Child Care Subsidy Program Rules and Stability in Child Care Subsidy Receipt: A State-Level Analysis

Background: Child care subsidies, funded by Child Care and Development Fund (CCDF), is a key work support for about 1 million low-income families to help pay for child care. However, instability in families’ subsidy receipt (short subsidy-receipt spells and churning) has been a great concern for policymakers, as subsidy instability has negative implications for parents’ employment and child care stability. Prior studies have examined factors associated with subsidy instability. These studies, however, generally focused on individual-level factors and system-related factors within a state, providing limited implications on the role of state-level subsidy program rules in subsidy instability. The child care subsidy program is significantly divergent across states. Each state has its own eligibility criteria, reimbursement and copayment rates, and funding levels. These different policy regimes may have different influences on program outcomes, yet there is little evidence on what specific subsidy rules affect subsidy stability. Therefore, our study conducts a state-level analysis on how state subsidy rules influence state-level subsidy instability, controlling for family-level instability factors and state socioeconomic circumstances that could affect subsidy instability.

Methods: Multiple data sources were used. Using ACF-801 data (federal CCDF administrative data), state-level subsidy instability is measured by the median of subsidy spell lengths of all families in that state that started in each month of January through August 2013, and each spell was followed for two years. Data for state subsidy program variables come from the National Women’s Law Center’s annual reports on state child care subsidy policies. Included subsidy program rules are: (a) state CCDF fund per child; (b) income eligibility cutoff, (c) family copayment rates (d) state reimbursement rates; and (e) use of a waiting list. Family-level instability measures (income, employment, and family structure) come from the 2014 panel of the Survey of Income and Program Participation by aggregating family-level instability to state-level instability. We employed various data sources to create measures for state socioeconomic circumstances (e.g., American Community Survey, Bureau of Labor Statistics), including percentages of female households, non-white, and welfare caseload in the states and state unemployment rate. The pooled cross-sectional sample includes 342 state-month observations (38 states with valid median spell length X 8 months). We conducted linear regression models to estimate the associations between state subsidy program rules and the state median spell length, all else equal.

Preliminary Results: Our findings show that higher state funding per child and higher income eligibility cutoff were associated with longer median subsidy spells, while using waitlist was associated with shorter median subsidy spells. For other factors, increases in non-white among subsidy users were likely to increase the state median spell length.

Policy Implication: This study provides the first empirical examination of the role of state child care subsidy program rules on subsidy spell lengths, providing insights into state program rules that can improve child care subsidy stability.