(C) an out-of-school time program that is 
licensed or regulated under State or local law 
and that satisfies the State and local require-
ments applicable to the child care services pro-
vided. 
(2) FAMILY CHILD CARE PROVIDER.—The term 
‘‘family child care provider’’ has the meaning given 
such term in section 658P of the Child Care and 
Development Block Grant Act of 1990 (42 U.S.C. 
9858n). 
(3) INDIAN TRIBE.—The term ‘‘Indian tribe’’ 
has the meaning given such term in section 4 of the 
Indian Self-Determination and Education Assistance 
Act (25 U.S.C. 450b). 
(4) LEAD AGENCY.—The term ‘‘lead agency’’ 
means the agency designated under section 658D of 
the Child Care and Development Block Grant Act of 
1990 (42 U.S.C. 9858b). 
(5) SECRETARY.—The term ‘‘Secretary’’ means 
the Secretary of Health and Human Services. 
(6) STATE.—The term ‘‘State’’ means any of 
the several States, the District of Columbia, the 
Commonwealth of Puerto Rico, the Virgin Islands of 
the United States, Guam, American Samoa, or the 
Commonwealth of the Northern Mariana Islands.
(7) TRIBAL ORGANIZATION.—The term ‘‘tribal 
organization’’ has the meaning given the term in 
section 4 of the Indian Self-Determination and Edu-
cation Assistance Act (25 U.S.C. 450b). 
SEC. 4. FUNDS FOR CHILD CARE PROVIDER DEVELOPMENT 
AND RETENTION GRANTS, SCHOLARSHIPS, 
AND HEALTH BENEFITS COVERAGE. 
(a) IN GENERAL.—From amounts appropriated to 
carry out this Act, the Secretary may allot and distribute 
funds to eligible States, and make payments to Indian 
tribes and tribal organizations, to pay for the Federal 
share of the cost of carrying out activities under sections 
7, 8, and 9 for eligible child care providers. 
(b) ALLOTMENTS.—The funds shall be allotted and 
distributed, and the payments shall be made, by the Sec-
retary in accordance with section 5, and expended by the 
States (directly, or at the option of the States, through 
units of general purpose local government), and by Indian 
tribes and tribal organizations, in accordance with this 
Act. 
SEC. 5. ALLOTMENTS TO STATES. 
(a) AMOUNTS RESERVED.—
(1) TERRITORIES AND POSSESSIONS.—The Sec-
retary shall reserve not more than 1⁄2 of 1 percent 
of the funds appropriated under section 12(a), and
not more than 1⁄2 of 1 percent of the funds appro-
priated under section 12(b), for any fiscal year for 
payments to the Virgin Islands of the United States, 
Guam, American Samoa, and the Commonwealth of 
the Northern Mariana Islands, to be allotted in ac-
cordance with their respective needs. 
(2) INDIAN
TRIBES
AND
TRIBAL
ORGANIZA-
TIONS.—The Secretary shall reserve not more than 
3 percent of the funds appropriated under section 
12(a), and not more than 3 percent of the funds ap-
propriated under section 12(b), for any fiscal year 
for payments to Indian tribes and tribal organiza-
tions with applications approved under subsection 
(c). 
(b) ALLOTMENTS TO REMAINING STATES.—
(1) GENERAL
AUTHORITY.—From the funds 
appropriated under section 12(a) for any fiscal year 
and remaining after the reservations made under 
subsection (a), and from the funds appropriated 
under section 12(b) for any fiscal year and remain-
ing after the reservations made under subsection (a), 
the Secretary shall allot to each State an amount 
equal to the sum of—
(A) an amount that bears the same ratio 
to 50 percent of the appropriate remainder as
the product of the young child factor of the 
State and the allotment percentage of the State 
bears to the sum of the corresponding products 
for all States; and 
(B) an amount that bears the same ratio 
to 50 percent of such remainder as the product 
of the school lunch factor of the State and the 
allotment percentage of the State bears to the 
sum of the corresponding products for all 
States. 
(2) YOUNG CHILD FACTOR.—In this subsection, 
the term ‘‘young child factor’’ means the ratio of the 
number of children under 5 years of age in the State 
to the number of such children in all the States, as 
determined according to the most recent annual esti-
mates of population in the States, as provided by the 
Bureau of the Census. 
(3) SCHOOL
LUNCH
FACTOR.—In this sub-
section, the term ‘‘school lunch factor’’ means the 
ratio of the number of children who are receiving 
free or reduced price lunches under the school lunch 
program established under the Richard B. Russell 
National School Lunch Act (42 U.S.C. 1751 et seq.) 
in the State to the number of such children in all
the States, as determined annually by the Depart-
ment of Agriculture. 
(4) ALLOTMENT PERCENTAGE.—
(A) IN GENERAL.—Except as provided in 
subparagraph (B), for purposes of this sub-
section, the allotment percentage for a State 
shall be determined by dividing the per capita 
income of all individuals in the United States, 
by the per capita income of all individuals in 
the State. 
(B) LIMITATIONS.—For purposes of this 
subsection, if an allotment percentage deter-
mined under subparagraph (A)—
(i) is more than 1.2 percent, the allot-
ment percentage of that State shall be con-
sidered to be 1.2 percent; and 
(ii) is less than 0.8 percent, the allot-
ment percentage of the State shall be con-
sidered to be 0.8 percent. 
(C) PER CAPITA INCOME.—For purposes 
of subparagraph (A), per capita income shall 
be—
(i) determined at 2-year intervals; 
(ii) applied for the 2-year period be-
ginning on October 1 of the first fiscal
year beginning after the date such deter-
mination is made; and 
(iii) equal to the average of the an-
nual per capita incomes for the most re-
cent period of 3 consecutive years for 
which satisfactory data are available from 
the Department of Commerce at the time 
such determination is made. 
(c) PAYMENTS TO INDIAN TRIBES AND TRIBAL OR-
GANIZATIONS.—
(1) RESERVATION OF FUNDS.—From amounts 
reserved under subsection (a)(2), the Secretary may 
make grants to or enter into contracts with Indian 
tribes and tribal organizations that submit applica-
tions under this subsection, to plan and carry out 
programs and activities—
(A) to encourage child care providers to 
improve their qualifications; 
(B) to retain qualified child care providers 
in the child care field; and 
(C) to provide health benefits coverage for 
child care providers. 
(2) APPLICATIONS
AND
REQUIREMENTS.—To 
be eligible to receive a grant or contract under this 
subsection, an Indian tribe or tribal organization
shall submit an application to the Secretary at such 
time, in such manner, and containing such informa-
tion as the Secretary may require. The application 
shall provide that the applicant—
(A) will coordinate the programs and ac-
tivities involved, to the maximum extent prac-
ticable, with the lead agency in each State in 
which the applicant will carry out such pro-
grams and activities; and 
(B) will make such reports on, and conduct 
such audits of the funds made available through 
the grant or contract for, programs and activi-
ties under this Act as the Secretary may re-
quire. 
(d) DATA AND INFORMATION.—The Secretary shall 
obtain from each appropriate Federal agency, the most re-
cent data and information necessary to determine the al-
lotments provided for in subsection (b). 
(e) REALLOTMENTS.—
(1) IN GENERAL.—Any portion of an allotment 
under subsection (b) to a State for a fiscal year that 
the Secretary determines will not be distributed to 
the State for such fiscal year shall be reallotted by 
the Secretary to other States in proportion to the
original corresponding allotments made under such 
subsection to such States for such fiscal year. 
(2) LIMITATIONS.—
(A) REDUCTION.—The amount of any re-
allotment to which a State is entitled under this 
subsection shall be reduced to the extent that 
such amount exceeds the amount that the Sec-
retary estimates will be distributed to the State 
to carry out corresponding activities under this 
Act. 
(B) REALLOTMENTS.—The amount of 
such reduction shall be reallotted to States for 
which no reduction in a corresponding allot-
ment, or in a corresponding reallotment, is re-
quired by this subsection, in proportion to the 
original corresponding allotments made under 
subsection (b) to such States for such fiscal 
year. 
(3) AMOUNTS REALLOTTED.—For purposes of 
this Act (other than this subsection and subsection 
(b)), any amount reallotted to a State under this 
subsection shall be considered to be part of the cor-
responding allotment made under subsection (b) to 
the State.
(4) INDIAN
TRIBES
OR
TRIBAL
ORGANIZA-
TIONS.—Any portion of a grant or contract made to 
an Indian tribe or tribal organization under sub-
section (c) that the Secretary determines is not 
being used in a manner consistent with the provision 
of this subchapter in the period for which the grant 
or contract is made available, shall be used by the 
Secretary to make payments to other tribes or orga-
nizations that have submitted applications under 
subsection (c) in accordance with their respective 
needs. 
(f) COST-SHARING.—
(1) CHILD CARE PROVIDER DEVELOPMENT AND 
RETENTION GRANTS AND SCHOLARSHIPS.—
(A) FEDERAL SHARE.—The Federal share 
of the cost of carrying out activities under sec-
tions 7 and 8, with funds allotted under this 
section and distributed by the Secretary to a 
State, shall be—
(i) not more than 90 percent of the 
cost of each grant made under such sec-
tions, in the first fiscal year for which the 
State receives such funds; 
(ii) not more than 85 percent of the 
cost of each grant made under such sec-
tions, in the second fiscal year for which 
the State receives such funds; 
(iii) not more than 80 percent of the 
cost of each grant made under such sec-
tions, in the third fiscal year for which the 
State receives such funds; and 
(iv) not more than 75 percent of the 
cost of each grant made under such sec-
tions, in any subsequent fiscal year for 
which the State receives such funds. 
(B) NON-FEDERAL SHARE.—
(i) IN GENERAL.—The State may pro-
vide the non-Federal share of the cost in 
cash or in the form of an in-kind contribu-
tion, fairly evaluated by the Secretary. 
(ii) IN-KIND CONTRIBUTION.—In this 
subparagraph, the term ‘‘in-kind contribu-
tion’’ means payment of the costs of par-
ticipation of eligible child care providers in 
health insurance programs or retirement 
programs. 
(2) CHILD CARE PROVIDER HEALTH BENEFITS 
COVERAGE.—
(A) FEDERAL SHARE.—The Federal share 
of the cost of carrying out activities under sec-
tion 9, with funds allotted under this section 
and distributed by the Secretary to a State, 
shall be not more than 50 percent of such cost. 
(B) NON-FEDERAL
SHARE.—The State 
may provide the non-Federal share of the cost 
in cash or in kind, fairly evaluated by the Sec-
retary, including plant, equipment, or services. 
The State shall provide the non-Federal share 
directly or through donations from public or 
private entities. Amounts provided by the Fed-
eral Government, or services assisted or sub-
sidized to any significant extent by the Federal 
Government, may not be included in deter-
mining the amount of such share. 
(g) AVAILABILITY OF ALLOTTED FUNDS DISTRIB-
UTED TO STATES.—Of the funds allotted under this sec-
tion for activities described in sections 7 and 8 and distrib-
uted by the Secretary to a State for a fiscal year—
(1) not less than 67.5 percent shall be available 
to the State for grants under section 7; 
(2) not less than 22.5 percent shall be available 
to the State for grants under section 8; and 
(3) not more than 10 percent shall be available 
to pay administrative costs incurred by the State to 
carry out activities described in sections 7 and 8.
(h) DEFINITION.—For the purposes of subsections 
(a) through (e), the term ‘‘State’’ includes only the 50 
States, the District of Columbia, and the Commonwealth 
of Puerto Rico. 
SEC. 6. APPLICATION AND PLAN. 
(a) APPLICATION.—To be eligible to receive a dis-
tribution of funds allotted under section 5, a State shall 
submit to the Secretary an application at such time, in 
such manner, and containing such information as the Sec-
retary may require by rule and shall include in such appli-
cation—
(1) a State plan that satisfies the requirements 
of subsection (b); and 
(2) assurances of compliance satisfactory to the 
Secretary with respect to the requirements of section 
9. 
(b) REQUIREMENTS OF PLAN.—
(1) LEAD AGENCY.—The State plan shall iden-
tify the lead agency to make grants under this Act 
for the State. 
(2) RECRUITMENT AND RETENTION OF CHILD 
CARE
PROVIDERS.—The State plan shall describe 
how the lead agency will encourage both the recruit-
ment of qualified child care providers who are new 
to the child care field and the retention of qualified
child care providers who have a demonstrated com-
mitment to the child care field. 
(3) NOTIFICATION OF AVAILABILITY OF GRANTS 
AND BENEFITS.—The State plan shall describe how 
the lead agency will identify all eligible child care 
providers in the State and notify the providers of the 
availability of grants and benefits under this Act. 
(4) DISTRIBUTION
OF
GRANTS.—The State 
plan shall describe how the lead agency will make 
grants under sections 7 and 8 to eligible child care 
providers in selected geographical areas in the State 
in compliance with the following requirements: 
(A) 
SELECTION
OF
GEOGRAPHICAL 
AREAS.—For the purpose of making such 
grants for a fiscal year, the State shall—
(i) select a variety of geographical 
areas, determined by the State, that, col-
lectively—
(I) include urban areas, suburban 
areas, and rural areas; and 
(II) are areas whose residents 
have diverse income levels; and 
(ii) give special consideration to geo-
graphical areas selected under this sub-
paragraph for the preceding fiscal year.
(B) SELECTION
OF
CHILD
CARE
PRO-
VIDERS
TO
RECEIVE
GRANTS.—In making 
grants under section 7, the State may make 
grants only to eligible child care providers in 
geographical areas selected under subparagraph 
(A), but may give special consideration in such 
areas to eligible child care providers—
(i) who have attained a higher rel-
evant educational credential; 
(ii) who provide a specific kind of 
child care services; 
(iii) who provide child care services to 
populations who meet specific economic 
characteristics; or 
(iv) who meet such other criteria as 
the State may establish. 
(C) LIMITATION.—The State shall describe 
how the State will ensure that grants made 
under section 7 to child care providers will not 
be used to offset reductions in the compensation 
of such providers. 
(D) REPORTING REQUIREMENT.—With re-
spect to each particular geographical area se-
lected under subparagraph (A), the State shall 
provide an assurance that the State will, for
each fiscal year for which such State receives a 
grant under section 7—
(i) include in the report required by 
section 10, detailed information regard-
ing—
(I) the continuity of employment 
of the grant recipients as child care 
providers with the same employer; 
(II) with respect to each em-
ployer that employed such a grant re-
cipient, whether such employer was 
accredited by a recognized national or 
State accrediting body during the pe-
riod of employment; and 
(III) to the extent practicable 
and available to the State, the rate 
and frequency of employment turnover 
of 
qualified 
child 
care 
providers 
throughout such area, 
during the 2-year period ending on the 
deadline for submission of applications for 
grants under section 7 for that fiscal year; 
and 
(ii) provide a follow-up report, not 
later than 90 days after the end of the suc-
ceeding fiscal year that includes informa-
tion regarding—
(I) the continuity of employment 
of the grant recipients as child care 
providers with the same employer; 
(II) with respect to each em-
ployer that employed such a grant re-
cipient, whether such employer was 
accredited by a recognized national or 
State accrediting body during the pe-
riod of employment; and 
(III) to the extent practicable 
and available to the State, detailed in-
formation regarding the rate and fre-
quency of employment turnover of 
qualified child care providers through-
out such area, 
during the 1-year period beginning on the 
date on which the grant to the State was 
made under section 7. 
(5) CHILD CARE PROVIDER DEVELOPMENT AND 
RETENTION GRANT PROGRAM.—The State plan shall 
describe how the lead agency will determine the 
amounts of grants to be made under section 7 in ac-
cordance with the following requirements:
(A) SUFFICIENT
AMOUNTS.—The State 
shall demonstrate that the amounts of indi-
vidual grants to be made under section 7 will 
be sufficient—
(i) to encourage child care providers 
to improve their qualifications; and 
(ii) to retain qualified child care pro-
viders in the child care field. 
(B) AMOUNTS
TO
CREDENTIALED
PRO-
VIDERS.—Such grants made to eligible child 
care providers who have a child development as-
sociate credential (or equivalent) and who are 
employed full-time to provide child care services 
shall be in an amount that is not less than 
$1,000 per year. 
(C) AMOUNTS TO PROVIDERS WITH HIGH-
ER LEVELS OF EDUCATION.—The State shall 
make such grants in amounts greater than 
$1,000 per year to eligible child care providers 
who have higher levels of education than the 
education required for a credential such as a 
child development associate credential (or equiv-
alent), according to the following requirements: 
(i) PROVIDERS WITH BACCALAUREATE 
DEGREES IN RELEVANT FIELDS.—An eligi-