Empire Justice Tesimony: Challenges Facing the Child Care Community

SENATE STANDING COMMITTEE ON CHILDREN AND FAMILIES

Good morning.  My name is Don Friedman and I am a Senior Staff Attorney at the Empire Justice Center, a support center for legal aid and legal services organizations across the state.  We have offices in Rochester, Albany, White Plains and Central Islip (Long Island).  We provide training, litigation support and policy analysis to civil legal services offices, from Long Island to Chautauqua.  In addition, we assist hundreds of community groups that serve low income clients, and also represent low income clients in a wide array of poverty law areas.  My work focuses on cash public assistance programs, and Susan Antos, who contributed to this testimony, also focuses on this and has a particular interest in child care issues affecting low income families. Other Empire Justice attorneys focus on health and Medicaid, Supplemental Security Income and Social Security Disability benefits, public and subsidized housing, legal issues affecting low income immigrants, consumer law and domestic violence, among other things. 

In times of economic instability, subsidized child care provides multiple vital supports to low-income families.  First, child care provides a nurturing and enriching environment in which children may learn and develop.  Children receiving quality child care exhibit a higher degree of language and cognitive development than those who do not receive high quality child care.[1]   Also, children who receive quality child care in their early childhood are less likely to be anxious or develop impulse control problems than children receiving less responsive or erratic care.[2]   Longitudinal studies of at-risk children who received early child care found that, by the age of 40, children who had received high quality early child care experienced fewer arrests, less drug abuse, and less public welfare use, along with higher earnings, more home ownership and greater educational achievement than a control group of similarly situated children who did not receive high quality early care.[3]  

Access to subsidies gives children in low income families the opportunity to engage in an early learning experience that their families could not ordinarily afford.  In New York, access to these public programs depends in large part on policies created by local social services districts.  Parental co-payments, the budgeting of children’s income, eligibility for child care necessary for a parent to work the night shift and many other rules vary dramatically from county to county.  Similarly, rules affecting providers vary from county to county, impacting the ability of providers in many districts to adequately pay and retain staff.  Rules regarding the payment to providers for absences, payment during program closures and the ability to charge an enhanced rate for accredited care are set by the local social services district and are subject to change.  These disparities are analyzed in detail in the attached report, Mending the Patchwork: A Report Examining County-by-County Disparities in Child Care Subsidy Administration in New York State.[4]   This testimony will address inequitable parent fees and the treatment of teen income.
   
In addition, this testimony will focus on the crisis in child care funding.  As a result of many factors, there simply are not enough child care dollars to support low income working families who need child care.  It is absolutely essential that New York prioritizes allocating supplemental state dollars to the federally funded Child Care Block Grant to keep low income New Yorkers working and to assure the well-being of their children.  Additionally, New York must develop policies that maximize the use of child care dollars on families who have jobs instead of the topsy-turvy system which prioritizes child care spending to spend first on the parents of young children who are required to participate in workfare and job search, while parents of children who are not on public assistance are told there is no child care funding available. 

A.  Parent Fees

In New York State parent fees are determined by each local social services district despite the fact that more than 75% of child care funding in this state comes from the federal government.[5]   This results in an inequitable system where parents in one county may pay as much as five times more for a child care subsidy than a parent in a nearby county even though the parents in both counties have the same incomes and child care needs, simply because their county has chosen a higher co-payment multiplier.

New York has a complicated parent fee schedule which subtracts the Poverty level (also called the State Income Standard) [6] from the parent’s income, and allows local social services districts to multiply the remaining number by a percentage of the district’s choice, between 10% and 35%.[7]   The Empire Justice Center has examined the relationship between geography, cost of child care, per capita personal income, median monthly housing costs, and family co-payments and found that there is no correlation between any of these factors and parent fees.[8]     

Federal regulations require that co-payments be set at an affordable level that assures “equal access” to child care services comparable to those used by families who are not subsidy eligible.[9]  The Administration for Children and Families has stated that “co-payment scales that require a low income family to pay no more than 10% of its income for child care, no matter how many children are in care, will help ensure equal access,” and that “a fee that is no more than 10% of a family’s income would generally be considered to be an affordable co-payment.”[10]    As indicated by Chart A attached to this testimony, social services districts with co-payments multipliers of 35% charge families with incomes at 200% of poverty parent fees that equal 17.5% of their annual gross income. Common sense tells us that these families cannot afford to pay such a high percentage of their income for child care.  The current formula for determining the family co-payment makes participation in facilitated enrollment nearly impossible in a county with a 35% multiplier, where the annual parent share for a family at 250% of poverty would be $9,612.75, or 21% of the household’s income.  In many cases, the parent fee exceeds the cost of child care.  As pointed out by the facilitated enrollment program in Monroe County:

The formula was designed for lower income families.  The formula disadvantages families who are above approximately 215% (of poverty) by either denying them because the calculation implies that they can afford to pay an amount that is higher than the actual cost of care or by calculating a high co-payment that borders on the cost of care.[11]

It is not only families at the highest end of the eligibility range who are assessed crushing co-payments.  As indicated by Chart A, as a result of the formula, families in counties with multipliers of 35% who have incomes at 175% of poverty must pay 15% of their annual income for a parent fee.

High co-payments jeopardize the financial stability of low income families.  New York must develop a uniform, statewide policy regarding co-payments to assure that all of the children in the state are treated fairly.  No parent under the poverty level should be required to pay a co-payment, and for parents over the poverty level, the assessed co-payment should not exceed more than 10% of household income.
   
To make matters more confusing, counties can change their rules by simply amending their plans.  This means that parents are not able to budget and plan properly.  From year to year, and even throughout the year, their co-payments and their very eligibility may change at any time.

An example of this is New York City.  As recently as April, 2009, New York City had set its family share at 25.5%, but then added a second calculation to the formula, which would look at the resulting assessed co-payment in relation to total household income and cap it at 10% of the total household income.  For low income parents with incomes over 150% of poverty, the cap prevented the co-payments from absorbing increasingly large amounts of the family’s income.  Effective May 1, 2009, New York City adopted a 35% multiplier and increased its cap to 12% of parent income.[12]   Most recently, as of May 1, 2011, New York City has a 35% multiplier with a 17% cap.  This means that a family of three with a total gross income of $36,620 (200% of poverty) in New York City that had no increase in income, would see its co-payment rise from $3662 per year ($70 per week) in January, 2009 to $4394 ($84.50 per week) in January 2010 to $6225 per year ($120 per week) in May of 2011.

There is precedent for asserting a moderate approach to what families can afford.  In 2001, the New York State Insurance Department commissioned a study that revealed that where individuals were required to pay more than 5% of their income for health insurance, most families were unable to afford it.[13]   In 2009, the legislature determined an “affordable” contribution to a health insurance policy when determining a child support order was no more than 5% of the parties’ combined gross income.[14]   When a health care policy is not affordable, the court, in most cases, will not direct the parent to purchase health insurance which allows the child to participate in a more affordable public health insurance program.

New York’s Social Services Law§410-x (6) requires that parental co-payments be based upon the parent’s “ability to pay” and §410-x (4)  requires that they be set in such a way that co-payments provide “equal access” to child care available to children who are not financially eligible for subsidies.  New York’s current hodgepodge of a system is not based on the ability of a parent to pay and does not to provide equitable access.  If these goals are to be realized, New York State must make a commitment to the development of a statewide system of child care copayments that are truly based upon a family’s ability to pay, as required by the Social Services Law.  Failure to do so is not only a violation of state law, but also a violation of equal protection of the laws, since the effect of the regulation is to treat similarly situated families differently with no rational basis and further, impinging on the right of families to travel.[15]

We urge the legislature to take several steps to deal with inequitable co-payments:

1.  Immediately begin work on a statewide parent fee schedule that is truly based on a family’s ability to pay, as required by law.  This schedule need not be uniform; like food stamps, it could have adjustments for persons who pay high rents, or pay child support, etc.  Geographic disparities would be permissible, but must be based upon economic indicators which justify such distinction.  

2.  Until the adoption of a parent fee schedule that is based on an analysis that assures affordability and equal access, Social Services Law 401-x(6)  should be amended to:

a. cap the maximum payment under the state co-payment regulation to 12% of gross household income, regardless of the multiplier used by the social services district, and until a statewide standard is developed, reduce the percentage annually by one percentage point;
b. require social services districts to affirmatively set forth how they have complied with the public comment requirements of 18 NYCRR 407.10 before the Office if Children and Family Services approves a change in co-payment for any social services district.

3.  Until the adoption of a parent fee schedule as described above, Social Services Law 34-a should be amended to require that affected parents be advised  if  eligibility levels are lowered or when the co-payment formula changes to increase the parent share at least 60 days before the change takes effect.  Current regulations only require that this information be mailed to the parent 10 days before the effective date, which often means notice of a week or less.  Such a notice provision will allow parents sufficient time to make alternative arrangements.  In 2010, a bill which we strongly supported was introduced in both houses [S.8137a (Montgomery)/A.11532-a (Peoples-Stokes)] which proposed a cost effective notice provision that only required that the counties notify the Office of Children and Family Services (OCFS) of the change 90 days before the effective date, and within 30 days, OCFS in turn would notify all licensed and registered providers, the local child care resource and referral agencies and on the OCFS website.   

B.  Equal Access for Families with Teens

Families that have older teens in the household may or may not qualify for child care assistance depending on the age of the teenager and whether the local district chooses to include the teen and the teen’s income in the household when determining eligibility.  Although a teen’s income is disregarded for the purposes of determining cash public assistance eligibility, when determining eligibility for a child care subsidy, only the income of a child under the age of 14 is disregarded.[16]   The income of children between the ages of 14 and 18 is counted, and local districts are provided the option of whether to allow local districts to determine whether to count the income of 18, 19 or 20 year olds when determining a parent’s financial eligibility for child care for a younger child in the household.[17]  

Thirty social districts opt to count an 18, 19, or 20 year old child residing at home as part of the child care services unit when calculating the family’s eligibility for child care subsidy benefits.[18]   Approximately three-quarters of the 30 districts that include the adult child living at home will only count the child if it is beneficial to the family.  This would happen when the adult child is not earning income and counting that child would increase the household size, respectively decreasing the family’s co-payment.  For example, a three person family with annual earnings of $25,000, where the parent has an 18 year old child and a 4 year old child, would pay a family share of $2,590 per year in a county where the family share is 35%.  The same family would pay a family share of $3,850 per year if the 18 year old child was not included in the child care services unit.  Including the 18 year old in the unit would be beneficial to the family.

Additionally, eight districts count the adult child in the household under some specific set of circumstances.  Suffolk and Otsego Counties always count the adult child in the child care services unit.  Allegany County will always count an 18 year old child, but not a 19 or 20 year old child.  Chemung, Putnam and Columbia Counties will always count a child who is enrolled in school.  St. Lawrence County will always count an adult child who is enrolled in school full time or a child with a disability.

In each of these counties, a risk arises that the presence of the adult child in the household could harm the family for the purpose of calculating child care subsidy benefits because any income earned by the adult child would be deemed toward the family.  There is no requirement that this money be made available to the parent.  For example, in our previous example, a three person family comprised of one parent earning $25,000 per year, an 18 year old child, and a 4 year old child, the family share will vary significantly if the 18 year old child has even a part time job earning minimum wage.  If the 18 year old child earns $3,718 per year ($7.15 per hour, 10 hours per week for 52 weeks), and this income is counted as part of the family’s total income, the family share will be $3,891 per year by comparison to the $2,590 per year family share if the adult child is not counted against the family.  When the adult child is unconditionally counted as part of the child care services unit, a family with an adult child who works will pay a larger family share than a family whose adult child does not work.

The legislature should pass S.4116 (Savino)/A.5843a (Jaffe) which provides that the income of all children under the age of 18 be disregarded and that the income of 18, 19 or twenty year olds should be included in the budget only if it is beneficial to the family.  In this federally funded program, families should be subject to the same income budgeting rules no matter where they live in the state.

C.  Funding

The New York State Child Care Development Block Grant (NYSCCDBG) is primarily funded with federal funds from the Child Care Development Fund and the Temporary Assistance to Needy Families Block Grant.  In fiscal years 2009-2010 and 2010-2011, the State was able to increase the NYSCCBG using American Recovery and Reinvestment Act (“ARRA”) funds.  The 2011-12 budget reduced the total funds available for child care assistance from over $847 million in 2010-2011 to $804.3 million due to the loss of ARRA funds.

Child care funding for the fiscal year 2012-13 budget will be affected even further by Congress’s total elimination of the federal TANF Emergency Contingency Fund.  Historically, New York State’s budget has transferred a portion of this fund to the NYSCCBG.  As a result of the elimination of this fund, the TANF transfer into child care is expected to be reduced by at least $37 million, resulting in inevitable reductions in subsidies.

Last year’s loss of ARRA funds has already resulted in significant hardship for many low income working families. Here are some examples of the dramatic step taken by some counties to cope with the loss of funding:

Albany County stopped taking applications for child care services from working families as of April 23, 2010.  This moratorium lasted for over one year.[19]
Columbia County is no longer processing child care applications for working families as of November, 2011.[20]
Erie County lowered its eligibility guidelines for low income working parents from 200% of poverty to 125% of poverty effective March 5, 2010, leaving 1100 children in 700 families without child care.  [21]
Fulton County discontinued payments to 140 families in October of 2011.[22]   Some families saw this funding restored the following month when the County Board of Supervisors restored some of the funding.[23]
Monroe County lowered eligibility to 165% of poverty.  Monroe once had a facilitated enrollment program that served families up to 275% of poverty.
Oneida County stopped processing new applications for child care in November of 2011.[24]

State Investment is Needed

Clearly dramatic steps must be taken.  Work must be done to find a permanent funding stream for child care.  The Empire Justice Center strongly supports the Winning Beginning ask for an additional $37 million in state funding to restore lost TANF Contingency funding in order to maintain child care subsides targeted to working families at last year’s levels, with an additional increase of 10% over last year’s total block grant.

Redirect Funds to Low Income Working Families with Real Jobs

New York State can help maintain funding for subsidized child care for people currently employed (both public assistance and non-public assistance households) by exempting parents with very young children (under the age of one or two) from the welfare work requirements (e.g. workfare, job search).

Empire Justice Center strongly supports S.5335 (Savino) which would amend the Social Services Law, modifying the exemption from welfare work requirements for a parent or relative of a child up to age two.  Empire Justice Center also strongly supports A.8101 (Titus)/S.5586 (Savino) which would modify the exemption from welfare work requirements for a parent or relative of a child up to age one.  Both of these bills would allow social services districts to redirect child care subsidies to low income working parents with real jobs who are at risk of losing their employment without assistance paying for child care.  Based on our most conservative estimates, the two year exemption would allow the redirection of $44.2 million dollars: the one year exemption would allow counties to redirect about $16.4 million.

There are 25 states that provide significantly broader work exemptions than New York State.  California and Washington exempt households with one child under 2 years of age and with more than one child under 6 years of age; Vermont exempts parents with children under the age of two.  Other states with a one year exemption include Alaska, Connecticut, Delaware, Georgia, Illinois, Kentucky, Louisiana, Maine, Maryland, Mississippi, Missouri, Nevada, New Hampshire, New Mexico, North Carolina, Ohio, Pennsylvania, Rhode Island, Texas, Virginia, West Virginia and the District of Columbia.

In calculating the work participation rate under the federal Temporary Assistance for Needy Families (TANF) program, states are allowed to exempt households with children under age 1, so the impact of A.8101/S.5586 will be minimal.  If New York were to choose the two year exemption, it could, like Vermont, create a separate state program that is not subject to the TANF work participation rules.  The projected savings is based on data from OTDA and OCFS. Please note – this is 2009 data.

If New York allows an exemption up to age one:

• Gross savings if single parent households (SPHH) with children under age one are exempted, with all parents taking the exemptions: $27,357,384

• Savings if SPHH with children under age one are exempted, assuming 40% of PA employed households receiving/opting out of the exemption: $16,414,430**

If New York allows an exemption up to age two:

• Gross savings if SPHH with children under age two are exempted, with all parents taking the exemptions: $73,724,208

• Savings if SPHH with children under age two are exempted, assuming 40% of PA employed households not receiving/opting out of the exemption:  $44,234,524**

These are the numbers used to calculate savings above:

Number of Temporary Assistance recipients receiving child care: 62,929

** (Assumes PA employed individuals would not receive the exemption or would opt out.)

This is a conservative estimate for several reasons.  First, the cost per slot used ($614 per month) is the average for children under 5 and infant care is the highest of all child care slots. For example, the infant rate for center-based care in New York City is $338 per week ($1,453/mo) and $160 per week ($688/mo) in a family day care home. 

Additionally, California’s $376.8 million annual savings was comprised of $215.3 million in child care savings plus $161.5 million of employment services savings through the elimination of the connected work program expenses (e.g. expense of the workfare or soft skills program).  Administrative savings account for about 42% of the total savings achieved in California.  If we assume the same percentage for administrative savings in New York, we could produce an additional $12 to $33 million in savings depending on which upper age limit is adopted.

D.  Conclusion

It would increase the economic stability of low income working families, and the many child care providers whose job it is to care for their children, if New York State established statewide standards for the rules of its child care subsidy programs.  To keep low income New Yorkers working, the legislature must continue to support child care for working families.  This can be done by restoring the $37 million in lost TANF Contingency Funding and by ending the mandate that welfare recipients be placed in work programs at the expense of low income working New Yorkers.  We urge the legislature to review the concerns expressed herein and work toward strengthening New York’s Child Care Block Grant so that it serves all the children of working New Yorkers on a fair and equitable basis.


End Notes:
 [1] Griffin, James A.  National Institute of Child Health and Human Development Study of Early Child Care and Youth Development, Phases 1 and 2 (1999).  Available at http://www.nichd.nih.gov/research/supported/seccyd.cfm.
 [2] Don Brower, “What Child Care Can Do” Better Brains for Babies, University of Georgia (1998), available at http://www.fcs.uga.edu/ext/pubs/chfd/FACS01-5.pdf
 [3] L.J. Schweinhart,, J. Montie, Z. Xiang, W.S. Barnett, C.R. Belfield, & M. Nores, Lifetime Effects: The High/Scope Perry Preschool Study Through Age 40, High/Scope Press: 2005.  General information available at http://www.highscope.org/Content.asp?ContentId=219
 [4] S. Akhtar and S. Antos, Mending the Patchwork: A Report Examining County-by-County Disparities in Child Care Subsidy Administration in New York State, Empire Justice Center (2010), available at http://www.empirejustice.org/assets/pdf/publications/reports/mending-the-patchwork-1.pdf
 [5] For example, 09 OCFS-LCM-05, which sets forth the 2009-2010 New York State Child Care Block Grant allocations, indicates that local districts would receive just over $778 million dollars in federal and state funds ($736 from the Block Grant and $42 million in federal American Recovery and Reinvestment Act stimulus funds) and that a $68 million maintenance of effort requirement from the local social services districts. See also: 09OCFS LCM-14 and 10 OCFS LCM-3.
 [6] Currently this figure is identical to the federal poverty level. See 10 OCFS INF-3, available at: http://www.ocfs.state.ny.us/main/policies/external/
 [7] 18 NYCRR 415.3(f).
 [8] S. Akhtar and S. Antos, Mending the Patchwork: A Report Examining County-by-County Disparities in Child Care Subsidy Administration in New York State, pp. 5-10, Empire Justice Center (2010), available at http://onlineresources.wnylc.net/EJC/Reports/MendingPatchwork.pdf
 [9] 45 CFR 98.43 (2010).
 [10] 63 FR 39936, 39960-61 (7/24/98).
 [11] G. Young-Miller, B. Lotyczewski, L. VanAuken, S. Moore, Children’s Institute, Child Care Dollars Evaluation 2006-2008 (October, 2008) at  p. 8, available at: http://www.childrensinstitute.net/download/?file=Childcare%20Dollars%20Evaluation.pdf
 [12] Even more puzzling is OCFS’s approval of New York City’s imposition of a $15 per week fee upon families who are otherwise eligible for public assistance but who choose to only take the child care subsidy. See http://www.ocfs.state.ny.us/main/childcare/plans/NYC/NYC%20CFSP%202011%20APU%205-1-11%20%28FS%29.pdf  Since page 62 of the Draft CCDF plan (§2.4.6)makes clear that OCFS has exempted temporary assistance recipients from the payment of a parent fee, it is puzzling why these families are being punished for choosing to forgo the temporary assistance grant for which they would be otherwise eligible.
 [13] K. Schwartz, Healthy New York: Making Insurance More Affordable for Low-Income Workers, Commonwealth Fund Report 484, November 200, p. 14.
 [14] Family Court Act §416(d); Domestic Relations Law §240(1)(b)(3). Additionally, no payment towards health insurance is required if to do so would bring the parent’s income below the self-support reserve of 135% of poverty for a single individual.
 [15] A statewide class action is currently pending on this issue in Monroe County Supreme Court, Williams v. Carrion, Index No. 13038-09.
 [16] N.Y. Social Services Law §§ 131-a(8), 131-a(10).
 [17] 18 NYCRR 415.1(l).
 [18] S. Akhtar and S. Antos, Mending the Patchwork: A Report Examining County-by-County Disparities in Child Care Subsidy Administration in New York State, pp. 5-10, Empire Justice Center (2010), available at http://onlineresources.wnylc.net/EJC/Reports/MendingPatchwork.pdf
 [19] FH #5796111J(6/8/11), available at: http://otda.ny.gov/oah/FHArchive.asp
 [20] W.T.Eckert, Agency Presents New Five Year Plan, Hudson Register Star, published November 8, 2011 at http://www.registerstar.com/articles/2011/11/08/news/doc4eb8bb2d3d5a2684323416.txt
 [21] M. Spina, Day Care Practices Prompt Questions, Buffalo News, February 14, 2010, updated August,21, 2010 at http://www2.erie.gov/comptroller/sites/www2.erie.gov.comptroller/files/uploads/pdfs/2-14-10%20Buffalo%20News%20Day%20Care%20Practices%20Prompt%20Questions.pdf
 [22] Fulton County Drops Childcare Funding Until Further Notice, October 27, 2011 http://www.wten.com/story/15895948/fulton-county-suspends
 [23] J. Studd, Fulton County Board Extends DSS Child Care Through End of 2011, Amsterdam Recorder, November 7, 2011 at http://www.recordernews.com/news/11172011_daycare
 [24] E. Cooper, Day care aid cut back as more families need help, Utica Observer Dispatch, November 22, 2011, at http://www.uticaod.com/communities/oneidacounty/x2128793826/Day-care-aid-cut-back-as-more-families-need-help

Supporting Documents:

Access to Child Care Income Guidelines