Trends in Child Care Spending from the CCDF and TANF

Summary

The Child Care and Development Fund (CCDF) is the main source of federal funding dedicated primarily to child care subsidies for low-income working families. The term “CCDF” was coined in regulation by the U.S. Department of Health and Human Services (HHS) to encompass multiple child care funding streams, including

federal discretionary child care funds authorized by the Child Care and Development Block Grant (CCDBG) Act,

federal mandatory child care funds authorized by Section 418 of the Social Security Act (sometimes referred to as the “Child Care Entitlement to States”),

state maintenance-of-effort (MOE) and matching funds associated with the Child Care Entitlement to States, and

federal funds transferred to the CCDF from states’ Temporary Assistance for Needy Families (TANF) block grants.

Mandatory and discretionary CCDF funds are appropriated separately and are allocated to states using different formulas. Although these funds are allocated to states in different ways, federal law generally directs states to spend these dollars according to the same CCDBG Act rules. TANF funds transferred to the CCDF are also subject to CCDBG Act rules. States spent roughly $8.6 billion from these combined federal and state funding streams in FY2012, the most recent year for which data are fully available.

Separate from the CCDF, states may spend federal TANF funds and state TANF MOE on child care services directly within state TANF programs. However, these “TANF-direct” child care expenditures are not subject to CCDBG Act rules. In FY2012, states spent roughly $2.8 billion in TANF-direct child care programs, when counting expenditures of federal TANF funds and certain state TANF MOE funds.

Because of this complex set of underlying funding streams, federal appropriations are not always the best measure of total spending on child care. This report reviews the legislative history behind these different funding streams, with particular emphasis on the relative importance of federal- and state-level decisions in setting spending levels and establishing basic program rules. In addition, the report presents historical data on child care spending from the CCDF and TANF over the course of FY2000-FY2012.

Highlights during this period include the following:

Total combined CCDF and TANF spending on child care (federal and state) increased by 12% in nominal dollars, but decreased by 17% in constant dollars (i.e., dollars adjusted for inflation).

Federal spending accounted for roughly 70% of all expenditures, with state contributions making up the remaining roughly 30%.

Spending from the CCDF (federal and state, including TANF transfers) accounted for about three-quarters of all expenditures on child care. TANF-direct child care (federal and state) accounted for the remaining expenditures.

When including amounts transferred from TANF programs to the CCDF, total child care spending originating in TANF programs represented more than one-third (between 36% and 48%) of all child care expenditures in each year.