LegiStorm

Summary:

The Child Care and Development Block Grant Act of 1990 (CCDBG Act, as amended) is the main federal law governing child care programs for low-income working families. The CCDBG Act authorizes discretionary appropriations to support grants to state, territorial, and tribal lead agencies. Lead agencies use these funds to subsidize the child care expenses of eligible children and to improve the overall quality and supply of child care. At the lead agency level, discretionary CCDBG funds are integrated with mandatory funds from the Child Care Entitlement to States (CCES). The CCES is permanently authorized in Section 418 of the Social Security Act. CCES funds generally must be spent according to CCDBG Act rules. Combined, the CCES and CCDBG are commonly called the Child Care and Development Fund (CCDF), and this report uses the term CCDF to refer to these joint funding streams, where appropriate. The CCDF is administered by the U.S. Department of Health and Human Services (HHS). With limited exceptions, to be eligible for CCDF subsidies, a child must (1) be younger than age 13, (2) live with a parent or parents who are working or in a job training or education program, (3) have a family income at or below 85% of state median income, and (4) have family assets that do not exceed $1 million. Lead agencies have some flexibility in implementing these rules and often set income eligibility limits below the federal maximum. Participating families may enroll their child with a provider who has a grant or contract with the lead agency (if available) or they may receive a certificate (sometimes called a voucher) to purchase child care from an eligible provider of their choice. Historically, most children (roughly 94% in FY2021)have been served by child care certificates. Under a new rule issued in 2024, lead agencies will generally be required to enter into some grants and contracts to address supply issues facing (at a minimum) children in underserved areas, infants and toddlers, and children with disabilities. Lead agencies set payment rates for child care providers after conducting an assessment of child care costs via a market rate survey or some other approved methodology. Payment rates are supposed to be sufficient to ensure equal access to child care, relative to children who are not eligible for the CCDF. In April 2023, HHS announced that lead agencies generally must set rates at or above the 50th percentile of the market rate to be in compliance with the equal access requirement. However, HHS continues to recommend that lead agencies set payment rates equal to at least the 75th percentile of the market rate (i.e., a level that equals or exceeds the rate charged by three out of every four child care providers). With limited exceptions, participating families are expected to contribute to the cost of care on a sliding fee scale basis. Sliding fee scales must account for variations in income and family size, as well as other factors selected by lead agencies. Family copayments are not intended to be a barrier that prevents a family from receiving assistance. The new rule issued in 2024 generally prohibits lead agencies from setting copayments above 7% of family income. In addition to subsidizing care for eligible children, lead agencies must spend a portion of their CCDF funds on activities to improve the quality and supply of child care in their communities. For instance, lead agencies may offer professional development or workforce supports, develop or implement tiered quality rating and improvement systems, or cultivate statewide systems of child care resource and referral services. To receive CCDF funds, states and territories must have in effect child care licensing requirements. However, some providers may be exempted from these requirements (e.g., those caring for a small number of children or operating for a small number of hours). Lead agencies must also establish health and safety requirements in specified areas, such as prevention and control of infectious disease and building and premises safety. CCDF providers must comply with health and safety requirements and are subject to compliance inspections. Lead agencies must collect and disseminate consumer education information to parents, the public, and (where applicable) child care providers. This includes information about the lead agency’s licensing, monitoring, and background check processes. Certain information must be made available on a consumer-friendly website, including a localized list, searchable by zip code, of all licensed child care providers.