At a House Human Services Committee meeting today, Secretary of Human Services Doug Racine sketched out how the state’s child-care subsidy program would change if lawmakers agree to Gov. Peter Shumlin’s proposal to redirect $16.7 million from the state’s earned income tax credit to the childcare program.
The Agency of Human Services wants to spend about $8.5 million on increasing benefits for people currently eligible for the program and $7.5 million on raising the rates it pays to childcare providers.
The program provides financial assistance to eligible families in the form of direct payments to childcare providers. Racine told lawmakers that removing funds from EITC was a “tradeoff.” Investing the money in childcare programs, he said, would have a “higher payoff.” The proposal, floated by Shumlin in his inaugural address, has rankled a number of legislators.
The program currently serves about 5,900 families, subsidizing care for approximately 8,400 children. Based on early estimates, the additional funds would allow the agency to bring another 900 families on board.
Under the current system, parents are eligible for a childcare subsidy on a sliding scale based on income up to 200 percent of the federal poverty line. The state covers 100 percent of childcare costs for parents with incomes at 100 percent of the federal poverty line. At the other end of the scale, the state pays 10 percent of child-care costs for parents at 200 percent of the federal poverty line. Parents with incomes exceeding the 200 percent threshold are not eligible for any subsidy.
The Agency of Human Services’ new plan would keep the 200 percent threshold in place, but would pay a larger portion of childcare costs for those eligible. The subsidy for parents with incomes at 200 percent of the poverty line would increase to 50 percent.
Reeva Murphy, deputy commissioner of the Child Development division of AHS, said there is a clear rationale for this course of action. Sixty-six percent of families in the program qualify for the full subsidy. Participation levels fall off steeply among families eligible for a less than a 50-percent subsidy.
“We see most of our beneficiaries clustered around 100 to 120 percent of poverty. They are really clustered at the bottom where the benefit is robust,” Murphy said.
Families at the higher end of the eligible income range seek cheaper arrangements, Murphy said, because even with the state’s help, footing the bill of an accredited provider is too much of a financial strain. “They don’t have the money so they say, ‘Forget it, I’ll just go hire someone down the street.’ … Sometimes that’s fine, but sometimes it’s not.”
Based on preliminary modeling, AHS estimates that adjusting the sliding scale will draw 900 additional families into the program. The agency currently determines eligibility for the program based on the 2009 federal poverty line; with the EITC funds, it would update the requirements to reflect the current poverty line. Levels for 2012 are $23,050 for a family of four and $19,090 for a family of three. Murphy said this change would draw in more beneficiaries, increasing program costs by between $750,000 and $900,000.
Providers would reap the benefits of the other $7.5 million. The state currently pays providers at the 2008 market rate; it would ratchet this up to the 2010 rate. (Under the agency’s STARS, Step Ahead Recognition System, program, rates are adjusted according to the quality and range of services offered by the provider.)
