I would 
implore Congress to aggressively oppose any legislative 
initiatives that would encumber the ability of parents to 
choose the child care option that they believe is in the best 
interest of their children or limit dollars for direct purchase 
of services. If the state flexibility we spoke to earlier is 
maintained and maximized, Virginia can continue to pursue its 
vision for the provision of child care while our colleagues in 
other states would be free to pursue their own.
    The final point I would like to leave you with speaks to 
the financial foundation of our child care system.

          Building Child Care Services on a Strong Foundation

    Child care expenditures over the past five years have grown 
geometrically. Since 1995, Virginia has increased day care 
spending by more than $63 million or 112%. It is far and away 
the fastest growing program the Department administers. We 
would however, encourage Congress to pay close attention to 
financial foundation of this burgeoning program.
    States have done exceedingly well and should be commended 
for their ability to expand their child care capacity to make 
full use of the dollars allocated. According to the most recent 
data available, states expended 100% of federal mandatory 
funds, 99% of federal matching funds, 90% of discretionary 
funds, and achieved 100% maintenance of effort (MOE) level. 33 
states spent $630 million in state MOE funds for child care and 
$190 million was transferred from TANF to CCDF with even more 
states are using TANF funds for child care.
    The TANF block grant allows for the transfer of up to 30% 
to child care expenditures. In Virginia, we use a portion of 
our TANF transfer to child care to fund our low-income 
subsidized day care system. This program provides dollars to 
families after their public assistance eligibility and for 
those that have never been on public assistance, but whose 
income still requires some financial assistance with day care. 
Just two years ago, we had a waiting list of more than 10,000 
families to receive the subsidy day care service.
    We used a combination of the CCDF and TANF transfer to 
reduce that waiting list to 2300 families. While we continue to 
have an unmet child care subsidy system need, we have 
transferred only 15 of the allowable 30% from TANF to child 
care. I am hesitant to recommend to the Governor transferring a 
greater portion of the TANF block grant due to the uncertainty 
of TANF funding. The Senate has proposed a $350 million cut in 
the TANF block grant. If states expand their child care 
services using the TANF block grant and the dollars are 
reduced, we will have thousands of families ``all dressed up 
with no place to go'' with regard to child care. The same 
scenario exists if an economic downturn would increase TANF 
caseloads.
    Last year in the appropriations process, the Title XX 
Social Services block grant was reduced from $2.38 billion to 
$1.9 billion for the current federal fiscal year 1999. Then, 
during the last quarter of '98, the future funding for Title XX 
was reduced to $1.7 billion in fiscal 2001 and beyond and 
transfer of TANF funds would be reduced from the current 10 
percent to 4.25 percent. Title XX funds critical working poor 
child care services and this cut has presented some significant 
challenges to states. Furthermore, President Clinton proposes 
to reduce state's ability to transfer TANF funds to Title XX 
from 10 percent to 4.25 percent in FY 2000.
    All of these actions threaten to weaken the financial 
foundation of child care. The nation has rightly determined 
that work-based, self-sufficiency directed public assistance is 
compassionate public policy. To help public assistance 
recipients transition from welfare to work and to assist 
working poor families continue to work--child care is 
essential. We urge Congress to reject any cuts or so-called 
deferrals on the TANF block grant, any cuts to the Title XX 
Social Services block grant or reductions in the percentage of 
TANF funds that states can transfer to the Child Care 
Development Fund or Title XX.
    In closing, the states have made remarkable strides in 
reconstituting the social safety net. The work-first, self-
sufficiency model has returned that safety net to its original 
intended purpose of being a trampoline instead of a hammock. 
While we are encouraged by our collective success, it's not 
time to declare victory and go home. Congress has some tough 
decisions ahead to protect funding and state flexibility.
    We have proven we are up to the task. We need your help to 
ensure the necessary resources are available.
    Thank you for this opportunity to share my thoughts with 
you on this important topic.
    [The attached article, ``Formal Comments on Child Care 
Regulations,'' published by the American Public Welfare 
Association,'' will be retained in the committee files.]

                                

    Chairman Johnson of Connecticut. Thank you. Mr. Carter, it 
is very interesting to me that Virginia did actually use the 
transfer mechanism to address the growing backlog of low-income 
families needing daycare. That that group should grow is 
absolutely perfectly logical. If it doesn't grow, we are not 
succeeding in supporting people as they move off welfare.
    Why is it, in talking with your colleagues throughout the 
country, why is it more States aren't doing that? Or are States 
doing this? Are the other States moving TANF funds off into 
daycare and we are just not seeing it?
    Mr. Carter. I think, Madam Chairman, what we have seen, we 
are in the--if my math is right, the seventh quarter with 
regard to implementation of the Personal Responsibility and 
Work Opportunity Reconciliation Act. States have done a 
tremendous amount of work in putting the infrastructure in 
place to manage those programs. I think, quite frankly, while 
in congressional terms it may seem like a lifetime, we have 
simply been operating--we are in our infancy when it comes to 
reconstituting the social safety net.
    So I think to suggest that States are not doing everything 
in that regard is not quite to understand that we have a 
significant challenge to turn this tanker the size of the 
Titanic on such short notice. So I think that we are doing 
really well in what we have done to this point. As these issues 
are raised, my colleagues are showing I think wonderful 
innovation in how they address the problem.
    Chairman Johnson of Connecticut. So you think actually when 
we look at this in a year, that we are going to see a lot more 
of the TANF dollars being used to subsidize daycare for working 
people?
    Mr. Carter. I think what we will see is that States will be 
taking other innovative approaches to addressing this issue of 
moving folks to self-sufficiency. Yes, ma'am.
    Chairman Johnson of Connecticut. I wanted to ask you, if we 
had just given you in the Child Care Block Grant the new money, 
instead of putting it in three categories, what would you have 
done differently? I mean we did put $19 million into resource 
and referral, and school-aged child care; $50 million into 
infant and toddler. Some of that you would have put into infant 
and toddler anyway because there is a big deficit there.
    So what is the big deal--as long as we don't begin to 
control the money under TANF, this was all add-on money.
    Mr. Carter. Well, I mean, quite frankly, I think the big 
deal is that we turn this responsibility to the States to allow 
States to deal with the issue of child care in the context of 
their self-sufficiency programs. So then to restrict how we do 
that, I think goes counter to the purpose of the creation of 
the block grant.
    Chairman Johnson of Connecticut. Well, I agree with you 
philosophically. I am wondering if you can give me examples of 
where--for instance, does this cause you to set up bookkeeping 
mechanisms and bureaucracies that you wouldn't have to? Are 
there variations across your State in what the sort of holes in 
the child care system are?
    Mr. Carter. Well, it certainly causes us to have to track 
administratively, to track along those three set-asides. It 
takes infrastructure in order to do that tracking. Quite 
frankly, in Virginia, we have made the determination to put as 
many dollars as possible into the direct purchase of service. 
We find if we put the dollars in mom and dad's hands, and give 
mom and dad the information that they need to make an informed 
decision, they will certainly make the best determination for 
their family.
    So we want to put every possible dollar into direct 
purchase of services. What we would have to do here along these 
three set-asides, is to track those. So we would need some 
dollars in order to administratively track those three set-
asides. Again, those dollars would come away from direct 
purchases of services.
    Chairman Johnson of Connecticut. Ms. Long, you mentioned 
Wisconsin, that they have increased State funding significantly 
and transferred TANF funds to child care, and reduced the pool 
of eligible families. Could you talk a little bit more about--
it sounds like what Wisconsin was trying to do was tailor the 
pool to the resources, that they did work to expand their 
resources. What did they do to tailor the pool?
    Ms. Long. What they did primarily to tailor the pool was to 
lower the income eligibility levels.
    Chairman Johnson of Connecticut. From what to what?
    Ms. Blank. They went to 165 percent of poverty. I think 
they were at 200, and they eliminated mothers in education and 
training. They may have put them back, but they dropped about 
3,000 mothers who were in school when they did this.
    Chairman Johnson of Connecticut. Did they also go from 200 
percent to 165 percent of poverty?
    Ms. Long. Yes. They ended up at 165. I don't remember where 
they started from, but they cut back to 165 to reduce the 
number of families that would be eligible for assistance.
    Chairman Johnson of Connecticut. Do they also have more of 
a co-payment than other States?
    Ms. Long. I don't know the answer to that.
    Chairman Johnson of Connecticut. Do you know that, Helen?
    Ms. Blank. They raised--well, actually, they had an 
original plan that created a huge fury. There are always some 
tradeoffs. In their plan, they were going to raise co-payments 
significantly. The day the new copayments went into effect, so 
many parents wrote the legislature, that they cut back on the 
co-payment increases. What they also did that was very 
controversial at the time was they made a decision to cut back 
on the quality of care. They were a State where providers who 
were caring for small numbers of children, I think it was under 
four, weren't required to be regulated. Before they made this 
change, they required those providers to have 15 hours of 
training a year if they receive public money, which I think is 
important as it affects the quality of care. They eliminated 
that training requirement. Then they paid the providers at the 
50 percentile of the market so those providers got less. But 
the way they structured the co-payment system, parents were 
steered to those providers because parents did better if they 
chose cheaper providers. They have remedied some of that.
    Wisconsin also is an interesting issue because they 
didn't----
    Chairman Johnson of Connecticut. Let me just get that clear 
though. Did they eliminate the requirement they had earlier put 
in place for 15 hours of training?
    Ms. Blank. They eliminated the training requirement. What 
they did was they also cut the co-payment. They gave those 
providers less money, but they set up their co-payment system 
so parents would do better if they chose cheaper providers.
    But the other interesting thing about Wisconsin is they 
didn't tell anybody about expanded child care assistance. They 
didn't do any active outreach when they made these changes, so 
it did not increase the demand substantially. They also had a 
policy in their welfare case manual called Light Touch, which 
said that caseworkers should encourage independence. A way of 
encouraging independence is not to tell people about benefits. 
I think they have since gotten rid of this.
    But they were very nervous about what would happen with 
this demand, so they neglected to tell families. They have just 
begun--they didn't do outreach until a year-and-a-half after 
they made these changes.
    Chairman Johnson of Connecticut. And what would you say was 
the sort of average, and I can't remember who mentioned this in 
your testimony, but the average income guidelines for working 
poor subsidies?
    Ms. Blank. I don't know if they are average. I believe that 
there are 10 States that are below 150 percent poverty. Three 
out of five States limit eligibility to 185 percent of poverty 
or less.
    Chairman Johnson of Connecticut. How many do 185 percent?
    Ms. Blank. Three out of five.
    The other interesting thing about income eligibility is no 
matter what it is, that doesn't mean families are getting the 
help. Even if families raise their eligibility, that doesn't 
mean States have enough resources to serve all the eligible 
families. They are hesitant to make child care assistance 
widely known. It has never been an entitlement like Medicaid. 
States are always going back and forth. You know, Ohio, because 
they were so afraid of the demand that welfare would create, 
lowered their eligibility. They made it too low. Then nobody 
came, so they raised it. But when you keep doing that to 
parents, they tend to shy away from the system.
    Chairman Johnson of Connecticut. That is very hard. While 
the Dependent Care Tax Credit only helps those who have a 
taxable income, it does at least go to everybody eligible, you 
know, if they claim it, and most of them do know to claim it. 
But it doesn't help those below the incomes where it is useful.
    Ms. Blank. Well, what is interesting about the DCTC, and I 
think you are right, is that it is available to everyone. I 
remember the year it got put on the short form. In 1982, this 
was before we changed the income tax liability, so there were 
more poor families with tax liability. Many low-income families 
took advantage of the DCTC.
    I found it interesting when we looked in my testimony, to 
find so many low and lower-middle income families, because of 
the different tax credits that are now in place, who wouldn't 
benefit from changes in the DCTC.
    Chairman Johnson of Connecticut. Of course that is to a 
large extent the fact that we have excluded a tremendous number 
of low earners from the tax, from paying taxes at all. So we 
don't need to relieve them for this cost. We have relieved them 
from any tax liability, as opposed to when we first passed the 
Dependent Care Tax Credit. So in recent years we have really 
excluded large new groups from paying taxes at all. It still 
doesn't help that it's a large expense, but we are better off 
not taxing them at all than giving them some relief.
    Ms. Blank. I agree. But then we still have the mothers who 
can't make it. There is a mother in my testimony in Manchester, 
Connecticut, who made $24,000 a year, and is probably one of 
the families that wouldn't get much help from the DCTC. She 
paid I think 50 percent of her income in child care costs. So 
these lower-middle income families are really having a hard 
time.
    Chairman Johnson of Connecticut. One last question before 
I'll turn to Mr. Cardin, and then I'll come back if I want. But 
one of the most distressing things I am seeing is that a lot of 
people who are leaving welfare and working part-time want to 
leave their children with family members or neighbors known to 
them. They therefore cannot get the money. It's true. They 
cannot get the low-income vouchers. They can if they qualify 
for kinship care, but even kinship care you have to go through 
a certain process. Many don't want to do that. So at the very 
time when they need it the most, they are not getting any 
voucher help.
    Ms. Blank. You know what is interesting, across the country 
people are saying the opposite. I think it depends on where you 
regulate family child care. In California, they sense that most 
of the money is going to informal care. In Connecticut, you 
have to be regulated once you take one child. So if you are 
doing family daycare with your voucher, you have to be in a 
regulated setting. You are only one of nine states that say 
once you take one child, you must be regulated. This is a state 
decision. Maryland is another one. But in some states, like in 
South Dakota, you can have 12 children and not be regulated. I 
don't think this is a good idea, you could go to a neighbor 
with 12 children.
    The Block Grant is clear that you can use the money for 
infant care. Parental choice is paramount. Parents can use the 
money for relatives and neighbors and friends, and the certain 
relatives do not have to meet standards. Now some states are 
choosing to impose some requirements for relative as they are 
concerned about liability because they are afraid that they 
could be giving money to people who might have a criminal 
background or whatever. There have been some horrendous 
stories.
    But it is very state-specific in terms of what the category 
of unregulated care is.
    Chairman Johnson of Connecticut. That's interesting. Then 
it is more of a State problem, but it is having the effect of 
eliminating the underground from any compensation. Where the 
underground is just your children with a neighbor, the woman 
ends up being deprived of the resources she needs. She is just 
struggling along, at least that is the impression that I am 
getting right now from workers in the field. They don't know 
what to do about it, because they are stuck.
    Ms. Blank. It is also interesting because in Connecticut 
under AFDC, about 70 percent of the families on AFDC were using 
unregulated care, as were 50 percent of the transitional 
caseload. But I don't think anything has changed in terms of 
the regulations.
    Chairman Johnson of Connecticut. The way the money flows 
has changed, so they can't pay these providers. So I'll check 
further.
    Ms. Blank. They may have imposed a requirement for a 
background check.
    Chairman Johnson of Connecticut. I don't know. I will have 
to check on that.
    Mr. Cardin.
    Mr. Cardin. Well, it is a fascinating discussion. I really 
want to follow on a point that Mrs. Johnson made which I agree 
with. That is, the emphasis over the last several years has 
been to try to help low-wage workers and to get them off the 
tax rolls, if at all possible, to keep on raising that level 
which a person is responsible for income taxes. In so doing, we 
don't provide any help on their daycare expenses, their child 
care. They child care expenses don't qualify for a tax credit 
because they are not eligible for a tax credit because they are 
not paying taxes.
    I don't think anyone would argue that a low-wage worker is 
in better financial shape than a higher-earner that pays income 
taxes that can get the benefits from the Dependent Care Credit. 
Certainly the low-wage worker has more difficult financial 
straights in order to be able to afford daycare. It seems to 
me, and I really would like your observations on this, that the 
States are, on their programs, are concentrating on the people 
that are on welfare. That they are trying to develop programs 
to help people find employment, get off cash assistance, and 
give them daycare, because they are going to need it.
    So if the States are concentrating on the people coming off 
of welfare, if the Federal tax credit program doesn't help low-
wage workers who may have never been on welfare, have only 
created a real void in a real need area. I would just 
appreciate your comments.
    Mr. Carter. Mr. Cardin, if I could, I would just say in 
Virginia, and I think in my testimony I talked about how we 
have increased spending in our subsidy program, to that part of 
our program where people are post-public assistance or have 
never been on public assistance. We reduced our----
    Mr. Cardin. I saw that. I notice that Virginia has, I 
believe, obligated all your 1998 TANF funds?
    Mr. Carter. That's correct.
    Mr. Cardin. And you have transferred 15 percent of your 
funds into the Child Care Block Grant. So can we assume that 
you have taken care of all the child care needs in Virginia? 
That people aren't hurting and getting child care?
    Mr. Carter. I think also in the testimony it says that we 
still have a waiting list of 2,300 families.
    Mr. Cardin. So you have taken maximum advantage, used all 
your funds, have really stretched and taken care of current 
needs, with low welfare roll numbers. You still have a large 
waiting list. Imagine those people on the waiting list--what 
are their income levels?
    Mr. Carter. No. 1, we haven't taken maximum. We have 
transferred 15 percent of----
    Mr. Cardin. But you used all your TANF funds. There's no 
more left.
    Mr. Carter. But we have also transferred 15 percent.
    Mr. Cardin. I know, but you couldn't transfer any more 
because you don't have any more to transfer. You might have 
been able--you had to give up some other funding programs in 
order to do that. Right?
    Mr. Carter. That's accurate.
    Mr. Cardin. So I assume you are using the money wisely.
    Mr. Carter. We would like to think so.
    Mr. Cardin. Whether it's child care or not child care.
    Mr. Carter. We have got a 48-percent reduction in our 
caseload.
    Mr. Cardin. But you still have a large waiting list. You 
still have a large needs list.
    Mr. Carter. We continue to have an unmet need, yes.
    Mr. Cardin. I think that answers my question.
    Mr. Carter. I think what we have asked, what we have asked 
is that where there have been attempts to make additional 
dollars available, if those dollars will be unencumbered and 
allow the Commonwealth to direct those to where the 
Commonwealth chose to direct it to, as opposed to being 
mandated where to put those dollars, then it would again allow 
us to address that unmet need.
    Mr. Cardin. I fully support the flexibility we have given 
to the States. I am not here to say Virginia hasn't done the 
best job in the Nation. You may have done the best job in the 
Nation. But I am also proud of States that have some money in 
reserve in the event that things don't go so well. If I were 
managing a program, I would want to have a little bit reserved, 
realizing that never before in the history of our Nation, never 
before in the history of our Nation have we seen the type of 
decline of people on the welfare rolls. I hope it is a trend 
that will continue. But in my gut, I have a concern that we are 
going to reach a time when the States are going to be hard 
pressed for resources to deal with people who need cash 
assistance. And that if you have taken your money away from 
TANF, you may find yourself in a very difficult position to 
meet those needs.
    Now again, you may have done the very best job. But here 
you are, you have maximized the resources in child care. I 
congratulate you for that. But you still have a tremendous 
unmet need. The people who aren't getting the services are 
people who are working. Right?
    Mr. Carter. The low-income subsidy system is yes, is for 
those low-income working families, yes.
    Mr. Cardin. But there are a lot of low-income working 
families that aren't getting help.
    Mr. Carter. We have reduced that waiting list to 2,300.
    Mr. Cardin. Twenty three hundred?
    Mr. Carter. Twenty three hundred, yes, sir.
    Mr. Cardin. I will be glad to yield.
    Chairman Johnson of Connecticut. I don't quite--I want to 
get this clear. In your testimony, you say that you have 
transferred 15 percent of the allowable 30 percent of TANF 
funds, and that you were hesitant to recommend to the Governor 
transferring the rest of the TANF funds that you could 
transfer.
    Mr. Carter. That is correct.
    Chairman Johnson of Connecticut. I think Mr. Cardin is 
hearing your testimony as that you have spent all your TANF 
funds. So you couldn't transfer 15 percent more because you 
have already spent them.
    Mr. Carter. No, no. I'm sorry, Mr. Cardin. We currently 
have about a $56 million TANF reserve at this point.
    Mr. Cardin. It's not encumbered?
    Mr. Carter. That is not encumbered. That is correct.
    Mr. Cardin. How much is that?
    Mr. Carter. Fifty six million dollars.
    Mr. Cardin. What percentage is that? What are we talking 
about? If you were to transfer that, how high a percentage 
could you get to?
    Mr. Carter. We could get to the 30 percent.
    Chairman Johnson of Connecticut. I think what you meant 
when you said that you had spent all your TANF funds, you meant 
you spent all your daycare TANF funds?
    Mr. Carter. Yes.
    Chairman Johnson of Connecticut. You transferred 15 
percent, and you could transfer another 15 percent, but you are 
afraid that we are going to step in and take it?
    Mr. Carter. That is accurate.
    Chairman Johnson of Connecticut. We are going to fight 
that.
    Mr. Cardin. For the record, HHS is showing that you have 
encumbered all of your funds. Now there is either a mistake in 
the information you are presenting or a mistake we have from 
HHS.
    Mr. Carter. Mr. Cardin, I would, with all due respect, the 
information--since I manage the program on a daily basis, I am 
pretty comfortable with the information we have provided you 
today.
    Mr. Cardin. OK. So you are saying that the information 
provided by HHS is wrong?
    Mr. Carter. I would like to see that.
    Chairman Johnson of Connecticut. It appears that way to 
him.
    Mr. Cardin. If I might just ask one or two more questions. 
I particularly appreciate, Ms. Blank, you raising the issue on 
quality on low-wage, that people who are in child care are 
receiving low wages generally. That has to have an impact on 
quality. There comes a time where you are going to get 
turnover, you are not going to be able to keep the 
professionalism that you need. It has got to have an impact. 
Are we seeing any improvement on people who take care of our 
children getting a fair wage for the services that they are 
performing?
    Ms. Blank. No. There are a few pioneers actually in the 
State of North Carolina, that created a program that ties 
minimal increases in education to increases in wages. They have 
also created another program, which actually supplements child 
care worker wages in a few counties. But we do find if you do 
that, you can reduce turnover. The participants in Teach in 
North Carolina in Orange County had a turnover that was reduced 
from 44 to 10 percent.
    But nationwide, we have a problem because women have to go 
to work. If we keep daycare wages low, it is possible for women 
to go to work. Every time I travel and I talk to people who are 
running child care programs, whether it is Maryland, North 
Carolina, Iowa, they all tell me the same thing. Over the last 
decade, while we have seen increased Federal and State 
investments in child care. Clearly, we have made great 
progress. I don't deny that. They think that the environment in 
programs for children are getting worse because they can't get 
quality staff.
    We talk about schoolteachers. Well, if we pay 
schoolteachers in the District of Columbia--my youngest is 
doing Teach for America, $26,000 a year, and we have trouble 
getting them. Why would anyone work for $12,000 or $13,000 a 
year?
    When you do have turnover, it is very hard for children. I 
have been in this business too long, so I remember testifying 
maybe 12 years ago, and this little child got up and said to 
his mother every Monday morning, ``Who is my teacher going to 
be today?'' Because you can be in the same program, but your 
teacher can switch. It is very hard to keep a program stable. 
It is hard for children, it's hard for people in this business. 
We just don't value our children enough. It is a make-shift 
system. That is what we believe it will be, until we change our 
minds.
    Mr. Cardin. Let me just make an observation. It really 
started with Mrs. Johnson and Mr. Stark's comments on this a 
couple hours ago on quality. I think you are hitting an issue 
of quality.
    In another role that I had once before, heading the 
Maryland Legal Services Corp., and I had some responsibility 
for giving out money to Maryland legal service providers, I was 
shocked at the low income that people in public interest law 
were receiving, and conditioned a lot of new money on raising 
salaries. It was somewhat of a surprise, because it worked. We 
made a big jump in the salary level for people at legal aid. It 
did an incredible, I think, service in attracting and keeping 
people to do poverty law.
    Now I know that some of my colleagues here would yell and 
scream if I tried to put as a condition to this new funds that 
there be improvement to the people who are providing these 
services. I really would like to do that, but I don't think I 
could get that through the Congress of the United States. But 
it would be helpful.
    Let me just make this comment. It would be helpful for 
those that are advocates for additional Federal support, to be 
able to come forward and show that one of the byproducts of a 
stronger Federal role would be that the people who are 
providing the services would receive a fairer wage. We know 
that can't be done over night, but there should be some 
commitment made to raise the salary levels for those that are 
providing incredible service, taking care of our youngsters, at 
wages that I agree with you, are just unacceptable.
    That is obviously not something that we are going to be 
able to deal with directly, or at least I don't think we are 
going to be able to. But I would hope that those that can do 
something about it would use some of the opportunities if we 
are able to move forward with additional help to make progress.
    Ms. Blank. Check on benefits, because they also don't--many 
of them don't have health care or sick leave, and they are with 
young children who get sick all the time. So when you start to 
fix that----
    Mr. Cardin. It's a quality issue. Thank you, Madam Chair.
    Chairman Johnson of Connecticut. Mr. Carter, I just wanted 
to ask you a couple of other questions. Does Virginia give most 
of the money directly to the parents?
    Mr. Carter. That's correct.
    Chairman Johnson of Connecticut. How do the parents find 
out about the various providers? Do you fund a large 
information and referral service or do you find that's not 
necessary?
    Mr. Carter. We do fund an information and referral service. 
We have expanded our outreach in that we are now putting 
together a Web site to make child care information available.
    We have also produced a registry of child care providers 
that is in every library in the Commonwealth. So we really have 
tried to in many ways make the information available to 
families.
    Chairman Johnson of Connecticut. Now did the Federal 
Resource and Referral Block Grant free up some money for you 
that you were using for resource and referral so that you could 
devote it to actual care?
    Mr. Carter. No. Quite frankly, we were making that 
expenditure, we were making the resource and referral 
expenditure prior to.
    Chairman Johnson of Connecticut. Yes. So when we gave you 
more money, did you just spend more on that or did you displace 
that?
    Mr. Carter. We had to spend more on that.
    Chairman Johnson of Connecticut. You couldn't displace?
    Mr. Carter. We were required to spend those dollars, we 
were required to spend the set-aside dollars.
    Chairman Johnson of Connecticut. So you couldn't reduce 
your State effort when we gave you more money?
    Mr. Carter. That's correct.
    Chairman Johnson of Connecticut. Looking at where you are 
now, would you rather have used some of those moneys for 
vouchers or was that an appropriate expansion of your resource 
and referral?
    Mr. Carter. I would rather use every single dime possible 
to put into a mother or mother and father's hands to purchase 
services.
    Chairman Johnson of Connecticut. On this business of the 
HHS requirements and the requirements they wrote into the 
regulations that we had stricken from the law----
    Mr. Carter. Right.
    Chairman Johnson of Connecticut. Why do you and the other 
administrators oppose those? Would you give us a little bit 
more insight into why you oppose the regulations?
    Mr. Carter. I mean we certainly don't oppose all the 
regulations. I am submitting with my written testimony a number 
of concerns that States have with the legislation.
    Chairman Johnson of Connecticut. Is that this?
    Mr. Carter. Yes. But particularly the issue with the market 
rate surveys in the 75th percentile, we have found that those 
issues simply don't help us as States get to the provision of 
quality child care. We think that was one of the reasons that 
Congress wrote those out of the statute. Yet for HHS to turn 
around and put it back in the statute, we just don't quite 
understand, or put it back in the regulations, we don't 
understand.
    Chairman Johnson of Connecticut. And how do you try to 
direct, affect the issue of quality?
    Mr. Carter. Again, as I said in my written testimony, we 
think that by providing appropriate information, to allow 
parents to make informed decisions, and then putting dollars in 
their hands, by what they do with those dollars, that will then 
set the bar for quality.
    Chairman Johnson of Connecticut. Do you have any idea what 
percentage of the cost that your subsidies cover?
    Mr. Carter. I'm sorry? The question again?
    Chairman Johnson of Connecticut. The percentage of the cost 
that your subsidies cover for low-income working families? I 
imagine it's a sliding scale.
    Mr. Carter. No, Madam Chairman. I'm sorry, I don't.
    Chairman Johnson of Connecticut. And what is the maximum 
income that your program deals with? What is the maximum income 
a parent can earn?
    Mr. Carter. We actually have three different categories 
based on regions of the Commonwealth, because the economy of 
the Commonwealth is so diverse. We go from as high as 185 
percent down to a low of 150 percent of the Federal poverty 
level.
    Chairman Johnson of Connecticut. Thank you very much. If 
there are no further questions, we thank you very much for your 
testimony.
    I would say, Helen, I appreciate all your data. It is a 
terrible tension between the potential demand that States face, 
and the salaries we are paying people, and then really the data 
about what is actually happening now. What is the meaning of 
those waiting lists? How many of those kids are really being 
served? How many are being served by the economy that we can't 
see, you know, family care and unlicensed care in States where 
licensure is very strict. But I really appreciate your very 
good data.
    Thank you all for being here.
    [Whereupon, at 4:12 p.m., the hearing was adjourned.]
    [Submissions for the record follow:]

Statement of Bill Harrington, American Fathers Alliance

    Father love, or members of a fathers extended family, 
should be a mandatory option before federally funded childcare 
is made available to an applicant for subsidized childcare 
services. In an era of limited public resources, reasonable 
options should be pursued before limited funding is made 
available on an entitlement basis. Our reasonable proposal is 
as follows:
    Upon receipt of an application for subsidized childcare 
services, every applicant should be required to provide the 
name and mailing address of the father. The service agent 
should mail a one page form to the father indicating whether or 
not the father or paternal family member, including aunts or 
uncles and grandparents, would be willing to care for the child 
during the time for which the mother has filed for subsidized 
childcare services. If such a document is returned from the 
father and signed, indicating whether he or a family member is 
willing to provide direct cost-free care for the child, this 
option shall be exercised and the request for subsidized care 
disallowed. If such document is not returned within 30 days, 
funding should be granted until or unless the father petitions 
the agency to request that he or his family members provide 
child care services at no cost to the government.
    Attached are research documents, the first which shows that 
significant numbers of unwed fathers are primary caregivers of 
children and they are doing an excellent job. In the second 
report, married fathers are the principal source of care for 
minor children, more than all paid childcare combined. Taken 
together, these reports demonstrate the power and experience of 
father love. That being the case, fathers and extended families 
can reduce governmental spending and the consumption of tax-
payer dollars.
    We learn there is no risk involved in having fathers caring 
for their minor children. These loving and caring men and their 
family members are available as a cost-free option to paid 
childcare, and represent a decision clearly in the best 
interest of the children. We urge your consideration of this 
option, on behalf of loving fathers and family members from all 
over America. Government is not a substitute for a father, but 
fathers will always be a replacement for Governmental 
assistance.

                                

Statement of Cory J. Jensen, Men's Health Network

    The taxpayers should not pay for childcare if a parent or 
immediate family member is willing to do it for free. Childcare 
assistance is an important element in moving adults from 
welfare to work. If a parent or immediate family member is 
willing to take care of the children, they should be given 
priority in the matter. Studies find that parents and family 
members are more able to take care of children and are 
preferred by the children.

Before a person can receive subsidies for child care, they must 
prove the following criteria:
    (1) That the other parent has declined to care for the 
child, or is unfit to care for the child. And, if the other 
parent has declined or is unfit to care for the child:
    (2) That members of the child's immediate family have 
declined to care for the child, or are unfit to care for the 
child.
    In today's world divorced and unwed parents are common. If 
the custodial parent works, is in job training or an education 
program, the non-custodial parent should become the first 
option in childcare. If the non-custodial parent is unwilling 
or is unfit to care for the child, the immediate family should 
be the next choice. If neither of these options is available, 
only then should the government subsidize childcare.
    Numerous studies cite the importance of parental 
involvement in their children's lives. Whether wed, divorced or 
unwed, both parents have a right to participate in the 
upbringing of their children. The most obvious of these rights 
and responsibilities is to provide for the day-to-day care of 
the child. The federal government has acknowledged that 
childcare assistance is crucial in moving welfare recipients 
into the working world. Thus, if one member of the family is 
willing to provide the childcare, not only does this relieve 
the burden from the government and taxpayer, but it also 
strengthens the bond between parent and child and has a 
positive developmental influence on the child.
    All too often fathers have been overlooked as willing 
caretakers of their children. Not only are many fathers willing 
and able to take care of their children, but a 1994 Census 
Bureau report (Who's Minding the Kids?, Child Care 
Arrangements: Fall 1991, P70-36) found fathers to be the 
preferred day care providers. To quote Mary Hawkins, co-author 
of the report, ``We are increasingly finding fathers to be the 
preferred provider for child care . . . '' (Press Release, May 
20, 1994).
    Unfortunately, the data collected also appear to highlight 
the barriers placed between children and fathers, if the father 
has been displaced from the home or has never lived with the 
mother. ``Divorce and separation agreements may be responsible 
for these lower rates of child care participation. Also, 
divorce or separation may result in geographic moves by either 
parent that make a father's participation in child care 
impossible. In addition, divorce or separation usually create 
strained relationships that may not be conducive to frequent 
daily contact between former spouses and their children'' 
(O'Connell, 1993).
    A 1993 analysis by the Population Reference Bureau 
highlights how many children are being cared for by their 
fathers. ``In 1991, there were more children under age 15 
living in married-couple families who had fathers as the 
primary care providers (3.2 million) than the combined number 
of children in child care centers and nursery schools (2.2 
million)'' (O'Connell, 1993).
    Day care costs were also studied, and the findings will be 
of interest to those studying childcare guidelines. This is a 
very lengthy and complicated study (61 pages) and we suggest 
that the reader obtain a copy for a better understanding of the 
definitions and terms used in the report. (U.S. Department of 
Commerce, Bureau of the Census, Washington, D.C. 20233).
    The involvement of fathers in their children's lives leads 
to positive outcomes. Studies from as early as 1975 have 
detailed the advantages of father involvement. The Child Study 
Journal reported `` . . . significant differences favoring the 
academic achievement of both boys and girls from father present 
homes . . . '' Whereas ``father absence had a much greater 
effect on . . . boys and girls . . . whose I.Q. was above 100'' 
(Sciara, 1975).
    The misconception that fathers are less suited to child 
raising than the mother is continuing to be debunked by 
researchers. ``Child development is enhanced by more father 
involvement . . . there is less sexism in the children.'' 
Fathers ``are able to meet the emotional and nurturance needs 
of children'' (Hanson, 1985).
    A 1981 study noted that ``the father plays an active and 
unique role in part in his child's development.'' Unfortunately 
``fathers participate in child care as much as the mother 
allows'' (Jones). This proves to be an argument for allowing 
non-custodial fathers to be the first option in childcare for 
their children, should the mother choose to move from welfare 
to work.
    Not only do researchers promote fathers as an essential 
component of child development, but it also has been shown that 
when a father is absent, children suffer. ``Children whose 
relationship with their fathers were disrupted were more 
vulnerable to a wide range of problems'' (Beeson, 1984). While 
researchers do a wonderful job of interpreting data, the views 
of the children should not be overlooked.

          Dan age eight: His mother was angrily attempting to prevent 
        any contact with the boy's father. Dan spoke of ``. . . awful 
        bad problems I'm having sleeping at night'' (Wallerstein & 
        Kelly, 1976).
          Sonia rushed into her classroom and announced ``. . . with 
        glee . . .'' that her father had moved out the night before. 
        Soon thereafter, she began vomiting in her breakfast, and 
        alternately clung to and angrily shouted to her mother. 
        Fearfully and repetitively she asked her mother, ``Don't you 
        love me?'' For Sonia, the separation meant the loss of the 
        parent that clearly favored her, while she remained in the 
        custody of a rejecting mother who openly preferred her sibling 
        (Wallerstein & Kelly, 1976).
          Bill: Teacher reported that, since the separation, Bill 
        seemed frightened and prone to outbursts of crying. At home, 
        Bill was moody, irritable, and forlorn at the loss of his 
        father (Wallerstein & Kelly, 1976).
          Mary age nine: ``. . . If my father could visit more often, I 
        probably wouldn't mind so much (Wallerstein & Kelly, 1976).
          Four-year-old girl: Reacted to the loss of her father with 
        nightmares, depression, and withdrawal from peers and 
        activities. (She had) strong guilt feelings, which pushed her 
        to a depressive, stage (Rosenthal, 1979).
          Jane: Cried on the telephone when speaking with her father, 
        ``I want to see you. I want to see you. I miss you . . . we 
        only see you once a month. That's not enough'' (Wallerstein & 
        Kelly, 1976).

    Professional studies also document the detrimental effects 
of decreased involvement of fathers.

          (The) duration of contact with the father was directly 
        related to the quality of the father-child relationship and, 
        indirectly, to the child's adjustment. (The) key factors (are:) 
        insure that the father (has) easy access to his children and 
        input into his children's lives, both of which are frequently 
        denied fathers in actual practice (Shanon, 1977).

    Additional studies support the concept that the presence of 
a father is tied to psychological adjustment of the child.

          Findings indicate a statistically significant association 
        between time lost in the presence of the father and current 
        adjustment. The more time lost, the higher the maladjustment 
        score. The direct impact on the child's psyche of reduced 
        contact with the father is an important factor to be considered 
        in further research (Jacobson, 1978).

    With overwhelming evidence that fathers are important in 
their children's lives, why not offer them the opportunity to 
provide for childcare? When the mother is working, in job 
training or an educational program a willing, non-custodial 
father should be the first option in childcare. Along with the 
obvious advantage of strengthening the child-parent 
relationship, there are the additional benefits of lowered 
government costs and involvement. Taxpayers should not be 
forced to support a welfare program that circumvents childcare 
by non-custodial parents or family members.

                          Selected References

    Beeson, Betty Spillers (1984), Yours, Mine or Ours?: 
Childhood Custody Decisions. Childhood Education, Sept/Oct.
    Caper, Lynne M., Hawkins, Mary & O'Connell, Martin (1994), 
``Who's Minding the Kids? Childcare Arrangements: Fall 1991.'' 
U.S. Bureau of the Census, Current Population Reports, U.S. 
Government Printing Office, Washington, DC.
    Hanson, Shirley (1985), Fatherhood: Contextual Variations. 
American Behavioral Scientist, 29:1.
    Jacobson, Doris (1978), The Impact of Marital Separation/
Divorce on Children I-III, Journal of Divorce, 1 & 2.
    Jones, Colete (1981), Father to Infant Attachment: Effects 
of Early contact and Characteristics of the Infant. Research in 
Nursing and Health, 4.
    O'Connell, Martin (1973), Where's Papa! Fathers' Role in 
Child Care. Population Trends and Public Policy, No. 20.
    Sciara, Frank J. (1975), Effects of Father Absence on the 
Educational Achievement of Black Children. Child Study Journal 
5:1.
    Wallerstein, Judith S. & Kelly, Joan B (1976), The Effects 
of Parental Divorce Experiences of the Child in Early Latency. 
American Journal of Orthopsychiatry, 46:1.
    Wallerstein, Judith S. & Kelly, Joan B (1976), The Effects 
of Parental Divorce Experiences of the Child in Early Latency. 
American Journal of Orthopsychiatry, 46:2.

                                

Statement of Cristina B. Firvida, National Women's Law Center

    Thank you for the opportunity to submit this statement to 
the Subcommittee on Human Resources for its hearing on child 
care financing. The National Women's Law Center is a non-profit 
organization that has been working since 1972 to advance and 
protect women's legal rights. The Center focuses on major 
policy areas of importance to women and their families, with 
special attention given to the concerns of low-income women. 
For more than a decade, the Center has been a strong advocate 
for federal and state policies that promote the availability, 
affordability, and quality of child care in America.
    At a time when the overwhelming majority of women with 
children work outside the home, a major national investment is 
necessary to improve the availability, quality and 
affordability of child care, especially for low-income families 
struggling to keep their jobs and become more self-sufficient. 
As described in greater detail below, a significant new 
investment in the Child Care Block Grant of $7.5 billion over 
five years is needed as an important first step to increasing 
the number of eligible families receiving help. Congress should 
also act to increase the amounts of the Dependent Care Tax 
Credit for lower and moderate income families and make it 
refundable so that families with no or low federal income tax 
liability can benefit from it.
    The child care needs of American women and their families 
have increased dramatically in recent years, as women with 
children have entered the paid workforce in unprecedented 
numbers. Seven out of ten American women with children under 
the age of 18--and nearly three out of four women with school-
age children--work in the paid labor force today, representing 
a major societal change since the 1940's when fewer than one in 
five women with children worked outside the home. Working 
parents know that providing their children with a safe and 
nurturing child care environment can make an important 
contribution to their children's healthy development. Yet high-
quality child care is too often unaffordable or simply not 
available. Generally, the cost of child care today can range 
from $4,000 to $10,000 annually; even at the lower end of the 
range, child care expenses can consume a very high percentage 
of low-income family's income.\1\ Although the federal 
government does provide some assistance to low-income families 
struggling with these high costs, too many families who are 
eligible for this assistance do not receive it. In many cases, 
high-quality care is not available at any price; recent studies 
have shown that most child care and early education in the 
United States fails to provide developmentally appropriate 
activities, and in the most egregious cases, fails to maintain 
basic safety and sanitary standards. Women and their families 
thus have a tremendous stake in public policies that will help 
make high-quality child care available and affordable to those 
who need it.
---------------------------------------------------------------------------
    Endnotes follow Statement.
---------------------------------------------------------------------------
    Women have another interest in effective child care 
policies as well: as child care providers. The vast majority of 
child care providers in this country--some 98%--are women. 
These women are working in a demanding occupation, charged with 
providing loving care and a healthy learning environment for 
the children entrusted to them. Yet the compensation these 
teachers and care-givers receive--between $10,500 and $14,800 
per year, on average, often with no benefits--shortchanges not 
only the workers but also the children in their care, because 
the lack of decent wages and career advancement opportunities 
in child care make it difficult to attract and retain trained, 
qualified care-givers.
    Women thus have a profound and dual interest in the 
enactment of effective child care policies. As parents, they 
need access to high-quality child care that will help their 
children learn and grow. As providers of child care services, 
they need compensation, training and advancement opportunities 
that will reflect the value of their important work while 
enhancing their skills and the quality of the care they provide 
to our nation's children.
    It is not surprising, then, that child care is high on the 
list of working women's concerns.\2\

            I. Working Families and the Need for Child Care

A Large Majority of American Women With Children Work Outside 
the Home

    It is an undeniable fact of American life today that a 
large and steadily growing majority of women with children--
married and single, with children of all ages from pre-school 
to teens--must look to child care to provide a safe and 
nurturing environment for their children during working hours. 
In addition, an increasing number of women with children are 
seeking a college education, and these women, too, need 
affordable, high-quality child care if they are to have access 
to the enhanced job prospects and increased earning power that 
a college degree can bring them.
    Over 70% of American women with children under age 18 
(72%), and almost three-quarters with children between the ages 
of 6 and 17 (74%), are in the paid labor force.\3\ Even the 
majority of mothers with pre-schoolers now work outside the 
home--65% of women with children under age 6 are in the paid 
labor force, and 58% of mothers with infants (under age 1) are 
either in the paid labor force or looking for paid 
employment.\4\ A majority of these women work full time--73% of 
all employed women with children under age 18, almost 70% of 
these women with children under age 6, and over 65% of these 
women with children under age 3 are working full time.\5\
    These labor force participation rates reflect a steady and 
dramatic increase over the last 50 years, as shown in the chart 
below. In 1947, at the end of World War II, only 19% of women 
with children under age 18 were in the paid labor force. By 
1960, that number had jumped to nearly one-third, by 1980 it 
was over half, and by 1990 it was over two-thirds.\6\ 
Similarly, in 1947, only 12% of women with children under age 6 
were in the paid labor force; by 1960 that number had climbed 
to over 20%, by 1980 it was over 46%, and by 1990 it was over 
58%.\7\ And as women have moved into the labor force in greater 
numbers, they have increasingly taken jobs that are both full 
time and year round, partly due to economic necessity and 
partly due to their movement into traditionally male-dominated 
occupations that require full-time, year-round work.\8\
[GRAPHIC] [TIFF OMITTED] T5629.008

    Mothers working outside the home today include married 
women as well as women who are sole heads of their households. 
In nearly 70% of married couples with children under age 18, 
the mother is in the paid labor force, and 70% of these women 
are working full time.\9\ Over 70% of mothers who are sole 
heads of households with children under age 18 are in the paid 
labor force, and 80% of these women are working full time.\10\
    Today, only 23% of married-couple families with children 
under age 18, and only 25% of married couples with children 
under age 6, fit the traditional model of husband as sole 
breadwinner.\11\
    In short, it is an undeniable fact of American life today 
that a large and steadily growing majority of women with 
children--married and single, with children of all ages from 
pre-school to teens--must look to child care to provide a safe 
and nurturing environment for their children during working 
hours. In addition, increasing numbers of women seeking a 
college education have children, and these women, too, need 
affordable, high-quality child care if they are to have access 
to the enhanced job prospects and increased earning power that 
a college degree can bring them.

Why Women Work: To Support Their Families

    Most women who work outside the home do so as a result of 
economic necessity. Some 10 million households with children--
almost 30% of all U.S. households with children--are headed by 
women alone (women who are divorced, separated, widowed or 
never married).\12\ These women must earn a living in order to 
feed, clothe, house and otherwise sustain themselves and their 
children. Child support alone does not enable these women to 
provide for their children, because so few child support orders 
are established or enforced, and when they are, the amount 
collected is generally insufficient to contribute significantly 
to meeting the demands of raising a child.\13\
    Most married women, as well, work because their families 
depend in large measure on their income. Surveys of working 
women yield similar findings. In a 1997 survey of working 
women, more than half of the married women respondents (52%) 
reported that they contribute half or more of their household 
income.\14\ A mother's income can often mean the difference to 
a family between living below the poverty line and living above 
it. One in five married women with children who do not work 
outside the home live in poverty, while only one in one hundred 
married women with children who work full-time live in 
poverty.\15\ In addition, some married women work in order to 
protect against complete financial dependence on a spouse and 
being left with no job skills and inadequate means of support 
in the event of divorce--a concern that is well-founded, in 
light of the inadequacy of child support awards, as noted 
above.

Many Families Need Help Paying for Child Care

    Working parents who rely on child care often have a hard 
time paying for it. For families with children between the ages 
of three and five, at all income levels, child care and early 
education is the third greatest expense after housing and 
food.\16\ Nationally, child care consumes between 6% and 25% of 
a family's income.\17\ However, one study of child care prices 
in six cities found that, for a minimum-wage worker, the 
average cost of care for an infant in a child care center would 
be at least 50% of the family's annual income.\18\
    Child care costs vary by the age of the child and the kind 
of child care arrangement used. Generally, the cost of child 
care today can range from $4,000 to $10,000 annually \19\--for 
example, the average annual child care cost for one 4-year old 
child in a child care center in Hartford, Connecticut is 
$5,710; for a one year-old infant in a child care center in 
Baltimore City, Maryland, $7,980.\20\ Yet about half of 
families with young children earn less than $40,000 a year,\21\ 
and single mothers with children earn even less--in 1997, the 
median income of families with children headed by a woman was 
$17,256, 40% less than the median income of families with 
children headed by a man ($28,668) and more than two-thirds 
less than the median income of married couples with children 
($54,395).\22\
    Although the federal government provides some assistance to 
low-income families struggling with the costs of child care and 
early education, many families who are eligible for the 
assistance do not receive it. The Child Care and Development 
Block Grant allows states to help pay for child care for 
families with incomes up to 85% of state median income. 
However, all but four states disqualify families for help 
before they reach this federally authorized level.\23\
    In some states, the income eligibility cutoffs are so low 
that only the poorest of the working poor can qualify. For 
example, in West Virginia, the cut-off is at $15,000 per year 
for a family of three (barely above the 1997 federal poverty 
level of $13,330), while Iowa and South Carolina cut off 
eligibility at $16,700.\24\
    Even with eligibility cutoffs set so low, many states 
cannot meet the demand for child care subsidies. As of January 
1998, about half the states had to turn away eligible low-
income working families or put them on a waiting list due to 
inadequate funds. In California, over 200,000 families--mostly 
non-welfare, low-income workers--are on the child care subsidy 
waiting list.\25\ A 1998 Children's Defense Fund study confirms 
that inadequate federal and state funding prevents at least 
nine out of ten eligible children in low-income working 
families from getting the child care assistance they need.\26\
    Moreover, even those families who do receive child care 
assistance through the Block Grant struggle to meet their child 
care expenses because the child care subsidies are often too 
low to meet the needs of working families. In some cases, the 
amount the state will pay for care is so low that parents 
cannot find qualified providers who can afford to serve their 
children.\27\ Delaware, for example, pays a maximum child care 
subsidy for a four-year-old in a child care center that is $200 
per month less than the amount needed to allow parents to 
access care from three-quarters of Delaware providers.\28\
    In other cases parents have to pay so much in parent fees 
or co-payments that child care expenses remain a staggering 
financial burden.\29\ In South Dakota, for example, a parent 
earning $1,670 per month must contribute $500 per month (30% of 
the family's income) in order to get a child care subsidy.\30\
    The amount of support provided by the government to 
families with child care expenses is in sharp contrast to the 
support offered to assist with the cosy of higher education. 
Families pay roughly 60% of total annual estimated expenditures 
for child care and early education, while families pay only 
about 23% of the cost of a public higher education.\31\ The 
total government resources for higher education far exceed 
those for child care and early education, amounting to about 
$4,552 for every postsecondary student compared to $1,395 for 
every child under age six in child care.\32\ This disparity in 
government support is compounded by the fact that families are 
usually better off financially by the time their children enter 
college than they are when their children are younger and in 
need of child care.\33\

Quality Child Care and Early Education: An Investment in Our 
Children's Future

    Working parents need access not just to affordable child 
care, but to a child care setting that is safe and nurturing 
and will contribute to their children's healthy development and 
education. Quality child care is a wise investment in our 
children's future.
    Research on early brain development and school readiness 
demonstrates that the experiences children have and the 
attachments they form in the first three years of life have a 
decisive, long-lasting impact on their later development and 
learning.\34\ Recent breakthroughs in neuroscience show that 
early interactions directly affect the way the brain is 
``wired.'' \35\ Brain development is non-linear: there are 
prime times for acquiring different kinds of knowledge and 
skills \36\--for example, by age two, a child's brain contains 
twice as many synapses and consumes twice as much energy as the 
brain of an adult.\37\
    For these reasons, the quality of child care has a lasting 
impact on children's emotional well-being, social skills and 
ability to learn.\38\ Children in poor-quality child care have 
been found to be delayed in language and reading skills, and 
display more aggression toward other children and adults.\39\ 
Children in higher-quality preschool classrooms display greater 
receptive language ability and pre-math skills, view their 
child care and themselves more positively, have warmer 
relationships with their teachers, and have more advanced 
social skills than those in lower-quality classrooms.\40\ In 
addition, higher-quality programs can lead to children's long-
term success, including better school achievement, higher 
earnings as adults, and decreased involvement with the criminal 
justice system.\41\ Higher-quality programs also pay for 
themselves in the long-run; researchers have found that seven 
dollars in public expenditures is saved for every dollar spent 
for quality child care and early childhood education.\42\
    Despite these findings, many young children are being cared 
for in settings in which books and toys required for physical 
and intellectual growth are missing; warm, supportive 
relationships with adults are lacking; and in some cases, basic 
sanitary conditions are not met and safety problems are 
endangering infants.\43\ It is not only pre-school children and 
infants who suffer from a lack of quality care settings. It is 
estimated that nearly five million children are left 
unsupervised after school each week, and many children are in 
settings that do not help them grow and learn because there are 
no constructive activities to promote their physical and 
intellectual development.\44\ The problem is most acute in low-
income communities, where fewer before- and after-school 
programs are offered.\45\
    Studies have indicated that school-age children who are 
left alone after school are at greater risk of truancy, risk-
taking behavior, substance abuse, poor grades, and stress.\46\ 
FBI data show that violent juvenile crime triples in the hour 
after the school bell rings with nearly half occurring between 
2 p.m. and 8 p.m.\47\ In a recent survey, 92% of police chiefs 
nationwide identified an increased government investment in 
programs like child care and after-school programs as the most 
effective anti-crime weapon by a four-to-one margin over trying 
more juveniles as adults or even hiring additional police 
officers.\48\

    II. The Early Childhood Workforce: Women as Child Care Providers

    The vast majority of child care providers in this country 
are women. The child care workforce is 98% female, and one-
third women of color.\49\ These women--approximately 2.3 
million early childhood teachers and teachers' assistants, 
family child care providers, and in-home providers \50\--carry 
the responsibility of providing a safe, nurturing, and 
stimulating setting for the children entrusted to them each 
day. The services these women provide can have a critical 
impact on the successful development of the children in their 
care.
    Especially in light of their tremendous responsibility, 
child care workers are shockingly under-compensated. The U.S. 
Department of Labor reports that, in 1997, the median weekly 
salary for a family child care provider was $202 per week, 
which is $10,504 annually, based on 52 weeks of wages.\51\ This 
is below the poverty threshold for a household that includes 
one parent and one child.\52\ For an early childhood teaching 
assistant, the median weekly salary was $239 per week, or 
$12,428 annually, and for a worker in a child care center it 
was $285 per week, or $14,820 annually.\53\ Moreover, many 
child care workers receive little if anything in benefits from 
their employers. Even among child care centers, the 
availability of health care coverage for staff workers remains 
woefully inadequate.\54\
    Child care workers thus earn far less than the median 
earnings for all workers ($26,156 in 1997), and less than the 
median earnings for bus drivers ($21,060), janitors ($16,276), 
or bartenders ($16,024).\55\
    In order to support themselves, many child care workers are 
forced to hold second jobs, continue to live with parents, or 
forgo health insurance, medical care and savings for 
retirement. As a result, many do not stay long in child care: 
31% of all teaching staff leave their child care centers each 
year.\56\
    This high turnover rate is shortchanging not only child 
care providers, but the children as well. The compensation of 
child care staff is clearly linked to the quality of care and 
education children receive. According to one study, ``teachers' 
wages, their education and specialized training were the most 
important characteristics that distinguish poor, mediocre, and 
good-quality centers.'' \57\ Another study identified staff 
wages as the most important predictor of the quality of care 
children receive: better quality centers paid higher wages, 
hired teachers with more education and training, and 
experienced lower staff turnover.\58\ Reducing turnover is 
critical, because the stability of the relationship between the 
child and the care-giver is important to the child's social 
development.\59\ For example, the U.S. Department of Defense, 
in its Military Child Development System, ties wages and 
advancement for its child care workers to training and 
education, and in so doing has significantly reduced turnover 
and thereby improved the morale and motivation of care givers 
and the quality of care.

          III. Increasing the Federal Investment in Child Care

    A major investment is needed to improve the availability, 
quality and affordability of child care, especially for low-
income families struggling to keep their jobs and become more 
self-sufficient. Currently, at most one in ten low-income 
families who are eligible for assistance through the Child Care 
Block Grant are receiving the assistance they need. A new 
investment in the Block Grant of $7.5 billion over five years 
would be a significant first step in increasing the number of 
eligible families receiving help. Some of the additional money 
should be used to improve the quality of child care programs, 
especially for infants and toddlers and for early learning 
programs for pre-school children. Using additional Block Grant 
funds to enhance the compensation and training of child care 
providers would also result in higher quality care for 
children.
    It is also critical that Congress act to strengthen and 
restore the value of the Dependent Care Tax Credit (``DCTC''), 
especially for lower- and moderate-income families. The DCTC 
provides valuable assistance to families by allowing taxpayers 
to offset a portion of their employment-related dependent care 
expenses against their federal income tax liability. Since the 
credit was last expanded in 1981, however, its value has 
eroded, particularly for low-and moderate-income families. To 
restore the value of the DCTC to these families, it should be 
made refundable so that families with no or low federal income 
tax liability can benefit from it. In addition, a number of 
other improvements should be enacted to strengthen the DCTC, 
such as raising the percentages of qualifying expenses that may 
be taken as a credit to help families cover the cost of more of 
their qualifying child care expenses. Improving the DCTC, 
however, must be paired with a significant expansion of the 
Child Care Block Grant if low-income families are to receive 
the level of assistance they truly need to meet their child 
care expenses.
    Thank you again for this opportunity, and if the Center can 
be of assistance to you in your deliberations, please do not 
hesitate to call on us.

                               References

    \1\ Child Care Information Exchange, July 1996.
    \2\ See, e.g., Ask a Working Woman, a report on the national survey 
for the Working Women's Department, AFL-CIO (1997); Women: the New 
Providers, Whirlpool Foundation study by Families and Work Institute 
(May 1995).
    \3\ Tabulations based on Department of Labor, U.S. Bureau of Labor 
Statistics, Employment Characteristics of Families, Current Population 
Survey, 1997, Summary and Table 3. These percentages understate how 
many women raising children are in the paid labor force because they 
reflect only women raising their own children, and do not include the 
many women who are raising grandchildren, nieces and nephews, or other 
related children.
    \4\ Id.
    \5\ Id, Tables 5 and 6. Of all mothers of children under age 18, 
50% work full time; of all mothers of children under age 6, 42% work 
full time; and of all mothers of children under age 3, 37% work full 
time. Id.
    \6\ U.S. House of Representatives Committee on Ways and Means, 1996 
Green Book, Table 10-1.
    \7\ Id.
    \8\ U.S. Department of Labor, Women's Bureau, ``Facts on Working 
Women: 20 Facts on Women Workers,'' Sept. 1996.
    \9\ Tabulations based on data from Department of Labor, U.S. Bureau 
of Labor Statistics, Marital and Family Characteristics of the Labor 
Force, Current Population Survey, 1996, Tables 5 and 6. The number of 
mothers in the paid labor force includes mothers who are working 
outside the home as well as mothers who are seeking work outside the 
home.
    \10\ Id.
    \11\ Tabulation based on data from U.S. Department of Commerce, 
Bureau of the Census, Money Income in the United States: 1997, Current 
Population Reports, Consumer Income, No. P60-200 (September 1998), 
Table 6.
    \12\ U.S. Department of Commerce, Bureau of the Census, Household & 
Family Characteristics: March 1997, Current Population Reports, (April 
1998), p. 6.
    \13\ In 1991, the most recent year for which these data are 
available, only 38% of custodial mothers actually received any child 
support payments, and the payments received on average were 
approximately only $148 per month per child. U.S. Department of 
Commerce, Bureau of the Census, Child Support for Custodial Mothers and 
Fathers: 1991, Current Population Reports, Consumer Income, Series P-
60, No. 187.
    \14\ Ask A Working Woman, p. 8.
    \15\ U.S. Department Of Commerce, Bureau of the Census, Poverty in 
the United States: 1997, Current Population Reports, Consumer Income, 
No. P60-201, Table 3.
    \16\ U.S. Department Of Commerce, Bureau of the Census, Statistical 
Abstract: 1998, Table 732 (1998).
    \17\ What Does it Cost to Mind Our Preschoolers?, Table 3.
    \18\ Clark and Long, Child Care Prices: A Profile of Six 
Communities--Final Report (The Urban Institute 1995).
    \19\ Child Care Information Exchange, July 1996.
    \20\ Child Care Challenges. (1998). Washington, DC: CDF. Also data 
from The California Child Care Portfolio. (1997). San Francisco: 
California Child Care Resource and Referral Network. Data collected 
from resource and referral agencies in each city.
    \21\ Bureau of Census, U.S. Dep't of Commerce, Current Population 
Reports, P60-197, Money and Income in the United States: 1997 (1998).
    \22\ Bureau of Census, U.S. Dep't of Commerce, Historical Income 
Tables-Families, Table F-10 (1998).
    \23\ Locked Doors: States Struggling to Meet the Child Care Needs 
of Low-Income Working Families. (1998). Washington, DC: CDF.
    \24\ Id.
    \25\ General Accounting Office, Welfare Reform: States' Efforts to 
Expand Child Care Programs, GAO/HEHS-98-27, (Washington, DC: General 
Accounting Office, January 1998).
    \26\ Locked Doors: States Struggling to Meet the Child Care Needs 
of Low-Income Working Families. (1998). Washington, DC: CDF
    \27\ Id.
    \28\ Id.
    \29\ Id.
    \30\ Id.
    \31\ ``Financing Child Care in the United States: An Illustrative 
Catalog of Current Strategies,'' The Ewing Marion Kauffman Foundation & 
The Pew Charitable Trusts, 1997, p. 2.
    \32\ Teresa Vast, The Postsecondary Financial Aid System: Potential 
Strategies for Early Care and Education, Robert R. McCormick Tribune 
Foundation and the National Association for the Education of Young 
Children, September 1997.
    \33\ ``Financing Child Care in the United States: An Illustrative 
Catalog of Current Strategies,'' The Ewing Marion Kauffman Foundation & 
the Pew Charitable Trusts, 1997, p. 3.
    \34\ Shore, Rima. Rethinking the Brain: New Insights into Early 
Development, Families and Work Institute, NY, 1997, p. 64.
    \35\ Id. at p. 18.
    \36\ Id.
    \37\ J. Madeleine Nash, Fertile Minds, Time Magazine, February 3, 
1997, Vol. 149, No. 5.
    \38\ Starting Points: Meeting the Needs of Our Youngest Children. 
(1994, Aug.). New York: Carnegie Corporation.
    \39\ Facts about Child Care in America (1998). Washington, DC: CDF.
    \40\ Helburn et al., Cost, Quality, and Child Outcomes Study, 
Economics Department, University of Colorado at Denver, January (1995).
    \41\ See, e.g., The Future of Children: Long-Term Outcomes of Early 
Childhood Programs, Center for the Future of Children and David and 
Lucile Packard Foundation, Vol. 5, No. 3 (Winter 1995).
    \42\ Teresa Vast, The Postsecondary Financial Aid System: Potential 
Strategies for Early Care and Education, Robert R. McCormick Tribune 
Foundation and the National Association for the Education of Young 
Children, September 1997.
    \43\ Helburn et al., supra. Indeed, one study of four states found 
fully 40 percent of the rooms serving infants in child care centers to 
be of such poor quality as to jeopardize children's health, safety, or 
development. Studies of family child care produced equally troubling 
results. The term family child care is used to refer to the care of 
unrelated children in the home of the provider.
    \44\ School-Age Child Care Project, Fact sheet on school-age 
children, Center for Research on Women, Wellesley College, October 
1997.
    \45\ U.S. Department of Education, The Condition of Education: 
1993, National Center for Education Statistics 1993.
    \46\ Dwyer et al. Characteristics of Eighth-Grade Students Who 
Initiate Self-Care in Elementary and Junior High School, Pediatrics, 
86.
    \47\ Sickmund, M., Snyder, H.N., Poe-Yamagata, E., ``Juvenile 
Offenders and Victims: 1997 Update on Violence,'' National Center for 
Juvenile Justice (Washington, DC: Office of Juvenile Justice and 
Delinquency Prevention); Fox, J.A. and Newman, S.A., ``After-School 
Programs or After-School Crime'' (Washington, DC: Fight Crime: Invest 
in Kids, September 1997), p. 1.
    \48\ ``Police Chiefs Say More Government Investments in Kids are 
Key to Fighting Crime.'' (Washington, DC: Fight Crime: Invest In Kids, 
1996), p. 1.
    \49\ Making Work Pay in the Child Care Industry, National Center 
for the Early Childhood Work Force (1997).
    \50\ U.S. Department of Labor, Women's Bureau, ``Facts on Working 
Women: Child Care Workers,'' November 1997.
    \51\ U.S. Department of Labor, Bureau of Labor Statistics, Current 
Population Survey 1997, Household Data, Annual Averages, Table 39.
    \52\ U.S. Department Of Commerce, Bureau of the Census, Poverty in 
the United States: 1997, Current Population Reports, Consumer Income, 
No. P60-201, Table 1.
    \53\ U.S. Department of Labor, Bureau of Labor Statistics, Current 
Population Survey 1997; Household Data, Table 39.
    \54\ Center for the Child Care Workforce, Worthy Work, Unlivable 
Wages (Washington D.C., 1998), p. 20.
    \55\ Id.
    \56\ Worthy Work, Unlivable Wages, supra, p. 19. The turnover rate 
is nearly 40% for lower-paid teaching assistants in child care centers. 
Id.
    \57\ Helburn et al., supra.
    \58\ Whitebook, M., et al., Who Cares? Child Care Teachers and the 
Quality of Care in America, Final Report, National Child Care Staffing 
Study, Child Care Employee Project, 1990.
    \59\ Whitebook et al., supra.

                                

Statement of Kathryn J. Rodgers, NOW Legal Defense and Education Fund, 
New York, New York

    Thank you for the opportunity to submit testimony to the 
House Ways and Means Committee on the importance of child care 
and early education for American families. NOW Legal Defense 
and Education Fund (NOWLDEF) has a 29-year commitment to 
women's rights and equality, particularly economic justice for 
all women. Access to affordable child care is essential to 
achieving this goal. In fact, affordable quality child care and 
early education programs are not only vital for women's 
economic independence, but are also critical to their 
children's development and well-being.

                            I. Introduction

    As women become a larger part of the workforce, child care 
has become a national issue. Availability of high quality, 
reliable and affordable child care is often the only way that 
women with children can fulfill their potential as workers and 
support their families. At the same time, research has made it 
clear that good quality child care in a child's early years can 
make the critical difference in that child's ability to 
succeed. How we care for our children is a central issue 
affecting America's ability to utilize the full potential of 
the nation's workforce. Providing quality care is also 
necessary to ensure the country's future.
    The critical importance of child care is nowhere more 
apparent than in the lives of low income women. Two years into 
welfare reform, the welfare rolls have declined dramatically 
and many poor single women with children have moved into the 
workplace. As this has happened, the inadequacy of our child 
care system has become extremely clear. Now is the time for a 
federal commitment to our nation's children, to make the 
resources available to ensure that while their parents work, 
their will have decent quality care. The American people 
support increased funding for child care and in particular 
support child care assistance for low income families. 
According to a national survey sponsored by the W.K. Kellog 
Foundation, 86% of Americans believe that child care should be 
available to all low income families so that parents can 
work.\1\ This cannot happen unless the federal government 
targets sufficient resources specifically for child care to 
enable the states to provide child care and child care 
subsidies for all who need them.
---------------------------------------------------------------------------
    \1\ Endnotes follow Statement.
---------------------------------------------------------------------------
    Our testimony provides a brief history of the federal 
commitment in this area. We then outline the need for an 
improved child care system, the particular problems facing 
women moving from welfare to work, the critical need for child 
care for all low income families (not just those receiving 
welfare), the importance of quality care for our nation's 
children, and the international context in which this country 
makes decisions about our commitment to our children.
    Based on this survey of available data, we urge Congress to 
take the following urgently needed actions to support children 
and their families:
     Increase funding for the Child Care and 
Development Block Grant (``CCDBG'') to a level that will enable 
states to meet the child care needs of all families with 
incomes below 85% of the State Median Income.
     Require states to provide child care subsidies for 
all low income families who meet the federal CCDBG income 
standards.
     Require states to provide women required to work 
under the Personal Responsibility and Work Reconciliation Act 
(``PRA'') with information on child care subsidies, available 
child care options and her right not to be sanctioned for 
failing to meet work requirements if the reason is the lack of 
appropriate child care for her child.
     Limit the co-payments that can be charged low 
income working families to a set percentage of income and 
prohibit co-payments for Temporary Aid for Needy Families 
(``TANF'') recipients.
     Increase funding under the CCDBG to improve the 
quality of child care. Additional funding can be used to train 
providers, enforce quality and health and safety standards and 
provide comprehensive services such as parent education and 
health and nutrition programs to children and families in child 
care programs.
     Require states to perform market surveys annually 
and provide at least 75% of the cost of child care for eligible 
children.
     Increase funding to expand and improve Head Start.

             II. Historic Federal Commitment to Child Care

    Congress has long recognized the importance of quality 
early education and child care programs for low income 
families. During the New Deal of the 1930's, the federal 
government first entered the child care business by 
establishing federally funded nursery schools for poor 
children. Although the schools were primarily established to 
create jobs for unemployed teachers, nurses and others (as 
opposed to child care for working parents), when large numbers 
of mothers began to enter the labor force during World War II, 
many of these nursery schools were expanded to provide child 
care services. In fact, under the Latham Act, the federal 
government financed child care programs for approximately 
550,000-600,000 children during the war years.\2\
    Although financing for these programs ended in 1946, the 
need for child care and early education programs continued. In 
1965, the federal government again responded to this need by 
making a major commitment to the early education of low income 
children with the establishment of the Head Start program, 42 
U.S.C. Sec. 9801. This important program, which has served over 
15 million children since 1965, provides comprehensive services 
including quality early childhood education, nutrition, health 
and social services, along with a strong parent involvement 
focus, to low income children nationwide.\3\
    In 1988, Congress enacted legislation providing child care 
for families receiving Aid to Families with Dependent Children 
(``AFDC''), families that formerly received AFDC, and low 
income working parents at risk of becoming dependent on AFDC. 
Two years later in 1990, Congress created the CCDBG, 42 U.S.C. 
Sec. 9858, to provide child care assistance for low income 
families as well as funds to improve the quality and 
accessibility of child care overall. In 1996, under the PRA, 
Congress eliminated the AFDC linked-child care entitlement 
programs and shifted the funding for these programs into the 
CCDBG.\4\
    Although Head Start and the CCDBG block grant contribute to 
providing our nation's families with the child care and early 
education they need, they are far from adequate. Head Start 
only serves two out five eligible children,\5\ and many 
children of working parents who could benefit from its services 
cannot take advantage of them because most Head Start programs 
do not offer full-day or year-round programs. Likewise, the 
CCDBG currently serves only 1 out of 10 eligible children.\6\ 
This leaves so many children and families without decent care 
that it is not an overstatement to say that there is currently 
a national crisis in affordable, quality child care, especially 
for low income families. Clearly, the federal government can do 
much more to make affordable quality child care a reality by 
making major funding increases in these programs.

           III. The Need for Federal Commitment to Child Care

    The need for child care is clear. Since World War II, the 
number of women entering the paid labor force has increased 
dramatically. Three-quarters of women with children between the 
ages of 6 and 7 work outside the home.\7\ Women with pre-school 
children have also entered the workforce in significant 
numbers. In 1947 only 12% of women with pre-school children 
worked. By 1996, 62% of working women had young children--a 
rate five times higher than in 1947.\8\ Yet in 1996, while 
there were an estimated 13 million children with working 
mothers, there were only 93,000 licensed child care facilities 
throughout the United States.\9\
    As clear as the need for more quality child care is the 
fact that most working parents cannot afford that care without 
help. Full-day child care costs between $4,000 and $10,000 per 
year.\10\ At the same time, half of America's families with 
young children earn less than $35,000 per year.\11\ A family 
with two parents working full-time at minimum wage jobs earns 
only $21,400 per year. In short, quality child care is out of 
the reach of most low income American families unless there is 
governmental support.

A. Welfare-to-Work Issues

    Passage of the PRA has increased the need for federal child 
care support.\12\ Under the PRA, Congress for the first time 
required states to impose work requirements on single parent 
families with pre-school age children who receive cash 
assistance through the TANF block grant.\13\ The PRA ended 60 
years of federal commitment to support poor single parents so 
that they could care for their children in their own homes. 
Instead, the federal policy now mandates work for all poor 
single parents in need of public assistance. Yet the children 
in these poor families still need care, and unfortunately, when 
Congress enacted the PRA, it also repealed provisions which 
guaranteed child care to low income families.\14\
    Although funding was increased for child care subsidies in 
1996 under the CCDBG, experts acknowledged that the increase 
was not sufficient to provide quality child care for all poor 
families that need it. According to the estimates by the 
Congressional Budget Office at the time of enactment of the 
PRA, if states put single parents on welfare to work at the 
rates required by the new law, there would be a $1.8 billion 
shortfall in what would be needed to supply child care for 
children of those parents by the year 2002.\15\ Indeed, a 
recent study of welfare recipients found that 60 percent 
reported that unavailability of child care kept them from 
participating in work programs.\16\ In New York City, where 
there is a strong initiative to put all mothers on the welfare 
rolls to work, the city's own figures show that there is 
insufficient child care available. In December 1998, there were 
57,000 children on welfare who were under the age of 3. At the 
same time, there were only 7,842 spaces for children in the 
city's subsidized family day care system, 1,120 spaces in the 
city's day care centers and 850 spaces in other centers that 
took subsidized children. In short, child care spaces were only 
available for one out of ten children in the city of New 
York.\17\ Similarly, a report on California's AFDC population 
estimated that there would need to be a 1,800% increase in 
child care funding to provide subsidized child care to all 
children receiving welfare.\18\
    In a nation with limited affordable child care, requiring 
poor parents to work outside the home for subsistence benefits 
without guaranteeing them child care creates both a moral and a 
real-life crisis while undermining the work goals of the PRA. 
Yet, to this day, Congress has failed to assure that care will 
be available for the children of poor parents forced to work 
outside the home when their low wages or a welfare check cannot 
possibly buy quality child care. Many states faced with moving 
significant numbers of poor women with children into the 
workforce, but without sufficient funds to ensure that all 
children can be placed in high quality subsidized care have 
responded in ways that are (1) harmful to both women and 
children, (2) counter-productive to the goal of making work 
possible for single mothers with children, and (3) contrary to 
federal law.
    (1) Need for Better Notice to Recipients of Their Rights To 
Subsidies and Their Right Not to be Sanctioned.--Congress 
provided certain child care protections in TANF and the CCDBG. 
Under the CCDBG, states have an obligation to inform parents 
about the availability of subsidies and their child care 
options.\19\ Under TANF, states are prohibited from sanctioning 
women who cannot meet work requirements because they do not 
have appropriate care for their pre-school child.\20\ 
Unfortunately, these protections are insufficient to protect 
poor families. Many states are not letting women know that 
child care subsidies are available. Few states are telling 
mothers that they cannot be sanctioned if they cannot meet work 
requirements due to the lack of child care for their pre-school 
age child. In fact, as of this date no state has defined the 
term ``appropriate care'' for purposes of determining whether a 
woman with a pre-school child can perform work outside her 
home. The result is that many mothers are using any care they 
can for their children or suffering loss of benefits in order 
to remain at home caring for their children. At one end of the 
spectrum are the horror stories of deaths of young children 
placed in the care of young siblings, abusive boyfriends or 
incompetent or neglectful caregivers:
     In Wisconsin, a 13 year old child with severe 
mental and physical handicaps, DeAndre Reeves, died while left 
without adequate supervision while his mother had to meet work 
requirements. His death followed months of pleading by his 
mother with caseworkers, social workers and her state 
representative that her son needed her personal care. She was 
not offered appropriate care for her son nor was she told 
anything but that she had to work to get her welfare check. A 
welfare rights group in Wisconsin places the death toll at 7 of 
children killed in inappropriate informal care situations while 
their mothers complied with work requirements.\21\
     In New York, a mother required to start a workfare 
job left her children with her boyfriend because she had no 
other care; when her 3-year old daughter cried too much, he 
beat her to death; the woman's other children were subsequently 
placed in foster care.\22\
     In Washington, a woman told she would lose her 
welfare benefits if she did not attend an orientation program 
for workfare and that she could not bring her 4-month old to 
the orientation left the child with an 11-year old who did not 
know what to do when the child vomited, left the baby on his 
back and returned to find that the baby had died by aspirating 
on his vomit.\23\
    For most mothers told they have no choice but to leave 
their children with anyone they can find, there is a constant 
fear that their children will become another victim of 
inadequate or abusive care.
    Failure to inform women of their options with respect to 
child care is nothing new. Studies of low income women entitled 
to child care subsidies under prior law show that most of the 
population eligible for subsidies did not know about them and 
consequently did not use them.\24\ Estimates are that fewer 
than 20% of welfare or former welfare recipients in employment 
programs in California in 1995 knew about child care subsidies 
potentially available to them; similarly, in Georgia, less than 
half of those leaving welfare for work were aware of the 
potential availability of Transitional Child Care assistance 
and only about 35% of those eligible for the program received 
assistance. In New York, a study by the Public Advocate for New 
York City found that welfare families were consistently 
misinformed by welfare program staff about available child care 
subsidies, with almost half never informed that subsidies were 
available and the same proportion believing they would lose 
their grant if they did not find child care. Half of the women 
given referrals by the Office of Employment Services, the 
agency responsible for workfare placements, were not able to 
find child care from the referrals either because the programs 
were already full or were not accessible to the family.\25\
    (2) Need for child care subsidies for all low-income 
families.--There is not enough money for child care in any 
state to ensure that all low-income families can provide good 
quality care for their children. Although the welfare rolls 
have dropped dramatically in the last five years, the majority 
of those leaving welfare move into low paying jobs that do not 
provide enough income to lift a family of three out of poverty, 
even when child care costs are not considered. By March 1998, 
only 8% of the previous year's recipients had jobs paying 
weekly wages above the poverty line--barely up from 6% in March 
1990. At the same time, the proportion of workers with weekly 
wages below three-quarters of the poverty line surged from 6% 
to 14.5%.\26\ As women move off the welfare rolls and into 
employment, they earn wages that are often little better than 
what their welfare benefits were--and out of those low wages, 
they must pay for child care. Given the average cost of child 
care in the United States, it is clearly impossible for low-
income women to provide quality child care for their children 
without outside help. And, in many cases, paying for child care 
may make it impossible to provide for the other basic needs of 
the family.
    Provision of child care support for all low-income mothers 
with children is therefore critical to allowing women to remain 
in the workforce when they leave welfare and enabling working 
single parent families to maintain a standard of living that 
meets their basic needs. In theory, the child care block grant, 
the CCDBG, permits states to make their child care systems a 
``seamless web'' in which welfare recipients, those 
transitioning off of welfare and other low income women workers 
are all eligible for child care subsidies as long as they earn 
less than 85% of the State Median Income. However, this theory 
has not become a reality.\27\ While some states have increased 
funding for child care for working poor families (e.g,. 
California by 12%; Texas, Pennsylvania by 24%; Florida by 70%), 
many states have decreased their child care subsidy funding for 
low-income working families (Minnesota by 24%; Ohio by 11%; New 
York by 5%). According to the Department of Health and Human 
Services (``HHS''), no state provides child care subsidies for 
all families who would be eligible under the CCDBG block grant 
standards.\28\
    Some states that claim to provide subsidies for the working 
poor require co-payments even of very low-income families. For 
example, eight states require co-payment fees for all families 
regardless of income ranging from 10% to 30% of the family's 
income.\29\ At least seventeen states charge co-payments to 
TANF families.\30\
    In addition, some states that provide subsidies to low-
income families as well as welfare reliant families do not 
provide subsidies that are high enough to purchase quality 
care. Under the terms of the CCDBG, states must ensure that 
their subsidies are high enough to purchase child care. Almost 
all states do this by means of a market rate survey and a 
provision of subsidy at a certain percentage of the market rate 
needed to purchase care. However, according to HHS, in 1998, 
only 12 states reported having conducted a survey in 1997 and 
many had not done so in three or four years.\31\

B. Quality of Care

    In addition to being crucial to parents' abilities to work, 
affordable, quality child care and early education programs are 
essential to children's development. The early years of a 
child's life are critical to intellectual development and later 
academic success. The first three years of life are 
particularly important to children's early learning and 
development.\32\ A recent Carnegie study pointed out that ``the 
quality of young children's environment and social experience 
has a decisive, long-lasting impact on their well-being and 
ability to learn.'' \33\
    Low income children in particular have a great need for 
quality care and education. Low income children are 30% more 
likely to suffer from delays in growth or development, a 
significant emotional or behavioral problem or a learning 
disability.\34\ Children on welfare are three times more likely 
to be in poor health than non-poor children.\35\ As more poor 
single parent families move into the workforce, and, as noted 
above, are not earning wages that lift their families above 
poverty, the need to support their children with good quality 
child care grows. In a nation where one in four children grow 
up in poverty, and 45% of all children under age six live in 
poverty,\36\ a national commitment to provide quality child 
care for these children whose parents are working would seem 
consistent with fairness, equality of opportunity and the long-
term goal of assuring that all Americans can contribute to the 
development of society. However, a large number of families, 
particularly low income families, do not have access to quality 
care due to unavailability or high costs of such care. As a 
result, many children miss out on an important opportunity for 
early learning, which in the long run can jeopardize their 
ability to succeed in school and their ability to succeed in 
life.
    The magnitude of this problem is significant considering 
the number of American children in child care. Each day, an 
estimated 13 million pre-school children--including six million 
infants and toddlers--spend some or all of their day being 
cared for by someone other than their parents.\37\ 
Unfortunately, the quality of care received by many children is 
low.
    A study of the quality of child care centers found that 7 
in 10 child care centers in the United States provided mediocre 
care, and 1 in 8 had care that was so inadequate that it 
threatened the health and safety of children.\38\ Indeed, 40% 
of infant and toddler rooms in centers were found to endanger 
children's health and safety.\39\
    While poor quality care affects families at all income 
levels, low income families are more likely to be cared for in 
settings that do not meet quality standards (such as 
unregulated family child care and profit making centers). A 
national study of child care in family-based settings found 
that low income and minority children were more likely to be in 
lower quality programs than other children.\40\

                     IV. The International Context

    A national commitment to child care and early education is 
not unprecedented. Indeed, during the national crises created 
by the Depression and World War II, the United States showed 
that the federal government would devote federal resources to 
child care when necessary. Now should be no different. In fact, 
since this country is in the midst of a child care crisis, 
federal action is needed more than ever.
    In making child care a national priority, the United States 
must follow the lead of 191 countries worldwide that consider 
child care a basic human right. These 191 countries have all 
ratified the Convention on the Rights of the Child which 
provides that parties ``shall take all appropriate measures to 
ensure that children of working parents have the right to 
benefit from child-care services and facilities for which they 
are eligible.'' \41\ Although the United States has signed this 
important international treaty (which in and of itself 
obligates it to accept the Convention's norms), it and Somalia 
are the only two countries that have failed to ratify it.\42\
    In contrast, many European countries take their commitment 
under the Convention seriously and have made access to child 
and early education programs national priorities. For instance, 
France has one of the most ambitious and comprehensive systems 
of free public pre-school in the world,\43\ and in 1995 Sweden 
amended its Social Services Act to require municipalities to 
provide child care for children between the ages of 1 and 12 
whose parents need it.\44\ The United States should not lag 
behind other industrialized nations in its commitment to 
children and parents. Rather, if the United States is to remain 
a world leader, it must follow the lead of other nations and 
make child care and early education a national priority.

              V. Federal Support for Child Care is Crucial

    Despite the challenge of welfare reform, despite the 
infusion of additional funds to the states for child care, 
despite the availability of TANF surplus money in some states, 
the states are not meeting the child care needs of low income 
families. There are simply too many children in low income 
families who need child care, and because quality child care is 
so expensive, the states cannot provide it without a commitment 
from the federal government to make quality and affordable 
child care and early education programs a national priority.
    With respect to TANF surpluses, this Committee should be 
aware that not all states have such surpluses.\45\ Nineteen 
states, including California, have no TANF surpluses. Children 
in those states as in other states need good quality child 
care. To refuse to provide additional federal money for child 
care because some states have TANF surpluses will penalize 
those states and the children in those states for the state's 
appropriate expenditure of federal TANF money on the needs of 
the TANF population. Furthermore, that some states have 
surpluses in their budgets from TANF or from other sources does 
not mean that they will choose to spend that money on child 
care. In any event, the availability of quality child care for 
any American child should not depend on which state he or she 
happens to live.
    Whatever states are doing with their TANF money, they are 
all spending 100% of the money appropriated under CCDBG. But 
they know it is not enough. In a recent survey done by the 
Children's Defense Fund, most states admitted that those 
entitled to subsidies did not know about them and conceded that 
if all who were eligible did apply, the needs of those families 
could not be met.\46\ A floodgates fear is one of the things 
that keeps the states from making a commitment to child care 
for all of their children. Good quality child care will only be 
available to all children in all low income families across the 
country if there is comprehensive federal legislation that 
makes a major federal investment in improving the availability, 
affordability and quality of child care and early education 
programs. The states cannot do it alone.
    Again, we ask Congress to:
     Increase funding for the CCDBG to a level that 
will enable states to meet the child care needs of all families 
with incomes below 85% of the State Median Income.
     Require states to provide child care subsidies for 
all low income families who meet the federal CCDBG income 
standards.
     Require states to provide women required to work 
under the PRA with information on child care subsidies, 
available child care options and her right not to be sanctioned 
for failing to meet work requirements if the reason is the lack 
of appropriate child care for her child.
     Limit the co-payments that can be charged low 
income working families to a set percentage of income and 
prohibit co-payments for TANF recipients.
     Increase funding under the CCDBG to improve the 
quality of child care. Additional funding can be used to train 
providers, enforce quality and health and safety standards and 
provide comprehensive services such as parent education and 
health and nutrition programs to children and families in child 
care programs.
     Require states to perform market surveys annually 
and provide at least 75% of the cost of child care for eligible 
children.
     Increase funding to expand and improve Head Start.

                               References

    \1\ Only 10% disagree with this statement and 5% don't know. Survey 
is posted at www.wkkf.org/programminginterests/devolution/survey/
default
    \2\ Committee on Ways and Means, U.S. House of Representatives, 
1998 Green Book Background Material and Data on Programs within the 
Jurisdiction of the Committee on Ways and Means, 105th Congress, 2d. 
Sess., at 676 (May 19, 1998) (hereinafter, ``Committee on Ways and 
Means'').
    \3\ Administration for Children and Families, Fact Sheet: Head 
Start (visited March 4, 1999) http://www.acf.dhhs.gov/programs/hsb/
hsgen.html.
    \4\ Committee on Ways and Means, supra note 2, at 676-677.
    \5\ Children's Defense Fund, The State of America's Children 
Yearbook 1999, (forthcoming 1999)(manuscript at 3, on file at NOW Legal 
Defense and Education Fund).
    \6\ Gina Adams et al., Locked Doors: States Struggling to Meet the 
Child Care Needs of Low-Income Working Women, Children's Defense Fund, 
1 (March 1998).
    \7\ Committee on Ways and Means, supra note 2, at 660.
    \8\ Id.
    \9\ Gina Adams & Nicole Poersch, Key Facts About Child Care and 
Early Childhood Education: A Briefing Book, E-1. (Children's Defense 
Fund, Washington, D.C. 1996). Although there were also about 271,000 
family child care homes throughout the country, such homes typically 
serve a small number of children, the quality of such homes is erratic, 
and clearly even with these added spaces, there is insufficient supply 
to meet the demand. See also State Estimates of Organized Child Care 
Facilities, U.S. Census Bureau, (March, 1998).
    \10\ Adams, et al., supra note 6, at 1.
    \11\ Money and Income in the United States: 1996, 60-197 Current 
Population Reports U.S. Census Bureau, (1997).
    \12\ Pub.L. 104-193, 110 Stat. 2105.
    \13\ 42 U.S.C.Sec. 607(a).
    \14\ Pub. L. No. 104-193, Title VI, 110 Stat. 2105.
    \15\ David A. Super, et al., Center on Budget and Policy 
Priorities, The New Welfare Law (1996).
    \16\ Ellen L. Bassuk, et al., Single Mothers and Welfare, 
Scientific American 60 (1996).
    \17\ Human Resources Administration Data Sheet, (Dec. 
1998.)(unpublished on file with NOW LDEF)
    \18\ Lapkoff & Gobalet Demographic Research Inc., California's 
Child Care Gap (Aug. 31, 1995).
    \19\ 45 C.F.R. Sec. 98.33(a).
    \20\ 42 U.S.C. Sec. Sec. 607(e)(2), 609(a)(11).
    \21\ Welfare Law Center listserv from Welfare Warriors of 
Wisconsin, October 28, 1998.
    \22\ Man is Accused of Killing Girl He Was Baby-sitting, N.Y. 
Times, July 7, 1998, at B2.
    \23\ Welfare Law Center listserv from Fair Budget Coalition of 
Washington Nov. 2, 1998.
    \24\ Marcia Meyers & Theresa Heintze, Subsidy Shortfall: Are Child 
Care Subsidies Working for Those Working Their Way Off Welfare, 
University of California at Berkeley (1997) Laurie Miller & Kitty 
Barnes, Parents Need Transitional Child Care, Child Care Action News, 
at 1 (Nov./Dec., 1997).
    \25\ Mark Green, Public Advocate for the City of New York, Welfare 
and Child Care: What About the Children? (1997).
    \26\ Children's Defense Fund & National Coalition for the Homeless, 
Welfare to What? (November 1998), Appendix B based on U.S. Census 
Bureau's March Current Population Survey.
    \27\ Sharon K. Long, et al., The Urban Institute, Child Care 
Assistance Under Welfare Reform: Early Responses by the States, (Sept. 
1998).
    \28\ Child Care Bureau, Report of State Plans (March 1998). Twelve 
states have state plans that call for providing subsidies for families 
up to 75% of the State Median Income but of those states only North 
Carolina actually provides a subsidy for those whose income is as high 
as 75% of the SMI.
    \29\ Adams, et al; supra note 6, at 24 -27. DC, Florida, Illinois, 
New Jersey, South Carolina, Washington, Wisconsin and Wyoming all 
charge high fees to low income users of child care subsidies.
    \30\ Helen Blank & Gina Adams (Children's Defense Fund, December 
1997) State Developments in Child Care and Early Education 1997, at 29.
    \31\ Child Care Bureau, Child Care and Development Block Grant: 
Report of State Plans, at 61 (March, 1998).
    \32\ Families and Work Institute, Rethinking the Brain--New 
Insights into Earl Development: Conference Report (June, 1996).
    \33\ Carnegie Corporation of New York, Starting Points: Meeting the 
Needs of Our Youngest Children, at 4 (Aug. 1994).
    \34\ Kristen Moore, et al., The Life Circumstances and Development 
of Children in Welfare Families: A Profile Based on National Survey 
Data, Child Trends, Inc. (1991).
    \35\ Id.
    \36\ National Center for Children in Poverty, One in Four, at 15 
(1996).
    \37\ Carnegie Corporation of New York, Years of Promise: A 
Comprehensive Learning Strategy for America's Children, at 53 
(September 1996).
    \38\ Suzanne Helburn, et al., Cost, Quality and Child Outcomes in 
Child Care Centers, Department of Economics, University of Colorado at 
Denver, at 1 (1995).
    \39\ Id.
    \40\ Ellen Galinsky, et al., Families and Work Institute, The Study 
of Children in Family Care and Relative Care: Highlights of Findings, 
at 4 (1994).
    \41\ Convention on the Rights of the Child, opened for signature 
Nov. 20, 1989 (entry into force Sept. 2, 1990), Art. 18, Sect. 3.
    \42\ Child Welfare League of America, FAQ: United Nations 
Convention on the Rights of the Child (visited February 12, 1999) 
http://www.wla.org/cwla/publicpolicy/unconvention.html. One clear 
violation of the Convention's principles is the United States' failure 
to ensure that welfare recipients and other low income parents can 
exercise their rights under existing child care laws.
    \43\ Ian McMahan, Public Preschool From the Age of Two: The Ecole 
Maternelle in France, Young Children, at 22 (July 1992).
    \44\ A Report from the Children's Ombudsman in Sweden to the 
Committee on the Rights of the Child Regarding the Second Periodic 
Report of Sweden June 1998 (visited on January 8, 1999) http://
www.bo.se.barnombudsmannen/eng/bo-report-1998.html.
    \45\ Department of Health and Human Services, TANF Federal Awards, 
Transfers & Expenditures Through 4th Quarter, FY-1998 (data as of 2/5/
99) (visited on March 11, 1999), http://www.acf.dhhs.gov/news/welfare/
stats/q4tnfa1.htm.
    \46\ Adams, et al., supra note 6 at 4-6; Charts A-2, A-3.

                                

Statement of Mathew E. Melmed, ZERO TO THREE: National Center for 
Infants, Toddlers, and Families

    Ms. Chairman and Members of the Committee, I am delighted 
to have the opportunity to appear before you today on behalf of 
ZERO TO THREE: National Center for Infants, Toddlers and 
Families to discuss the special needs of infants and toddlers 
in child care. I am Matthew Melmed, Executive Director of ZERO 
TO THREE, a national non-profit organization that has worked to 
advance the healthy development of America's babies and young 
children for over 20 years. I would like to start by commending 
Congresswoman Johnson's role in championing the Family and 
Medical Leave Act for more than a decade--your efforts have 
made a profound positive contribution to the healthy growth and 
development of our youngest children.
    You have no doubt been hearing a great deal about the 
critical brain development that occurs in the first three years 
of life and its impact on all that follows. How, and how well, 
we think, learn, control our emotions and relate to others for 
the rest of our lives--in short what makes us human--depends on 
the nature of the interactions and attachments we have as very 
young children with our parents and caregivers.
    In 1990, nearly half of all children under the age of three 
were being cared for by someone other than their parents.\1\ As 
welfare-to-work requirements affect families with very young 
children, the demand for out-of-home care for infants and 
toddlers is rising. At the same time, concern about the quality 
of infant/toddler child care is growing. Although detailed 
information about child care arrangements for very young 
children is sparse, the research that has been done raises 
serious questions about the quality of many child care settings 
that serve children under three.
---------------------------------------------------------------------------
    \1\ Endnotes follow Statement.
---------------------------------------------------------------------------
    As more and more infants and toddlers are moving into child 
care, for longer and longer periods of time, it is important 
that we understand how early caregiving experiences profoundly 
influence cognitive, social, and emotional development. Recent 
neuroscientific research has provided us with this greater 
understanding.

     Brain Development: The Lasting Effects of Early Relationships

    Until recently, neuroscientists didn't know that infants' 
brains were so active and complex. They had always assumed that 
brain structure was genetically determined by the time babies 
are born. Now, we know differently. New imaging techniques 
provide non-invasive ways to study the brains of living people, 
and allow scientists to see a baby's brain developing--not just 
growing bigger, but forming microscopic connections responsible 
for such things as feeling, learning, and memory.
    While genes give you certain predispositions, for example, 
to have a certain type of temperament, these predispositions 
are vitally influenced by a wide range of experiences as you 
grow. The old debate over ``nature vs. nurture'' is dead. We 
now know that they work hand in hand to guide future 
development.
    At birth, the brain is in a highly unfinished state. During 
the first 3 years, it forms most of the synaptic connections, 
the basic wiring of the brain, that it will keep for life. PET 
scans show us that by 12 months, a baby's brain qualitatively 
resembles an adult's in terms of basic architecture. The brain 
of a two-year-old is as active as an adult's. This is visual 
proof that very young children are primed for learning.
    All learning takes place in the context of important 
relationships. During the earliest days, months, and years, 
children learn about the world through their own actions, and 
their caregiver's reactions. They are learning about who they 
are, how to feel about themselves and what they can expect from 
those who care for them. Such basic human capacities as the 
ability to feel trust, to experience intimacy with, and 
cooperate with others, develop from the earliest moments of 
life. Early experiences--positive and negative--have a decisive 
impact on who we become as adults.
    Research has found that a strong secure attachment to a 
nurturing caregiver has a protective biological function, 
helping the child learn to cope with stress and control 
emotions. What research also tells us is that day-to-day 
interaction between babies, their parents, and other caregivers 
are learning partnerships with very high stakes. That's because 
babies and young children experience their environment almost 
completely through their relationships with their primary 
caregivers. They need us to survive and thrive.
    When a toddler plays with, talks to and listens to his 
parents or child care provider, he learns to focus and 
concentrate, to recognize the familiar and explore the 
unfamiliar, to communicate, to take pleasure in learning. These 
same processes allow a first grader to focus on a book, quiet 
down, filter out noise in a classroom, feel motivated to try a 
new challenge, and feel good about learning to read.
    Loving a baby is important, but parents and caregivers must 
also be able to read a child's individual signals and respond 
appropriately. Every baby is unique. By nature babies vary 
greatly in how they react to sensations. Some are more 
sensitive to sound ... others to touch. These variations in how 
they learn affect how they understand their world.
    Babies also have different temperaments and different ways 
of showing their needs, moods, and preferences. The key to 
successful development lies in how well caregivers--parents and 
child care providers--respond to a baby's signals, and how well 
they nurture them and mediate their environment, in order to 
mesh with the child's own physical characteristics, 
sensitivities, abilities, temperament, and mood.
    Any policy decisions about infants and toddlers in child 
care must be premised upon and support the central fact that it 
is through continuous, day-to-day relationships with parents, 
child care providers, and other caregivers that children 
develop intellectually, socially, and emotionally.
    The key to quality child care is the quality of 
relationships--relationships between the infant and her family, 
between child and caregiver, between caregiver and family, and 
among adults in the child care setting. Child care quality 
depends on caregivers who are knowledgeable and skilled, and 
committed to creating and sustaining these relationships.

                            Quality Matters

    Over the past 15 years a number of studies have examined 
the effects of varying levels of quality on children's behavior 
and development. Each reached the same conclusion: A 
significant correlation exists between program quality and 
outcomes for children.\2\ In longitudinal research currently 
underway, The NICHD Study of Early Child Care has found that 
among children under three, in a range of child care settings 
chosen by their families, higher quality care is related to 
better mother-child relationships, higher cognitive 
performance, higher language ability, a higher level of school 
readiness, and fewer problem behaviors reported by 
caregivers.\3\
    Inadequate care poses serious and potentially fatal risks 
to the current well-being and future development of infants, 
toddlers and their families. Recent empirical research suggests 
that unfortunately, inadequate care is a widespread phenomenon. 
The national Cost, Quality and Outcome study of center-based 
infant/toddler care showed that ``child care at most centers in 
the United States is poor to mediocre, with almost half of the 
infants and toddlers in rooms having less than minimal 
quality.'' It found that fully 40 percent of the rooms serving 
infants in centers provided care that was of such poor quality 
as to jeopardize children's health, safety, or development.\4\
    A study of family and relative care in three communities 
revealed similar patterns in family child care programs and 
home-based care. Using the Family Day Care Rating Scale 
(FDCRS), this study rated only 9 percent of the homes as good 
quality (meaning growth-enhancing) while 56 percent of homes 
were rated as adequate/custodial (neither growth-enhancing nor 
growth-harming), and 35 percent were rated as inadequate 
(growth-harming).\5\
    The National Center for Early Development & Learning, 
supported by the Institute on Early Childhood Development and 
Education, Office of Educational Research and Improvement, US 
Department of Education, recently reviewed six studies that had 
each rated the quality of a sample of programs for young 
children using either the Early Childhood Environment Rating 
Scale or the Infant-Toddler Environment Rating Scale. All 
studies reported average quality ratings below the minimum 
rating for reasonable quality, and infant programs were always 
rated lower than preschool programs.\6\

                         What is Quality Care?

    Parents, providers, and child development experts may use 
different words to describe elements of quality, but they tend 
to agree about what is essential:
     health and safety;
     small groups for infants and toddlers, with 
caregivers responsible for no more than three young or mobile 
infants and no more than four children 18 months-3 years old;
     primary caregiver assignments;
     continuity of care;
     responsive caregiving and planning;
     cultural and linguistic continuity;
     meeting the needs of the individual within the 
group context; and
     the physical environment.\7\
    At the National Leadership Forum on Quality Care for 
Infants and Toddlers, sponsored by the Child Care Bureau and 
Head Start Bureau last year,\8\ J. Ronald Lally, a pioneer in 
the field of infant/toddler child care and a founding member of 
ZERO TO THREE, observed that good child care for infants and 
toddlers is a blend of science and art. The science of child 
care, he explained, encompasses knowledge of health and safety, 
developmental stages in the first years of life, and 
temperament and other individual differences. The art of child 
care is the ability to respond to the child--and to a group of 
children--in the moment, in a way that will support development 
and learning.
    Lally has identified seven ``gifts'' that a good child care 
program offers babies and very young children--nurturance, 
support, security, predictability, focus, encouragement, and 
expansion. He groups these gifts in two clusters, each 
providing a distinct set of benefits for very young children's 
development. Predictability appears in both clusters, serving 
as a bridge on which the young child can travel from the 
comfort of the familiar to the adventure of discovery. Before 
young children can explore their environment purposefully and 
develop their intellectual potential fully, they must feel 
safe. Once they find security, they can seek challenges.
    In Lally's conception, the gifts of nurturance, support, 
security, and predictability let children know that they can 
count on being loved and cared for in the child care setting. 
Predictability, focus, encouragement, and expansion facilitate 
the young child's intellectual development. But the ability to 
offer children these gifts rests on the structural elements of 
quality--small groups, appropriate staff-to-child ratios, 
primary caregiving, and continuity of care from responsive, 
knowledgeable adults who are well trained and feel supported by 
their colleagues and work environments.

Using Standards, Licensing and Regulation, and Accreditation to Achieve 
                  Quality in Infant/Toddler Child Care

    In a July, 1998 analysis of using standards to ensure high-
quality child care, The United States General Accounting Office 
distinguished two major dimensions of quality--structural and 
interactive.\9\ Structural dimensions include measurable 
aspects of the child care setting, including caregiver 
education and training, child-to-staff ratios, group sizes, and 
safety and health standards. Interactive dimensions focus on 
the child's experiences during the day. These experiences 
largely reflect the quality of interaction among all the 
children and adults who are part of the child care environment. 
The GAO found that staff turnover (that is, how many staff left 
a setting during a year) and compensation of caregivers were 
identified by the literature and experts to be critical 
determinants of the quality of child care, since these issues 
affect interactions between the child and caregiver.
    State licensing standards for infant/toddler care tend to 
focus almost exclusively on structural dimensions of quality. 
Using the database of the National Resource Center for Health 
and Safety in Child Care (NRC) at the University of Colorado, 
which contains child care standards for 50 states and the 
District of Columbia, the GAO report found that the extent to 
which state standards reflect the standards set by the National 
Association for the Education of Young Children and the 
National Health and Safety Performance Standards developed by 
the Maternal and Child Health Bureau vary. Maryland requires a 
1:3 ratio for infants 0-18 months, a 1:6 ratio for toddlers 18-
24 months, and a 1:10 ratio for 3 and 4 year olds. Child care 
standards in over half the states stipulated staff/child ratios 
that were the same as the NAEYC standard for younger children 
(6 weeks through 18 months). Fewer states incorporated these 
standards for older children. Not all states have standards for 
group size. Thirty-two states have state standards stipulating 
group size for children ages 6 weeks through 18 months. 
According to the Center for Career Development in Early Care 
and Education, as of 1995, 35 states had no preservice training 
requirement for center-based child care providers; 46 states 
had no preservice training requirement for family child care 
providers.\10\
    Systems of accreditation for center-based and family home 
child care generally examine a range of quality indicators 
including: relationships among adults, as well as those between 
adults and children; the physical environment of the child care 
setting; developmental learning goals, curriculum and 
activities; safety and health; staff qualifications and 
professional development; and administrative and business 
practices. The process of accreditation tends to involve a 
number of steps, including self-assessment; parent surveys; 
systematic efforts, as needed, to improve program quality; on-
site evaluation by an accreditation team; review; and ongoing 
monitoring and renewal of accreditation to ensure maintenance 
of quality. There are 6 national systems that accredit child 
care programs and providers. In addition, some states are 
establishing accreditation systems as a way to improve the 
quality of child care. A number of local, state, and national 
initiatives are underway to encourage individuals and child 
care programs to go through the accreditation process.
    The Revised Head Start Program Performance Standards, which 
govern the operation of all Early Head Start and Head Start 
grantees and delegate agencies, address both structural and 
interactive dimensions of infant and toddler care. Performance 
standards describing the Head Start Program's child development 
and education approach for infants and toddlers, staff 
qualifications, staff-child ratios, and group size provide the 
rationale for each standard, guidance, and related information. 
As the Early Head Start Program expands and efforts are made to 
place infants and toddlers of participating families in 
community-based child care settings, relevant performance 
standards will be applicable to community-based settings, as 
well as to child care provided directly by Early Head Start 
grantees.
    Several sections of the Revised Head Start Program 
Performance Standards and guidance specifically address the 
care of infants and toddlers in groups.
     Infant and toddler staff qualifications: Early 
Head Start and Head Start staff working with infants and 
toddlers must have obtained a Child Development Associate (CDA) 
credential for Infant and Toddler Caregivers or an equivalent 
credential that addresses comparable competencies by January 1, 
1999 or within one year of hire as a teacher of infants and 
toddlers. Staff training must develop knowledge of infant and 
toddler development, safety issues in infant and toddler care, 
and methods for communicating effectively with infants and 
toddlers, their parents, and other staff members. When a 
majority of children speak the same language, at least one 
classroom staff member interacting regularly with the children 
must speak their language.
     Staff-child ratios and group sizes: Each teacher 
working exclusively with infants and toddlers must have 
responsibility for no more than 4 infants and toddlers. No more 
than eight infants and toddlers may be placed in any one group. 
If State, Tribal or local regulations specify staff-child 
ratios and group sizes more stringent than this requirement, 
the State Tribal, or local regulations must apply.
     Child development and education approach: 
Standards require grantee and delegate agencies to:
       encourage the development of secure 
relationships in out-of-home care settings for infants and 
toddlers by having a limited number of consistent teachers over 
an extended period of time. Teachers must demonstrate an 
understanding of the child's family culture and, whenever 
possible, speak the child's language.
       encourage trust and emotional security so that 
each child can explore the environment according to his or her 
developmental level.
       encourage opportunities for each child to 
explore a variety of sensory and motor experiences with support 
and stimulation from teachers and family members.
       Promote an environment that encourages the 
development of self-awareness, autonomy, and self-expression.
       support the emerging communication skills of 
infants and toddlers by providing daily opportunities for each 
child to interact with others and to express himself or herself 
freely.
       Support the development of infants' and toddlers 
gross motor skills and create opportunities for fine motor 
development.

                     Public Investments for Quality

    Neuroscientific and child development research that 
highlights the importance of sensitive, responsive care during 
the earliest years, combined with evidence documenting the 
dearth of such care in many infant/toddler child care settings, 
has led to important initial public investments from all levels 
of government and the private sector. Unfortunately, the 
disparity between the demand for quality infant/toddler child 
care, and the capacity to meet those needs given resource 
limitations, continues to increase.
    In order to meet the increasing need for quality infant and 
toddler child care we must:
    1. Examine licensing and regulatory standards to promote 
child development and ensure health and safety for all children 
by reducing group size and ensuring appropriate staff/child 
ratios for infants and toddlers and staff qualifications.
    2. Raise the level of training expected of all infant/
toddler caregivers; expand and improve training opportunities.
    3. Increase compensation and benefits to infant/toddler 
child care providers, linking increases in compensation to 
completion of training, demonstrated competence, and commitment 
to the field.
    4. Create child care environments that are models of 
comprehensive services, based on child-centered, family-focused 
efforts that make multiple services families may need easily 
accessible and linked through the child care setting.
    5. Promote linkages within the child care and Head Start 
communities and forge new partnerships with groups and 
organizations typically seen as ``outside'' the child care 
community to improve the quality of infant/toddler care.
    6. Involve parents, employers, legislators, and other 
stakeholders and decisionmakers in public awareness and 
engagement campaigns designed to create and sustain societal 
commitment and investment in quality care for infants and 
toddlers.
    7. Use all currently available funding streams and allocate 
new financial resources to supplement and maximize efforts that 
support quality infant/toddler child care.
    Experts in the field agree that structural elements of 
child care--group size, staff/child ratios, and staff 
training--are essential to support quality. Adequate 
compensation and benefits for workers is essential to minimize 
turnover and ensure the professional development of staff over 
time. Until salaries and benefits are high enough to attract 
and keep competent staff in the field, training becomes an 
endless cycle of basic courses for beginning workers. More 
importantly, from the perspective of children's development, 
the turnover in staff that inadequate compensation makes 
inevitable destroys the secure, intimate, growth-promoting 
relationships in the child care setting that are the goal of 
all quality improvement efforts.
    Child care for infants and toddlers can serve as a central 
element in an array of community-based health, parenting 
education and social supports that all families with very young 
children require.
    The connection between public engagement and imaginative 
financing has become increasingly clear. We must build public 
support for the idea that protecting and promoting the healthy 
development of all very young children is the responsibility of 
communities as well as families. Increased public awareness of 
the importance of the earliest years can lead to the 
mobilization of public and private resources for the 
significant, sustained community investment required to finance 
the true cost of quality care.

                          Promising Approaches

    Many states and counties are blending federal, local, 
state, and private funds and are forming creative partnerships 
that are allowing them to maximize the impact of each dollar 
they spend to improve the quality of infant and toddler child 
care.
    They have recognized that responsive care for infants and 
toddlers requires trained caregivers who stay on the job. So 
they look for ways to make training affordable and financially 
rewarding to individual caregivers, as well as reimbursement 
mechanisms that will increase the resources of centers and 
family child care homes that recruit and retain well-trained 
staff.

California

    In California for example, federal funds are being used to 
enhance more than a decade of investment in increasing the 
number of slots and improving the quality of care. In 1986, the 
California Department of Education (CDE) and WestEd (formerly 
Far West Laboratory) created a partnership, the Program for 
Infant/Toddler Caregivers (PITC) and created a comprehensive, 
high quality, multi-media training system for center-based and 
family child care providers.
    With CDE and private funds, trainer-of-trainer institutes 
were created. Participants could become certified by completing 
a training plan. At that time, however, participants were 
required to pay the full cost of the institutes.
    When Child Care and Development Block Grant quality 
improvement funds became available in 1991, the CDE designated 
funds to provide institute participants with scholarships to 
cover the cost of the training, plus lodging and meals. In 
return, participants are expected to fulfill certification 
requirements and to provide 25 hours of training to other 
providers in their county during the two years after completion 
of the training.
    The goal is to have a cadre of certified graduates in each 
county to provide training on an ongoing basis at the local 
level to program directors and caregivers and to provide 
critical information to local policymakers about the components 
of quality infant/toddler services.
    The Federal Infant Capacity Building funds made available 
to the states in FY 1998 provided the additional funding 
required to, among other things, coordinate and expand training 
efforts at the regional and local level and provide grants for 
start-up costs for new infant/toddler programs that meet PITC 
program standards (such as small groups and continuity of 
care).

Michigan

    In Michigan more than half of the families leaving the 
welfare rolls are placing their infants and toddlers in 
informal care, either in the homes of relatives or with aides, 
who provide care in the family's home. To qualify as a provider 
of state-subsidized care, an aide or relative must only fill 
out a simple form and be checked against a child abuse/neglect 
protective services data base.
    Concerned by the growing number of providers with little 
knowledge about child development, and little incentive to stay 
in the field (aides coming into the home earn $1.35-$1.60 per 
hour/per child) if other opportunities arise, Michigan's 4-C 
resource and referrals agency approached the state legislature 
about the need for better outreach to aide and relative care 
providers. Beginning this year, free training will be opened to 
aides and relatives. Aides and relatives who complete 15 hours 
of free training and provide child care for 3 months to 
Michigan Family Independence Agency-funded children will 
receive a one-time bonus of $150.
    Many aides and relatives who have completed this training 
are choosing to pursue a CDA credential and have become either 
a licensed family child care provider or a center-based 
employee. Of these providers many have chosen to pursue further 
training, with some working to open their own family child care 
homes.

Oklahoma

    With significant savings from reduced welfare rolls, the 
Oklahoma First Start initiative was requested by the Oklahoma 
Legislature and approved by the Commission on Human Services. 
Administered by the Oklahoma Department of Commerce, funds are 
used to provide full day/full year services for 191 infants and 
toddlers, 0-3 years of age, to families who are employed or are 
moving from welfare to work.
    A competitive bidding process made funds available 
statewide to public and private child care programs that are 
able to blend funds from different sources. The seven grantees 
utilized funding sources that included the state child care 
subsidy system, the Child Care Food Program, foundations and 
corporations. First Start grantees must commit to meeting the 
Early Head Start Performance Standards--which govern the 
operation of all Early Head Start programs and address both 
structural and interactive dimensions of infant and toddler 
care--and to receiving national accreditation within 24 months.
    The largest Grantee is the Tulsa Children's Coalition, 
which administers the grant and contracts with non-profit and 
for-profit child-care providers to serve 92 children. The 
Coalition, an organization that includes Tulsa's Chamber of 
Commerce, Tulsa Public Schools, United Way, Community Service 
Council and the Head Start Agency, has been very successful in 
finding creative ways to access new resources and build child 
care capacity. For example, the Coalition joined with Tulsa's 
anti-poverty agency, the Community Action Project (CAP), to 
establish two family child care homes in resource-poor 
neighborhoods. Through CAP's family home ownership program, 
women who had experience in child care were provided assistance 
in purchasing homes in public housing developments. Another 
example is two new centers in Tulsa Housing Authority (THA) 
communities where THA provided space and other resources. The 
United Ways and a private foundation provided funding for 
necessary renovations and supplies for these new centers.
    The three states that I've highlighted represent just some 
of the many bold and creative initiatives that states have 
undertaken to improve the quality of infant and toddler child 
care. Unfortunately, these initiatives are enhancing the lives 
of only a small fraction of our youngest children. The 
disparity between the demand for quality child care, and the 
capacity to meet those needs given resource limitations, 
continues to increase.

                               Conclusion

    New developments in brain and child development research 
shows us what infants and toddlers need. Our challenge is to 
ensure that every child receives it. It is for this reason that 
I am here today, to ask you on behalf of America's babies and 
families to commit to allocating the additional resources, and 
to forming the new partnerships at all levels of government, 
with child development experts and the private sector that will 
nurture the healthy growth and development of our country's 
youngest citizens. Thank you.

                               References

    \1\ S. Hofferth et al. (1990). National Child Care Survey as cited 
in Carnegie Corporation of New York (1994). Starting Points: Meeting 
the Needs of Our Youngest Children. New York: Carnegie Corporation, p. 
45.
    \2\ Frede, E. (1995). The role of program quality in producing 
early childhood program benefits. Future of Children, 5 (3), 115-132.
    \3\ Peth-Pierce, R. (April, 1998). The NICHD Study of Early Child 
Care. Bethesda, MD: National Institute of Child Health and Human 
Development (NICHD), National Institutes of Health, Public Health 
Service, US Department of Health and Human Services(NIH Pub. NO. 98-
4318).
    \4\ Helburn, et. al.(1995). Cost, Quality, and Child Outcomes in 
Child Care Centers: Executive Summary Denver: University of Colorado, 
p. 2.
    \5\ Galinsky, et al. (1994) The Study of Children in Family Child 
Care and Relative Care: Highlights of Findings. New York City: Families 
and Work Institute, p. 4.
    \6\ Love, J.M. (Summer, 1997). Quality in Child Care Centers. Early 
Childhood Research & Policy Briefs, 1. Chapel Hill, N.C: National 
Center for Early Development & Learning.
    \7\ Lally, J.R., Griffin, A., Fenichel, E., Segal, M., Szanton, E., 
& Weissbourd, B. (1995). Caring for Infants and Toddlers in Groups: 
Developmentally Appropriate Practice. Washington, DC: ZERO TO THREE: 
National Center for Infants, Toddlers and Families, p. 29.
    \8\ Child Care Bureau and Head Start Bureau (1998) National 
Leadership Forum on Quality Care for Infants and Toddler. Vienna, VA.
    \9\ Health, Education, and Human Services Division (1998). Child 
Care: Use of Standards to Ensure High Quality Care (Publication No. 
HEHS-98-223R). Washington DC: General Accounting Office.
    \10\ The Center for Career Development in Early Care and Education 
(1995). Data on Licensing: Ongoing Training Hours and Child: Staff 
Ratios. Boston, MA: Wheelock College.

                                
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