The Welfare of Children

By Jennifer Mezey

Published December 26, 2003, issue of December 26, 2003.
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In 1996, President Bill Clinton, seeking to fulfill a campaign promise “to end welfare as we know it,” signed a welfare reform law that turned the cash assistance entitlement program into a block grant to states, set lifetime time limits on use of federal funds for welfare, and adopted a work-first philosophy for welfare recipients. Seven years later, advocates and policymakers continue to debate the legacy of the law, even as Congress struggles to reauthorize the program, which has been operating on continuing resolutions for more than a year.

Though the ultimate outcome of this reauthorization is unclear, one clearly positive consequence of welfare reform has been the three-fold increase in spending on child-care services to low-income families since 1996, particularly those who are leaving welfare for work or who are at risk of ending up on welfare. Parents need child care to support their work; mothers who receive child care are more likely to work and more likely to leave welfare. Children need quality child-care services to support their healthy development and enhance their school readiness and performance.

Since 1996, more low-income parents have had access to child-care subsidies, and states have invested in initiatives to improve the quality of services. Unfortunately, the current welfare and child care reauthorization bills in the House and the Senate will not preserve this progress. In fact, these bills as written will likely result in hundreds of thousands of children losing child care services.

In addition to welfare reform, the last decade has seen the United States experience a period of record economic prosperity. As the number of welfare cases fell by half, states invested welfare dollars in non-cash programs to support low-income families, including child care. These welfare dollars and the increased federal child care funding made available in 1996 led to a tripling of child care spending between 1996 and 2001, with states doubling the number of children receiving child-care assistance and investing more money in quality improvements.

At the same time, the demand for child-care subsidies grew. Employment of low-income and single mothers increased dramatically between 1995 and 2001, but states could not fully meet the need for child-care assistance. In 2000, only one out of seven federally eligible children received child-care assistance. In an effort to target resources, states concentrated their subsidy assistance on lower income families; in 2000, the vast majority of families with subsidies earned $2,000 or less per month.

Recent child-care gains, however, are now in jeopardy, endangering the welfare of hundreds of thousands of low-income families with children. States have fewer welfare dollars to invest in child care, and state fiscal crises are restricting other funding sources. First, states are spending down their welfare reserves in order to meet ongoing service needs; within about two years, only a few states will have any reserves left for contingencies like increased caseloads. Second, states are no longer experiencing the welfare caseload decreases that made substantial child-care investments possible. In fact, in many states, caseloads have been increasing. Third, since January 2001, states have had to close budget shortfalls cumulatively totaling $200 billion in order to comply with their own balanced budget requirements.

One way states have addressed budget shortfalls is by cutting child-care assistance. In April 2003, the U.S. General Accounting Office reported that 23 states had made child care less available to families since January 2001. About half of the states have waiting lists or are no longer accepting applications for child-care subsidies. Additionally, states have coped with reduced resources by restricting eligibility to even lower income families, requiring low-income parents to pay more for their child care and cutting staff and programs that protect the health and safety of children and promote quality in child-care settings. The burden of these cuts has fallen largely on low-income families not receiving welfare, who are already struggling to meet their health-care, child-care, food and housing needs.

This burden will only worsen without significant child-care investments. A recent analysis by the Center for Law and Social Policy and the Center on Budget and Policy Priorities estimates that if federal funding for child care and welfare remains flat for the next five years, more than 360,000 children will lose their child care subsidies by the fiscal year 2008.

Against the backdrop of declining availability of welfare funds and state fiscal crises, Congress and the Bush administration should have taken steps to at least prevent low-income parents from losing ground in their struggle to work while ensuring that their children are healthy and safe. Instead, the administration’s proposal and the Senate and House welfare bills would increase work requirements for welfare recipients, thereby increasing the need for child-care subsidies.

To make matters worse, the Bush administration essentially proposed no increase in the welfare and child-care block grants, and the Senate and House bills contain a small child-care funding increase that would make only a small dent in addressing the need for child-care assistance.

Both the Senate and House welfare bills would increase federal child care funding by $1 billion over five years, but this is not enough to meet both bills’ increased work requirements without forcing states to reduce child-care assistance to families not receiving welfare. The Congressional Budget Office has estimated the cost of new work requirements to range from $1 billion to $9 billion over five years, depending on the details. Furthermore, the Center for Law and Social Policy and the Center on Budget and Policy Priorities estimate that states will need $5.7 billion to counteract the effects of inflation and the declining availability of welfare funds.

Child care can support low-income families’ employment and promote healthy child development. Unfortunately, the progress made in increasing low-income families’ access to this support is in jeopardy because of insufficient child-care funding. Next year, Republican Senator Olympia Snowe of Maine will propose an amendment to the Senate welfare bill to add $6 billion in additional child-care funding, which would help preserve the gains that have been made.

When Congress returns after the new year, the Senate is expected to debate welfare reauthorization. Any welfare bill Congress passes must contain significant child-care funding increases. The well being of low-income children and families depends on it.

Jennifer Mezey is a senior staff attorney at the Center for Law and Social Policy in Washington, D.C.

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