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Innovative Strategies
for Financing
Quality Child Care
Anne Mitchell
Early Childhood Policy Research
2002
Outline of presentation
How we finance child care/early learning
Lessons from other fields
Innovative finance strategies
Crafting solutions that will work here
2
Child care is many things...
Child care centers
Family child care homes
Head Start or public pre-k programs
Nursery schools
School-age child care & recreation
Summer camps
“Informal” care (relatives, friends, and neighbors)
Partial wage replacement (e.g. paid parental leave)
Flex-time and other “family friendly” work policies
3
The Challenge...
Finding financing mechanisms that can…
educate & nurture children AND
support families AND
ensure a strong workforce overall AND
provide good jobs in child care
and are organized in a sensible framework
4
3 fundamental premises
1. Nearly all families need help paying for child
care/early education/out-of-school.
2. Services and infrastructure both need to be
supported financially.
3. All the beneficiaries of quality care must
contribute: not just families, but government
and employers the public and the private
sectors.
5
How do we finance it now?
Families pay for most
of it (60%)
Government pays for
some (39%)
The Private Sector
contributes about 1%
6
Government means...
Federal, state and local -- all have roles
Government generates revenue from
Taxes (income, sales and property)
Fees (permits, licenses, lotteries, etc.)
Other sources??
Allocates revenue in its annual budget
among many categories
7
The Private Sector means...
Employers
Deciding how
to use their
Unions
resources...
Philanthropy, including
space
United Way
time
The faith community
money
Business and civic leaders
8
Major federal govt. sources
Head Start = $6.7 Billion
Child Care & Development Fund = $4.8B
Child & Dep. Care Tax Credit = $2.7B
Child & Adult Care Food Program--$1.8B
TANF (Temporary Assistance to Needy
Families) = $3.5B for child care
21st Century Learning Centers = $1B
(all FY2002)
tax year 2000
transfer & direct
9
More federal sources...
Special Education (0-3s) -- $417 Million
Special Education (3-5s) -- $390 Million
Title I (preschool) -- $400 Million
Title I (Even Start) -- $250 Million
Early Reading First -- $75 Million
Early Learning Opportunities Act -- $25 Million
EC Educator Professional Development -- $15M
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What other fields?
Transportation
Housing
Health care
Higher education
11
Lesson #1 from other fields
#1 Public subsidies are available to all
families, regardless of income
Transportation: fares are ‘subsidized’ for all riders
Housing: Sec. 8, Low-Income Housing Tax Credit,
mortgage tax deduction
Health: all seniors get Medicare, poor also get
Medicaid
Higher Ed: Tuition same for all, financial aid grants
and loans
12
Lesson #2 from other fields
#2 Public support is an economic
development investment, not charity
Transportation & Housing: public subsidies
are investments in the construction industry
Higher Ed: public support is investment in
educated citizenry, financial aid has no stigma
13
Lesson #3 from other fields
#3 Programs/projects receive BOTH direct
financial assistance AND portable aid
Transportation: direct capital aid and low
fares for riders
Housing: equity for building construction and
rent subsidies for families
Higher Ed: direct appropriations to colleges
and financial aid for students
14
Other fields
Public support for all
families
Investment, not
charity
Direct and portable
aid
Child Care
Nearly all public funds
are for the poor
So, it must be
charity..
NO! that’s doubledipping!
15
How can we
do a better
job with
financing?
16
First, know where the money
for child care comes from...
Government
Generate and allocate
public funds in..
Social & Human Services
Health
Education
Justice/Crime Prevention
Higher Education
Philanthropy
Grants and donations
Families
Pay tuition and take
advantage of Tax Credits
Federal & state child care
tax credits, EITC, Child TC
Business & Unions
Dependent Care Assistance
Plans
Direct tuition assistance
17
MAXIMIZE current sources,
then consider creating new
sources via...
Government
Private Sector
Public-Private Partnerships
18
Exemplary
Finance Strategies
Government: Property, sales and
income taxes, & general revenues
Private: Employers and philanthropy
State-Local government partnerships
Public-Private partnerships
19
Finance Strategy:
Property Tax
Seattle, Washington
Families & Education Levy
raised property tax rate .23 mills per $1,000
of assessed value
generates average of $10 million per year
$3 million is dedicated to child care (ages 0-15)
tuition assistance to working families
program improvements (training, literacy projects)
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Finance Strategy:
Sales Tax
Pitkin County, Colorado (Aspen)
.45% tax generates $1.7 million per year
About $600,000 for child care each year
40% to the Child Care Trust Fund
60% for:
Child care resource and referral
Grants to child care programs for improvements
Tuition assistance to low-income working families
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Finance Strategy:
Sales Tax
California’s Prop 10 tobacco sales tax
Early childhood development, broadly
defined: child care, health, family
support, communication and research
$725 million annually
80% to county commissions
20% for statewide activities
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Finance Strategy:
Income Taxes
Federal DCTC and state DC tax credits
best practices: refundable, no income cap,
allowed expenses match cost of quality,
indexed for inflation, big enough to matter
Colorado’s child care contribution tax
credit = 25% of contribution amount up to
$100,000 for any taxpayer (1998 = $3 Million in
contributions, when limited to Enterprise Zones)
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Finance Strategy:
State Government
Washington Child Care Career
Development Wage Ladder
Pilot -- $4 million for 100-150 centers over
2 years
Raises of 50¢ to $4 an hour based on
education and experience
Uses TANF reinvestment funds
24
Finance Strategy:
State general revenue - Higher Ed
Campus Child Care Fund in New York
Grants to start, expand, renovate and
operate centers (renewable)
$7.3 million annual from Higher Education
budget for SUNY/CUNY campuses plus
$2.5 million in CCDF funds (total=$10.8M)
25
Finance Strategy:
State general revenue - Justice
Network of Children’s Centers in the Courts
(New York)
Began 1994, now 22 centers offering free dropin care for 47,000 children
Some also offer family support, comprehensive
referrals (health, CHIP, WIC, Head Start, etc.)
$975,000 annually from Court budget plus
$300,000 annually in CCDF funds
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Finance Strategy: Education
Early Childhood Program Aid (New
Jersey)
established in 1996 due to school finance equity
lawsuit Abbott v. Burke
School-day K and part-day preschool for 3- & 4year olds in 105 districts and full-day preschool
in 30 districts
$310 M for 99-00 school year -- $99 million for
preschool Uses TANF reinvestment funds
27
Finance Strategy:
State/local partnerships
Smart Start (North Carolina)
1 state and 100 county partnerships for
children
child care, health, family support
Goal: All children ready for school
$220 million from state general revenue
plus $19 million in private contributions
28
Finance Strategy:
Private - Philanthropy
Child Care Matters -- in 5 counties in SE
Pennsylvania
(Philadelphia area)
Community-wide initiative to improve quality of child
care, increase public/civic engagement, enact public
policy and increase state and local financing
$14.1 million from William Penn Foundation and
$3.75 million from United Way of SEPA
Began 1997, renewed through 2003
29
Finance Strategy:
Private - Employer
Bank of America (nationwide)
Funded Dependent Care Assistance Plan
$152/child/month -- in addition to regular
salary
$22 million annually
Benefit: Employee turnover 50% lower
30
Finance Strategy:
Public-Private Partnership
San Francisco Child Care Facilities Fund
City, business, and philanthropy contribute
• Providian Financial Services -- $400,000
• Miriam & Peter Haas Fund -- $300,000
• City of San Francisco -- $200,000
Since 1998, raised $4.8 million and leveraged
$10 million more (HUD) to make no-cost/lowcost loans to child care programs and family
child care providers
31
Finance Strategy:
Public-Private Partnership
Florida Child Care Partnership Act (1996)
State now budgets $10 million annually to help
working families afford child care
Incentive for employer contributions
Public sector and business contribute equally
Generates additional $10 million (total=$20M)
32
Solution #1:
Maximize current sources
Government
State and federal child
care funds, TANF
Head Start, Early HS
Education: State Pre-K
Local districts (Title I,
21st Century Comm’ty
Learning Centers)
Higher Ed, Justice,
Health departments
Families
Earned Income Tax Credit
Federal & state child care
tax credit & child tax credit
Business and Unions
Dependent Care Assistance
Plans for employees
Direct tuition assistance
Philanthropy
Grants and donations
33
Solution #2:
Create new sources
Government
Tax strategies
Budget strategies
Endowment/Trust
Funds
Private Sector
Scholarship Funds
Foundations, United
Way, employers
Employers supporting
their own employees
Public-Private Partnerships
Scholarship/Facilities/Quality Funds
United Way-Foundation Community Initiatives
34
Solution #3:
A better finance framework
We need a framework that...
Encourages public AND private investment
ADDs to what families already pay
Works for ALL families
Handles funds from multiple sources
Advances quality in all programs
Supports infrastructure & services
35
Remember “other fields”?
Compare reliance on user fees
100%
87%
80%
60%
40%
Child Care
Centers
41%
35%
Public
Transportation
Higher Education
20%
0%
Revenue from user fees
36
Principles of finance
Maximize revenue
government, families, business, philanthropy
Expand/create new sources of revenue
government, employers, philanthropy
Diversify revenue sources
Leverage through partnerships
Invest so price to families doesn’t increase
Adopt new frameworks, e.g. other fields
37
Lessons on strategy
1. Child care and…
2. Politically feasible opportunities
3. Long-term thinking
4. Multiple approaches, multi-faceted solutions
5. Leaders, partners, nontraditional advocates
6. Community variation
38
The essential questions...
1. What are we financing?
2. Who is it for?
3. How much will it cost – how much more
money do we need?
4. Who should pay for it?
5. What are the financing mechanisms?
6. How are we going to organize our finances?
39
Feasibility (is a new finance
mechanism worth the effort?)
What is the revenue-generating potential
(i.e., how much new money per year)?
Will the revenue increase or decrease
over time?
Is it durable & sustainable?
Is it winnable politically?
40
Questions to consider...
Given the examples, principles, and
lessons:
What are the strengths and
resources --in our state, in our
community -- to build upon?
How can we take action here?
41