You asked whether other states have increased child care subsidies for licensed, center-based care, with a corollary decrease in subsidies for unlicensed care. In OLR report 2004-R-0502 we reported that Connecticut had experienced such a trend between January 2002 and July 2004.

This report does not explore in depth the reasons for the trends.

SUMMARY

Families in Connecticut and other states who received state child care subsidies chose licensed, center-based care over unlicensed care in greater numbers between FFYs 00 and 04. This is according to data from the U. S. Department of Health and Human Services (DHHS), which provides states with significant funds to subsidize the care.

The percentage of children in Connecticut’s Care 4 Kids program served by licensed centers rose from 35% in 2000 to 60% in 2004, a 71% increase. This was the largest increase in the nation. Indiana experienced the next highest increase (60%) during this period. But some states have bucked the trend. For example, Wyoming’s use of licensed center-based care declined by 43%, while its use of informal care jumped nearly 35%. Nationally, there has been no increase in the use of center-based care, while the use of unlicensed care dropped slightly.

Connecticut’s spending on center-based child care parallels the national usage figures. In January 2002, the state spent only 21. 7% of its child care subsidies on licensed centers and 62. 1% on unlicensed care. As of July 2005, these numbers were nearly reversed, with 47% spent on centers, compared with 41% on unlicensed care.

CHILD CARE SETTINGS—TREND SINCE 2000

As shown in Table 1, most states saw increases between FFYs 00 and 04 in the number of children receiving federal Child Care Development Fund-funded subsidies who attended licensed child care centers. Connecticut experienced the greatest increase (71%), with 60% of children in center based care in FFY 04. Other states had smaller increases but higher overall numbers of children in center-based care. Mississippi, North Carolina, Florida, and Georgia all reported that 81% or more of their children used their federal subsidies for center-based care.

Interpreting the Data

The information in Table 1 is not as straightforward as it might appear. This is because states have an enormous amount of flexibility in how they (1) use their federal Child Care Development Fund money for child care subsidies, (2) define the types of settings on which funds may be spent, and (3) report this information to the DHHS. For example, in Connecticut, families can use their Care 4 Kids subsidies on care provided by a relative in that relative’s home. The caregiver does not have to be licensed. But in other states, subsidies can only be spent on licensed (and hence regulated) care settings.

Likewise, the way states define a particular setting can also differ. HHS breaks down the data to two main categories, licensed or regulated and providers legally operating without regulation. These categories are further divided to show the actual settings. Licensed providers include care in the child’s home, family home, group home, and center. For the unlicensed group, care is provided in the child’s home, family home, group home, or center. The first three groups are further split by whether the care is provided by a relative or non-relative.

We combined all of the unlicensed groups, except for centers, since only a few states reported any significant use of unlicensed centers. We compared this figure to the licensed center data for FFYs 00 and 04.

The National Conference of State Legislatures cautions that subsidy rates for the different types of care settings vary considerably among the states. The states that show declines in the use of unlicensed care may not be paying caregivers any more than they received in 2000, which would make this type of work less economically feasible for the relative caregiver and cause these numbers to fall. Likewise, states may be putting more money into center development, which might explain a rise in their use.

Table 1: Percentage of Children Receiving Federal Child Care Subsidies Served By Unlicensed and Center Based Providers (FFYs 00 and 04)

-Continued-

Source: HHS Data, 2000 and 2004 tables

¹“0” does not always mean that no families used this setting. If could mean that fewer than . 5% used it. However, we assumed it was 0% when calculating the percent change.

²The sum of the categories may not appear to add up to exactly 100% because of rounding.

³New Hampshire did not provide data for this setting type.

⁴Oklahoma was unable to report its data before the report was prepared.

Connecticut Data

In 2004, the Office of Fiscal Analysis, using DSS expenditure reports, reported on where DSS was spending its child care subsidies between January 2002 and July 2004. Table 2 depicts annual spending trends for major child care settings (e. g. , center-based care) (as opposed to the percentage of children using these settings). It too shows a continuing movement away from unlicensed care and a corresponding increase in spending on center-based care.

Table 2: Connecticut Spending on Child Care Subsidies by Setting

(Percent of Total) [1]

Source: OFA (2004), DSS (2005)

¹According to DSS, licensed care includes child care centers, group homes, family day care homes, exempt school based, and exempt non-school based. This table covers excludes the exempt settings.

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