Take the Subsidy or Not? What Family Child Care Provider Characteristics Influence Their Use of the Federal Child Care and Development Fund

Background and Purpose

Family child care providers (FCC) operate their small child care businesses from their homes and are registered or licensed through the state. A steep decline in the number of FCCs over the last decade has resulted in fewer suitable child care options for low-income families. The federal Child Care and Development Fund (CCDF) is the largest source of child care subsidy for low-income families and is an important source of revenue for FCCs. Multiple sources suggest that increasing the CCDF reimbursement rate would increase FCC income and therefore stem the decline in FCC supply. Yet little is known about FCCs who do and do not participate in the subsidy system. This descriptive study aims to lay the groundwork for building a knowledge base by detailing the proportion of FCCs that participate in the subsidy program and by identifying characteristics that are predicted to be associated with participation.

Methods

Data came from the National Survey of Early Care and Education DS4 Home-based Listed Provider Quick Tabulation. Sponsored by the Office of Planning, Research, and Evaluation in the Administration for Children and Families, the DS4 includes nationally representative survey data of FCC providers. Linear probability models were used to investigate several FCC characteristics as predictors of the probability of using the subsidy system. Predictors included demographic characteristics of the FCC, as well as characteristics of the FCC’s business, community, and children served. The regression models used survey weights to account for the DS4’s sampling approach to ensure that estimates were nationally representative of all 91,154 FCCs appearing in national or state administrative registers. All statistical analysis used Stata SE Version 18.

Results

Overall, two-thirds of the FCC (n=2049) participated in the subsidy system. Multivariate results suggest significant predictors (p<.05) of increased subsidy use that include the provider’s education major, household income derived from child care, involvement with either a sponsoring organization or provider network and an FCC regularly serving school-aged children. In particular, the probability of using the subsidy was 10 percentage points higher for FCC with an Early Childhood and Education (ECE) major than those who majored in education or other fields, 23 percentage points higher for those who derived more than half of their household income from child care, 17 percentage points greater for those who were sponsored by an organization, 12 percentage points higher for those belonging to a provider network, and 13 percentage points greater if they served school-aged children than not. The predictors in this model explained approximately 17% of the variation in the outcome.

Implications and Conclusions

The results can significantly aid CCDF administrators in identifying ways to support low-income families with child care choice through ensuring a strong supply of FCCs. This is the first known study to compare FCC subsidy use between providers who do and do not participate and to identify specific characteristics that increase the probability of subsidy use. The results help us to predict which FCCs could be affected by changes in CCDF policies and reimbursement rates.