We Don’t Just Need More Money

1. We Don’t Just Need More Money Visioning a New Child Care Financing Structure in Maine Louise Stoney Alliance for Early Childhood Finance September 27, 2002

2. High-quality early care and education services that: offer children opportunities for early learning support families with a range of year-round, full and part-day services provide comprehensive services to children and families who need them What Are We Financing?

3. Our charge today is to explore various financing systems…so we won’t be spending time costing out the service… But for purposes of discussion, let’s assume we are talking about per child costs in the $6,000 - $7,000 range for full-day early learning and $10,000 - $12,000 range for comprehensive services. What will it cost?

4. Layered Layered Layered Layered Assume Funding

5. The ECE Layer Cake Parent Fees Employer Subsidy Community Foundation CCDF Preschool Head Start CACFP

6. Establish common funding standards and monitoring practices across all ECE funding streams; What can policy makers do to encourage and support layered funding? Coordinate or consolidate Requests for Proposals and reporting requirements; Assume that a program will have a single budget to which multiple funders will contribute, a single/coordinated audit, etc.

7. e l b a t r o P Combine and direct financing.

8. Higher Education - government appropriations to public & private colleges; grants for research & special projects; endowment/investment income; revenues from auxiliary services (food, housing, bookstore, sports..) What is a direct subsidy? Funding that directly supports an institution or industry

9. Housing: Equity from the Low Income Housing Tax Credit, Federal Community Development Financial Institution Grants and Subsidized Loans, HUD Grants, Foundation and other private sector grants. Funding that directly supports an institution or industry What is a direct subsidy?

10. Higher Education - government grants to students (Pell, BEOG) scholarships, subsidized loans, tax credits. Housing - Section 8 vouchers, home mortgage tax deduction, housing subsidies from government or an employer. Funding that is tied to a specific child or family & follows them to the program/services they select. What is a portable subsidy?

11. In other fields, direct and portable subsidies are designed to work in tandem…. Direct and portable subsidies work in tandem. ….but this is not the case in early childhood care and education.

12. Direct Subsidies - Head Start, state pre-k/school readiness grants, subsidy contracts, a few private sector grants, CACFP. In early care and education: Portable Subsidies - child care certificates, the dependent care tax credit, private scholarships.

13. Cost/price analysis in child care and higher education. 100 90 Tuition & 42 80 Fees 70 Institutional 87 Total Cost Subsidy 60 50 40 58 30 20 13 10 0 All Child Care Centers 1993- All private non-profit 94 colleges 1995-96

14. Early care and education policy needs to recognize that direct and portable subsidies are not substitutes for one another but should be combined. The moral of the story:

15. Quality Improvement Grants “Base Funding” Contracts Grants for Specific Costs (wages, benefits, facilities) Industry Supports (economies of scale) Tax Benefits for Families and Programs Financing Approaches that Combine Direct & Portable Assistance

16. Texas Comprehensive Child Development Centers Wisconsin Quality Improvement Grants Mississippi Child Care Enhancement Grants Colorado Educare Differential Reimbursement Quality Improvement Grants

17. Connecticut Child Care and School Readiness Contracts Georgia Prekindergarten The Military child care system Base Funding Contracts

18. Wage Initiatives - stipends to providers (NC, WS, OK, IL, NY), grants to programs (WA), stipends & grants combined (CA) Subsidized Benefits - RI and NC Facility Grants & Subsidized Loans (CT, IL, RI, NC, MA, and others) Grants for Specific Costs

19. Tompkins County (Vision) Kansas City World-Class Early Education System payroll support Industry Supports

21. Colorado School Readiness Tax Credit (proposed) Oregon Child Care Investment Tax Credit (modeled on LIHTC) Child and Dependent Care Credit (Maine et al) Additional industry-related tax benefits (new ideas) Tax Benefits

22. Child Care is a vital part of the local economy. ( from Tompkins County, NY) Economic Impact of Child Care Business Spending $24.2 Million in Product and 893 jobs Direct Effects from child care establishments taking in revenue. $15.2 Million, 700 jobs 280 early care and education businesses serve 3,557 children Indirect Effects frombusinesses and suppliers making purchases. $4.8 Million, 86 jobs Induced Effects from child care workers spending wages. $4.2 Million, 107 jobs Parent Impact 3,557 jobs and $101 Million in wages Parent wages $112.3 Million Parent child care payments $11.3million 3,557 working parents

23. Economic impact of child care subsidies. Tompkins County gains $4 for every $1 invested in child care subsidies Total Direct Impact of Subsidies $1.3 Million Average Children Enrolled Per Month 413 Average Annual Subsidy By Child $3,150 Total Economic Impact of Child Care Subsidies $5.3 Million Indirect Effect from Centers&Suppliers Making Purchases $416,017 Induced Effect from Child Care Staff Spending Wages $364,015 Parents Receiving Subsidies 206 Average Wage of Parents $15,548 Productivity Impact from Parent’s Wages $3.2 Million

24. 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Alabama California DC Florida Oregon Services Retail Other Industries Child care subsidies support the services and retail trade industries. Employment among families who receive child care subsidies.

25. 1 2 3 4 5 6 7 8 1. Construction 5. Agriculture, Forestry, Fishing 2. Finance, Insurance, Real Estate 6. Wholesale Trade 3. Transportation 7. Communications, PublicUtilities 4. Services 8. Retail Trade A Case for Action The services sector leads employment growth. Georgia Industry Employment Growth, 1996-2006 50% 44% 45% 40% 35% 30% 27% 25% 25% 22% Percent Change 20% 17% 16% 14% 15% 12% 10% 5% 0% Source: Occupational Outlook, 1996-2006

26. Think outside the box. some of the best ideas haven’t been tried yet.

27. Fees, Surcharges & “Sin” Taxes Arkansas: a new surcharge on beer, earmarked for child care California: imposed a surcharge on cigarettes The Military: uses revenues from the PX “Earmarks” on Revenue Maine, Kansas and Kentucky: earmarked tobacco settlement funds Georgia: earmarked part of the lottery for pre-k Missouri: earmarked a portion of the Gaming Commission Fund Think Outside the Box.

28. Tax Credits Maine: doubled state DCTC for families who select “quality” child care; and Employment Increment Tax Credit could be adapted to early care & education Colorado: School Readiness Tax Credit (proposal) New York: greatly expanded its Dependent Care Tax Credit Oregon: child care investment tax credit modeled on low-income housing tax credit Think Outside the Box.

29. Other Public Funds Rhode Island: taps into health care funds to help pay the cost of health insurance for child care providers. Connecticut: makes tax exempt bonds available to help finance facilities, then uses TANF funds to underwrite a portion of the debt. New York, D.C., Boston: use criminal justice funds to help create child care centers in court buildings. Think Outside the Box.