Predicting participation in the child care subsidy system from provider features, community characteristics, and use of funding streams

https://doi.org/10.1016/j.childyouth.2022.106392Get rights and content

Highlights

  • Predictors of provider subsidy participation are examined in a national sample.

  • Centers’ funding structures are significant determinants of subsidy participation.

  • Centers in high poverty areas are more likely to participate.

  • Providers that serve infants and toddlers have greater odds of participation.

Abstract

Child care is not affordable for many U.S. families, particularly those living in poverty. Child care subsidies and other sources of public funding for early education can assist low-income families with accessing child care. However, the number of providers that accept child care subsidies is declining, threatening both the sustainability of these government programs and access to early care and education for families from low-income backgrounds. The current study identifies factors that may influence center-based child care providers’ subsidy system participation using nationally representative data from the 2012 National Survey of Early Care and Education (n = 7771). Our results suggest that certain features of providers, such as having a quality rating, and the poverty density of the community within which a center operates may be positively related to subsidy system participation. In addition, we find that programs serving infants and toddlers are more likely to accept child care subsidies than early childhood programs that focus exclusively on preschool-age children. Findings also indicate that receipt of other sources of public and private funding is associated with subsidy system participation. The findings of this study help identify priorities for policymakers seeking to incentivize provider participation in the subsidy system.

Introduction

Access to quality child care and early childhood education (ECE) has positive influences on both children’s development (e.g., Votruba-Drzal et al., 2013, Yoshikawa et al., 2013) and economic self-sufficiency for families (e.g., Ha and Miller, 2015, Pilarz et al., 2019), particularly for families in poverty. Yet, child care is unaffordable for many U.S. families. Though the U.S. Department of Health and Human Services (DHHS) recommends that child care spending be no more than 7% of a family’s income, state averages across the country are much higher than that threshold (Child Care Aware of America, 2019). In fact, center-based child care is estimated to cost low-income working parents approximately 28% of their income (Baldiga et al., 2018).

Public funds from federal, state, and local sources can help make child care more affordable. The Child Care and Development Fund (CCDF) is a federal government program that disburses funds to states to administer child care subsidies. These subsidies allow families living in poverty to access ECE programs for their young children. Yet the number of providers that accept subsidies is declining, threatening children’s ECE access (U.S. Department of Health and Human Services, Office of Child Care, 2019).

Providers willing to serve children using subsidies to afford the cost of ECE are essential for the sustainability of CCDF. Previous research has highlighted the substantial administrative and logistical challenges associated with participation in the subsidy system for ECE providers (Adams et al., 2008, Rohacek and Adams, 2017, Sandstrom et al., 2018). Perhaps more importantly, providers may be accepting a loss in revenue by participating in the subsidy system because most states offer provider reimbursement rates that are significantly lower than the market value of a child care slot (Schulman, 2019).

In this study, we fill a critical gap in the literature by identifying factors that may influence center-based ECE providers’ subsidy system participation. Using a nationally representative sample of providers available from the National Survey of Early Care and Education (NSECE, 2012), we identify predictors of center-based ECE providers’ participation in the child care subsidy system. Specifically, we narrow in on features of providers, communities, and funding sources that may play a role in the decisions providers make around serving children that receive subsidies. In highlighting these features that may factor into provider decision-making, our findings may help inform states’ future decisions concerning how to effectively use limited federal funding to incentivize provider subsidy system participation.

The study relies on the Conceptual Framework of Child Care Provider Subsidy Participation (Giapponi Schneider et al., 2017), which was developed and empirically tested with Massachusetts administrative data. This conceptual framework is informed by prior research on provider participation in the subsidy system as well as by research from the field of business. As businesses, for-profit child care providers are incentivized to maximize profits. However, these ECE businesses are subject to constraints such as government regulations and policies (e.g., subsidy reimbursement rate, availability of state and city pre-K funding) and local market factors (e.g., demand for child care, number of competing providers). On the other hand, Giapponi Schneider et al. (2017) use research on non-profit organizations to argue that non-profit providers are motivated by their mission statements and the goal of remaining financially stable. Giapponi Schneider et al. (2017) hypothesize that having a different legal status (i.e., being for- profit or non-profit) may play a role in a provider’s decision to participate in the subsidy system.

The initial testing of this conceptual model (Giapponi Schneider et al., 2017) suggested a variety of provider factors—including being a for-profit or accredited program—were significant predictors of subsidy system participation. The Massachusetts-based study also found that certain features of the local child care market were predictors. In particular, the higher the median income of provider’s local area, the lower the odds of provider subsidy system participation. Given that the researchers carried out their study in a single state context, they were unable to more broadly examine the potential influence of state and federal policies and programs.

The present study uses a nationally representative sample of center-based ECE providers to test an adapted version of Giapponi Schneider et al.’s (2017) conceptual model with a more diverse group of providers (see Fig. 1). We examine additional features of providers, including the ages of children served and program sponsorship. Since our study relies on publicly available nationwide data that does not allow us to appropriately capture important features of local markets, we instead include available community characteristics, including the community poverty density and community urban density. Given previous research suggesting families use subsidies at higher rates in low-income (Adams et al., 2008) and urban (Davis et al., 2010) communities, it is possible that the location of the center could impact decisions providers make about subsidy system participation. Importantly, our study also examines how different funding sources relate to providers’ decisions about whether to enroll children from low-income families receiving subsidies. Accepting subsidies is likely to impact the provider’s finances (Schulman, 2019). Further, the types of private and public funding sources a program receives could be an important consideration for providers as they make decisions about subsidy system participation.

Though research suggests high quality ECE positively shapes children’s development, particularly for children from low-income backgrounds (e.g., Votruba-Drzal et al., 2013, Yoshikawa et al., 2013), many low-income families lack access to affordable ECE (e.g., Baldiga et al., 2018). As a result, there are income-based gaps in center-based ECE participation (e.g., Chaudry & Datta, 2017; Magnuson & Waldfogel, 2016). For instance, in 2015, families with incomes above $97,000 enrolled children in preschools at rates that were 16–23% higher than families below that threshold, with more than three-quarters of families with higher incomes paying for private programs (Chaudry & Datta, 2017). A number of public funding sources support access to ECE with a primary focus on low-income families, and will be discussed in the subsequent sections. One of the largest sources of public funding comes from CCDF, which disburses subsidies to help offset the high cost of child care for low-income working families.

The CCDF is a federal government program with a goal of improving access to ECE for families with low incomes who have children under the age of 13. At its inception, CCDF was established primarily to allow families to work, but over time and through the Child Care and Development Block Grant (CCDBG) Act of 2014 reauthorizing the CCDF program, CCDF has evolved to simultaneously prioritize the healthy child development. CCDF aims to help families from low-income backgrounds access more affordable child care through the use of subsidies, which come in the form of vouchers to families or contracts with ECE providers. In fiscal year 2017, approximately 1.32 million children received CCDF assistance and approximately $8.6 billion federal and state dollars were spent (U.S. Department of Health and Human Services, Office of Child Care, 2019). However, it is estimated that only one in six children eligible for subsidies actually receives them (U.S. Government Accountability Office., 2016).

The number of providers that accept child care subsidies has been declining in recent years (U.S. Department of Health and Human Services, Office of Child Care, 2019), threatening the sustainability of CCDF and families’ access to ECE. And while the largest decline has occurred amongst home-based providers (Adams & Dwyer, 2021), the number of center-based providers that receive CCDF funds declined by more than 21,000, from 92,980 providers in 2010 to 71,940 providers in 2019 (U.S. Department of Health and Human Services, Office of Child Care, 2019)). Further, there is wide variation in participation by state. Relying on administrative data in Massachusetts, Giapponi Schneider et al. (2017) report a 52% subsidy system participation rate amongst all licensed providers while a workforce survey in Arkansas found that 36% of providers accept subsidies (McKelvey et al., 2018).

Research has begun to shed light on some of the challenges and barriers for providers that participate in the subsidy system, including burdensome paperwork and administrative requirements, communication problems between subsidy agencies and providers, and late or incorrect payment rates (Adams et al., 2008, Rohacek and Adams, 2017, Sandstrom et al., 2018). As a result, provider participation in the subsidy system is a national concern that needs to be addressed by developing strategies to increase the supply of providers serving children using subsidies (Schumacher, 2015, Child Care and Development Fund (CCDF) Program, 2016). Though the CCDF final rule requires states to track information on the extent of provider participation in CCDF as well as any barriers to participation (CCDF Program, 2016), little is known about what factors may influence providers’ decisions (Rohacek, 2012). Research has not yet explored the predictors of subsidy system participation among a national sample of child care providers. Below, we review what is known about provider characteristics, community characteristics, and public and private funding streams as potential predictors of participation in the subsidy system.

Across the U.S., child care providers vary significantly on a variety of structural, administrative, and enrollment characteristics. For instance, providers vary in the number of years their program has been operating, whether or not the program participates in the state’s Quality Rating and Improvement System (QRIS), as well in their legal structure (i.e., non-profit, for-profit). Providers also differ as it relates to the children enrolled in the program, including the total number of children served and the child age ranges served. Each of these unique provider characteristics may be linked to decisions providers make about whether or not to enroll children receiving child care subsidies.

Limited previous research with a sample of providers in Massachusetts has shown that having a for-profit status makes a provider approximately 2.75 times more likely to participate in the subsidy system than non-profit providers (Giapponi Schneider et al., 2017). Participation in a state’s QRIS may also be associated with participation in the subsidy system, especially if there are policies in place to incentivize participation. For example, 13 states require providers that serve children receiving subsidies to be enrolled in the state’s QRIS (BUILD Initiative & Child Trends, 2019). In addition, more than 30 states use a tiered reimbursement rating system that provides higher reimbursement rates for providers that achieve higher quality ratings in the state QRIS (Dwyer et al., 2019). Participation in and policies around a state’s QRIS, therefore, may also be associated with provider decisions to participate in a state’s child care subsidy system.

Provider enrollment profiles may be linked to decisions about participation. Research by Giapponi Schneider et al. (2017) shows providers are more likely to accept subsidies when they have greater licensed capacity. However, another study suggests providers that have fewer children enrolled may be more willing to accept children receiving subsidies (Adams et al., 2008). Not previously considered in existing research about subsidy system participation is the influence of the ages of children served in the program. A report found that the majority of providers charged more for infant care than the recommended CCDF payment rates, and in some cases, did not serve infants at all because state reimbursement rates were not sufficient to cover operating costs (Office of the Inspector General, 2019). This may suggest the infant and toddler enrollment in a program may influence providers’ participation in the subsidy system. More research is needed to further investigate the characteristics of providers that may be related to subsidy system participation, especially analyses using a more diverse sample of providers from across the nation.

Features of the local community—including the average urbanicity, community poverty density, and specific income levels of families in the community—may influence a child care providers’ costs and funding structure as well as the prices charged for child care services. Research suggests these factors may also further influence a provider’s decision to participate in the subsidy system. For example, in higher-income communities, providers may not need to enroll children using subsidies to sustain program operations or be fully enrolled (Adams et al., 2008, Giapponi Schneider et al., 2017). On the other hand, providers from low-income areas tend to rely on income from subsidy payment and view subsidy payments as more reliable than payment from private-paying families in their community (Adams et al., 2008, Sandstrom et al., 2018). Previous research shows that families in rural communities are less likely to use child care subsidies than families in urban communities (Davis et al., 2010), suggesting that provider subsidy system participation may vary depending on whether a community is in an urban or rural area. Yet, more research is needed, particularly that which uses nationally representative samples so as to capture the wide variation in communities across the U.S.

A majority (73%) of center-based child care and early education programs rely on public funding—such as child care subsidies, Head Start funds, and/or state pre-K funds—to support their program operations and many center-based programs rely on multiple public funding streams (NSECE Project Team, 2014). Specifically, weighted data from the NSECE suggests that 11% of centers report receiving Head Start funding, 22% report pre-K funding, and 6% report both Head Start and pre-K funds (National Survey of Early Care and Education Project Team, 2015). And as we report in this study, 33% of centers receive funds from child care subsidies. Other sources of public funding could include sources such as Title I and the Child and Adult Care Food Program. Given a general lack of affordability of child care and that this also disproportionately affects racial and ethnic minority families (Baldiga et al., 2018), programs’ use of public funding sources has the additional benefit of increasing diverse families’ access to early childhood services by reducing or eliminating their costs. While numerous public funding sources exist, the method of delivery for early childhood programs has long been considered a “non-system” (e.g., Satkowski, 2009) that lacks coordination across different initiatives, even those with similar goals such as serving children from low-income families (Hustedt & Barnett, 2011). Each available funding stream imposes unique requirements. Thus, providers considering whether to accept support from multiple public sources must be attentive to these regulations as part of their decision-making process, as well as the feasibility of meeting different sets of requirements simultaneously.

Head Start focuses on children ages 3–5 and their families and is the federal government’s largest preschool-age program, while Early Head Start is a companion initiative for pregnant mothers and families with children up to age 3. As Head Start and Early Head Start share many common regulations and are both administered by the federal Office of Head Start, we will use the term “Head Start” to refer to both types of programs except when there are specific distinctions. Like CCDF, Head Start focuses primarily on serving families living in poverty. Unlike CCDF, which uses state-specific income criteria to determine eligibility, Head Start uses the federal poverty level to determine eligibility. Local programs accepting Head Start funds must follow extensive federal regulations about the types of services offered and how they are delivered (U.S. Department of Health and Human Services, Office of Head Start., 2016). More specifically, Head Start offers comprehensive services spanning education, social-emotional development, and health, and takes a two-generation approach by offering services to both children and their caregivers. Also, unlike CCDF, Head Start does not require a determination of citizenship or immigration status (Matthews, 2017). Another difference between Head Start and CCDF relates to copayment collection, which has been identified by providers (Rohacek & Adams, 2017) as a key concern involved in working with families receiving subsidies. Head Start does not use copayments outside of supplemental services. Providers wary of these administrative burdens related to immigration status and copayments may be more willing to participate in Head Start than CCDF.

State prekindergarten (pre-K) initiatives collectively represent another major source of funding for ECE programs. These initiatives primarily serve 4-year-olds during the year prior to kindergarten and currently operate in 44 states, the District of Columbia, and Guam (Friedman-Krauss et al., 2021). States that operate pre-K programs each develop their own program standards and models for service delivery. This results in wide variations from state to state in terms of accessibility for families and the types and quality of services offered to children. There is also wide variability in the types of funding models that are employed (Friedman-Krauss et al., 2021, Hustedt and Barnett, 2011). According to an annual report by Friedman-Krauss et al. (2021), only four states and the District of Columbia offer pre-K programs that serve at least 70% of their 4-year-old population. Meanwhile, there are eight states where less than 10% of the 4-year-old population attends state pre-K. Further, some state pre-K initiatives operate exclusively in public school settings, while others rely on partnerships with community-based ECE providers. In addition to state pre-K initiatives, some cities also fund separate public pre-K programs (CityHealth & NIEER, 2019). ECE providers in some places have opportunities to receive substantial funding by operating public pre-K programs, while in other places pre-K funding is more limited, unavailable to providers, or not offered at all. However, when deciding whether to participate in a state pre-K program, providers may find these funding sources attractive. Pre-K funds have potential as a stable source of support to all children in a classroom rather than the provider seeking CCDF subsidy reimbursement on more of an individual-child basis.

While some child care programs receive funds from a single public source – such as participating only in the child care subsidy system – others simultaneously utilize funds from multiple funding sources. For example, an early childhood center may accept state subsidies while at the same time receiving federal Head Start funding or state pre-K dollars. This strategy of utilizing multiple funding streams within a single child care program is referred to as blending or braiding funds (Fonseca, 2017, Wallen and Hubbard, 2013). When blending funds, a program delivers a common set of services for children by pooling funds from multiple sources. Whereas when braiding funds, a program supports individual children using unique funding sources – in this case, then, different children within a group may be funded in different ways. Both strategies have the potential to increase families’ access to early childhood programs and provide financial support for those programs. However, as Wallen and Hubbard (2013) note, efforts to blend and braid funds can be inefficient, creating numerous challenges for both programs and the families they serve. One key set of challenges is that different funding streams are likely to have different eligibility requirements for families, as well as different requirements programs must follow when delivering early childhood services. An additional challenge involves the time commitment and level of fiscal expertise needed by programs when navigating the requirements of each funding stream to receive payment for those services. Providers contemplating the decision to blend or braid funds must weigh these potential difficulties against the likelihood of several potential benefits: serving families who may have otherwise struggled to pay for care, bolstering the quality by meeting the highest standard of the funding streams utilized, and increasing the financial solvency of the child care center.

Previous research has not considered the potential influence of other federal, state, or local funding streams on provider decisions to participate in the subsidy system. It could be that providers that have experience working with other government agencies may be more likely to participate in CCDF because they have relevant experience working with these agencies and are familiar with processing government paperwork, engaging in reporting requirements, and are accustomed to periodic monitoring and compliance. It could also be that providers that have access to other sources of revenue, particularly when that revenue exceeds the subsidy reimbursement rate, may participate in the subsidy system because they can offset the loss of revenue often associated with subsidy system participation.

The CCDF program has identified a national concern regarding the supply of child care providers that care for children receiving subsidies. As a result, there is a need to understand factors that may influence whether or not a provider serves children receiving subsidies (Adams, Rohacek, & Snyder, 2008; Child Care Aware of America, 2019; Rohacek, 2012). The present study meets a critical research need by examining associations between provider features, community characteristics, and funding sources with center-based child care providers’ subsidy system participation. The results of this study may provide policymakers guidance for incentivizing provider participation in the subsidy system.

Our study explores the following research questions: 1) How do providers compare on a series of descriptive characteristics based on subsidy system participation status? and 2) What features of providers, community characteristics, and funding sources are associated with center-based providers’ subsidy participation?

To answer the first research question, we provide a rich descriptive picture of center-based child care providers as it relates to features of providers, communities, and public and private funding streams. We assess these features and break down results by whether or not the child care provider serves any children receiving subsidies. To answer the second research question, we assess the relationship between provider subsidy system participation and features of providers, communities, and sources of public and private funding. Our approach allows for a discussion of specific elements of providers, communities, and funding that could be targeted by policymakers to incentivize provider participation in the child care subsidy system.

Section snippets

Data source and sample

This study relies on data from the National Survey of Early Care and Education (NSECE, 2012), which is sponsored by the Office of Planning, Research and Evaluation in the U.S. Department of Health and Human Services (DHHS). The NSECE, which was fielded at a single time point in 2012, includes a set of four surveys including: a household survey, a center-based provider survey, a workforce survey, and a home-based provider survey. Using a multistage probability design, 219 primary sampling

Descriptive analyses

Weighted descriptive information regarding provider characteristics, community characteristics, and funding information is provided for the full sample as well as for subsets of providers that participate in the subsidy system and those that do not (see Table 1). In our sample, approximately 33% of providers participate in the subsidy system.

There are significant differences between providers that participate and those that do not on nearly all provider and community characteristics as well as

Discussion

Though the literature on predictors of provider participation in the child care subsidy system is sparse, previous research with Massachusetts administrative data suggests that both provider and local market-specific features are associated with provider participation (Giapponi Schneider et al., 2017). When comparing providers that participate in the subsidy system with those that do not, our findings with a nationally representative sample largely confirm the Massachusetts-specific findings.

CRediT authorship contribution statement

Gerilyn Slicker: Conceptualization, Methodology, Formal analysis, Project administration, Writing – original draft, Writing – review & editing. Jason T. Hustedt: Supervision, Writing – original draft, Writing – review & editing.

Declaration of Competing Interest

The authors declare that they have no known competing financial interests or personal relationships that could have appeared to influence the work reported in this paper.

References (47)

  • Build Initiative & Child Trends. (2019). A catalog and comparison of quality initiatives [Data System]. Retrieved from...
  • Child Care Aware of America (2019). The US and the high price of child care: An examination of a broken system....
  • Child Care and Development Fund (CCDF) Program (2016). Rules and regulations, 81 Federal Register 190. (codified at 45...
  • A. Chaudry et al.

    The current landscape for public pre-kindergarten programs

    (2017)
  • CityHealth & NIEER. (2019). Pre-K in American cities. Retrieved from...
  • E.E. Davis et al.

    Rural-urban differences in childcare subsidy use and employment stability

    Applied Economic Perspectives and Policy

    (2010)
  • Dwyer, K., Tran, V., & Minton, S. (2019). Child care subsidies under the CCDF Program: An overview of policy...
  • Fonseca, M. (2017). Braiding, blending, and layering funding sources to increase access to quality preschool. Retrieved...
  • A.H. Friedman-Krauss et al.

    The state of preschool 2020: State preschool yearbook

    (2021)
  • E. Greenberg et al.

    Assessing quality across the center-based early care and education workforce: Evidence from the National Survey of Early Care and Education

    (2018)
  • J.T. Hustedt et al.

    Financing early childhood education programs: State, federal, and local issues

    Educational Policy

    (2011)
  • A.D. Johnson et al.

    How do early care and education workforce and classroom characteristics differ between subsidized centers and available center-based alternatives for low-income children?

    Children and Youth Services Review

    (2019)
  • K.M. La Paro et al.

    Assessing quality in toddler classrooms using the CLASS-Toddler and the ITERS-R

    Early Education and Development

    (2014)
  • Cited by (6)

    View full text