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Focusing on Fragmentation of Early Childhood Funding Overshadows the Real Issue: Inadequate Funding

It’s a common talking point: the main problems with the early childhood system are fragmentation and duplication of federal programs. But that axiom is as dubious as the predictable solution that often accompanies it: give states more flexibility. A closer look at federal funding streams and state administration of those funds, however, reveals that this so-called truth is not entirely accurate and the focus on it obscures the real problem: inadequate funding.

The American Enterprise Institute’s (AEI) recent brief states “fragmentation among federal funding streams is hindering growing state efforts to provide low-income working families with adequate access to high quality [child] care.”  It also discusses that a possible solution is to grant states greater flexibility in the use of funds across various funding streams. Over the last several decades, Congress has examined the issue of fragmentation and duplication in the early childhood system numerous times. There have been three major General Accountability Office (GAO) reports—in 1994, 2012, and 2017—on the topic, and numerous hearings. The result? GAO identified nine primary funding streams with the sole purpose of funding early care and education. When it comes to managing funds of the major programs, Congress gives complete discretion to states.

When it comes to managing funds of the major programs, Congress gives complete discretion to states.

As a response to the states’ pleas in the 1990s, Congress created two major block grants designed to give greater flexibility for use of federal funds: Temporary Assistance for Needy Families (TANF) and the Child Care and Development Block Grant (CCDBG). Many states used that flexibility as intended: to design programs that work best for families. Others instead used the flexibility to lower standards, drop quality, and cut valuable services for children and families. Only after nearly 20 years of experimentation did Congress realize that too much flexibility resulted in children being placed in unsafe and unhealthy child care settings subsidized by taxpayer money. In 2015, Congress reauthorized the CCDBG to institute basic health and safety standards in response. TANF, however, remains unchanged, with some states still using their flexible spending authority under the law to circumvent even the most basic of health and safety standards.

Now, with states having almost full authority on eight of the nine GAO cited programs and additional flexibility through block grants such as TANF, the question is…what more flexibility do states really need? And at what point do states begin to take responsibility for aligning programs and breaking down the silos that make it difficult for communities, programs, and families to access high-quality early care and learning?

While the federal government and Congress are not completely off the hook in contributing to fragmentation (Congress did, after all, assign implementation to different federal agencies for some of the listed programs), states bear much of the responsibility for creating the stovepipes in the early childhood system. And they already have the flexibility to change it. According to the AEI brief, some states, like Missouri, have already begun to do so. States like Georgia, Arkansas, North Carolina, and Maryland have also made great strides in streamlining the administration of their early childhood programs and have structured their systems so that only two state agencies, working together, oversee all programs.

The federal government, for its part, has undergone steps in the last several years to align programs and funding streams. The Department of Health and Human Services, Department of Education, and others established the Interagency Policy Board to ensure better alignment and address conflicts with regulatory guidance. Congress and HHS also worked closely to align child care and Early Head Start programs with the creation of the Early Head Start-Child Care Partnerships. Through the Partnerships, states like Georgia and Alabama are using federal resources to bring Early Head Start and child care programs into alignment, while enhancing the quality of services across the board—including in private-market child care—and expanding access to low-income infants and toddlers from working families.

At the heart of the matter is the unresolved issue of who is responsible for providing child care for our nation’s families, especially those whose income is too low to allow them access to quality care while they work.

Now to the most important question: funding. At the heart of the matter is the unresolved issue of who is responsible for providing child care for our nation’s families, especially those whose income is too low to allow them access to quality care while they work. The lack of an answer has resulted in constant finger-pointing, with states accusing the federal government of overregulation and Congress pointing to duplication, fragmentation, and overlap within federal agencies as the culprit. It’s time to decide who funds early care and education and move forward to secure adequate resources. Is it Congress, is it the states, or is it a shared responsibility? If it is a shared responsibility, then it is time for the states to stop using fragmentation and overlap as an excuse for their own inaction.  

What is causing many low-income working families to be denied access to high-quality child care is not overlap in federal funding streams; it’s a lack of funding altogether. The cost of providing quality care exceeds what most parents can afford to pay, and even families that qualify for subsidized programs may not receive assistance due to inadequate funding. Current CCDBG funding levels give access to only 11 percent of those eligible, and in most places across the country the subsidies that those families receive are not worth nearly enough to purchase high-quality care.

Because of this lack of funding, administrators at every level of the system must make decisions they wish they did not have to make and that are not in the best interest of children and families. The classic example of this is serving more children at the expense of quality, resulting in children receiving care that is subpar at best, unsafe at worst, and subsidized with taxpayer money. Some states have also manipulated eligibility levels and waiting lists so that fewer families are eligible and waitlists appear to be smaller. In other cases, they make it so difficult for families to re-determine their eligibility that families simply can’t keep up and fall off the rolls, freeing up the limited resources for another family, albeit temporarily.

In an unprecedented move in the 2018 Consolidated Appropriations Act, Congress started to address this lack of funding by adding $2.37 billion to CCDBG, nearly doubling discretionary funding for child care. Unfortunately, some states are considering using their “flexibility” to replace either their own state child care investments or TANF funds with the new discretionary child care funds. Since this is hardly what Congress intended, the states cannot blame Congress or the federal government for not meeting the needs of working families. This responsibility lies squarely on the shoulders of state governments.

Undoubtedly, at the end of the day, even with the new infusion of CCDBG resources, the child care system needs more funding to close the gap between what it costs to provide quality care and what parents can afford to pay. It is also apparent that for its part, Congress needs to be clearer on what is expected of funding. States should not even have an option to supplant TANF funds with the new CCDF funds.

Most young families cannot afford high-quality care. Providers—many of whom make poverty wages and are eligible for food stamps—cannot afford basic necessities for their own families. Private child care businesses find it increasingly difficult to provide high-quality services to low- and middle-income families while staying financially afloat. As a result, children suffer. Of course more can be done to promote alignment and efficiencies, particularly at the state level, but at the end of the day the reason the system is broken is chronic and severe under-investment. States should make optimal use of the new infusion of resources through CCDBG to improve the system, not try to cheat it or cling to the broken status quo. 

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