Child care services are supplied by providers operating in varied settings: in center care, a child is cared for in a nonresidential setting and in family child care, a child is cared for in the home of a provider. Child care centers provide care outside of the home, but family child care is provided to a small number of unrelated children—typically fewer than six—in a provider’s home. Some child care centers and family child care homes also offer school-aged care for children before and after school. (See table 1.) Generally, children in center-based care and family child care have not yet started school and after-school care is offered to children in kindergarten through age 12. Research on child care quality identified two broad sets of attributes that pertain to quality in all child care settings: structural attributes of the child care environment and children’s daily interactions with their caregivers. Structural attributes of child care include characteristics such as child-to- staff ratios, the number of children per caregiver in a classroom; group size, the number of children assigned to a team of caregivers in a classroom; caregiver formal education; caregivers’ specialized training; caregiver wages; staff turnover; the amount of floor space per child; and health and safety features, such as frequent staff and child hand washing. Child-caregiver interactions refers to actual experiences that occur in child care settings, and include such attributes as caregiver sensitivity and responsiveness, caregiver participation in children’s play and learning activities, and language stimulation by caregivers. State and local governments are responsible for the oversight of child care providers that operate in their state. Each state establishes its own child care standards, determining the areas and types of providers that the standards will cover and the specific criteria that will be used to determine provider compliance. Most child care providers are required to meet a state’s standards to obtain a license to operate legally in a state. State child care standards primarily focus on the structural attributes of care. States can turn to organizations such as the National Association for the Education of Young Children (NAEYC) and the Maternal and Child Health Bureau (MCHB) in HHS’s Public Health Service that have developed standards based on research and professional practice. NAEYC, the nation’s largest association of early child professionals, was formed to improve professional practice in early childhood care and education and increase public understanding of high quality early childhood programs. NAEYC also accredits, through a voluntary system, early childhood centers and schools. In 1998, we reported that state licensing standards varied in the extent to which the standards reflected those of NAEYC and MCHB. For example, we found that only two states had standards for caregiver education and training that matched NAEYC standards. Typically, state standards tended to require significantly fewer years of education than the standards set by NAEYC. Thus, to achieve accreditation by a national accrediting body, child care providers may have to meet higher standards than those they would meet to obtain and keep a state operating license. Title I of the Personal Responsibility and Work Opportunity Reconciliation Act of 1996 (PRWORA) overhauled the nation’s welfare system by replacing the legal entitlement to cash assistance under the previous welfare program with the Temporary Assistance for Needy Families (TANF) block grant. Title VI of PRWORA amended the Child Care and Development Block Grant Act of 1990 (CCDBG) and combined CCDBG funds with the funding of three other federal child care programs. HHS named the combined set of funds the CCDF. Each state receives an annual CCDF allocation composed of funds from three separate funding streams: discretionary, mandatory and matching. Assessing the portion of CCDF funds states spend on quality improvement is complicated to some extent by the distinct set of rules covering each stream that determine the time period allowed for obligating and spending the funds. (See table 2.) Each state receives a share of the total amount of money in the discretionary funding stream, which is determined each year by the congressional appropriations process. A state’s share of discretionary funds is based on a formula stipulated in the statute. A state must obligate discretionary funds within 2 fiscal years after a grant award and spend the funds by the end of the following fiscal year. A state’s share of mandatory funds is based on the amount of funds the state received from a set of federal child care programs in a base year. Mandatory funds are available until they are spent. However, to receive federal matching funds, a state must obligate all mandatory funds by the end of the fiscal year in which they were awarded; maintain program spending of state funds at a specified level, referred to as a state’s maintenance of effort (MOE); and spend additional state funds above that level. States may spend more of their own funds on child care than the amount actually accounted for under CCDF’s MOE and matching requirements. Federal and state matching funds must be committed by the end of the fiscal year in which they are received and spent by the end of the following fiscal year. Finally, funds transferred from the TANF block grant represent an additional source of funds for the CCDF. PRWORA allowed states the flexibility to transfer up to 30 percent of TANF funds to the CCDF. Transferred TANF funds are treated as part of the discretionary funding stream and are subject to CCDF rules. States must spend at least 4 percent of their CCDF funds—of discretionary, mandatory and matching, but not of state MOE funds—for a given fiscal year on activities intended to improve the quality and availability of child care. Specifically, the law requires that states use at least 4 percent of these funds for activities to provide comprehensive consumer education to parents and the public, activities that increase parental choice, and activities designed to improve the quality and availability of child care. As stated earlier, HHS, through its regulations, has provided illustrative examples of activities designed to improve the quality of child care. In addition, the regulations permit other expenditures that are consistent with the intent of the regulation. This provision of PRWORA is known as the 4 percent set-aside. Congress also has earmarked money in CCDF’s discretionary fund for resource and referral services and school-age care, infant and toddler care and quality-related activities. Any funds expended for the activity beyond the designated earmarks can be used to meet the 4 percent set-aside requirement. Earmarked funds must be tracked and reported separately from 4 percent set-aside expenditures. For fiscal year 2001, Congress provided $19,100,000 for the resource and referral services and school-age care earmark, $100,000,000 for the infant and toddler earmark, and $172,600,000 for the quality-related activities earmark. These earmark amounts were continued for fiscal year 2002. HHS guidance for expenditure of the quality-related activities earmark includes activities similar to those approved for the 4 percent set-aside, but covers additional suggestions such as specific health activities, special needs child care and activities that support cultural diversity. To encompass the broad range of quality improvement initiatives that states are undertaking, including those allowed by the 4 percent set-aside provision and HHS’s regulations as well as strategies suggested in child care quality research and practice, we developed a framework for describing the initiatives and analyzing states’ expenditures on them. To assess evidence on the effectiveness of states’ initiatives that has been developed in the research community, we developed criteria for data and research quality that reflect GAO’s methodological standards and those of the broader policy research community. The CCDF 4 percent set-aside provision and HHS regulations specify several types of activities for which quality improvement funds may be expended but also allow states the discretion to include other activities. HHS also requires states to report total expenditures of 4 percent set-aside funds annually but does not require separate reporting for the quality improvement initiatives the states undertake. Thus, to examine states’ quality improvement expenditures, we developed a framework to guide data collection and analysis. Beginning with examples of the allowable activities included in the 4 percent set-aside provision and HHS regulations, we specified nine categories to characterize states’ initiatives. The categories are based on several sources. (See table 3.) Most categories—caregiver compensation, meeting state standards, safety equipment or improvement, caregiver education and training and resource and referral—are based on examples in the law and regulations. Because our analytic framework includes the full range of states’ quality improvement initiatives, including those funded by sources other than CCDF, we identified additional categories based on child care quality literature. On-site training and enhanced inspections were included as categories based on the Department of Defense’s child development program, which has been widely recognized as a model of high quality care. Incentives for achieving accreditation or exceeding standards is a category based on several studies of child care quality improvement strategies that look beyond the scope of activities cited in the law. The final category for other quality-related activities included initiatives that may be unique to a state and those that may foster the availability of high quality care, such as strategies that provide consumer education or increase parental choice. Because activities to provide comprehensive consumer education to parents and the public and increase parental choice were not included among the activities noted by the law or HHS regulations as designed to improve child care quality, we did not include these activities in our framework. However, states were free to report these or other quality-related activities when they construed them as such. Prior to and since CCDF’s creation, a large body of research on child care that included an analysis of its effects on children’s development has been accumulating. In 1990, the National Research Council assessed this research, focusing on the costs, effects and feasibility of child care policies and programs. As part of this assessment, the council concluded that child care quality is linked to children’s development. The council emphasized that it would be important for future research to examine exactly how the various components of quality affected children’s development, what magnitude of improvement in development could be expected from measured improvements in quality and, most importantly, whether the quality of child care has an effect on children’s development that is separate from that of family characteristics. Noting that studies using random assignment of children to differing child care arrangements of varying quality provide the most rigorous evidence of whether child care quality has an effect that is separate from family characteristics, the council also found that random assignment had been used rarely in studies of community-based child care settings. Pointing out the contributions of experimental designs, the term given to studies that employ random assignment, to research on early interventions for children from disadvantaged families, the council urged that experimental designs be used in future research on child care quality. Other reviews of the research on child care quality, while agreeing on the importance of looking at the effects of child care quality separately from the effects of family characteristics, acknowledged the practical difficulties of random assignment and recommended an alternative approach that uses advanced statistical methods and a comparison group, an approach known as quasi- experimental design. In conducting our assessment of research on the effectiveness of states’ quality improvement initiatives, we also used the criterion that to determine a program’s effect, an evaluation should employ an experimental or quasi-experimental design. Appendix I provides additional details about these designs and our complete scope and methodology. States reported undertaking resource and referral activities more than any other initiative. (See fig. 2.) Resource and referral services are identified in the CCDBG Act as an example of activities for which states may make expenditures for quality improvement. Two of the states we visited described the use of resource and referral agencies to deliver technical assistance to providers. In South Dakota, the state’s five resource and referral agencies provided child care providers with technical assistance needed to meet regulatory requirements. In Massachusetts, the child care agency used resource and referral agencies to assist providers in caring for children with special needs, such as a child with a disability. In collaboration with the state’s Department of Public Health, the Massachusetts child care agency developed a consultation program for special needs children. Consultation program representatives helped resource and referral agencies understand what a child’s needs were when placing the child with a provider. Three states described the use of resource and referral agencies as a vehicle for training. The South Dakota and California child care agencies used resource and referral agencies to deliver all training for child care providers. In Massachusetts, the state’s resource and referral agencies trained providers in using the Early Childhood Environment Rating Scale for self-assessments of quality, in using information technology and in early literacy. Providers who then implemented early literacy initiatives for their staff were offered rate increases. Initiatives received different proportions of total reported expenditures for quality improvement, using all funding sources. In addition to being the most frequently undertaken, states reported that resource and referral activities received a larger share of reported expenditures on quality improvement than did any other initiative, about 20 percent of all expenditures. (See fig. 3.) States reported undertaking several initiatives to improve caregiver qualifications and compensation. Eighty-two percent of the states funded an off-site caregiver training initiative. One example is the Teacher Education and Compensation Helps (TEACH) program, which provides caregivers with scholarships to attend college classes related to child development. TEACH began in North Carolina and has been replicated in 17 states. One-third of the states undertook initiatives to improve caregiver compensation through increased wages or benefits. For example, child care officials in Massachusetts use Quality Awards to reward child care staff and family child care providers with one-time bonuses for excellence in their work. A similar number of states reported funding on-site caregiver training, which provides caregivers with training and education opportunities at their place of employment. Officials in Wisconsin reported funding caregiver training for increased safety in family child care homes. Taken together, these initiatives received about 25 percent of the expenditures states reported. Most states also reported undertaking initiatives to assist providers in meeting state standards and to reward providers for exceeding state standards. Thirty of the 42 responding states reported providing funding to assist child care providers in meeting state licensing standards, such as California’s provision of funding to assist child care providers with health and safety standards and a variety of training requirements. Additionally, 29 of the 42 responding states reported funding safety improvements. For example, South Dakota’s health and safety funding offers child care providers up to 75 percent of the cost of safety equipment, such as windows designed to provide an escape route in the event of an emergency. Over half the states reported providing incentives for child care providers to become accredited or exceed state standards. Under its child care program, Wisconsin did so by setting the maximum reimbursement rate for providers that met accreditation standards, which exceed licensing standards, 10 percent higher than the regular reimbursement rate. Initiatives to assist providers in meeting state standards received about 13 percent of states’ reported quality improvement expenditures. However, although many states reported funding safety improvements and offering incentives for accreditation or exceeding standards, these initiatives received the smallest shares of funding. Half the states reported initiatives devoted to enhancing inspections of child care facilities, either by increasing the frequency or the thoroughness of such inspections. Although less commonly reported than several other initiatives, these inspection efforts received the second largest proportion of quality funds. Finally, over half the states reported undertaking initiatives in the all other activities category. These included consumer education campaigns and improvement of the quality and availability of care for special populations, such as infants, toddlers, and children with special needs. California, for example, reported funding a variety of other activities including school- age curriculum and material development and a program for infant/toddler caregiver training coordinators. The CCDF 4 percent set-aside funded nearly half of all state-reported expenditures on quality. (See fig. 4.) State funds were the next largest funding source, constituting almost one-third of all expenditures on quality improvement initiatives. States also made use of earmark funds, additional CCDF funds, and money available from TANF. Though some states did make use of funds available from private foundations and other sources, this constituted a negligible proportion of the total. The views of state officials in both the executive and legislative branches of state government are considered in the allocation of federal and state child care funds for quality improvement. Officials in four of the five states we visited cited the views of state officials and previous research as two key factors in their selection of initiatives. In four states, decisions on how child care funds are allocated among the various quality initiatives are determined through the legislative process. For example, in Massachusetts, the state legislature’s perspective and previous research were cited as reasons that most quality initiative funds were devoted to caregiver compensation. Officials we spoke with said the state legislature supported early literacy, which led officials to offer rate increases to providers that implemented early literacy initiatives. In addition, research led state officials to believe that improving caregiver compensation would increase child care quality. Therefore, these rate increases were meant to enable providers to improve caregiver compensation. (See fig. 5.) Officials in Tennessee explained that several factors—recent events in the child care community, the state legislature’s perspective, and research— influenced the state’s emphasis on enhanced inspections. The Tennessee lead agency director told us that in 1999, the accidental deaths of two children in a child care van prompted the legislature to focus on quality improvement initiatives. Subsequently, Tennessee instituted a policy of criminal background checks and an increase in the number of unannounced inspections of child care facilities. Tennessee’s distribution of funds emphasized this focus on inspections, as seen in figure 6. Tennessee now conducts six unannounced inspections of each facility per year. In addition, Tennessee officials consulted research on child care quality to inform their decisions but did not sponsor evaluation, pointing to the trade-off between funding evaluations and direct services to improve quality. Wisconsin officials told us that research and gubernatorial proposals influenced the selection of a range of quality improvement initiatives. State officials said they analyzed data on quality improvement programs, and consulted experts in the child care field. The state legislature and the governor also influenced priorities. For example, in January 1999, the governor put forth a proposal to direct $15 million into an Early Childhood Excellence Commission to develop high quality child care in low income neighborhoods. In South Dakota, the decision to emphasize resource and referral agencies was guided by previous research and the governor’s perspective. State officials relied on existing child care quality research for making choices about how to improve quality because they believed that sponsoring evaluations would be too resource intensive. On the basis of previous research findings, state officials believed training caregivers to be the central mechanism through which child care quality could be improved. After obtaining the governor’s support, child care officials directed funding to resource and referral centers to train caregivers. (See fig. 7.) By contrast in California, officials in the Department of Education, the CCDF lead state agency in that state, said that they have more discretion than other states in deciding which quality initiatives to fund. According to these officials, because the California Department of Education has its own constitutional officer, who is independent of the governor, California child care officials have more autonomy in their selection of initiatives. Department of Education officials explained that the department’s priorities—health and safety, best practices in early development and learning, and professional development—influenced the selection of a range of quality improvement initiatives. While HHS requires that states spend at least 4 percent of the CCDF on quality improvement, the majority of states reported expenditures for quality in excess of this minimum requirement in fiscal year 2000. In fact, in that year, 23 of 42 states reported expenditures representing 8 percent or more of the CCDF on quality related activities. We estimated that the percentage of the CCDF expended on quality ranged from 3 percent in California, Idaho and New Mexico to 38 percent in Kansas. (See table 4.) These reported expenditures are a snapshot of states’ expenditures for quality improvement in fiscal year 2000. Because of the distinct set of rules covering each of CCDF’s three funding streams, expenditures in that year by an individual state may have drawn on funds available from CCDF grants made in fiscal years 1998, 1999, or 2000. The percentage expenditure of funds from a particular fiscal year’s grant cannot be determined definitively until time limitations on all funding streams have expired. Among the 34 states that tracked the type of provider targeted, child care centers received over two-thirds of all expenditures for six initiatives that states targeted to individual providers. (See fig. 8.) However, nationwide, 55 percent of all children whose care involves CCDF assistance are attending child care centers and 32 percent of all children are in center- based care. Thus, centers receive a larger share of quality improvement expenditures targeted to providers than the share of CCDF-subsidized children in their care. In addition, while there was insufficient information in states’ responses to analyze initiatives devoted to informal care, the policy research community has expressed interest in quality improvement initiatives targeted on these providers because we have the least information about them and a significant number of children are cared for in informal settings. When we looked at expenditures on individual initiatives by the thirty-four states, we saw the same pattern of emphasis on centers. (See table 5.) For the six initiatives, centers received the majority of funds, followed by family child care. Moreover, for initiatives related to meeting standards, the proportion of expenditures devoted to centers was smaller than for other initiatives, but still greatly exceeded the proportion devoted to family child care and after-school care. However, when we examined expenditures on initiatives by individual states, the proportion of expenditures on quality improvement activities devoted to each provider type varied. (See table 6.) For example, Minnesota, Mississippi, Tennessee, Texas and Washington reported devoting 90 percent or more of quality expenditures to centers, and Delaware, Hawaii, Michigan, North Dakota, and Oregon reported devoting less than one-third of quality expenditures to centers. These differences can be explained in part by state-to-state differences in the proportion of children receiving CCDF subsidies that attend each type of provider. For example, in Michigan, 19 percent of children receiving CCDF subsidies attend centers, while in Tennessee, 73 percent of children receiving CCDF subsidies attend centers. Given the variation in the proportion of subsidized children attending center-based care, it would be reasonable for Michigan to devote relatively less of its quality expenditures to centers and for Tennessee to devote relatively more of its quality expenditures to centers. Because the CCDF set-aside is intended to improve child care for all children, the law allows states flexibility in developing programs and policies, including quality improvement initiatives and the types of providers targeted. While few states have evaluated the effectiveness of state quality improvement initiatives on children’s development, some studies provide useful findings about them. Officials in four of five states we talked to explained that states must make trade-offs between serving more families and conducting evaluations of their own quality improvement initiatives. Out of a handful of state-sponsored studies, a few had study designs that isolated an initiative’s effect and survey response rates that provided reliable estimates. The research on child care quality does not evaluate initiatives as actually implemented by states, but a few studies, using rigorous methods, show that some of the attributes of child care quality that these initiatives address, such as caregiver qualifications, affect children’s social, emotional and cognitive development. HHS has begun to support some analyses of states’ quality improvement efforts and could play an even more important role in supporting rigorous studies of the initiatives states are undertaking. Of the handful of studies that examined the effectiveness of states’ initiatives, three had methodological approaches sufficient to produce conclusive findings. In considering studies of the initiatives’ effectiveness, we looked primarily for studies that analyzed the effect of an initiative on children’s development. We also considered studies that examined effects on attributes of child care quality, such as caregiver qualifications or turnover. Improvements in attributes of child care quality can be seen as an intermediate step toward strengthening children’s development One of the three studies with conclusive findings, sponsored by Florida, analyzed how Florida’s implementation of more stringent child-to-staff ratios and caregiver education requirements in child care centers was related to children’s cognitive and socio-emotional development over time. The two other studies with conclusive findings, sponsored by Massachusetts and Washington state, examined caregiver compensation and caregiver recruitment and retention rates. Taking measures of child care quality and children’s development before and after Florida instituted more stringent teacher-to-child ratios and caregiver education requirements, Florida’s study found that a reduction in child-to-staff ratios and an increase in early education requirements for center providers contributed to gains in children’s development and the quality of early education and care they received. The study’s design allowed the contribution of child-to-staff ratios and caregivers’ education to children’s development to be examined, but, without a comparison group, was unable to isolate their effects completely. However, this limitation did not compromise the study’s findings. Massachusetts’s recruitment and retention study examined caregiver compensation, conducting a survey of providers regarding the reasons for the shortage and high turnover of providers in child care centers across Massachusetts. The study confirmed findings of other studies that caregivers who receive low wages are difficult to hire and retain. However, the study design it employed did not rule out explanations other than low salaries for the association between high turnover rates and workers receiving low wages. Washington State also evaluated caregiver compensation and retention, using a quasi-experimental design, but found no effect of the compensation on retention. It is important to acknowledge that while we looked at all of the studies we identified for evidence of the effectiveness of state initiatives, the studies that states sponsored may not always have been designed for that purpose and in some cases provided useful data on other issues that they were intended to address. For example, when the data sources used in nonexperimental studies meet data quality standards, as did data collected for the Massachusetts recruitment and retention study, state-sponsored studies can provide reliable information that is needed to address program design issues, such as setting reimbursement rates; to assess program implementation, such as examining the number of caregivers that have acquired training in child development; or to understand the child care market, such as determining the number of providers that offer health benefits to their caregivers. Studies that collect this type of descriptive information also help in planning research that employs rigorous designs. We also recognize that more definitive studies are labor and resource intensive; studies that employ experimental designs are difficult and expensive to conduct. Similarly, surveys that involve low-income families, which may be needed for studies using quasi-experimental designs, require special procedures, such as the use of financial incentives or several rounds of follow-up with nonrespondents, to achieve a response rate that meets minimum data quality standards. Moreover, while state child care agencies may partner with universities or contract research organizations to conduct such studies as CCDF funding sources permit, officials in four of the five states we talked to explained that states must make trade-offs between serving more families and conducting evaluations of their own quality improvement initiatives. The remaining studies we identified did not meet our criteria for data quality, because of low survey response rates or self-selected samples. California conducted a comprehensive study of caregiver compensation, and Massachusetts conducted a second study of caregivers’ salaries, but both studies had very low response rates. North Carolina examined the reliability of criteria used in the state’s incentive for accreditation initiative, but the sample of providers they studied was self-selected and included few centers with low quality ratings. California also evaluated a statewide toll-free telephone line using administrative and survey data but this survey had a very low response rate. The results of our assessments of particular studies are described in greater detail in appendix II. The extensive body of research on child care quality that has been developed over the past 20 years has laid the foundation for understanding how the quality of care affects children’s progress. Child care research studied a variety of child care quality attributes and a few studies provided evidence of the effects of these attributes on children’s developmental progress. We examined reviews of the broad range of studies in this area to supplement the studies available on states’ initiatives. While the findings of this research suggest that some states’ initiatives are attempting to influence aspects of child care that have demonstrable effects on children’s development, this is not sufficient to determine that these initiatives are necessarily effective as implemented. In 2000, the National Research Council conducted a second methodological review of research on early childhood development that included research on child care quality. The council, like a team of reviewers sponsored by HHS’s Office of the Assistant Secretary for Planning and Evaluation and a team of reviewers sponsored by a foundation, examined the relationship between the structural attributes of quality and child-caregiver interactions on children’s developmental progress. (See table 7.) The reviewers found that structural attributes, such as caregiver qualifications, child-to-staff ratios and smaller group size, lead to developmental gains directly or fostered supportive and responsive caregiver behavior. All reviewers concluded that child- caregiver interactions that are responsive and supportive have positive effects on children’s developmental progress. Each of these reviews also emphasized that studies of the effect of child care quality on child development should employ study designs and statistical methods that separate the effects of family characteristics on children’s development from the quality of the child care setting. The third review in table 7 includes a detailed discussion of the study designs and statistical methods, other than experimental design, that can be used to isolate the effect of child care quality. Among the large number of studies that were reviewed, the findings of those that met these criteria are summarized in appendix III. These studies have shown relationships between structural attributes, child-caregiver interactions and children’s developmental progress that suggest many state initiatives are targeted on aspects of child care settings that have the potential for enhancing developmental outcomes. However, this is not sufficient to conclude that states’ initiatives are necessarily effective in enhancing child care quality. Such a conclusion would presume that they are not only targeted on aspects of child care quality with the potential to improve developmental outcomes, but that they are reaching providers in need of help and reflect the individual attributes and the context in which they were studied originally. For example, because many studies were conducted at an earlier time period, the qualifications of the caregivers studied may differ from the pool of caregivers available in the current labor market. In addition, the populations of providers that were drawn at the state or substate level are not necessarily similar to the populations of other states. Thus, while existing research findings help states plan their initiatives, rigorous evaluations of initiatives actually implemented by the states are needed to provide evidence of the initiatives’ effectiveness. Using CCDF funds set aside for research, demonstration and evaluation by the 2001 Consolidated Appropriations Act, HHS has developed a research agenda that includes studies of child care quality and a commitment to rigorous evaluation. HHS’s research agenda covers three goals and four categories of activity. The goals are (1) improve the capacity to respond to policy questions, (2) strengthen data collection and analysis systems for child care research, and (3) increase knowledge about the effectiveness of child care policies and programs on child development and in helping low- income families obtain and retain work. HHS supports these goals by funding state research partnerships, field-initiated research, demonstrations and evaluations and data collection and analysis systems for child care research. Of 23 quality-related on-going research projects HHS identified for us, components of three projects are investigating quality improvement initiatives. With funding in the state research partnership area, Minnesota and Massachusetts are examining how tiered reimbursement strategies affect child care quality. Minnesota’s study is a component of a child care research partnership grant and Massachusetts’s is part of a grant that supports state data and research capacity building. Under the same grant, Massachusetts is evaluating the impact of caregiver compensation strategies on the quality of care. In addition, HHS has undertaken a multiyear evaluation of the implementation, net impact and benefits of selected state child care policies and strategies that will be conducted using experimental design to determine if there are effects. Currently in its first year, this 7-year, 9 million dollar study will examine state strategies in four locations. HHS has taken an important first step by initiating this evaluation. However, to represent the diversity of the 50 states and their quality improvement approaches, more research that employs experimental or quasi-experimental designs will be needed to determine the effectiveness of states’ quality improvement initiatives. Few states have evaluated the effectiveness of their quality improvement initiatives. While current research provides states with promising directions in which to target their efforts, it offers little specific guidance on how to modify ongoing initiatives or the most cost effective placement of additional expenditures to improve quality. This limits states’ capacity to sustain and enhance initiatives that effectively improve the quality and availability of child care. Having additional rigorous research in this area would provide important information to both policymakers and administrators at all levels of government and support the Congress’ efforts to improve child care quality. We recommend that HHS include in its planned multiyear evaluation of the net impact and benefits of state child care policies, an analysis of the effects on children’s development of selected state quality improvement initiatives, such as off-site caregiver training or enhanced inspections. We obtained comments on a draft of this report from HHS’s Administration for Children and Families (ACF). These comments are reproduced in appendix IV. ACF also provided technical clarifications, which we incorporated when appropriate. HHS generally agreed with the findings of our report, expressing appreciation for the work we have done that makes the case for more research that evaluates the effectiveness of state quality improvement initiatives. HHS also described the department’s role in supporting studies of states’ initiatives and mentioned the technical assistance it provides states about relevant research findings through initiatives such as the National Child Care Information Center and the Healthy Child Care America campaign. In reference to our recommendation that HHS initiate research on state quality improvement initiatives, HHS expressed optimism that one or more of the analyses of state child care subsidy strategies in the multisite evaluation it is undertaking will test the effectiveness of state quality improvement initiatives. As requested, unless you publicly announce its contents earlier, we plan no further distribution of this report until 30 days after the date of this letter. At that time we will send copies of this report to the Secretary of Health and Human Services, appropriate congressional committees, and other interested parties. In addition, the report will be available at no charge on the GAO Web site at http://www.gao.gov. If you or your staff have any questions about this report, please contact me on (202) 512-7215 or Betty Ward-Zukerman, Assistant Director on (202) 512-2732. Other staff who contributed to this report are listed in appendix V. We studied the initiatives that the states have implemented to improve child care quality. Our assessment examined two questions: (1) what initiatives have states undertaken with the 4 percent quality set-aside and other funding sources and (2) what evidence has been gathered, if any, about the effectiveness of states’ quality improvement initiatives? The scope of our study was broader and more detailed than CCDF- mandated state reports because we asked states for data beyond what they reported to HHS. States receiving CCDF money must report to HHS aggregate expenditures to meet the set-aside requirement for child care quality improvement. However, states are not required to report to HHS how much they spend on specific quality improvement initiatives or which initiatives have shown evidence of effectiveness. Moreover, state or local governments may spend more money on quality improvements, using state funds or other resources, than is reflected in CCDF-mandated reports to HHS. We asked states to report all expenditures in federal fiscal year 2000 by initiative, including those made with CCDF funds that may have been appropriated in prior fiscal years but spent in federal fiscal year 2000, plus funds from other sources. The CCDBG Act and HHS regulations give states discretion in deciding how to spend money to meet the 4 percent set-aside requirement. The set- aside may be spent on activities to provide comprehensive consumer education, parents’ choice of child care and on activities designed to improve the quality and availability of care children receive. The CCDBG Act defines quality in terms of activities states may undertake to meet the set-aside provision’s requirements. The act includes two provisions that apply to parents seeking child care: (1) comprehensive consumer education for parents and the public and (2) increased parental choice. The act identifies expenditures on these two activities as appropriate uses of set-aside funds but does not cite them as examples of child care quality and availability improvement activities. The provision does cite resource and referral services as an example of an activity designed to improve the quality and availability of care. Similarly, HHS regulations for the CCDF 4 percent set-aside aim at improving parents’ child care knowledge and choices and at improving the quality and availability of care children receive. The regulations include comprehensive consumer education and increasing parental choice as “quality” activities. The regulations state that activities to improve the quality of child care may include, but are not limited to, the following: Improving resource and referral programs Making grants or loans to providers to assist in meeting child care standards Improving compliance with and enforcement of state and local licensing requirements Providing training and technical assistance to providers in health and safety, nutrition, child abuse detection and prevention, and care of children with special needs Improving salaries and compensation for staff who provide child care services. The regulations also include a provision that allows expenditures for any other activities that are consistent with the intent of the 4 percent set-aside section, which grants states considerable discretion. Because of the discretion that the law and HHS regulations allow states in selecting quality improvement initiatives, collecting information on quality improvement across all states required a common set of categories. The starting point for constructing categories for states’ quality improvement initiatives was the CCDBG Act and its regulations. However, the quality improvement activities specified in the law and regulations did not include all of the initiatives states are undertaking to improve the quality of care children receive. To ensure that our study analyzed all state spending for child care quality improvement, we developed nine categories for states’ child care quality improvement initiatives and asked states in which categories they funded activity, how much they spent, and the funding source. We developed the categories by combining federally designated activities with initiatives from contemporary child care quality analyses. To address the limitations of the federal activities, to create a more complete picture of state child care quality initiatives and to capture innovations in child care improvement, we added three categories to the federal categories. Two were derived from quality improvement initiatives undertaken by the Department of Defense’s military child development program and one category was derived from literature analyzing child care quality improvement. An “other quality-related activities” category was added because the regulations were not exhaustive and permitted states to develop initiatives not listed in regulations, provided that they were consistent with them. Thus, the category for other quality-related activities included initiatives that may be unique to a state and those that may foster the availability of high quality care, such as strategies that provide consumer education or increase parental choice. Because activities to provide comprehensive consumer education to parents and the public and increase parental choice were not included among the activities noted by the law or HHS regulations as designed to improve child care quality, we did not include these activities in our framework. However, states were free to report these or other quality-related activities when they construed them as such. Table 3 in the background section lists the nine initiative categories, their derivation, and descriptions. We surveyed CCDF lead state agency officials in the 50 states and the District of Columbia, asking that they report how much their state spent in each of the nine categories, the percentage of funds spent from each funding source in each category, types of providers and caregivers that initiatives targeted, and other information. For initiatives that included spending in more than one category, we asked state officials to record the spending for that initiative in the predominate category. When the draft data collection instrument was complete, GAO analysts and methodologists conducted a pretest in 4 states to ensure that the data collection instrument was clear and could be answered accurately in a reasonable amount of time. We made changes in the data collection instrument to incorporate comments from the pretest. Using a list of lead CCDF state agencies that was provided by HHS, we sent the data collection instrument on December 6, 2001, to 50 states and the District of Columbia by facsimile. The survey relied on state self-reporting of quality improvement initiatives and expenditures. While we did not independently verify states’ reports, we compared state survey responses to data collected from our case study sites to provide some checks on the validity of state responses and cross- checked states’ estimates of 4 percent set-aside expenditures. We compared state expenditure data reported in the data collection instrument with expenditure data that states reported to HHS and resolved discrepancies through interviews with state officials. We worked with state officials to ensure a uniform understanding of the categories but the possibility exists that 2 states might have categorized similar initiatives differently. Forty-two of the 50 states and the District of Columbia responded to the survey, yielding a response rate of 82 percent. However, the District of Columbia’s complete data collection instrument was not received in time to be included in our analysis. For the analyses of how states’ devoted expenditures to providers of different types, we supplemented our survey data with data on CCDF- subsidized children from the House Committee on Ways and Means’s Greenbook. We selected California, Massachusetts, South Dakota, Tennessee and Wisconsin as case study states. Our selection criteria included diversity in geography and population density; representation of a variety of child care quality improvement initiatives, such as direct and indirect attempts to improve caregiver compensation, initiatives directed at informal care giving; and whether a state used tiered reimbursement rates as incentives for quality improvement. We also considered the population’s income distribution, licensing caseloads, use of Temporary Asistance for Needy Families funds, and whether state licensing requirements reflected NAEYC recommendations for child-to-staff ratios. We excluded states where we pretested our data collection instrument to minimize burden on any single state. The purpose of the case studies was to collect data that would explain or amplify data gathered by the data collection instrument. The case study protocol allowed state officials to provide explanations about what initiatives had been conducted, what factors influenced the state to undertake particular initiatives, what evaluations the state had performed, what innovations the state was undertaking, and whether the state had any unusual needs or problems in child care. Question 2 asked us to examine the evidence that had been gathered, if any, about the effectiveness of states’ quality improvement initiatives. We sought evidence of effectiveness in evaluations of the initiatives. We employed several search strategies to identify the evaluations. In our survey of CCDF lead state agencies, we asked states to identify evaluations they had conducted. We contacted HHS officials and child care researchers regarding their efforts to evaluate child care quality and reviewed major research efforts. Our review included a discussion with experts engaged in a study of child care quality funded by HHS’s Child Care Bureau. We also reviewed the literature on child care quality improvement initiatives, including information from previous GAO work, literature suggested by experts and information from electronic searches. Our review included both searching for studies on the effectiveness of quality improvement initiatives and conducting a citation search using a highly regarded state evaluation of child care quality improvement and an electronic search for reviews of research on child care quality. We also reviewed state reports regarding child care subsidies. From our survey and search strategies, we obtained reports from nine states that had sponsored research on quality improvement initiatives. We used a structured data collection instrument to analyze the reports. We collected information on the type of report, the report’s timeframe, quality improvement initiatives studied, design, data collection and analysis methods and findings. In addition, we assessed the study’s methodological strengths and limitations. Our assessment included both the quality of the data used in the evaluation and the methodological quality of the research. The criteria we used for assessing the data’s quality are shown in table 8. While we recognized that the administrative data were not collected to meet research standards, we paid particular attention to the administrative data’s completeness and the surveys’ response rates. When 30 percent or more of the administrative or survey data were missing, we looked for analyses showing no important difference between individuals represented in the data and those who were not included. Our assessment of the evaluations focused on the designs and analysis methods required to determine effects. The criteria we used in the assessment are shown in table 9. An evaluation determines a program’s effect on its participants by isolating a program’s contribution from the effects of other influences that could have affected participant outcomes. To isolate the program’s influences, an evaluation studies two groups: those receiving program services and a similar group not receiving program services. Researchers compare the relevant outcomes of these two groups, such as children’s socioemotional development, to determine the program’s effect. The criteria for study design in table 9 apply to two types of evaluations: an experimental design and a quasi-experimental design. The two designs differ primarily in the way that the comparison groups are developed. In an experimental design, because comparison group members are selected randomly, researchers can compare outcomes to determine the program’s effect without using statistical controls for other factors that could have influenced the program. In a quasi-experimental design, the comparison group is composed of individuals who share characteristics with program participants, but who have not been randomly selected and who have not received program services. With this design, statistical controls, such as those provided by a multivariate analysis procedure, are needed to isolate the program from other factors that could influence outcomes. While there can be substantial practical difficulties in implementing experimental designs of social programs because program staff may be reluctant to participate and because of the tendency for comparison group participants to leave the study, there is no substantial debate about the desirability of a comparison group of some type in drawing conclusions about program effects. The criteria for assessing the administrative and survey data used in the evaluations were the same data quality criteria we discussed above. The criteria for data analysis in table 9 refer to the need to control for factors other than the program when program participants and comparison group members are not randomly selected. They also encompass additional analyses that may be needed if the group receiving program services and the comparison group were not randomly selected or to determine if missing data affect the reliability of the estimates of the program’s effect. Finally, several of the studies we assessed and the reviews of child care research we examined made reference to scales for measuring child care quality. In child care quality research, the structural attributes of quality are measured directly by, for example, counting the number of children per caregiver in classrooms or the years of education that a caregiver has attained. However, because child-caregiver interactions must be observed and recorded for research purposes, researchers have developed various scales to measure it. These scales contain numerous items that evaluate the areas of personal care routines, furnishings, language reasoning experiences, motor activities, creative activities, social development, and staff needs. Three of the most well known scales used in measuring process quality are the Early Care Environment Rating Scale (ECERS), the Infant/Toddler Environment Rating Scale (ITERS), and the Family Day Care Rating Scale (FDCRS). The ECERS and ITERS scales measure child- caregiver interactions at center-based care while FDCRS measures process quality in child care homes. One of the reviews assessed the scales’ strengths and limitations. The strengths of these three scales are their ease of use, reliability, good psychological measurement properties, and ability for cross-study comparisons. However, the reviewer pointed out, these scales also have some limitations. For example, their global composite scores combine features of various environments and influences when some of these areas may have greater influence on children’s development as compared to others. Additionally, these scales are setting-specific which means it is not possible to make simple comparisons across types of care or to combine scores in meta analyses. Another review pointed out that none of the existing scales include measures for the aspects of informal care that parents see as important, including such characteristics as shared values and language, a homelike atmosphere, the opportunity for a child to be cared for with siblings, and flexibility about hours and schedule. Table 10 presents studies that we identified as attempting to examine the effectiveness of state quality improvement initiatives. They are ordered so that studies that meet GAO’s criteria for data and research quality are presented first. The table provides the study’s title, the quality improvement initiative the study examined, major findings, and methodological strengths and limitations. Studies in the table were conducted or sponsored by the state. Appendix III presents findings from two of the reviews of research on child care quality, discussed in the letter of the report, that found effects of the structural attributes of quality and child-caregiver interactions on children’s developmental progress. These two reviews provided sufficient methodological detail about the studies they assessed to identify those that met the criteria for analyses of the effects of child care quality that we describe in appendix I. The findings from these reviews are broken out in appendix III by those that are linked to children’s socio-emotional development, cognitive development, and development over time. We present only findings of studies the reviewers examined that could isolate the effect of child care quality on children’s development. The attributes that underlie the quality improvement initiatives being implemented by the states are primarily structural. These include child- teacher ratios, group class size, caregiver formal education, caregiver specialized training, classroom structure, and health and safety features. While research shows that child-caregiver interactions are equally as important in improving the quality of child care, states’ initiatives tend to address these attributes only through such initiatives as incentives for achieving accreditation. Thus, findings from research examining structural attributes may be more useful for targeting states’ quality improvement initiatives. Several studies have determined that children cared for in high quality child care settings show positive socio-emotional development. Lower child-to-adult ratios and smaller class sizes improve children’s social and emotional development. Lower child-to-adult ratios result in children appearing less apathetic and distressed; fewer behavior problems at 24 and 36 months of age; enhancements in children’s social development;and teachers and children interacting more beneficially. Smaller class size has been linked with children being more cooperative and less hostile and conflict-prone in their interactions with others; fewer behavior problems at 24 and 36 months of age; and enhancements in children’s social development. Additionally, researchers have found that when caregivers have more formal education and specialized training, children are more cooperative, have fewer behavior problems at 24 and 36 months of age, and have a greater security of attachment. Low staff turnover is associated with children being more competent in social development, and higher staff wages are linked with higher-quality centers. Finally, children appeared happier and more positively engaged with their classmates when their caregivers were more involved, positive, and responsive with them. Children showed greater interest and participation when centers had ECERS scores in the high-quality range. Child care quality research also has found that high quality care contributes to improvement in children’s cognitive development. Lower child-to-staff ratios are linked with enhancements in children’s cognitive development, including improvements in general knowledge, receptivity to language, and at 36 months, school readiness, and language comprehension scores. Smaller groups are associated with enhancements in children’s cognitive development, school readiness, and language comprehension scores. Caregiver education and training are also associated with better cognitive development in children. More highly educated or trained caregivers have been found to improve children’s school readiness and language comprehension scores. In addition, low staff turnover is associated with children being more competent in language development. The experiences that occur in the environment in which children are cared for are also linked to cognitive development. Higher quality experiences are associated with children performing better on tests of language,intelligence, and reading. In addition, child-to-caregiver interactions are linked to better cognitive development and improvements in cognitive competence during free play after participating in activities involving art, playing blocks, and dramatic play. Caregiver language stimulation (in both centers and homes) is associated with better performance on standardized language tests. Studies that examined children’s development over time have shown that high quality care is a predictor of improvement in children’s receptive language and functional communication skills, verbal IQ skills, cognitive skills, behavioral skills, and attainment of higher math and receptive language scores. Changes in these skills can be detected with greater certainty when examined over time. When children attend classrooms that meet recommended child-to-staff ratio guidelines, they exhibit better receptive language and communication skills over time. However, when children attend classrooms with higher than recommended child-to-staff ratios, the children, once they reach preschool and kindergarten, are rated by their teachers as being more difficult and hostile. In addition, these children tend to engage in less social play and display less positive emotions. Caregivers with more specialized training were associated with children having higher math and receptive language scores over time. Girls whose caregivers had at least 14 years of education displayed better cognitive and receptive language skills over time. On the other hand, once in preschool and kindergarten, children who (during their first 3 years of age) attended child care where caregivers had no formal child development training or where they were cared for by more than two primary caregivers in a year, were rated by their teachers as being more difficult and hostile. In addition, those children engaged in less social play and displayed less positive emotions. Finally, when more involved and invested caregivers care for children during their first three years, kindergarten teachers report that those children have fewer behavior problems and better verbal IQ scores. In addition, higher quality experiences are associated with children exhibiting better receptivity to language and communication skills over time. In addition to those named above, the following individuals made important contributions to this report: Cara Jackson, in collaboration with methodologists from our Advanced Research Methods (ARM) team, designed the data collection instrument used to survey CCDF lead state agencies, oversaw data collection and designed and conducted the analysis of the states’ quality improvement initiatives and expenditures; Cara also contributed to selection of the 5 case study states, development of the case study protocol and collection of case study data; Jyoti Gupta, of GAO’s Atlanta Field Office, lead case study data collection and analysis and played a major role in the research assessment; James Wright and Joel Grossman of ARM lead design and development of the data collection instrument; and Bill Keller provided timely insights and consultation on CCDF funding and expenditure patterns and block grant implementation issues. 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Summary: The demand for child care has increased dramatically in the past several decades as the number of mothers who work outside the home has grown. Welfare reform has further increased this demand. To support low-income parents moving into the workforce, welfare reform established the Child Care and Development Fund (CCDF). In fiscal year 2000, states spent $5.3 billion in CCDF funds to subsidize child care for low-income families. Out of concern for the quality of care that the CCDF funds, welfare reform legislation also required states to set aside at least 4 percent of the total grant to improve the quality and availability of child care. Department of Health and Human Services (HHS) regulations provide examples of allowable activities, such as providing child care providers with financial incentives for meeting state and local standards, improving the compensation of child care staff, and offering resource and referral services. However, the regulations do not limit states' use of funds to these activities; rather, the fund's block grant structure allows states considerable flexibility in choosing appropriate quality and availability improvements to pursue. Using primarily the four percent quality set-aside, states reported undertaking a variety of child care quality improvement initiatives, such as training caregivers, raising the compensation of caregivers, referring parents to child care providers, and efforts to enhance the safety of child care facilities. Although few states have evaluated the effects of their quality improvement initiatives on children's development, some studies provide useful findings about them. The research on child care quality does not evaluate initiatives as actually implemented by states, but a few studies, using rigorous methods, show that some of the attributes of child care quality that these initiatives address, such as caregiver qualifications, affect children's social, emotional and cognitive development.