files.eric.ed.govProperty Tax Abatement (Travis County, Texas) 38 Fees and Lotteries 40 Profiles: Child Care Licensing Fees (Virginia) 40 "Invest in Children" License Plate (Massachusetts)

DOCUMENT RESUME

ED 413 988 PS 025 550

AUTHOR Mitchell, Anne; Stoney, Louise; Dichter, HarrietTITLE Financing Child Care in the United States: An Illustrative

Catalog of Current Strategies.INSTITUTION Ewing Marion Kauffman Foundation, Kansas City, MO.; Pew

Charitable Trusts, Philadelphia, PA.PUB DATE 1997-00-00NOTE 152p.

PUB TYPE Reference Materials Directories/Catalogs (132) -- ReportsDescriptive (141)

EDRS PRICE MF01/PC07 Plus Postage.DESCRIPTORS Block Grants; Children; *Day Care; *Day Care Centers; Early

Childhood Education; Employer Supported Day Care; FederalAid; *Financial Support; Grants; Income; *Private FinancialSupport; Program Descriptions; Public Policy; *PublicSupport; Tax Allocation; Tax Credits; Tax Deductions

IDENTIFIERS *Child Care Costs

ABSTRACTThis catalog provides information on innovative financing

strategies, primarily state and community strategies, being used successfullyto fund child care in the United States. Five sections of the manual aredevoted to profiles of programs using the following categories of strategies:(1) generating new public revenue for child care, including tax strategies,tax credits, deductions, and exemptions, and fees and lotteries; (2)

allocating existing public general revenue for child care; (3) financing

child care in the private sector, such as employer- and union-supported careand community child care initiatives; (4) financing child care throughpublic-private partnerships; and (5) financing child care facilities,including using grants, bonds, and loans. The catalog's introductiondescribes characteristics of successful financing strategies for raisingmoney for child care. Each profile describes a specific financing strategy,when it was initiated, the amount of funding it generates, how funds aredistributed, what services are funded, and who is eligible for them.Additional locations using similar financing strategies are listed withcontact information. Also in each profile are opinions and analysis of thepros and cons of each strategy plus lessons learned from the participants'perspective. Historical, political, and economic factor contributing to thesuccess of an approach are included. Four appendices describerevenue-generation methods, outline tax strategies and governmental powers,and list key national organizations in child care and family support, andmembers of the National Children's Facilities Network. Contains 58references. (KB)

*** ************** ********************* ********** ***** ** ***** ****** ****** ********Reproductions supplied by EDRS are the best that can be made

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U a ULVAI-11 MtN I OF EDUCATIONOffice of Educational Research and Improvement

EDUCATIONAL RESOURCES INFORMATIONCENTER (ERIC)

This document has been reproduced asreceived from the person or organizationonginating it

0 Minor changes have been made toimprove reproduction quality

Points of view or opinions stated in thisdocument do not necessarily representofficial OERI position or policy

FINANCING CHILD CAREIN THE UNITED STATES

An Illustrative Catalog of Current Strategies

I I MI I1 h .1.1

PERMISSION TO REPRODUCE ANDDISSEMINATE THIS MATERIAL

HAS BEEN GRANTED BY

P\W MAC\142-

TO THE EDUCATIONAL RESOURCESINFORMATION CENTER (ERIC)

1

Va. 'I.

The Ewing Marion Kauffman Foundation

The Pew Charitable Trusts

FINANCING CHILD CAREIN THE UNITED STATESAu Illustrative Catalog of CHrrelit Strategies

by Anne Mitchell, Louise Stoneyand Harriet Dichter

for The Ewing Marion Kauffman Foundationand The Pew Charitable Trusts

3

Anne Mitchell is the founder of Early Childhood Policy Research, an independent consulting firm specializing

in evaluation research, policy analysis and planning on child care/early education for government, foundations

and national nonprofit organizations. Previously, she was associate dean of the Research Division at Bank

Street College of Education in New York City. In 1981, she founded Bank Street's graduate program in Early

Childhood Leadership, drawing on her previous experience directing child care centers in Massachusetts and

Vermont. She received her B.S. degree in astronomy from Wellesley College and her M.S. degree in educational

leadership from Bank Street College of Education. Mitchell may be reached at Early Childhood Policy Research,

HCR #1, Box 77, Honey Hollow Road, Climax, NY 12042. Phone: (518) 966-4585; Fax: (518) 966-5503;

E-mail: [email protected].

Louise Stoney is an early childhood policy specialist and founder of Stoney Associates, a research and consulting

firm specializing in early childhood policy based in Albany, N.Y. Stoney has worked in public policy for over

15 years, including positions as a staff member in the New York State legislature, policy director for an early

childhood advocacy organization and instructor for the Center for Women in Government at the State University

of New York at Albany. She consults with state and local govemment, the federal Child Care Bureau, national

policy organizations, child advocacy groups and foundations. Stoney is at Stoney Associates, 10 Tillinghaut

Avenue, Albany, NY 12204. Phone: (518) 463-3677; Fax: (518) 463-3677; E-mail: lsroney95 @aol.com.

Harriet Dichter is the policy director for Philadelphia Citizens for Children and Youth. Formerly a program

officer for The Pew Charitable Trusts, she worked closely on issues of child care policy and financing. She

previously directed the Maternal and Child Health Office of the Philadelphia Department of Public Health,

co-directed the City of Philadelphia's strategic planning for its Empowerment Zone, and worked as an attorney

with a practice focusing on health and human service issues. Her undergraduate degree is from Yale University

and her law degree is from the University of Pennsylvania Law School. Dichter may be reached at Philadelphia

Citizens for Children and Youth, 7 Benjamin Franklin Parkway, 6th Floor, Philadelphia, PA 19103.

Phone: (215) 563-5848; Fax (215) 563-9442; E-mail: [email protected].

Copyright 1997 © The Ewing Marion Kauffman Foundation and The Pew Charitable Trusts. All rights reserved. A limited

royalty-free license to reproduce and distribute copies of this work is hereby granted only to persons who: (1) do not directly or

indirectly charge or receive any consideration of any kind for such reproduction or distribution; (2) ensure that all reproductions

contain this copyright notice in its entirety; and (3) assume all risks associated with their use of the work. No license or right

is granted to use any trademark or service mark on or in the work, or to make any changes, amendments or other derivations of

the work without the express written permission of the owners of the work.

ii4

AUTHORS' ACKNOWLEDGMENT

The Pew Charitable Trusts and The EwingMarion Kauffman Foundation offered us anopportunity to explore an area of child care

policy that has been of enduring interest. HarrietDichter, former program officer with the Trusts andcurrently with Philadelphia Citizens for Children andYouth, moved from sponsor to author during thecourse of this project. We are grateful to Stacie Goffin,senior program officer, the Kauffman Foundationand Linda J. Rich, program associate, the Trusts,for this unparalleled learning experience.

Invaluable assistance and guidance was providedby Gina Adams, Children's Defense Fund; Eve Brooks,

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National Association of Child Advocates; Fred Buse,Schwartz, Heslin, Pilarski and Associates; ScottGroginsky, National Conference of State Legislatures;John Kyle, National League of Cities; Linda McCart,Office of Governor George Voinovich; and Jan Stokley,National Economic Development and Law Center.Kathleen Noonan clarified important tax conceptsand assisted with fact-checking many of the profiles.The individuals listed as contacts for each of theprofiles generously answered questions, providednew leads, shared documents, checked facts andoffered wise counsel; without them, the profilescould not have been completed.

How TO USE THIS CATALOG

This catalog was developed to share informa-tion on innovative financing strategies thatare successfully funding child care in the

United States. The purpose of the catalog is to pro-vide a better understanding of what can be doneand to encourage development of other successfulstrategies to finance child care.

Locating InformationSeveral approaches are possible:

Review the table of contents, which categorizesthe profiles by the type of financing method.Read the introductory section preceding eachcluster of profiles, which describes the financingmethod and summarizes the strategies profiled.Use the index, organized by state/city, programname and financing strategy, for reference.

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Profile DescriptionEach profile describes a specific financing strategy,when it was initiated, the amount of funding itgenerates, how funds are distributed, what servicesare funded and who is eligible for them. Additionalplaces using similar financing strategies are listedwith contacts so that readers may follow up formore information. The "Strategic Considerations"section in each profile includes opinion and analysisof the pros and cons of each strategy plus the lessonslearned from the perspective of the participants.Also, historical, political and economic factors thatcontributed to the success of a particular approachare included under this heading.

CONTENTS

How to Use This Catalog iv

Introduction 1

Generating New Public Revenue 7

Tax Strategies 7

Local Property Taxes 11Profiles: Children's Services Special Taxing Districts (Florida) 11

Families and Education Levy (Seattle, Washington) 16The Children's Services Fund: Proposition J (San Francisco, California) 18

State and Local Sales Taxes 20

Profiles: Dedicated Sales Tax (Aspen, Colorado) 20Local Option Sales Tax (Ames, Iowa) 23

State Income Taxes 25Profile: Voluntary Income Tax Checkoff for Child Care (Colorado) 25Tax Credits, Deductions and Exemptions 27

Profiles: Child and Dependent Care Tax Credit (Federal) 28Child and Dependent Care Credit (Minnesota) 31

Chart: State Income Tax Provisions for Child Care (All States) 33

Profiles: Federal Dependent Care Assistance Plan (New York) 35Enterprise Zone Contributions Tax Credit (Colorado) 37Property Tax Abatement (Travis County, Texas) 38

Fees and Lotteries 40Profiles: Child Care Licensing Fees (Virginia) 40

"Invest in Children" License Plate (Massachusetts) 42The Georgia Lottery for Education 43The Florida Public Education Lottery 45

Allocating Existing Public General Revenue 49Chart: State-by-State Funding for Child Care and Early Education Services 51Chart: State Investments in Prekindergarten and Family Education Programs 53Profiles: Wisconsin Works (W-2) 55

Child Care Quality Improvement Initiatives (Wisconsin) 57Early Childhood/Youth Crime Prevention and Intervention (Colorado) 59Prekindergarten Program (Texas) 60Families and Children First (Ohio) 62The A+ Program (Hawaii) 65

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Financing Child Care in the Private Sector 67Employers and UnionsProfiles: The Con Agra Child Care Initiative (Multistate) 68

The Levi Strauss & Company Child Care Initiative (Multistate) 70The American Business Collaboration for Quality Dependent Care (National) 72Houston Area Network for Dependent Services (Corporate H.A.N.D.S.) (Texas) 74Child Care Partnership Act (Florida) 75The NYSLMCCAC Enrichment Grants Program (New York) 76The 1199/Employer Child Care Fund (New York City) 78Temporary Disability Insurance Coverage for Maternity Leave (New Jersey) 79

Community Child Care InitiativesProfiles: Child Care Scholarship Fund of the Mann Community Foundation

(Marin County, California) 81The Model Centers Initiative of the Miriam and Peter Haas Fund(San Francisco, California) 83Allegheny County Early Childhood Initiative (Pittsburgh, Pennsylvania) 84

Financing Child Care Through Public-Private Partnerships 87Profiles: The Early Childhood Investment Fund (New York) 88

Smart Start (North Carolina) 91The T.E.A.C.H. Early Childhood® Project (North Carolina) 93Rochester/Monroe County Early Childhood Development Initiative (New York) 94

Financing Child Care Facilities 97Profiles: General Obligation Bonds (Minnesota) 99

Tax-Exempt Bonds (Illinois) 100Child Care Center Start-up and Health and Safety Grant Programs (New York) 102Family Child Care Start-up and Health and Safety Grant Program (New York) 104State Loan Guarantee Program (Maryland) 105Child Care Facilities Direct Loan Program (Maryland) 106Special Child Care Revolving Loan Fund (Maryland) 107Community Development Financing (North Carolina) 108Community Development Finance Fund Linked Deposits (Ohio) 110Commercial LenderPublic-Sector Partnership (District of Columbia) 111

Resources and IndexReferences and BibliographyAppendix I: Revenue-Generation MethodsAppendix 2: Understanding Tax Strategies and the Powers of GovernmentAppendix 3: Key National Organizations in Child Care and Family SupportAppendix 4: National Children's Facilities NetworkIndex

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INTRODUCTION

BEST COPY AVAILABLE 9

INTRODUCTION

This catalog highlights strategies currentlyemployed in states and communities, usingpublic, private and mixed sources of funding,

to finance child care. The focus is on strategies thatgenerate new revenue or increase the share of cur-rent revenue allocated to child care. Only strategiescurrently being applied or in the process of imple-mentation are included. Examining how states andcommunities have found ways to fund child carebroadens our understanding of potential resources,demonstrates that greater investment is not onlyneeded but achievable and can stimulate additionalplanning and efforts to finance child care.

The federal government (rather than state andlocal government) is regarded as the major sourceof public revenue for child care, with the energy ofmany child care advocates focused on federal policymaking. Most readers will be familiar with thefederal Head Start program, other federal publicrevenue sources for child carethe Child Care andDevelopment Block Grant, At-Risk Child Care,Transitional Child Care'and the child care appro-priations made by each state to match federal funds.These are significant sources of funding for childcare, but they are not the only sources.

Most of the catalog is devoted to state andcommunity strategies. The strategies fall into fivebroad categories:

generating new public revenue for child careallocating existing public revenue for child care

What Is Child Care?

"Child care" in this context means the fullrange of services used by families to educateand nurture young childrenservices that alsoallow parents to work or go to school. Somewould refer to this as "early care and educa-tion"; we use the term "child care" as shorthandand to match commonly used terminology!

Child care has many functions in society.Good child care:

helps children enter school ready to succeedand continue to thrive once they are there;provides an appropriate learning environmentfor all children, including those with disabilities;improves employee performance andproductivity;aids economic development and growth;helps parents move from welfare to work;prevents violence.

1. Except for Head Start, these have now been consolidated into the federal Child Care and Development Fund as a result of thefederal Personal Responsibility and Work Opportunity Reconciliation Act (PRWORA), August 1996.

2. In the introductory sections throughout this catalog, "child care" is used as an inclusive shorthand term to mean all types of edu-cation and care for children from birth through age five, and programs for school-age children before and after school and duringvacations. We believe the terms "child care," "early childhood education," "child development" and "early care and education" areinterchangeable. For some, "child care" implies younger children, and other terms such as "school-age program" or "latchkey pro-gram.' would be used when older children are involved. In the profiles, we have used whatever terminology our informants used todescribe their activities.

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financing child care in the private sectorfinancing child care through public-privatepartnershipsfinancing child care facilities

Generating new public revenue includes innov-ative tax and fee-based approaches to financing childcare. This section includes two federal financingmechanisms because they are less well-known andunderstood than other federal programs. These are:(1) the federal income tax credit for child and depen-dent care and (2) the federal provision authorizingemployer-sponsored dependent care assistance plans.Child care is also financed by allocating existing staterevenue streams for child care. As the profiles illus-trate, this financing strategy occurs most frequentlywhen state policy recognizes the impact of childcare in meeting welfare reform or educational goals.The third area covered, private sector financing ofchild care, focuses on business and labor-initiated

The System of Child Care

An effective child care system makes good childcare services possible.

A child care system is the unique combinationof services, supports and policies characteristicof a state or community.Services are the programs offered to childrenin centers and homes, by schools, communityorganizations, religious groups, employers,and for-profit and nonprofit agencies.Supports are child care resource and referralservices, child care workforce preparation andcontinuing development programs, accreditationschemes, consumer engagement and othersupports that make child care services better,more efficient and easier for parents to use.Policies are the actions of government, busi-ness and civic organizations that support andadvance (or constrain and retard) the develop-ment of child care services and supports.

programs that improve access to child care as wellas its quality and supply. In the fourth section, thefocus is on public-private partnerships in whichpublic and private sector funds are blended to sup-port child care. The closing section on the financingof child care facilities includes techniques to supportthe bricks and mortar needed for child care programs.

Following a brief overview of each strategy,profiles illustrate how the strategies evolved andwere implemented. Not all the possible applicationsof any method are given. This catalog focuses on afew examples in each category.

Paying for child careNationally, in 1993, among families who paidfor child care, a family with a preschool-age childspent on average $79 per week ($4,108 per year).A median-income family earns $32,000 and spendsabout 11 percent of its income on child care. Afamily earning $15,000 spends 24 percent of itsincome on child care.' What families report spendingon child care does not represent the full price ofchild care, because some families receive partialsubsidies or scholarships. Further, the actual costof producing child care is higher than the pricecharged to consumers because of in-kind donationsand other contributions.4

Overall, families pay the largest shareroughly60 percentof total annual estimated expendituresfor child care in the United States. Government(federal, state and local) pays much of the balance,primarily by directly subsidizing all or part of childcare tuition fees for low-income families directlythrough state appropriations. The government providestax credits for other eligible families. The privatesector (business and philanthropy) contributes less

than 1 percent, as the chart on page 3 illustrates.The central issue in financing child care is a

tug-of-war among three competing factors: quality ofservices for children, affordability for parents andcompensation for child care professionals.

3. U.S. Census Bureau. September 1995. What Does It Cost to Mind Our Preschoolers? Current Population Reports, Survey of Income

and Program Participation, Fall 1993. Washington, DC: U.S. Department of Commerce, Census Bureau.

4. Cost, Quality, and Child Outcomes Study Team. 1995. Cost, Quality and Child Outcomes in Child Care Centers. Denver: University

of Colorado.

2 11

Major revenue sources for child careand early educations

Government 39%

Families 60%

PrivateSector 1%

Researching the Profiles

A wide net was cast for recommendations ofinnovative or unusual child care financingmethods that raise significant money. We calledknowledgeable people in communities acrossthe country and in national organizations, putqueries on the Internet, scanned publicationsand searched bibliographic databases. The listof possibilities was categorized, preliminarytelephone interviews were conducted, and docu-ments were collected. Each profile was checkedfor accuracy by the individuals who providedthe background information.

In contrast, consider the financing of highereducation. Everyone knows that sending a child tocollege is expensive, that financial aid in variousforms is available and that saving for a child's edu-cation is (or should be) a priority in the family budget.Tuition and fees at a four-year public college oruniversity average $2,700 per year. But the tuitionand fees charged to families represent only a modestportion of the actual cost of that college education,which is about $14,500 per year for a four-yearpublic college or university. Families pay about 23percent of the cost of a public college educationor about 8 percent of income for a median-incomefamily. The balance of costs are paid by governmentor the private sector, as the chart below illustrates.

Major revenue sources for public highereducation 1993-946

StateAppropriations 42%

Other* 35%

Tuition andFees 23%

* The "other" category includes federal and local government

appropriations, research and other grants and contracts from

public and private sources, and endowment income.

Consider the differences for families when pay-ing for child care and paying for college. Familiesare usually better off financially by the time theirchildren enter college than they are when their chil-dren are young and in need of child care. The pricecharged to families for child care is close to theexpended cost of producing child care, while theprice charged to families for higher education is less

5. Stoney, L., and M. Greenberg. 1996. "The Financing of Child Care: Current and Emerging Trends." In The Future of Children,Vol. 6, No. 2. The estimates in the chart are based on data from this article. Most but not all of the expenditure estimates in thearticle were based on data for 1995.

6. General Accounting Office (August 1996). Higher education: Tuition increasing faster than household income and public colleges' costs(GAO/HEHS-96-154). Washington, DC: U.S. General Accounting Office.

7. U.S. Dept. of Education (1996). Expected Family Contribution Formulas 1995-96. Cited in: Cicarelli, A. and N. Limn (1996).The affordability gap: Working families and child care. New York: Child Care, Inc.

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than a quarter of the actual cost, reflecting muchgreater investment in higher education by govern-ment and the private sector. Families are expected tocontribute much less for college than for childcarein those few states that permit a median-income family to apply for child care subsidy, sucha family would be required to pay at least 15 percentof its income for child care. The U.S. Departmentof Education, in determining eligibility for federalfinancial aid, would expect the same family to pay5 percent of its income for college costs.'

Solutions to the persistent child care quandarythat families face will require greater investment inchild carefrom sources other than the families whouse child care. A common theme in most proposedsolutions is that child care costs should be sharedamong all the beneficiariesfamilies, employersand society (meaning the civic and public sectors atall levels)with each contributing a "fair share" inways that leverage and extend the total investmentof resources.

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Common themesFinancing strategies that are successful in raisingsignificant sums for child care appear to share sixcommon characteristics, described below.

1. Child care and...Child care is frequently embedded in a larger issueor context: child development, education improve-ment (school-readiness), economic developmentor support for the adult workforce. These broaderissues offer persuasive rationales for revenue genera-tion and greater resource allocation for child care,and often include all children.

Rationales for Child Care

Child care is one of many broadly definedchildren's services (e.g., San Francisco's Children'sServices Plan, Florida's children's servicescouncils and North Carolina's Smart Start)Child care for school-readiness is the rationalefor prekindergarten programs (e.g., Texas andFlorida) and for Seattle's Families and Educa-tion LevyGeorgia's lottery-funded programs link earlyeducation and higher education.Child care is an economic developmentstrategy (e.g., Travis County [Austin], Texas)Child care is linked to "dependent" careincluding school-age care, youth programs(e.g., New York City's Local 1199/EmployerChild Care Fund) and elder care (e.g., theAmerican Business Collaboration, both thefederal income tax provisions)Child care is embedded in welfare-to-workreforms with some states shifting resources tochild care (e.g., Wisconsin).

2. Politically feasible approachSuccessful financing strategies grow out of a keenunderstanding of the legal environment and thepolitical climate. Knowing what powers are availableto which levels of government, what tax strategiescan legally be used and how government actuallyworks are essential to crafting a public-revenuestrategy. Understanding what motivates employersand unions is necessary for a workplace strategy.Whether the dominant community concerns aresafety and security, or ending welfare dependence,the revenue-generating strategy has to respond tothose concerns and link with issues people really careabout. While the approaches to child care financingare varied, a common factor is the ability to read thepolitical winds and sail in the prevailing direction.

3. Long-term thinking and multiple approachesSuccessful strategies are rooted in a plan for advancingchild care that recognizes the value of incrementalsteps. An example of this is Massachusetts, whichhas instituted a series of financing approaches. Themost recent is a specialized license plate that willgenerate a modest amount of new revenue for childcare quality improvement. Not only is it importantin the short term, but it establishes a line item forchild care quality in the state budget, which can beincreased over time.

Successful strategies are often multi-pronged:civic and business leaders in Rochester, New York,spent years studying the demand and supply andoutcomes for early childhood programs, bringing innew partners, and educating wider circles of thecommunity. Their long-term community plan isgenerating revenue partly through efficiencies andleveraging that they could not have predicted whenthey began. In Aspen, Colorado, two years werespent developing a community child care plan.When the opportunity for raising revenue for childcare through a new tax was realized, the municipalitywas ready with a plan for how the funds would bestbe spent, including establishing a permanent trustfund for child care.

4. Partners and nontraditional advocatesMost of the strategies were developed by broad groupsof business, government, child care professionals andadvocates, whether at the community, state or national

levels. Advocates and others explored with theirpartners, listened to new perspectives on old issues,and focused on different approaches to old problems.Civic and business leaders became strong child careadvocates and powerful messengers for children. Often,the education process occurred over many years. Childcare advocates frequently played a behind-the-scenesrole on financing measures. Child care advocateswere not always present when financial measureswere presented or finalized, but their messages were.

5. LeveragingMatching and leveraging are consistent themes thatrun throughout many of the strategies. Public fundsare often designed to be matched. In some cases, thematch comes from local private funds such as UnitedWay, or employers (e.g., Florida's new Child CarePartnerships Act targets employers). Many of thecommunity strategies pool funding and distributefunds through collaborative processes involving allcommunity funders (e.g., Ames, Iowa's sales tax).T.E.A.C.H. Early Childhood® Project in North Car-olina leverages funds from many sources (child careproviders, government and philanthropy) and isbased on principles of shared funding and mutualcommitment among the contributing partners.

6. Community variationThere is a strong community theme in many strate-gies. These strategies recognize that all child care islocal and child care conditions vary among commu-nities. All of these strategies build in communityassessment and explicitly target their funds inresponse to demonstrated community needs. Manyalso engage community residents in determiningtheir own needs, building local capacity. Othersfocus on community because it is the locus ofstrength, innovation and commitment.

Many of the national strategies profiled here arealso intentionally designed to be community-driven,responsive to unique local needs and resources. Forexample, the American Business Collaboration forQuality Dependent Care is national in scope butspends most of its funds in target communities onprojects tailored to addressing local solutions. Stategovernment initiatives are often designed to linkstate- and community-level players and base deci-sions on community input.

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GENERATING NEWPUBLIC REVENUE

Tax StrategiesLocal Property Mxt,5 11

Children's Services Special Taxing Districts (Florida) 11Families and Education Levy (Seattle, Washington) 16The Children's Services Fund: Proposition ./(San Francisco, California) 18

Stale and Local Se 110 TIA:c5 20Dedicated Sales Tax (Aspen, Colorado) 20Local Option Sales Tax (Ames, Iowa) 23

Stale Income Taxes

Voluntary Income Tax Checkofffor Child Care (Colorado)

25

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Tax Credits, Deductions and Exemptions 27Child and Dependent Care Tax Credit (Federal) 28Child and Dependent Care Credit (Minnesota) 31Chart: State Income Tax Provisionsfor Child Care (All Stares) 33Federal Dependent Care Assistance Plan(New York State) 35Enterprise Zone Contributions Tax Credit (Colorado) 37Property Tax Abatement (Travis County, Texas) 38

Fees and Lotteries 40Child Care Licensing Fees (Virginia) 40"Invest in Children" License Plate (Massachusetts) 42The Georgia Lottery for Education 43The Florida Public Education Lottery 45

GENERATING NEW PUBLIC REVENUE

Federal, state and local governments generaterevenue two waysprimarily through taxa-tion and secondarily through fees. Taxes are

assessed based on:what you own, such as property taxes;what you spend, which includes sales taxes; andwhat you earn, such as income taxes.

Fees are payments for services based on whatyou use. Fees can be charged to use a park, drive ona highway, acquire a marriage license and buy a lot-tery ticket. State-sponsored gambling is in essence afeecharged for the purchase of a lottery ticket. Feesare smaller sources of revenue for government thantaxes. But as tax-limitation measures are enactedacross the nation, fees, in particular gambling, becomeattractive revenue-generation methods. Appendix 1:"Revenue-Generation Methods" (see page 115) sum-marizes basic information about revenue-generationmethods at each level of government.

TAX STRATEGIESIncome taxes are the major source of revenue for thefederal government, and a significant source of rev-enue for those states with an income tax. Sales taxesare the most common and lucrative way for states togenerate revenue. Property taxes are the majorsource of revenue for local governments.

Local property taxesProperty taxes typically are levied on real estate(land and buildings) based on its assessed value.Such taxes may be levied by one or more units oflocal government, such as the town and/or countyin which the property is located and by a localschool district. One way to generate funds for childcare is to increase property taxes and earmark theincrease for this purpose. This is the approach usedin Seattle, Washington. Another strategy is to ear-mark a percentage of existing local property tax dol-lars for children's services, which is being done inSan Francisco. Both are profiled in this section.

Property taxes may also be levied by creating"special taxing districts," which are independent,usually single-purpose units of local government.These districts are legal entities separate from gen-eral-purpose local governments such as cities, townsand counties, although they may share boundarieswith a local government unit. Two of these specialtaxing districts for children's services in Floridacounties are profiled in this section.

State and local sales taxesSales taxes are the most common and lucrative wayfor states to generate revenue. Forty-five states haveenacted state sales taxes. Some states levy the tax onall purchases, while others exempt certain types ofgoods (e.g., food for home consumption [45 states),prescription drugs [44 states), clothing [six states)).

167

Seventeen states permit local government units tolevy additional sales taxes. A few local governmentshave dedicated a portion of local sales tax revenue tochild care. Two of these, in Colorado and Iowa, areprofiled in this section.

State income taxesIn addition to taxing income to generate revenue,states often generate revenue for specific programsthrough a voluntary income tax checkoff. Forty-onestates currently have tax checkoffs for more than150 separate uses. The most common uses for thecheckoff are political contributions, wildlife preser-vation and child abuse prevention. Others includeelder care, Indian children, foster care and childhooddisease funds. The only state income tax checkoff forchild care, recently enacted in Colorado, is profiledin this section.

Tax credits, deductions and exemptionsIndividual income taxes are the primary source ofrevenue for the federal government. Also, 41 statestax individual income. After sales taxes, incometaxes are the largest source of revenue for states. Atboth the state and federal levels, the total revenueraised from individual income taxes are usuallyabout four times larger than the total generatedfrom corporate income taxes. Various credits(against taxes owed) and deductions (from incomebefore computing taxes owed) are allowed by bothfederal and state tax codes. In contrast, the majorsource of local revenue is from property taxes. Local

governments often offer property tax abatements asa way to encourage industry to locate (or remain) in

their area and/or to spur expansion of existing localbusinesses.

Personal income tax credits/deductionsThe federal tax code allows a credit for some of theexpenses of work-related child care. In fiscal year1995, the federal credit represented an estimated$2.8 billion of forgone revenue for government andchild care assistance for families. The maximum ben-efit an individual family can realize from the federalcredit is $1,440. Although the federal child anddependent care tax credit also covers the care of

adult dependents, the profile focuses on the childcare aspects of the tax credit.

Twenty-five stares and the District of Columbiaalso have child care income tax provisionseithercredits (21 states and the District of Columbia) ordeductions (four states). All but five of these havechild care tax provisions linked to some or all of theprovisions of the federal child care credit. Ninestates have no personal income tax, although one ofthese has a refundable' child care credit provision(Alaska). Seventeen states levy personal income taxesbut do not have child care tax provisions.

The estimated total value of forgone state taxrevenue from all state child and dependent care taxprovisions is between 5 percent and 10 percent of thefederal tax credit total, or roughly $150 million to$300 million in 1995. The maximum benefit from astate child care tax provision ranges widely from a low

of $25 in Louisiana to a high of $1,440 in Oregonand Minnesota.

Because it is especially well designed to benefitlower-income families, the state of Minnesota's incometax credit related to child care is profiled in this sec-tion. The State Income Tax Provisions for ChildCare chart (see page 33) details the characteristics ofeach state's child care tax provisions. While allstates with credits also cover the care of adultdependents, the information in the profile focuseson the child care aspects of these tax provisions.

State Dependent Care Provisions

Generally, state tax provisions allow claimsfor the same range of child care services as thefederal credit. Any legal form of child care usedso that the parent(s) can work is allowable:child care centers, nursery schools, family childcare homes, nannies, relatives (nondependentsover age 18) and day camps (but not overnightcamps). Arkansas is the only state that struc-tures its tax credit to recognize qualitythecredit is doubled for families with three- tofive-year-old children enrolled in a child carecenter in the Arkansas quality approval system.

1. "Refundable.' means that a taxpayer who owes no taxes may claim the credit.

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Personal income andemployment tax benefitsThe U.S. Internal Revenue Service code allows tax-payers to set aside up to $5,000 from their salariesbefore taxes to help cover the cost of child care,elder care or care of a disabled spouse or domesticpartner, so long as their employer has established anapproved dependent care assistance plan (DCAP).Any employerpublic or private, proprietary ornonprofitmay establish a DCAP. Under a DCAP,the employee's pay is reduced by the amount desig-nated by the employee, and these funds are set asidein a special account to pay dependent care expenses.The employee does not pay income or Social Securitytaxes on these funds. The employer also saves its shareof Social Security taxes on funds placed in a DCAP.(In some states, these tax savings apply to state incometaxes as well.) The state of New York's DCAP isprofiled as an example of structuring DCAP policiesand procedures to help low- and moderate-incomeworkers take advantage of this tax benefit.

Corporate tax provisions for employers are anotherapproach to supporting child care. At least 14 stateshave established some form of an employer tax credit,which typically allows an employer to claim a cor-porate tax credit of up to 50 percent for the cost ofan employee child care benefit. Of course, employersmay still deduct expenditures for child care programsfrom their corporate income as reasonable and necessarybusiness expenses before taxes are calculated. Whilemany states have enacted employer tax credits, theyhave not been extensively claimed. Rather than pro-filing a credit limited to employers, a Colorado taxcredit that applies to any taxpayeran individual ora businesshas been included. While this tax creditis currently limited to enterprise zones, efforts areunder way to expand it statewide.

Property tax exemptionsStates may permit localities to offer incentives throughproperty tax reduction to attract business. A localproperty tax abatement in Texas includes a childcare provision and is profiled in this section. Childcare is viewed in this context as a necessary part of acommunity's economic development strategy. Thetax abatement strategy approaches child care costs aspart of the overall economic incentive package.

FEES AND LOTTERIESFederal, state and local governments generate rev-enue principally through taxation, but also in otherways. Fees are payments requested for services, suchas admission to a park, tuition at the state universi-ty, a lottery ticket and tolls on a bridge. Payment offees is somewhat voluntary on the citizen's part, asdistinguished from taxes, which are compulsory.

FeesThere are three main categories of fees: impact, ser-vice and enterprise. Impact fees anticipate the needfor government services (e.g., roads, water, schools)that will result from actions by the private sectorthat will cause population growth, and are intendedto offset their costs. Service fees shift the cost (orpart of the cost) from government to the user of apublic service (e.g., mortgage/deed records, garbagecollection). Enterprise fees are generated from a self-supporting enterprise created by government (e.g., amunicipal golf course, a state lottery, a nationalpark) for which fees can be charged. The profitsgenerated by the enterprise can be used for othergovernment expenses.

Fees are typically charged to cover all or part ofthe cost of providing a service, such as producingbirth certificates or granting licenses to practice anoccupation. Fees may be charged for the use of apublic facility, such as a park or swimming pool, orfor a particular public service, such as garbage col-lection or water. Charging fees for child care licens-ing is becoming common. Revenue from these feesmay be used to help offset the cost of licensing or,in the Virginia profile included in this section, togenerate revenue for other child care qualityimprovement activities. Fees may be generated byone enterprise and used to fund another, unrelatedactivity. Massachusetts will use revenue generatedfrom vehicle license plate fees to support a fund forchild care improvement. This strategy is profiled inthis section of the catalog.

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Uses of Lottery Fund

In 1993, states realized total profits of $9 billionfrom total lottery ticket sales of $25.2 billion.On average, 36 percent of lottery sales is trans-ferred to government as profit, 14 percent is usedto cover operating expenses and commissions,and 50 percent is used to pay prizes.

Twelve states deposit lottery profits inthe general fund. Twenty-four states "earmark"lottery profits for a specific purpose, including:education (California, Florida, Idaho, Illinois,Massachusetts, Michigan, Montana, NewHampshire, New Jersey, New York, Ohio andWest Virginia); state building funds (Colorado,Idaho, Kansas, Maryland and South Dakota);economic development (Arizona, Kansas andOregon); parks and natural resources (Colorado,Minnesota and West Virginia); as well as localtransportation, law enforcement, senior citizenservices and property tax relief.

LotteriesLotteries are an increasingly popular way for statesto "fund" education-12 states have lotteries whosestated purpose is funding education. State-sanctionedgambling appeals to public policy makers as a lesspainful alternative for generating revenue thandirect taxation. Earmarking lottery profits does notguarantee, however, that these funds will be used toincrease or improve services. In many cases, ear-marked lottery profits are used to replace generalfund dollars that are reallocated to other programs.2Two states that use lottery funds to support theirprekindergarten programsGeorgia and Floridaare profiled in this section.

2. National Conference of State Legislatures Legisbrief. Vol. 3, No. 25, June/July 1995.

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LOCAL PROPERTY TAXESA significant source of revenue for local governmentis property taxes. Property taxes typically are leviedon real estate (land and buildings) based on itsassessed value. Such taxes may be levied by one ormore units of local government, such as the townand/or county in which the property is located andby a local school district. One way to generate fundsfor child care is to increase property taxes and ear-mark the increase for this purpose. This is theapproach used in Seattle, Washington (see page 16).Another strategy is to earmark a percentage of exist-ing local property tax dollars for children's services,which is being done in San Francisco (see page 18).

Property taxes may be levied by "special taxingdistricts," which are independent, usually single-purpose units of local government. These districtsare legal entities separate from general-purpose localgovernments such as cities, towns and counties,although they may share boundaries with a localgovernment unit. Special districts are fiscally andadministratively independent of local government.Two of these special taxing districts for children'sservices in Florida counties are profiled below.

LOCAL PROPERTY TAXES

Children's Services Special TaxingDistricts (Florida)

The specific examples profiled are the Children'sBoard of Hillsborough County, where Tampa andits surrounding communities are located, and theChildren's Services Council of Palm Beach County.Hillsborough has a total population of 894,000;Palm Beach County has a total population of 961,000.

Description

By Florida state statute, a children's services districtmay be created by a county. It must be officiallycreated by action of the county government (boardof county commissioners), have boundaries cotermi-nous with the county's and have a governing boardof 10 members. Five are permanent members definedin the statute: the superintendent of schools, onelocal school board member, the district administratorof the local Department of Health and RehabilitativeServices (the state's social service agency), a juvenilecourt judge and one member of the board of countycommissioners. The other five board members areappointed by the governor for four-year terms. InFlorida counties, a district board is called a chil-dren's board, a children's services council (CSC) or ajuvenile welfare board.'

If the district board is to raise revenue throughtaxation, the board of county commissioners mustput before the voters a referendum authorizing thedistrict to collect property tax not to exceed 50cents per $1,000 of assessed valuation. If taxingauthority is granted by majority vote in the referen-dum, the district must prepare an annual budgetthat includes the millage rate needed to raise thebudgeted revenue. This budget is submitted to theboard of county commissioners each year by July 1.The Florida statute specifically states that the coun-ty board (or any other local authority) may not mod-ify the district board's submitted budget. The lawalso provides that after one year of operation of theboard, the county may choose to fund the children'sservices budget from county revenue.

According to a 1995 report, 25 of Florida's 67counties have established district boards. Nine of

1. Because such a governing board is commonly referred to as a children's services council (CSC), these profiles often refer to CSCs.

9(1

these are independent and unfunded entities; 10 arecounty-funded entities; and six are independentboards with taxing authority. The six with taxingauthority are the counties of Hillsborough, Martin,Okeechobee, Palm Beach, Pinellas and St. Lucie.

When EstablishedAt the urging of advocates in Pinellas County, theFlorida Legislature passed a local bill in 1945 allow-ing that county to establish a special district forchildren called a "juvenile welfare board" and tolevy a property tax subject to referendum. In 1946,the voters of Pinellas County approved (by an 80-20margin) both the board and its taxing authority. In1990, county voters approved raising the district'smaximum millage rate from 50 cents to $1 per$1,000 of assessed valuation.

In the 1980s, advocates in Palm Beach Countyresolved to try to establish in their county a specialindependent taxing district for children. With helpfrom advocates across the state, they were able, in1986, to have the Florida Legislature pass the Juve-nile Welfare Services Act (with only one dissentingvote). Effective October 1, 1986, the law allowedany county to create a special district for children'sservices with a governing board and the authority tolevy taxes. On November 4, 1986, the voters ofPalm Beach County approved the children's servicescouncil taxing authority by a 70-30 margin. Two othercounties attempted to establish districts with taxingauthority that year and failed (Polk and Sarasota).

The Children's Board of Hillsborough Countyand the Children's Services Council of Martin Coun-ty were established and granted taxing authority bycounty referendum in 1988. The Children's ServicesCouncils in St. Lucie and Okeechobee counties wereestablished with taxing authority in 1990.

Amount Generated AnnuallyIn the 1994-95 fiscal year, across the six indepen-dent funded children's services councils, close to $63million was raised, of which just over 70 percentwas spent on children's direct service programs.About one-quarter of the children's programs fund-ed are child care related. The balance of funding isinvested in training for community residents andservice providers, community outreach functionsand council administration.

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Each county sets its millage rate annually with-in statutory limits-50 cents per $1,000 of assessedproperty value for all but Pinellas, which is $1.None of the six counties is presently taxing at itsmaximum millage rate. In 1994-95, the rangeamong the five with 50-cent limits was from .1974(St. Lucie) to .421 (Hillsborough). The average was.2855 among these five counties. The millage ratewas .7822 in Pinellas County.

Hillsborough. In 1995-96, the Children's Boardof Hillsborough County generated $12.3 million ona millage of .421 per $1,000. Home owners with a$75,000 home (the average assessed value of a homein Hillsborough County) paid $21.05 for children'sservices. Of the $12.3 million total, $9.6 million(78 percent) is allocated to children's services, about30 percent of which is child care related.

Palm Beach. In 1995-96, the Children's ServicesCouncil of Palm Beach County generated $21.1 millionon a millage rate of .373 per $1,000. Home ownerswith a $125,000 home (the average assessed value ofa home in Palm Beach County) paid $37.30 for

children's services. Of the $21.1 million total, $17.5million (83 percent) is allocated to children's services,about 19 percent of which is child care related.

Services FundedThe Florida statute authorizing juvenile welfareservices specifies broad areas related to juveniles andto the general welfare of the county: mental health,direct care and any services operated for the benefitof juveniles (except those under the exclusive juris-diction of the public school system). The statutealso specifies that boards can collect and use dataand consult with other agencies dedicated to thewelfare of juveniles to prevent overlapping services.

Each CSC identifies community issues withinits county and promotes and develops programs inresponse. In the 1995 CSC agency survey, CSCs listed

a wide range of issues in which they were involved,including school-readiness, neighborhood development,prenatal care, early intervention, youth developmentand foster care review. In the same survey, CSCsidentified imminent challenges, including developingdata management systems, coordination of servicesand neighborhood initiatives.

Child care is funded by each of the boards indiffering amounts, averaging about one-quarterof total children's services expenditures across all

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funded CSCs. The funding is directed toward twopurposesimproving the quality of child care andreducing the number of children on the waiting listfor subsidized child care.

Hillsborough. The Children's Board of Hillsbor-ough County (CBHC) spends about 30 percent of itsprogram funds on child care, supporting both qualityimprovement and subsidies. Quality improvementincludes accreditation support and child develop-ment associate (CDA) training ($250,000) andsupport and training for family child care providers($180,000). Subsidies are funded through variousmethods: an equal financial partnership with UnitedWay ($40,000 each) to provide subsidies for daycare and summer day camp for children from low-income families, and a similar grant to the YMCA($35,000). Current-year and prior funding for childcare programs are awarded to agencies through acompetitive application process. Grants awardedmay continue for up to three years.

In addition, continuing and one-time grantshave been provided to child care centers to matchstate or federal funds, offer antiviolence programs,provide child care to children who do not qualify forother subsidy programs, offer additional services tochildren with special needs, obtain accreditation,and make renovations and physical improvements.Currently, the Children's Board is working in part-nership with community agencies and funders toplan a community-wide child care subsidy program.

Palm Beach. The Children's Services Council ofPalm Beach County has funded quality improve-ments and child care subsidies, and it has providedmatch for federal funds for both child care and HeadStart. In 1995-96, the CSC allocated $2.274 millionfor child care for children under five. In addition todirect grants to agencies, this sum included $340,000used to match federal funds and $243,000 to createthe Child Care Investment Fund to reduce the num-bers of eligible families waiting for subsidized childcare in the county. The investment fund is a pool forcontributions generated by the United Way's com-munity challenge for child care, local businesses andthe local Health and Rehabilitative Services office.In addition, the CSC allocated $1.81 million forout-of-school activities for school-age children (i.e.,"latchkey" programs or school-age child care).

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How Funds DistributedEach Children's Services Council must prepare anannual budget for submission to the county board ofcommissioners by July 1 each year. All the CSCsconduct a community needs assessment with annualupdates, which are used to set priorities. Each CSCuses different methods to determine spending prior-ities and funding methods. All fund both agenciesand discrete programs within agencies.

Hillsborough. The Children's Board of Hillsbor-ough County (CBHC) conducts an annual commu-nity needs assessment, which is the foundation of itsspending priorities. This year, the CBHC moved toan outcome-focused method of resource allocationwith four key result areas: 1) promoting resilientfamilies, 2) promoting resilient systems of support,3) promoting a social issues response capacity and 4)promoting meaningful outcomes and accountability.

The CBHC's efforts are organized around theresult areas and aimed at achieving four priorityoutcomes focused on children birth through age 12:1) healthy births (prenatal through infancy), 2)school-readiness (preschool), 3) school success(school-age) and 4) optimal development (all stagesof childhood).

Within this framework, the CBHC (with othercommunity funding partners such as United Way,the county, the community foundation and theschool district) funds two kinds of work: analysis ofcritical issues and collaborative initiatives designedto address them. It has allocated $5 million to priorfunding commitments (ongoing programs and ser-vices) and $6 million to the new key result areas,$2.5 million each for the first two and about$500,000 each for the last two. Distribution is pri-marily through targeted requests for proposals(RFPs) based on the work and recommendations ofcommunity partnership groups and a competitiveapplication process.

Palm Beach. Until 1996, the Children's ServicesCouncil (CSC) of Palm Beach County organizedfunding allocation within 10 categorical fundingpriorities related directly to assessed communityneeds. In 1996, the board adopted a focus on pre-vention and early intervention to promote successfulchild development and strengthen families andcommunities. The funding focus will follow devel-opmental stages: birth to five, six through 11 and12 through 18, with a primary focus on children

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from birth through early elementary school age. Thelong-term desired outcome is a family-centered,neighborhood-based service delivery system.

By the 1997-98 funding cycle, the CSC's goalis to commit 45 percent of all funds to services forchildren birth to five and 19 percent to out-of-school activities of elementary school children agessix through 12. (The remaining funds are allocatedto preventing pregnancy and HIV infection in ado-lescents [12 percent), strengthening families [17percent), and building neighborhood capacity andservices [7 percent).) The primary strategy for thebirth-to-five age group is comprehensive services forchildren, building services around the core programin child care centers, family child care homes andhome-based family literacy programs. Universalhome visiting to families with newborns is a long-term goal. The intent of the new focus is that,rather than funding discrete services, funds willfollow a child and family, and community agencieswill collaborate in serving families. The transitionfrom categorical to prevention-focused allocationsis expected to take three years.

To apply for funds, community agencies respondto a request for proposals aligned in the past withthe categorical service areas and requiring proof ofcollaboration with other community agencies. (Theprevention focus will affect the RFP process for1996-97.) CSC staff review all proposals and inter-view the applicants. The staff then recommend anallocation plan to the CSC board for approval.

Population ServedThe CSCs can focus on all "juveniles" in a county,defined as children birth through age 18. Somecounties narrow the age range somewhat. For example,Hillsborough focuses on birth through age 12, whereasPalm Beach focuses on birth through age 18 with aprimary focus on children five and under. Bothcounties fund a range of direct child care services,quality improvement projects and efforts to make childcare available to families eligible for state subsidy.

Hillsborough. The mission of the CBHC is tomaximize the potential of children and families toensure optimal development and well-being of chil-dren in Hillsborough County.

Palm Beach. The mission of the CSC is toenhance the lives of Palm Beach County childrenand their families, and to enable them to attain

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their full potential by providing a unified contextwithin which children's needs can be identified andresolved by all members of the community.

Strategic ConsiderationsOne of the perceived strengths of CSCs is theirfocus on all children and their mandate to involvein governance the key systems in a county. CSCsare viewed as an effective way to eliminate (or atleast reduce) "turfism" and as a way to use localresources efficiently. This way, the key players areall at the same table, theoretically looking at thewhole child (in family and community context).The mandate to do community planning (commu-nity needs assessments updated annually) is animportant feature. It promotes long-term think-ing that goes beyond one fiscal year.CSCs generate a new source of local funds, whichcan be allocated flexibly according to communityneeds. This increases the initiative and responsive-ness of local children's services organizations.The explicit focus of CSCs on prevention andearly intervention is a counterbalance to the puni-tive and remedial approaches in many legislativeinitiatives to address juvenile justice and provisionof human services.Increasingly, the CSCs are concerned with focusingtheir own efforts on outcomes and accountability.As an extension of their own efforts toward usingfunds most efficiently, CSCs often partner withother community funders (e.g., United Way,school districts, community foundations) in plan-ning and in funding, which focuses all funders'behavior toward shared goals and outcomes.CSCs educate citizens to children's issues and createstronger constituencies for children. For example,both Hillsborough and Palm Beach publish theirannual reports as a supplement to their local dailynewspapers. CSCs become the hub of child advocacy

in a county, broadening the constituency of advocatesand concentrating efforts, thereby strengtheningadvocacy. As CSCs become the trusted source ofinformation about children, they have becomemore powerful political forces at the state level.

Some county legislative delegations essentiallysupport what their CSC recommends regardingchild and family policy.

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There is no evidence of state revenue declinesrelated to the counties' establishing children'sservices taxing districts.Counties that succeeded in establishing CSCs andauthorizing taxing used a political campaignframework for their referendum campaigns. Theyused respected civic leader support and peer-matrix approachesthat is, having senior citizenstalk to other seniors, businesspeople campaign toother businesspeople, families with children orga-nize other families with children.Campaigns that failed often used less-effectivespokespeople (e.g., service providers who wereviewed by the voters as self-serving since theiragencies ultimately would benefit financially).Unsuccessful campaigns also did not recognizeopposition forces early enough and failed to strate-gically address the opposition's concerns.Some believe the term "juvenile welfare" hasnegative connotations to the voting public.The term in common use now"children'sservices"conveys a positive message.Some believe the timing of a referendumon aprimary ballot rather than a general election bal-lotcan affect its passage. Primaries often havelower voter turnout, so the numbers of targetedreferendum supporters voting can have a greatercumulative effect.The tax climate has changed significantly sincethe 1980s, making the passage of new taxespotentially more difficult. Rationales that linkmoderate spending on early prevention with lateravoidance of much costlier items such as prisonsmay be effective arguments.

Other Sites With Similar StrategyOther jurisdictions have allocated specific increasesin property taxes to children (e.g., Seattle's Familiesand Education Levy, profiled on page 16), but noother special taxing districts for children are known.

Contacts

Jack Levine, Executive DirectorFlorida Center for Children and YouthP.O. Box 6646Tallahassee, FL 32314Phone: (904) 222-7140Fax: (904) 224-6490E-mail: [email protected]

Gerald Malouin, Executive DirectorChildren's Board of Hillsborough County1205 East 8th AvenueTampa, FL 33605Phone: (813) 229-2884Fax: (813) 228-8122

Marlene Passell, Public Information AssociateChildren's Services Council of Palm Beach County1919 North Flag ler DriveWest Palm Beach, FL 33407Phone: (561) 655-1010 or (800) 331-1462Fax: (561) 835-1956


Families and Education Levy(Seattle, Washington)

Description

The Families and Education Levy raises propertytaxes by a fixed percentage for a period of seven years.The funds raised are split approximately equallyamong four specified purposes: 1) early childhooddevelopment, 2) school-based student/family services,3) comprehensive student health services and 4)children's out-of-school activities. The city of Seattlehas a population of just under 500,000 residents.

When Established

The referendum passed in November 1990 andestablished the special levy through 1997.

Amount Generated Annually

In 1996, approximately $2.3 million was spent onchild care.

The levy alone generated just over $10 millionin 1996. The Families and Education Levy set amillage rate of .23 per $1,000 of assessed propertyvalue. In the first year (1990-91), the levy generated$8.5 million. Although the levy is capped at a per-centage of the property tax rate, revenue generatedcan increase as property values change.

Beginning in 1993, the city council adopted theChildren and Youth Action Plan (CYAP), whichadds an additional $1 million per year to the citybudget from city general revenue. Each year, theCYAP expenditures from the preceding years aremaintained in the city budget and an additional $1million is added. The CYAP, originally a four-yearcommitment, was recently extended through 1998.In 1996, the combined total from both the levy andthe Children and Youth Action Plan was $14 million.

Services Funded

Levy and CYAP funds are used primarily to expandand extend child care, building on services and sup-ports that are ongoing. For example, Seattle's childcare subsidy fund existed for some years before thelevy, and the city has funded child care training formany years. New activities are also funded: forexample, funds go to family advocates based in

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family support centers across the city who workdirectly with child care providers and parents toimprove relationships, and to the Business Initiative,which is working to build partnerships among areabusinesses and child care programs.

Child care activities are funded within twocategories, totaling $2.3 million: early childhooddevelopment and out-of-school activities. A total of$1.8 million was allocated for subsidies, trainingand other quality improvements in early childhooddevelopment in 1995-96. Within the out-of-schoolactivities category, $520,000 was allocated forschool-age child care.

The $1.8 million represents a variety of pro-grams. About $450,000 was added to the city ofSeattle's child care subsidy pool, which is designedto serve families who are over the income eligibilitylimits for state child care subsidy funds. Supportand training for child care service providers (includ-ing school-age care) received $300,000. Support forthe school district's preschool program (CAMPI,named for its originators, the Central Area Mothers'Preschool Initiative) totaled $650,000. Another$400,000 partially supports the school district'sstate prekindergarten program (ECEAPEarlyChildhood Education Assistance Program) and localHead Start agencies to expand services, offer longerdays and improve quality. (These funds can be usedfor Head Start's required local match.)

How Funds DistributedLevy funds are administered by the city of Seattlethrough its various departments. No more than 5percent of levy funds can be used for administrativeexpenses of the city and/or the school district. Levy(and CYAP) funds are distributed through contractswith the school district and nonprofit agencies, orby transfer to city departments (e.g., the child caresubsidy is handled by the Department of Housingand Human Services, and the library administers thefunds for its child development resource specialistand literacy outreach to family child care providers).An RFP (request for proposals) process is used toselect providers for out-of-school activities. Agenciesreceiving child care subsidy funds must meet thecity's quality standards to participate in the program.

A Levy Oversight Committeeincluding themayor, the superintendent of schools and representa-tives from the city council and the communityis

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responsible for making budget and program recom-mendations, reviewing performance annually andissuing reports on the effectiveness of levy-fundedprograms.

Population Served

The only limitation overall is geographicalonlyresidents of Seattle are eligible for levy-funded ser-vices. Levy funds that are added to other programs,such as the child care subsidies, ECEAP or HeadStart, are then subject to the limitations of thoseprograms. For example, in Head Start, 90 percentof the children must have family incomes belowthe federal poverty level. Seattle's child care subsidyprogram is designed to serve families who are above

the eligibility limits for state-funded child caresubsidies. City subsidy funds are available forfamilies with incomes up to 80 percent of the statemedian income who use providers that meet thecity's quality standards.

Strategic ConsiderationsThe Families and Education Levy emerged fromMayor Norman Rice's community education sum-mit in the spring of 1990, which engaged morethan 2,000 citizens in discussing how to improveeducation in the city. The summit participantsrecognized the relationship between the context ofchildren's life outside of school and their schoolexperiences. Thus, the levy proposal addressedschool-readiness, health, children's out-of-schooltime and their families.The original plan for levy funds suggested anallocation of $2.2 million for child care ($1.65million in child care/early education and $550,000for "latchkey" programs for elementary school stu-dents). This level has been maintained over time.Levy funds increase the city's financial commit-ment to children (and child care). The levy fundsare used primarily as additional funds to extendcurrently successful programs. New initiatives areundertaken as needed after careful consideration.Levy funds build on existing community capacity.Part of the revenue generated by the levy ($2.1million) was designated to fund programs former-ly funded by the school district. In the originalplan, these were: $146,000 for Head Start and thestate-funded prekindergarten program (ECEAP);$407,000 for the locally designed preschool

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(CAMPI); $231,000 for elementary guidancecounselors; and $1.325 million for nursing ser-vices in schools. Shifting funds from the schooldistrict budget to the city budget could have thepotential for "supplantation." However, the schooldistrict was required to redirect the amount offunds freed by the levy to a defined set of specificeducational enrichment priorities that wouldimprove classroom learning environments. Howthese redirected funds are used must be reportedannually as part of the accountability plan for thelevy. The district has used the "redirect" primarilyfor class-size reductions and staff development.In 1993, the city council approved adding anadditional $1 million each year for four years(1993-96) to the city budget to increase servicesfor children and youth. In 1996, the city councilextended this commitment for another two years(through 1998). These CYAP funds have support-ed child care through such activities as trainingprograms for staff of the Parks and RecreationDepartment's school-age programs, additionalfunding for a children's librarian dedicated toproviding reading enrichment services in familychild care programs, and hiring a child develop-ment specialist in the library to serve as a resourcefor all child care providers.The Families and Education Levy must berenewed by the voters in 1997. Planning forpassage is under way with public relations andcommunication activities and a careful review ofoutcomes attributable to the levy. Those involvedexpect it to pass but anticipate that there may bechanges in its direction, focusing more on acade-mic achievement results.

Other Sites With Similar StrategyThe City Council of Santa Fe, New Mexico, resolvedto set aside 3 percent of the city's share of state grossreceipts tax revenue (about $800,000 annually) for aChildren and Youth Fund.

Contact

LaVonne DouvilleSeattle Department of Housing and Human Services618 Second AvenueSeattle, WA 98104-2232Phone: (206) 386-1010Fax: (206) 386-1138

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The Children's Services Fund: Proposition J(San Francisco, California)

Description

Through a public referendum (Proposition J),San Francisco's city charter was amended in twoways. First, a baseline of funding for children'sservices (a level below which funding could not fallunless there was a decrease in aggregate city appro-priations) was established. Second, a percentage oflocal property tax dollars was set aside for children'sservices. The set-aside was $.0125 of every $100 ofproperty taxes during the first year and $.025 ofevery $100 for the remaining nine years.

When Established

Proposition J was passed in November 1991 andwill remain in effect for 10 years.

Amount Generated AnnuallyThe baseline stands at $44.7 million. The set-asidegenerated $13.8 million in fiscal year 1995-96. Ofthe set-aside funds, 25 percent is reserved for childcare, which amounted to $3.3 million to supportchild care and early education services in fiscal year1995-96.

Services Funded

The set-aside funds, referred to as the Children'sFund, are allocated into four broad categories, eachreceiving 25 percent of available dollars: 1) childcare, 2) health and social services (including prenatalservices), 3) job-readiness and 4) delinquency pre-vention, education, libraries and recreation. TheChildren's Fund cannot be used for law enforcementservices, the purchase of property or for any servicethat benefits children only incidentally or as mem-bers of a larger population including adults.

Funds from the four categories are allocated to:1) early childhood development (targeting childrenbirth through age five), 2) youth development (tar-geting children and youth ages six through 17) and3) family support (targeting families with childrenof all ages). The $3.3 million in child care funds for1995-96 was spread as follows: early childhooddevelopment got $1,785,000 for licensed care inhomes, centers and schools as well as training for

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providers and parent education; youth developmentreceived $1,130,500 for after-school and summeractivities in schools and licensed facilities; and fami-ly support, $172,000 for services with emphasis onfamilies with children under six. With the inclusionof child care funds allocated for administration andevaluation, these amounts totaled $3.3 million.

The majority (90 percent) of the child carefunds are distributed to community-based organiza-tions through a Request for Proposals processadministered by the Mayor's Office of Children,Youth and Their Families (MOCYF). The priority ischild care for children under six.

How Funds DistributedThe Children's Fund is administered by the Mayor'sOffice of Children, Youth and Their Families. MOCYFis responsible for developing a children's servicesplan, issuing a request for proposals to community-based organizations, staffing a Citizen AllocationCommittee to review proposals, negotiating con-tracts for services provided by community agenciesand city departments, monitoring contracts andworking with an independent organization to evaluatefunded programs.

Population ServedThe Children's Fund is limited to serving childrenand youth under the age of 18. Child care funds aretargeted for two groups: children under six and chil-dren six to 18, with priority for serving childrenfrom low-income families. Families in all areas ofthe city are eligible.

Strategic ConsiderationsAmending the city charter through a publicreferendum (rather than having the city council passlegislation) is a costly and labor-intensive process.Thousands of signatures must be obtained just toget the referendum on the ballot. Once on the ballot,the referendum must be approved by a majority ofvoters. A referendum can, however, be an excellentway of organizing the citizenry around children'sissues in general as well as passing a specific amend-ment. Coleman Advocates for Children and Youth,the lead organization in the effort to establish theChildren's Fund, carefully weighed the costs andbenefits of the referendum process and decidedthe results were worth the effort. In addition to

27

engaging the public around children's issues,Proposition J sought to end the annual budgetbattles over funds for children's services, mandatea change in public priorities, and institutionalizethe protection and expansion of expenditures forchildren. A number of lessons may be learned fromthis effort, including:

Proposition J sets aside funds for a broad array ofchildren's servicesnot just child care or earlyeducationand was therefore able to garner abroad base of support.The mandated baseline and set-aside makes annualbudget battles unnecessary.The law was carefully drafted to ensure that base-line funds would not be supplanted and that thenew funds for children's services would be used fornew programs. Even with an established baseline,however, funds can be shifted (for example, childcare funds could be shifted to child health care,since both are in the baseline).The 10-year "sunset" provision allows the issueto be reviewed in the future (but opens the doorfor another costly battle to pass a referendum)and, along with a two-year "phase-in," made theproposal seem more reasonable at the time it wasinitially voted on.Planning for effective use of the funds was notbuilt into the proposal, and political pressuremade it difficult to take the steps necessary toensure maximum impact.The opposition raised concerns that Proposition Jwas "bad government," "ballot-box budgeting"and "special-interest politics." Opponents includedthe business community (which saw it as an effortto increase public spending) and, at the outset,most elected officials (because the amendmentwould tie their hands in terms of spending).In the end, passage of the referendum reinforcedthe notion that children are a concern to the entirecity of San Francisco. Outreach constantly linkedthe problem (children need support) with thesolution (Proposition J) and helped to increasepublic education on children's issues.The Children's Fund has helped to leverage otherpublic and private support, including funds fromnational and local foundations, the San Franciscoschool district and the federal government.

Other Sites With Similar StrategyOakland, California, has a similar measure on anupcoming ballot.

In 1989, The Children's Alliance in the state ofWashington attemptedbut failedto pass a ballotinitiative. Lack of funds to do outreach and publicitywas cited as the major reason for failure. The allianceis currently working on a "Dollar for Dollar" budgetbill that seeks to create a pool of money for children'sservices by matching each dollar allocated to juvenilecorrection to prevention programs (including earlychildhood programs). There has been no vote on thebill yet.

The Children's Action Alliance in Tucson, Ari-zona, is currently working on.a proposal called 1%for Kids of Tucson, which will set aside a portion ofcity general revenue. Unlike Proposition J (whichwas a referendum approved by the voters), the Tuc-son effort is focused on convincing the city councilto pass an ordinance. (The alliance decided that areferendum was too expensive and labor-intensive.)In addition to the Tucson campaign, the alliance isconsidering launching a statewide initiative in 1998.

ContactsGwen HenryChild Care/Grant CoordinatorMayor's Office of Children, Youth and Their Families1390 Market Street, Suite 918San Francisco, CA 94102Phone: (415) 554-8990Fax: (415) 554-8965

Barbara CarlsonDirector, San Francisco Starting PointsMayor's Office of Children, Youth and Their Families1390 Market Street, Suite 918San Francisco, CA 94102Phone: (415) 554-8990Fax: (415) 554-8965

Margaret BrodkinColeman Advocates for Children and Youth2601 Mission Street, Suite 804San Francisco, CA 94110Phone: (415) 641-4362Fax: (415) 641-1708

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STATE AND LOCAL SALES TAXESSales taxes are the most common and lucrative wayfor states to generate revenue. Forty-five states haveenacted state sales taxes. Some levy the tax on allpurchases, while others exempt certain types ofgoods (e.g., food for home consumption [45 states),prescription drugs [44 states], clothing [6 states]).Seventeen states permit local government units tolevy additional sales taxes. A few local governmentshave dedicated a portion of local sales tax revenue tochild care. Two of these, in Colorado and Iowa, areprofiled.

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STATE AND LOCAL SALES TAXES

Dedicated Sales Tax (Aspen, Colorado)

DescriptionIn 1990, voters in the city of Aspen enacted aprovision to add .45 percent to the local sales taxand dedicate this portion for the purposes of afford-able housing and child care.

The affordable housing purpose also receivesrevenue from the local real estate transfer tax (inforce through 2004) and from certain local housingimpact fees. The child care purpose receives revenueonly from the dedicated sales tax.

The total sales tax collected in the city of Aspenis 8.2 percent, which consists of 3.0 percent state ofColorado sales tax, 3.5 percent Pitkin County salestax and 1.7 percent city of Aspen sales tax. Of theAspen portion of the tax, .45 percent is for childcare and affordable housing.

Aspen is located in Pitkin County, which hasabout 12,000 permanent residents; about half livewithin the city limits of Aspen.

When EstablishedThe dedicated sales tax was established in 1990,when voters approved a referendum raising the citytax from 1.25 percent to 1.7 percent. The .45 per-cent tax will remain in force until June 30, 2000.

Amount Generated AnnuallyActual receipts from the dedicated portion of thelocal sales tax for 1994 totaled $1.435 million.The Aspen city budget office projects that sales taxrevenue will grow at the rate of 3 percent annuallythrough 2000, generating $1.63 million that yearfrom the dedicated sales tax. Each year, the citycouncil decides how to allocate revenue from thededicated sales tax to each purpose (child care andaffordable housing) when approving the annualcity budget.

In 1992, the city council acted to set aside 20percent of annual receipts from the dedicated salestax each year to be placed into a Child Care TrustFund. The trust is designed to generate interestincome to be used for child care projects after 2000(when the tax expires). In 1996, the city budgetedto put $240,000 into the trust fund, which willcontain $1.13 million at the close of 1996. By

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2000, the trust fund is projected to have a principalbalance of $2.4 million. By conservative estimates,this will generate income of $150,000 annually.

From the remaining 80 percent of dedicatedsales tax receipts, the city council expends on aver-age $200,000 for child care annually, although theamount has fluctuated from year to year. In 1994,Aspen spent $115,441 on child care. In 1995, thecity budgeted to spend $351,048. In 1996, the cityoriginally budgeted expenditures of $1.745 millionon child care, but will spend less than anticipated.(The city had discussed purchasing a former publicschool building.) The total expenditures for 1996will amount to $224,000.

The amount of annual revenue available forchild care depends on sales tax revenue.

Services FundedThree categories of child care are supported throughthe sales tax: 1) child care resource and referral services,2) grants to nonprofit centers for improvements and3) child care tuition assistance for low-income work-ing families.

In 1996, Kids First, the local child careresource and referral agency, received a contributionof $47,000. The total expenditure in the 1996 bud-get for the other two categories (contributions tononprofit organizations and tuition assistance forfamilies) is $177,000.

How Funds DistributedKids First is a public city-funded agency that pro-vides child care resource and referral services to thecommunity and also administers Aspen's child carefunds. The city council appoints the board of direc-tors of Kids First. This board sets priorities for childcare funding, and it makes an annual recommenda-tion to the city council on the budget amounts forKids First operation, child care grants and thetuition assistance program.

Grants. The board oversees the grant applicationprocess, reviews requests from nonprofit organizationsand makes a recommendation to the city council forfunding. In the early 1990s, many of the grantrequests were for capital improvements. Now mostgrant requests are for operating expenses (e.g., tosupport teacher incentive pay, staff development)and for other nonfacility improvement strategies.Presently, nearly half of the grant funds support the

infant-toddler programs at two centers to reduce thecenters' parent tuition fees, making them moreaffordable for families.

Tuition assistance. The tuition assistance programoffers partial support for child care fees to familiesliving or working in Pitkin County (where Aspen islocated). The program targets families with incomesabove the cutoff for state child care subsidies. Aboard composed of bankers and one member of theKids First board sets assistance levels and reviewsapplications.

Families can apply by May 1 each year or at threeother specified times during the year. Applicants haveto certify their income, work status and residence orplace of work. The subsidies granted can range from$1 to $12 per day, based on a sliding scale that takesinto account family size and income level. (Thegoing rate for child care tuition in Pitkin county is$27 to $30 per day.) Assistance continues for as longa period of time as the family remains eligible.

Population ServedAny low- or moderate-income family who uses childcare for work-related reasons and either lives orworks in Pitkin County is eligible for the child caretuition assistance program.

Any nonprofit child care organization in theAspen area is eligible for the child care grants pro-gram. Child care centers, associations of directorsand associations of family child care providers haveall received funds.

Strategic ConsiderationsAffordable housing is a major community concern,given the rapidly rising cost of housing in Aspen.Having affordable housing located in Aspen(rather than in outlying areas of the county) is amajor benefit to employers of lower-wage workersin the tourism industry, which dominates the area.The sales tax was originally proposed to addressthese housing concerns. During deliberationswithin the city council, the concept of Aspen'soverall affordability for families was introducedinto the discussion by a council member (also amember of the board of a child care center) whonoted that housing and child care are the twolargest items in a family budget. When the coun-cil member proposed adding child care to the taxproposition, there was no debate. The proposition

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went to the voters to adopt a sales tax for afford-able housing and child care.Aspen is a community that prides itself on com-munity valuescaring about its citizens andworkers and striving to be a community with ahealthy economy and a healthy environment. Thecombination of child care with affordable hous-ingboth needs easily understood in a high-costarea like Aspenwas appealing to the communitybecause of these values.Enacting sales tax legislation in an area dominatedby tourism is a "Robin Hood" proposition: Thevoters know that the majority of the taxes will bepaid by nonresidents, while the majority of benefitswill go to residents. Enacting sales tax legislationmay encounter opposition in lower-income com-munities and/or in communities without significantnonresident involvement in the local economy.Two factors that contributed to passage are thatthe tax is not permanent and that the city councilretains annual decision-making power over theallocation of funds within and between the twobroad purposes. Voters will get to decide whetherto renew the tax for another period of time or letit "sunset." Earmarking the revenue too specifical-ly could be perceived as undermining the role oflocal government.The sales tax proposition went to the voters on thesame ballot with two extremely controversialitems: approval for a major hotel development andconsent to allow wider roads (i.e., a four-lanehighway). These latter two items dominated thecommunity debate and were strongly partisanissues. The sales tax proposal, by comparison, wasnot debated, generated only one instance of minorpublic opposition and appeared to be widelyregarded as noncontroversial. In the only publicmention of child care during the referendum cam-paign, an opponent of the housing tax accused thecouncil of purposely putting the two together toassure passage "because [you know) no one willvote against babies." Ultimately, the hotel passed,the highway was defeated and the sales tax passedby a modest margin with supporters across thepolitical spectrum.

Aspen's dedicated sales tax will expire in 2000.Community supporters are planning to campaignfor renewal, probably in 1997 so that, should thefirst attempt fail, there will be other chancesbefore the tax expires.

Other Sites With Similar StrategyStarting in 1995, a citizen group in Boulder, Colorado,spearheaded by a retired physician who had a passionfor establishing a universal maternal/infant homevisiting program, began to gather sufficient signaturesto put on the November (1996) ballot a sales taxinitiative' dedicated to young children. They havesucceeded in placing this on the ballot. The Children'sFund initiative asks voters to approve an increase inthe county sales tax of .1 percent for children two andyounger. This will generate an estimated $2.4 millionper year. The revenue would be allocated in severalways: 25 percent for home visiting; 25 percent to afund to match payment for child care services forchildren two and younger (one-third from the fund,one-third from the parent's employer, one-third fromthe child's parent); 2 percent for mediation for parentswho are preparing to divorce; and 5 percent to expandthe supply of infant care centers. The remaining 43percent is not designated, except for the restrictionto benefit children ages two and under, and would be

distributed by an appointed board of seven members.

Contacts

Virginia Newton, DirectorKids First0405 Castle Creek Road, Suite #3Aspen, CO 81611Phone: (970) 920-5363Fax: (970) 920-5558

Frank Peters (former city council member)629 W. NorthAspen, CO 81611Phone: (970) 925-1169

Bob McFarland, M.D., DirectorNational Parenting Community2300 KalmiaBoulder, CO 80304Phone: (303) 443-8585

1. The Colorado legislature granted initiative power to voters in counties in 1994 and rescinded it by 1996.

22 31.

STATE AND LOCAL SALES TAXES

Local Option Sales Tax (Ames, Iowa)

Description

In 1986, the state of Iowa created the local optiontax, allowing localities to levy a 1 percent sales taxon top of the 5 percent state sales tax. Local votersmust approve the levying of the tax and the specificpurposes for which funds raised by it can be spent.Ames and Sioux City were the first localities toapprove local option taxation. Ames' referendumproposed three broad categories: 60 percent to prop-erty tax relief, 20 percent to community bettermentand 20 percent to arts and human services, whichincluded child care. The tax is collected locally andremitted to the state, which returns it to localitieswithin each county proportionate to their population.

Ames, Iowa, is a city of about 48,000 that is hometo one of the campuses of Iowa State University. Nearlyhalf the population of Ames are university students.

When EstablishedAmes passed the local option tax referendum in 1987.

Amount Generated AnnuallyThe local option tax generates over $3.2 millionannually. Each year, the 60 percent earmarked forproperty tax relief goes directly into the city's generalfund. The 20 percent allocated to arts and humanservices amounts to about $640,000. The portionfor human services (over $450,000 annually) isallocated among various human services programs.

In 1994-95, the city's child care expenditures were$87,976. In 1995-96, Ames' child care expenditureswere $91,961. The amount of funding available isdirectly related to sales tax receipts.

Services Funded

Child care centers and child care resource and referralservices have been funded.

Hon. Funds DistributedThe city council approves the distribution of all itsrevenue, including those generated by the localoption tax, through the annual city budget approvalprocess. The funds generated by the local option taxfor human services (20 percent of the total) are dis-tributed through the city budget, but based on an

32

allocation plan recommended each year to the citycouncil by the county-wide Analysis of Social Ser-vices Evaluation Team (ASSET).

In Story County, the four major funders ofhuman services (United Way of Story County, AmesCity Council, Story County Board of Supervisors, andthe Government of Student Bodies of the Universityof Iowa at Ames) pool their funds and cooperativelyallocate them. (The total pool for 1995-96 was $1.4million.) All human services funding requests fromagencies in Story County are made through ASSET.The volunteer board of ASSET is an appointed bodyof 16 membersfour representatives are selected byeach of the funding partners. In addition, a represen-tative of the county office of the state Department ofHuman Services sits as an advisory member of theboard. United Way manages the operations of ASSET.

Community agencies make annual requests toASSET for specific human services programs. Dur-ing August and September, agencies are invited todiscuss their programs with the ASSET board. InJanuary, each is asked to make a budget presentationfor its program requests. Program requests are cate-gorized in three "panels": community at large,youth and services for the mentally/physically chal-lenged. Child care is included in the youth category.The appropriate ASSET panel evaluates requests,taking into account the priorities of each partnerfunder, the cost and quality of programs, and thehistory and management of applicant agencies; itthen prepares an allocation recommendation. Thefull ASSET board makes the recommendation forfunding specific programs. The recommendation forfunding includes a total award amount for each pro-gram, with this total apportioned among the fourfunders. The complete human services allocationplan is then forwarded to the partner funders. Thefinal step is for the governing body of each partnerfunder to officially act to adopt (or amend) the allo-cation plan recommended to it by ASSET.

Population ServedAll children and families who use child care servicesin the city of Ames are eligible to be served, regard-less of income or reason for needing child care. Thecity council has not imposed any restrictions besideslocation in the city of Ames. The referendum autho-rizing the local option tax did not impose anyrestrictions on the population to be served or the

23

services to be funded, as long as they are within theauthorized broad categories.

Strategic ConsiderationsIn the state of Iowa, the local option tax is part ofthe home rule, local control philosophy of govern-ment. Sales taxes are broad-based and generallyregarded by the public as fair, so long as the per-centage levied is low.The rationale for the 60/20/20 split that Amesproposed was based on a political judgment abouthow to appeal to the widest range of potentialsupporters among the voting constituency.Because affordable housing was a long-standingcommunity concern, property tax relief was a pri-mary consideration and was designated to receivethe bulk of funds.The mayor and city council reasoned that fundingbroad categories (e.g., community betterment) anddiverse activities (e.g., the arts) along with thefamiliar (e.g., human services) would generate thebroadest support. Real estate interests would supporttax relief; arts organizations would have a reasonto get involved in a public issue; human servicesproviders would support the referendum becauseit represented a potential source of new funds.Child care was included without discussion as oneof many human services; child care concerns werenot influential in shaping the tax proposal or thestrategy for its passage.The sales tax is permanent, unless the city councilproposes a referendum to repeal it.

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The allocation method for human services fundingis now well-respected and considered to be fair. Atfirst, getting the political and civic leaders to giveup personal influence over funding decisions washard. Some of the larger, more savvy and well-con-nected human services agencies resisted the change,too. With the establishment of ASSET and a per-manent source of dedicated public funds, humanservices delivery and planning are working as effi-ciently as possible, according to political leaders.A potential downside may be that the 20 percentallocation would not generate sufficient funds tomatch needs, if human services needs were toincrease rapidly.

Other Sites With Similar StrategyNone have been identified.

Contacts

Larry CurtisMayor of Ames, Iowa515 Clark AvenueAmes, IA 50010Phone: (515) 232-4732Fax: (515) 232-4756

Rich LampkinUnited Way of Story County (ASSET)510 Fifth StreetAmes, IA 50010Phone: (515) 232-2720

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STATE INCOME TAXESStates often generate revenue for programs througha voluntary income tax checkoff. Forty-one statescurrently have tax checkoffs for more than 150separate uses. The most common uses for the check-off are political contributions, wildlife preservationand child abuse prevention. Others include eldercare, Indian children, foster care and childhood dis-ease funds. The only income tax checkoff for childcare is profiled below.

STATE INCOME TAXES

Voluntary Income Tax Checkoff for Child Care(Colorado)

DescriptionEstablishes a fund for quality enhancement in licensedchild care programs financed through a voluntary childcare checkoff on Colorado state income tax returns.

When EstablishedThe proposal passed the state legislature in 1996,and the funds will be collected starting in thespring of 1997 for the 1996 tax year.

Amount Generated AnnuallyEstimates are that the checkoff will generate between$250,000 and $500,000 each year. In order to maximizecontributions, a coalition from the public and privatesectors to support the tax checkoff will be organized.

Services FundedFunds generated by the checkoff will be used to supportprofessional development activities and training forearly childhood care and education practitioners,program accreditation and other investments inquality that have the potential to produce improve-ments in child care services on a systemic level.

How Funds DistributedThe fund will be administered by the ColoradoChildren's Campaign, a statewide nonprofit organiza-tion committed to improving conditions for childrenin Colorado. A competitive application process andan independent selection committee will be estab-lished to make decisions regarding the disbursementof funds to qualified applicants.

Population ServedChild care and early education teachers and practi-tioners, community-based Learning Clusters,'resource and referral agencies, community collegesand institutions of higher learning.

1. Colorado distributes training funds through local Learning Clusters, which are composed of early childhood practitioners andparents who come together to identify their training needs and to develop a plan to meet those needs.

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Strategic ConsiderationsColorado's Business Commission on Child CareFinancingwhich was created by Governor RoyRomer in 1995made a series of recommendationsaimed at improving the supply of high-quality,affordable child care. The tax checkoff proposal wasone of the commission's recommendations. Factorsto consider when exploring the feasibility of repli-cating this strategy in another jurisdiction include:

Using a tax checkoff strategy to generate funds isoften appealing because participation by a taxpayeris entirely voluntary. Additionally, making acontribution is very simple (the taxpayer simplyplaces a check mark in the box), and many indi-viduals have the opportunity to participate.Still, the participation rate in checkoff initiativestends to be low (around 1 percent). Checkoff pro-grams do not produce a consistent or reliablesource of funding. The greatest support for theseis usually in the earliest years, and there is often aquick drop-off.Even if it generates limited funds, a child care taxcheckoff has the potential to give greater visibilityto this issue.Without strong maintenance-of-effort language,funds from the voluntary checkoff could be used tosupplant, rather than augment, current expenditures.

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Other Sites With Similar StrategyColorado is currently the only state to use a checkofffor child care or early education.

ContactKathleen ShindlerDeputy Policy DirectorFamilies and ChildrenOffice of the Governor136 State CapitolDenver, CO 80203Phone: (303) 866-3124Fax: (303) 866-2003E-mail: [email protected]

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TAX CREDITS, DEDUCTIONSAND EXEMPTIONSIndividual income taxes are the primary source ofrevenue for the federal government. Forty-one statestax individual income. After sales taxes, incometaxes are the largest source of revenue for states. Atboth the state and federal levels, the total revenueraised from individual income taxes are usuallyabout four times larger than the total generatedfrom corporate income taxes. Various credits(against taxes owed) and deductions (from incomebefore computing taxes owed) are allowed by bothfederal and state tax codes. In contrast, the majorsource of local revenue is from property taxes. Localgovernments often offer property tax abatements asa way to encourage industry to locate or remain intheir area and/or to spur expansion of existing localbusinesses. In this section, child care measuresfinanced through credits, deductions and exemp-tions from income tax and property tax are profiled.

Personal income tax credits/deductionsThe federal Child and Dependent Care Tax Creditallows a credit for some of the expenses of work-relatedchild care. Twenty-five states and the District ofColumbia also have child care income tax provi-sionseither credits (21 states and the District ofColumbia) or deductions (four states). All but fivehave child care tax provisions linked to some or allof the provisions of the federal child care credit.Nine states have no personal income tax, althoughone of these has a refundable child care credit provi-sion (Alaska). Seventeen states levy personal incometaxes but do not have child care tax provisions.

Generally, state tax provisions allow claims forthe same range of child care services as the federalcredit. Any legal form of child care used so that theparent(s) can work is allowable: child care centers,nursery schools, family child care homes, nannies,relatives (nondependents over age 18) and daycamps (but not overnight camps). Arkansas is theonly state that structures its tax credit to recognizequalitythe credit is doubled for families withthree- to five-year-old children enrolled in accredit-ed center-based child care.

Because it is especially well designed to benefitlower-income families, the state of Minnesota'sincome tax credit related to child care is profiled.The "State Income Tax Provisions for Child Care"chart (see page 33) details the characteristics of eachstate's child care tax provisions. While all stateswith credits also cover the care of adult dependents,the information below focuses on the child careaspects of these tax provisions.

Personal income andemployment tax benefitsThe U.S. Internal Revenue Service code allows tax-payers to set aside up to $5,000 from their salariesbefore taxes to help cover the cost of child care,elder care or care of a disabled spouse or domesticpartner if their employer has established anapproved dependent care assistance plan (DCAP).Any employerpublic or private, proprietary ornonprofitmay establish a DCAP. Under a DCAP,the employee's pay is reduced by the amount desig-nated by the employee, and these funds are set asidein a special account to pay dependent care expenses.The employee does not pay income or Social Securitytaxes on these funds. The employer also saves itsshare of Social Security taxes on funds placed in aDCAP. (In some states, these tax savings apply tostate income taxes as well.) The state of New York'sDCAP is profiled as an example of structuring DCAPpolicies and procedures to help lower-income workerstake advantage of this tax benefit.

The DCAP is not a tax credit; it is a way toreduce taxable income. As a result, it provides itsgreatest benefits to families in the highest taxbrackets. Employers can, however, take steps tomake the DCAP more accessible and beneficial tolow-income families. The DCAP for employees ofthe state of New York, profiled, is one example ofthis approach. Con Agra Refrigerated Foods (seethe Con Agra Child Care Initiative, profiled onpage 68) is another employer that has successfullyused a DCAP to reduce the cost of child care foremployees with low and moderate incomes.'

1. Parent(s) who participate in their employer's federal dependent care assistance plan may not be limited to the benefit they receiveunder their employer's DCAP. They may also be entitled CO a tax credit under the federal Child and Dependent Care Tax Creditprogram (see page 35 for a profile of that program). In addition, parents with low incomes may also be entitled to a tax creditunder the federal Earned Income Tax Credit program.

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Corporate Income TaxesAnother approach to supporting child care is

corporate tax provisions for employers. At least 14states have established some form of an employer taxcredit, which typically allows an employer to claima corporate tax credit of up to 50 percent for thecost of an employee child care benefit.

Unfortunately, these credits appear to have hadminimal impact. A 1989 study by the Child CareAction Campaign (CCAC) found that fewer than 1percent of eligible employers actually took advan-tage of the employer credits.' Even in Connecticut,which has a relatively well marketed and quitegenerous employer tax credit, only 45 out of 80,000eligible companies claimed the credit in 1989.Because comprehensive information on states thathave established employer tax credits is availablefrom CCAC (see the appendix on page 119 for itsaddress), we elected not to include them in thiscompendium. Instead, a lesser-known Colorado taxcredit that applies to any taxpayeran individual ora businesshas been profiled. While this tax creditcurrently is limited to enterprise zones, efforts areunder way to expand it statewide.

Local Business Property TaxesThe final entry in this section focuses on a localproperty tax abatement in Texas that includespotentially significant funds for child care. Localgovernments often offer property tax abatements asa way to encourage industry to locate (or remain) intheir area and/or to spur expansion of existing localbusinesses. Special funds to help support child caremay be included in these abatement agreements.Child care is viewed in this context as a necessarypart of a community's economic development strate-gy. Rather than being viewed as an expenditure forchild care, the tax abatement strategy approachesthese costs as part of the overall incentive package.

TAX CREDITS, DEDUCTIONS ANDEXEMPTIONS (Personal Income Taxes)

Child and Dependent Care Tax Credit (Federal)

DescriptionThe federal Child and Dependent Care Tax Credit(CDCTC) allows all families with child care expens-es to claim a credit against federal taxes owed equalto a percentage of their employment-related expen-ditures for any form of child careif both parentsare working or, in the case of a one-parent family, ifthat parent is in the workforce. Children must beunder age 13 and live with the parent(s) claimingthe credit. The law limits creditable expenses to$2,400 for one child and $4,800 for two or morechildren. The expense limits were set in 1981 andreflected average prices for care at that time. Thecredit is not indexed for inflation as other parts ofthe tax code are (e.g., the personal exemption, stan-dard deduction and earned income tax credit).

The credit declines as income rises:Adjusted Percentage ofgross income credit allowed

below $10,000$10,000- $12,000$12,000-$14,000$14,000-$16,000$16,000-$18,000$18,000- $20,000$20,000-$22,000$22,000-$24,000$24,000-$26,000$26,000-$28,000above $28,000

30%29%28%27%26%25%24%23%22%21%20%

The maximum credit of $720 for families withone child, or $1,440 for families with two or morechildren, is available to families with incomes below$10,000 (who are able to spend up to the limits).However, in practice, virtually no families are ableto claim the maximum credit because families withincomes this low are unlikely to be able to spend tothe expense limit, and they often have no tax liability.In 1995, a one-parent family with one child would

2. Euben, D., and B. Reisman. November 1989. Employer Tax Credits for Child Care: Asset or Liability? N.Y.: Child Care ActionCampaign.

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not owe federal income taxes until their incomeexceeded $11,000. The maximum credit for familieswith incomes over $28,000 is either $480 for fami-lies with one child or $960 for families with two ormore children.

When EstablishedThe 1954 revisions to the federal tax code added aprovision to allow a tax deduction for certainemployment-related child/dependent care expenses.The deduction was converted to a credit in 1976.Expense limits were raised, the sliding scale wasestablished, and the maximum credit was raised to30 percent beginning with tax year 1982. In taxyear 1983, the credit became available to taxpayersfiling the "short" tax return form (1040A).'

Amount Generated AnnuallyThe estimated federal revenue loss associated withthe CDCTC was $2.8 billion in federal tax year19942significantly lower than comparable levelsfor 1988, when the cost of the CDCTC was $3.8billion. The federal Family Support Act of 1988,among other changes, modified the IRS code to pro-vide that a taxpayer would not be eligible for theCDCTC unless the tax return included the name,address and taxpayer identification number of thedependent care provider. In apparent response, thenumber of returns claiming CDCTC dropped from9 million in 1988 to 6 million in 1989.3

There is no cap on the number of families whomay participate or the total amount that all familiescollectively may claim. The only limits are those onexpenses that may be used to calculate the credit(described above), and the requirements for claimingthe credit, which may deter some from using it,such as the need to have a provider's tax identifica-tion number and to file the necessary forms as anemployer if in-home care is used. (If the provider isa nonprofit corporation, then parents are notrequired to supply the tax identification number.)

Services FundedGenerally, the credit can be claimed for any form ofchild care, in-home or out-of-home, that is employ-ment-related; if the provider cares for more than sixchildren, the provider must comply with applicablestate and local laws and regulations. The taxpayermust have paid for the care, and must supply thename and taxpayer identification number of the per-son or organization that provided the care. The costof care claimed cannot exceed the earned income ofthe lower-earning spouse.

How Funds DistributedExpenditures are made throughout a year and thetax credit is claimed on the annual income taxreturn. for that year due in mid-April of the follow-ing year. Rather than receiving a larger refund longafter having paid for the child care, taxpayers whocan predict their child care costs may choose toadjust their federal tax withholding amounts toaccount for the credit, thus receiving the benefitsthroughout the year.

Population ServedAll families with federal tax liability and employ-ment-related care expenses can claim the creditwithin the limits described. All types of child carequalify for the credit.

Families with very low incomes cannot takeadvantage of this credit because they owe no federaltax and the credit is not refundable. For example, asingle-parent family with one child owes no taxuntil their adjusted gross income exceeds $10,750.A two-parent family with one child owes no federaltax until their adjusted gross income exceeds $14,000.

Strategic ConsiderationsBecause the credit is available to all families for alltypes of child care, it appeals to a wide constituency.As part of the tax code, it is easier to administer thanare direct-benefit programs that require more staff.

1. If the parent(s) participate in their employers' federal dependent care assistance plan (DCAPsee page 35 for a profile of thisbenefit), the parent(s) are required to offset what they receive under the DCAP with this tax credit program. In some circum-stances, the parent(s) may not be able to collect both benefits. In addition, parents with low incomes may also be entitled to atax credit under the federal Earned Income Tax Credit program.

2. Caspar, L., M. Hawkins and M. O'Connell. 1994. Who's Minding the Kids? Washington, DC: U.S. Department of Commerce,Bureau of the Census.

3. U.S. House of Representatives, Committee on Ways and Means. 1994. Overview of Entitlement Programs: 1994 Green Book.Washington, DC: U.S. Government Printing Office.

29

38

Historically, tax provisions have been stable fund-ing mechanisms because they are not subject tothe debates of regular reauthorization or annualappropriations.The tax credit (along with the federal dependentcare assistance plan) is currently the only source offederal support for the work-related child careexpenses of middle-income families. Such tax pro-visions are evidence of public support for the nec-essary expenses of working that all families withyoung children incur.The federal tax code includes other credits that arerefundable, e.g., the federal earned income taxcredit, which is refundable and capped, and isdesigned with a sliding scale benefiting lower-income families the most. Although the child carecredit is available to families of all income levels,because the credit is not refundable, familiesowing little or no federal tax cannot take fulladvantage of it. About 60 percent of the credit'sbenefits go to families with incomes under$50,000.4 Just under 5 percent of the benefits goto families earning less than $15,000.' Whilelower-income families apparently derive greaterpercentage benefits, actually they are unlikely tobe able to afford to spend enough to take fulladvantage of the credit.Relative to the current average price of child care,the amount of benefit a family receives throughthe tax credit is small. Moreover, because the cred-it is not indexed, the benefits it provides diminishover time. However, the tax credit is helpful if afamily has federal tax liability.

The credit treats all forms of child care equally,that is, the credit does not favor one form of careover another. Furthermore, the credit is not affectedby the quality of child care used. Unlike federalmortgage interest deduction, which provides asignificant enough benefit to affect consumerbehavior, the value of the child care credit isprobably too small an amount of money to affectconsumer choices in the direction of purchasinghigher-cost or better-quality child care.There have been efforts to phase out the credit forhigher-income families (e.g., phasing out the cred-it for families with incomes over $60,000 was oneof hundreds of options for reducing the deficitthat were presented to Congress by the Congres-sional Budget Office [CBO) in early 19956). Thusfar, these efforts have been unsuccessful. Advocatesin the child care community have opposed thesechanges because the expected savings realizedfrom phasing out would not have been redirectedwithin the child care credit program.

ContactNancy Duff CampbellNational Women's Law Center11 Dupont CircleWashington, DC 20036Phone: (202) 588-5180Fax: (202) 588-5185

4. Congressional Budget Office. 1995. Reducing the Deficit: Spending and Revenue Options, p. 349. Washington, DC: U.S. GovernmentPrinting Office.

5. Gold, S.D., and D.S. Leibschutz. 1996. State Tax Relief for the Poor. Albany, NY: Center for the Study of the States, Rockefeller

Institute of Government.

6. Congressional Budget Office. 1995. Reducing the Deficit: Spending and Revenue Options, p. 349. Washington, DC: U.S. GovernmentPrinting Office.

30 39

TAX CREDITS, DEDUCTIONS ANDEXEMPTIONS (Personal Income Taxes)

Child and Dependent Care Credit (Minnesota)

DescriptionMinnesota allows families with child care expensesto claim a refundable child and dependent care taxcredit against state personal income taxes owed. Thecredit is on a sliding scale favoring lower-incomefamilies and has income limits indexed for inflation.Minnesota also provides a credit for families with aninfant (born during the tax year), regardless ofwhether they had child care expenses, and provides acredit for operators of licensed family child carehomes to claim a credit for their own children whoare under age six.

When EstablishedMinnesota's child care credit was established in1977. The provision for family child care operatorstook effect for tax year 1992; the infant credit tookeffect for tax year 1994.

Amount Generated AnnuallyLike the federal tax provisions, Minnesota's statechild care tax benefits are not capped in terms of thetotal number of families who may file for them orthe total amount claimed by all filers. In 1994, thechild care tax credit was claimed on 38,949 Min-nesota tax returns for a total of $12,256,000.

Minnesota's tax credit is targeted to help lower-income families. For tax year 1995, families withincomes under $16,050 are generally eligible for themaximum state credit-100 percent of the federalcredit for which the family would have been eligible.Families who cannot claim the federal credit becauseof their limited federal tax liability remain eligiblefor the state credit. Thus, the maximum amount afamily may claim as a state credit is $720 for onedependent and $1,440 for two or more. Families withincomes over $29,700 are not eligible for the statecredit. In between these income levels, the creditamount declines proportionately as income increases:for every additional $350 of income, the credit declinesby $18 (or $36 if the claim is for two or more depen-dents). Minnesota's credit is refundable, making itvaluable for low-income taxpayers who owe no taxes.(Six other states have refundable child care credits.)

Minnesota extended its credit to licensed familychild care providers (who are income-eligible) forthe care of the provider's own children under agesix. For children under 16 months of age, the creditis claimed based on expenses of $2,400. For a childbetween the ages of 16 months and six years, thecredit is based on the amount the provider wouldhave charged to care for a child the same age and forthe same number of hours of care.

Minnesota's credit permits an income-eligible,married-couple family with a newborn (i.e., aninfant born during the tax year) to claim a creditbased on $2,400 of expenses even if the family hadno child care expenses.

Services FundedGenerally, state tax provisions allow claims for thesame range of child care services as the federal credit.Any legal form of child care used so that the parent(s)can work is allowable: child care centers, nurseryschools, family child care homes, nannies, relatives(nondependents over age 18) and day camps (butnot overnight camps). Arkansas is the only statethat structures its tax credit to recognize qualitythe credit is doubled for families with three- to five-year-old children enrolled in the Arkansas qualityapproval system.

Minnesota allows taxpayers to claim a creditbased on the same expenses as those eligible for thefederal credit.

How Funds DistributedChild care expenses are paid throughout the year,and the tax credit is claimed on the annual incometax return. Taxpayers who can predict their childcare costs may choose to adjust their state tax with-holding amounts to account for the credit, thusreceiving the benefits throughout the year.

Population ServedMinnesota has limited its tax credit to lower-incomefamilies; families with incomes over $29,700 are noteligible for the credit. Seven states (including Min-nesota) cap their child care tax credit by imposingan upper income limit. Most states follow the federalmodel and allow families at all income levels toclaim the credit.

Like nearly all other states with child care taxprovisions, Minnesota's tax credit applies to child

4031

care for children up to age 13 years, the same agelimit as the federal credit.

Strategic ConsiderationsGenerally, the justification for state child care taxcredits is similar to that for the federal credit. Taxcredits are public recognition of the work-relatedexpenses that families with young children incur.Child care tax provisions are one of many strate-gies to help families afford child care. Tax creditsmay be more politically feasible than direct spend-ing in the current anti-tax, budget-cutting climate.Tax credits alone are insufficient for lower-incomefamilies. The actual benefits often are too small tohelp the lowest-income families, and tax creditsdo not directly influence the quality of child carechosen by a family.In general, deductions are worth much less totaxpayers than credits, and deductions favor higher-income taxpayers over lower-income ones.State tax provisions that are directly linked to thefederal provision share the strengths and liabilitiesof the federal credit. The federal credit is on a slidingscale favoring lower-income families and is avail-able to all families. However, the federal credit isnot refundable and is not indexed for inflation.States with tax credits linked to the federal creditcan minimize the downside by basing their creditson either the eligible federal expenses or the potentialcredit (rather than the actual federal credit). Thiswill enable families who cannot claim the federalcredit to benefit from the state credit.State tax credits that are refundable help lower-income families who may have no tax liability.To ensure that all families are aware of child caretax credits, the tax credit should be incorporatedinto both the "long" and "short" tax return forms.Many lower-income families use the short form, soit is particularly important to include the taxcredit there.

32

Expense limits that reflect the average cost ofgood child care in the state and are indexed forinflation will help families more than fixedexpense limits.States can target assistance to lower-income familiesby offering credits instead of deductions, makingthe credit refundable, indexing the credit forinflation, using sliding scales that favor lower-income families and putting the tax credit on theshort form.A few state child care tax provisions are designedto "sunset." For example, California had a modestcredit that expired at the end of 1993 and has notbeen reenacted. Montana's child care deductionexpired in 1994. Most states' child care tax provi-sions are permanent.

Other Sites With Similar StrategyAs noted above, 25 states and the District of Columbiahave child care income tax provisions. See page 33for a chart summarizing child care tax provisions forall states.

Contacts

Nancy Duff CampbellNational Women's Law Center11 Dupont CircleWashington, DC 20036Phone: (202) 588-5180Fax: (202) 588-5185

Minnesota Department of RevenueMail Station 555510 River Park PlazaSt. Paul, MN 55146-5555Phone: (612) 296-3781 or (800) 652-9094Fax: (612) 297-7430

41

STATE INCOME TAX PROVISIONSFOR CHILD CARE1 (1995 unless noted)

States(with personalincome taxes)'

Type ofchild careprovision

Description Refundable? Income cap? MaximumbenefitsMr 1 ana as mom dep.)

AlabamaAlaska

Arizona

Arkansas

California

Colorado(1996)

ConnecticutDelawareDistrict of Columbia

GeorgiaHawaii

Idaho

Illinois

IndianaIowa

Kansas

KentuckyLouisiana

Maine

Maryland

nonecreditnonecredit

none

credit

nonecreditcreditnonecredit

deduction

nonenone

credit

creditcreditcredit

creditdeduction

16% of federal credit yes

10% of federalcredit; 20% ifaccredited centerfor 3- to 5-year-olds

50% of federal credit<$25,000; 30% offederal credit for$25,000-$35,000;10% of federal creditfor $35,000-$50,000

no S115/$230

no, except no 5144/$288accreditedpreschool

yes

50% of federal credit no

32% of federal credit

25% of eligible expensesfor <$22,000, sliding in$2,000 income incrementsto 15% for incomes> $40,000deduct expenseseligible for federal credit

75% of federal credit<$10,000

'65%-for.$10;0007$20,000 .-55% fir $20,000425,00050% for *25,000435,00040% for $35,000-$40,00025% of federal credit no

$50,000 5360/$720

no

no no

no

20% of federal credit10% of federal credit,but nor >$25

5360/$720$230/$461

no $600/$1,200

no E197/$394

$540/$1,080$40,000

nono no

no no

25% of federal credit no no

deduct eligiblefederal expenses

no no

$180/$360$1444288$25/$25

$1804360$144/$288

1. This chart was compiled from two main sources augmented by telephone interviews. These sources are:

Steinschneider, Campbell and Williams. 1994. Making care less taxing: Improving state child and dependent care tax provisions.

Washington. DC: National Women's Law Center; and Gold and Liebschutz. 1996. State tax relief for the poor. Albany, NY:

Rockefeller Institute of Government, Center for the Study of the States.

2. Nine states do not tax personal income: Alaska, Florida, Nevada. New Hamphshire, South Dakota, Tennessee, Texas, Washington

and Wyoming.

BEST COPY AVAILABLE

933

STATE INCOME TAX PROVISIONSFOR CHILD CARE' (1995 unless noted)

States Type of Description Refundable? Income cap? Maximum(with personal child care benefitsincome taxes)2 provision

(for 1 dep./2 or more dep.)

Massachusetts deduction deduct maximum of no no $143/$286

Michigan none

$2,400 or $4,800

Minnesota credit 100% of federal credit . yes $29,700 $720/$1,440

Mississippi

Missouri

Montana

none

none

none

<$16,050; sliding in $350income increments to nocredit for incomesover $29,700

NebraskaNew Jersey

creditnone

25% of federal credit no no $180/$360

New Mexico credit 40% of eligible expenses yes $17,680 $480/$960/up to $8/day $1,200 (3+)

New York (1996) credit 60% of calculated federalcredit <$10,000 sliding inequal increments to 20%for incomes over $14,000

yes no 5432/5864

North Carolina credit For incomes <$25,000: :'no no $312/$62413% of federal expenses forchild <7 years and 9% forchild 7 or older$25,000-$40,000: 11.5%for <7 and 8% for 7+over $40,000: 10% for

North Dakota none

<7 and 7% for 7+

Ohio credit 35% of federal credit for no $40,000 $252/$504<$20,00025% for $20,000-$40,000

Oklahoma credit 20% of federal credit no no S144/8288

Oregon credit 30% of federal expensesfor <$5,000

no $45,000 $720/$1,440

15% for $5,000-$10,0008% for $10,000-$15,0006% for $15,000-$25,0005% for $25,000-$35,000

Pennsylvania none

4% for $35,000-$45,000

Rhode Island credit 27.5% of federal credit no no $198/$396

South Carolina

Utah

credit

none

7% of eligiblefederal expenses

no S10,000 S168/5336

Vermont credit 25% of federal credit no no 5180/5360

Virginia

West VirginiaWisconsin

deduction

none

none

deduct eligiblefederal expenses

no no $138/$276

34 LiES1 C6NAVAIABLE zi 3

TAX CREDITS, DEDUCTIONS ANDEXEMPTIONS (Personal Income andEmployment Taxes)

Federal Dependent Care Assistance Plan(New York State)

DescriptionNew York State has established a flexible spendingaccount for its employeescalled the Dependent CareAdvantage Account Program (DCAAccount). IRSrules specify that employees must pay their dependentcare expenses and then request reimbursement fromthe pre-tax funds they have set aside through payrolldeduction. The DCAAccount program has takensome unique steps to greatly reduce the time betweenpayment and reimbursement, which makes partici-pation in the program feasible for moderate-incomefamilies. New York State allows funds set aside in aDCAP to be exempt from state income taxes as well.

When EstablishedThe plan was implemented in 1991 as a result ofcollective negotiations between New York State andits major public employee unions.

Amount Generated AnnuallyThe average participant will have saved $1,500 incombined federal and state personal income taxes forthe tax year 1996. Although the state loses state taxeson the amount participants set aside, it saves federalSocial Security (FICA) taxes on these funds. (In 1995,New York State saved approximately $862,000 infederal FICA taxes.) Projections indicate that for fiscalyear 1996, the FICA savings will exceed the loss instate tax revenue, resulting in a cost-positive program.

Services FundedFunds may be set aside if they are used to pay forcare of a child under 13 years of age (children withspecial needs may be older) who is a dependent byfederal tax rules, or for an adult dependent who isunable to care for him- or herself. These servicesmay be provided in the home or in another childcare location, but not by someone who is claimed asa dependent for tax purposes. The taxpayer mustprovide the name, address and Social Security num-ber (or taxpayer identification number) of thedependent care provider.

How Funds DistributedThe New York State Labor/Management Child CareAdvisory Committee (NYSLMCCAC) oversees theprogram. Claims are reviewed and processed by athird-party administrator under contract with theGovernor's Office of Employee Relations on behalfof the NYSLMCCAC.

Population ServedAll state employees, including employees of the leg-islature and the Unified Court System, are eligibleto participate. More than 3,000 employees currentlyare enrolled. Most participating employees haveannual incomes above $25,000.

Strategic ConsiderationsNYSLMCCAC wanted to establish a work/familybenefit that was available to a wide group of fami-lies, not just those who had children enrolled intheir network of work-sire child care centers.DCAAccount funds may be used in a wide range ofchild and elder care settings. In considering thisstrategy, the following issues should be explored:

Many employees find it difficult to wait for reim-bursement of their child care expenses. To helpalleviate this problem, NYSLMCCAC staff haveworked closely with the DCAAccount third-partyadministrator to ensure a quick and efficientreimbursement process. These features include: atoll-free fax line for reimbursement claims; directdeposit of reimbursement and daily check-writesor wire transfers; and no minimum restrictions forreimbursement. A toll-free hot line for questionsor problems is also available.Employees often do not have the cash flow neces-sary to cover the "double hit" that occurs inadministration of a dependent care assistance planprogram. In other words, participants must paytheir child care provider and have sufficient fundsin their account through payroll deduction beforethey can be reimbursed for eligible expenses. Tominimize this problem, NYSLMCCAC does notmake payroll deductions from the first or lastpaycheck of the plan year. This allows users toaccumulate eligible expenses and submit a reim-bursement claim form prior to the first payrolldeduction and also enables employees to have fullpaychecks during the holiday season.

4435

Many employees are concerned about the IRS "useit or lose it" rule, which requires that they spendthe full amount set aside for dependent careexpenses or forfeit these funds. To help addressthese concerns, NYSLMCCAC staff contact eachemployee (by certified letter and/or phone) whostill has funds in their account at the end of theplan year to ensure that they understand the IRSrule and have the opportunity to expend anyunused funds before the deadline.In some cases, using the federal and state depen-dent care tax credit provides greater tax benefits.Families need to carefully analyze the tax benefitsof various approaches, a process that can be com-plex. NYSLMCCAC offers employees assistance inconducting this analysis and making a decisionabout how much money to set aside.Nationally, dependent care assistance plans gener-ally do not benefit employees with annual incomesbelow $20,000. These employees typically findgreater benefit from using the federal child anddependent care tax credit. The income cutoff iseven higher in states that have established a statedependent care tax credit. NYSLMCCAC reportsthat New York State families must have incomesabove $25,000 before participation in a dependentcare assistance plan results in a significant tax savings.

36

Other Sites With Similar StrategyAt least 36 states have established dependent careassistance plans for some or all state employees,including the states of: Alaska, California, Colorado,Florida, Georgia, Illinois, Iowa, Kansas, Kentucky,Maryland, Massachusetts, Michigan, Minnesota,Missouri, Mississippi, Montana, Nebraska, Nevada,New Hampshire, New York, North Carolina, NorthDakota, Ohio, Oklahoma, Oregon, Pennsylvania,South Carolina, South Dakota, Tennessee, Texas,Utah, Virgin Islands, Vermont, Washington, Wis-consin and Wyoming. Many private employers haveestablished DCAPs as well. See the Con Agra ChildCare Initiative, on page 68 of this report, for furtherinformation on a private-sector plan that benefitsemployees with low and moderate incomes.

ContactRegina PollackAssistant Staff DirectorNew York State Labor/Management Child Care

Advisory CommitteeSouth Swan Street BuildingCore 1, 2nd Floor6 Empire State PlazaAlbany, NY 12223Phone: (518) 473-8091Fax: (518) 473-3581E-mail: [email protected]

45

TAX CREDITS, DEDUCTIONS ANDEXEMPTIONS (Corporate Income Taxes)

Enterprise Zone Contributions Tax Credit(Colorado)

DescriptionColorado's enterprise zone law created a state incometax credit to encourage taxpayers to make contributionsto assist enterprise zones in implementing their eco-nomic development plans and to promote child carein enterprise zones. The amount of the credit is 50percent of the value of cash contributions (up to amaximum of $100,000 per year) and 25 percent ofthe value of in-kind contributions. If the creditexceeds the contributor's Colorado income tax liability,the excess credit may be carried forward up to five years.

When EstablishedChild care contributions made to enterprise zoneadministrators on or after May 24, 1990, may quali-fy for the credit.

Amount Generated Annually$1.4 million was generated for child care programsand services in calendar year 1995.

Services FundedContributions may be made for the following pur-poses: establishing a child care facility; trainingchild care providers; establishing a fund for makinggrants or loans to parents residing or employed inthe zone; and establishing a child care informationdissemination or referral program.

Hon, Funds DistributedThe contribution must be made directly to a desig-nated enterprise zone administrator. The administra-tor certifies that the purpose of the contribution isto promote child care in the zone and then transfersthe funds to the child care program specificallynamed by the taxpayer.

Population ServedEither the child care facility to whom the contribu-tion is targeted must be located in an enterprisezone or the parent or trainee (who receives scholar-ship funds) must reside or be employed in the zone.

Strategic ConsiderationsThe credit was initiated by a group of individualsinterested in expanding the supply of child careandpromoting employer-supported child care in partic-ularin the state of Colorado. A tax credit mechanismfor the economic development zones already existed,and it made sense to expand it to include child carerather than establish an entirely new credit.

Several revisions to the Colorado law are currentlybeing explored, including proposals to reduce thecredit from 50 percent to 25 percent. In consideringthis strategy, the following issues should be explored:

A strength of this approach is that it builds onthe voluntary sector (that is, it isn't perceived as agovernment program and allows taxpayers to choosewhere they want tax funds to go). Some policymakers are concerned, however, that allowing tax-payers to choose where tax funds go underminestheir role in allocating resources.Limiting the credit to economic development zonesis inequitable. There is often a geographic mismatchbetween zones and child care needs. Colorado'sBusiness Commission on Child Care Financingrecommended that the credit be expandedstatewide. The proposal is under consideration.Using the zone administrator as a "middleman"for distributing funds is cumbersome, increasesadministrative costs and discourages smallercontributions. Handling the paperwork for thesecontributions (especially if they are small) can bea headache for a zone administrator, who typicallyknows very little about child care. To this end, thestate is considering an amendment to allow fundsto be contributed directly to the child care programrather than passing through the zone administrator.


ContactEvan MetcalfEnterprise Zone CoordinatorColorado Department of Local Affairs1625 Broadway, #1700Denver, CO 80202Phone: (303) 892-3840Fax: (303) 892-3725E-mail: [email protected]

4637

TAX CREDITS, DEDUCTIONS ANDEXEMPTIONS (Local Business Property Taxes)

Property Tax Abatement (Travis County, Texas)

DescriptionThe Texas State Legislature has enacted laws toallow local governments to offer incentives to attractnew companies and expand existing ones. TravisCounty recently executed its first tax abatementagreement with the Samsung Austin SemiconductorCompany) Establishment of a dedicated fund tosupport job training (including child care costs) waspart of the agreement.

When EstablishedIn 1995, Travis County elected to participate in thetax abatement process, and established guidelinesand criteria for approving abatements. In 1996, thecounty executed its first tax abatement agreementwith Samsung.

Amount Generated AnnuallyUnder the abatement agreement, 100 percent of theproperty taxes owed by Samsung will be apportionedas follows:40 percent baseline tax abatement (incentive for

locating in Austin)additional tax abatement "bonus" ifSamsung fills 40 percent of jobs withtargeted workerstaxes set aside (by county) to support jobtraining of targeted workers, includingthe cost of child caretaxes transferred to the countygeneral fund

15 percent

20 percent

25 percent

While the total property taxes owed by Samsunghave not been determined (because the facility hasn'tbeen built yet), it has been estimated that the abate-ment agreement will generate at least $1.5 million ayear for job training, including child care. Theabatement will be in effect for 10 years. The preciseamount set aside for child care will depend upon thenumber of individuals who participate in job train-ing and need child care.

Services FundedSubsidized child care for targeted workers partici-pating in job training programs designed to helpthem obtain the skills they need to work for Sam-sung and other employers in Travis County.

How Funds DistributedSamsung will work with the Travis County Work-force Development Board to identify and supportjob training programs that are approved by thecounty and are appropriate training for prospectivestaff. Support services, including child care, will bepart of this agreement. Property taxes will be paidby Samsung to Travis County. The county will use aportion of the taxes it collects from Samsung to payfor job training programs and other support servicesfor targeted workers.

Population ServedChild care will be made available to targeted workers.The term "targeted workers" includes individualswho: reside in Travis County with a family incomeat or below 80 percent of the county median income,or reside in public housing, and are trained in aWorkforce Development Board training program orany other training program approved by the county.

Strategic ConsiderationsThe tax abatement is designed to attract "high-tech"companies who are willing to create new jobs, hiretargeted workers and make a capital investment ofat least $250,000 per new job created. The job trainingset-aside was included to ensure that low-incomeindividuals who currently reside in Travis Countyare able to apply for the new jobs rather than thecompany's drawing employees from other areas. Childcare is a critical component because many individualsare unable to participate in job training programsbecause they cannot afford child care. In consideringthis strategy, the following issues should be explored:

The strategy ties child care directly to economicdevelopment. It isn't a separate child care initiative,but an integral part of a community investmentplan. Rather than being viewed as an expenditurefor job training and child care, the tax abatementstrategy approaches these costs as part of the over-all incentive package.

1. At the time this profile was prepared, Travis County was in the process of negotiating a similar tax abatement agreement withanother high-tech company, Photronics.

38 4

Including child care in an initial tax abatementagreement can help lay the groundwork for futureinvestments in an employer-supported child carebenefit once the employees are hired.The strategy is viable only in areas of high growth.Communities that can employ this strategy effec-tively must have the capacity to attract companiesthat are large enough employ a significant numberof people, target a percentage of their jobs tolow-income individuals and invest in trainingthose individuals.

Other Sites With Similar StrategyMany states and communities have tax abatementlaws. The extent to which these policies include aset-aside for child care and/or job training is unknown.Connecticut allows cities to provide property taxexemptions to businesses that offer child care ser-vices to town residents.

Some cities and counties have the capacity tocreate redevelopment agencies that earmark increasedlocal tax revenue and use these earmarked funds tosupport capital construction projects in distressed orblighted communities. The Los Angeles CommunityDevelopment Agency has, for example, established apolicy that recognizes child care as a fundamentaltool in achieving the goals of redevelopment agencies.Additionally, the redevelopment agencies in severalCalifornia cities have begun to establish "fund-swapping" agreements between the redevelopmentagency and the local government that can help makeoperating funds available to child care and earlyeducation programs.'

ContactsSamuel BiscoeCounty Commissioner, Precinct OneTravis County Administrative Building314 W. 11th Street, Room 510P.O. Box 1748Austin, TX 78767Phone: (512) 473-9111Fax: (512) 473-9535

Verna BrowningTravis County Human Services DepartmentTravis County Administrative BuildingP.O. Box 1748Austin, TX 78767Phone: (512) 707-3200

2. For further information, see Linking Child Care Development and Public Sector Redevelopment by J. E. Stokley, The National EconomicDevelopment and Law Center, Oakland, CA, (510) 251-2600.

39

48

FEES AND LOTTERIESWhile sales taxes are the major source of state revenue,and property taxes are the primary source of revenuefor localities, another way in which states and localitiescan generate revenue is through fees. Fees typicallyare charged to cover all or part of the cost of providinga service, such as producing birth certificates orgranting licenses to practice an occupation. Fees maybe charged for the use of a public facility, such as apark or swimming pool, or for a particular publicservice, such as garbage collection or water.

Charging fees for child care licensing is becomingcommon. Revenue from these fees may be used tohelp offset the cost of licensing or, as in the Virginiaprofile included in this section, to generate revenuefor other child care quality-improvement activities.Fees may be generated by one enterprise and used tofund another unrelated activity. Massachusetts willuse revenue generated from vehicle license plate feesto support a fund for child care improvement.

To generate revenue for public services 37 stateshave established lotteries. In 1993, states realized profitsof $9 billion from lottery ticket sales of $25.2 billion.On average, 36 percent of lottery sales is transferred togovernment as profit, 14 percent is used to cover oper-ating expenses and commissions, and 50 percent is usedto pay prizes. Twelve states deposit lottery profits inthe general fund. Twenty-four states earmark lotteryprofits for a specific purpose, including: education(California, Florida, Idaho, Illinois, Massachusetts,Michigan, Montana, New Hampshire, New Jersey,New York, Ohio and West Virginia); state buildingfunds (Colorado, Idaho, Kansas, Maryland and SouthDakota); economic development (Arizona, Kansasand Oregon); parks and natural resources (Colorado,Minnesota and West Virginia) as well as local trans-portation, law enforcement, senior citizen services andproperty tax relief. Earmarking lottery profits does notguarantee, however, that these funds will be used toincrease or improve services. In many cases, earmarkedlottery profits are used to replace general fund dollarsthat are reallocated to other programs.' Two states thatuse lottery funds to support their prekindergartenprograms are profiledGeorgia and Florida.

FEES AND LOTTERIES

Child Care Licensing Fees (Virginia)

DescriptionThe state of Virginia collects an annual fee from eachlicensed child care center and family child care home.'Annual fees are based on licensed capacity and rangefrom $200 for a center with a capacity of more than200 children to $14 for a licensed family child carehome. Family child care systems pay an annual feeof $70. Short-term programs (such as summer camps)pay $25 per year if they serve up to 50 children, and$50 per year if they serve more than 50 children.

When EstablishedLegislation establishing the fees was passed in 1983and was implemented in 1984.

Amount Generated AnnuallyRevenue from child care licensing fees averages$250,000 per year. These fees are generated fromapproximately 2,300 licensed centers and 1,200licensed homes.

Services FundedLicensing fees are used to support training work-shops, "train the trainer" sessions, and training andtechnical assistance materials for licensed child carecenters and family child care homes. (Additionally,the Division of Licensing has used funds from thefederal Child Care and Development Block Grant tosupport training and scholarship opportunities forall child care providersincluding registered familychild care homes and providers that are exempt fromlicensingand consumers of child care.)

How Funds DistributedThe Division of Licensingthrough contracts withprivate entities or by using its own staffdevelopstraining curricula and delivers training. Training ona wide range of topics is made available to staff anddirectors of all licensed child care programs in thestate. Training topics are identified based on formal

1. National Conference of State Legislatures Legisbrief. Vol. 3, No. 25, June/July 1995.

2. The term "licensed child care center" includes most nursery schools, school-age child care programs, Head Start agencies and manysummer camps. The term "licensed family child care home" includes only homes that care for six to 12 children. Virginia has avoluntary registration system for family child care homes that care for fewer than six children. Registered providers are notrequired to pay a licensing fee.

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and informal needs assessments conducted withchild care providers, Division of Licensing programstaff and the Child Day Care Council.

Population ServedFunds generated from licensing fees are used tosupport training of licensed child care centers andfamily child care homes. Other federal or state fundsmay be used to support training for regulation-exempt providers and consumers.

Strategic ConsiderationsThe Virginia Legislature began to consider a proposalto establish licensing fees to help offset the cost ofregulating child care programs in 1982. The Depart-ment for Children (a government coordinating andadvocacy body that was disbanded in the early1990s) successfully argued, however, that child carelicensing fees could not generate enough money tooffset the cost of regulating providers, and recom-mended instead that the fees be used to help fundprovider training. The proposal was revised to incor-porate these principles, and it passed the followingyear. In thinking strategically about this approach,key points to consider include:

Provider groups may be less likely to opposelicensing fees if the fees are used to support providertraining. Strong objections to licensing fees mostoften occur in situations where the revenue fromfees goes into the state general fund and is notused to enhance training or other child care services.Due to limited resources and the pressure to keepparent fees low, many boards and owners of childcare programs are reluctant to budget funds forprofessional development; charging fees (that areused for training) effectively requires them to setaside some funds for this purpose. If licensing feesare combined with other funds to support a com-prehensive training initiative, child care programshave greater access to more varied and higher-quality training than individual programs couldfind or afford on their own.Licensing fees can provide a stable source of fundingfor training activities and may help to leverageother state, federal or private-sector training funds.

The link between licensing and training has beendemonstrated by research indicating that stafftraining is a predictor of compliance with qualitystandards.'Fees could encourage family child care providersto avoid regulation, especially in states whereregulation is voluntary.Some states are prohibited by law from charginglicensing fees.At best, licensing fees can generate a limitedamount of money for a very specific purpose. Thisstrategy should be viewed as only one part of alarger strategy to strengthen training and techni-cal assistance for child care providers.

Other Sites With Similar StrategyArkansas charges licensing fees and uses them tofund training grants and background checks. TheVirgin Islands also use licensing fees for trainingand other activities. Idaho, Maine, Mississippi andNorth Dakota use fees for such activities as finger-printing and background checks; health, sanitationand fire inspections; and program administration.Additionally, 23 jurisdictionsArizona, California,Colorado, Connecticut, District of Columbia, Florida,Indiana, Kansas, Kentucky, Louisiana, Massachu-setts, Michigan, Minnesota, Nebraska, New Jersey,New Mexico, Ohio, Oklahoma, Tennessee, Texas,Utah, Washington and Wisconsincharge fees andtransfer revenue to the state general fund.

ContactCarolynne Stevens or Elizabeth Wheatley Baron, Ph.D.Office of Training, Education and ConsultationDivision of Licensing ProgramsVirginia Department of Social Services730 East Broad StreetRichmond, VA 23219Phone: (804) 692-1774 or 1761Fax: (804) 692-2370E-mail: [email protected]

3. See Fiene, R. 1996. "Using a Statistical-Indicator Methodology for Accreditation," from NAEYC Accreditation: A Decade of Learningand the Years Ahead, pp. 61-64. Bredekamp, S., and B. Willer, Eds. National Association for the Education of Young Children.Washington, DC.

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FEES AND LOTTERIES

"Invest in Children" License Plate(Massachusetts)

DescriptionBoston's Success By 6 Initiative, a program of theUnited Way of Massachusetts Bay, has filed legislationto establish a Child Care Quality Fund supportedthrough the sale of specialized license plates with adistinctive design and the message "Invest in Children."

When EstablishedThe bill passed the House in one day (through rulessuspension engineered by the former speaker, who isa strong supporter of children's issues) and wasenacted in 1996. The specialty license plates areavailable starting 1997.

Amount Generated AnnuallyBased on the revenue experience of another specializedlicense plate in Massachusetts, revenue projectionsare for $2 million the first year and modestly decliningamounts in subsequent years. The amount generatedannually depends on license plate sales. The localABC-TV affiliate, WVBC-TV, is a partner in SuccessBy 6 and has agreed to promote the license plates,which should increase sales.

Services FundedQuality improvements in five categories will befunded: teacher training, parent/consumer education,equipment and materials, multicultural training andcurricula, and technical assistance for programaccreditation.

How Funds DistributedThe state Office for Children will administer thefund, which will offer competitive grants to non-profit child care organizations.

Population ServedAny nonprofit child care program in Massachusetts,and the children and families it serves, is a potentialbeneficiary.

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Strategic ConsiderationsThe United Way decided to focus the efforts ofthe Success By 6 volunteers on influencing publicpolicy and felt that the license plate legislationwas a tangible product that would engage its vol-unteers. Further, when United Way calculated thelevel of projected revenue, it decided the best useof funds would be increasing the quality of earlycare and education programs.Buying a specialty plate is a voluntary act. Alicense plate offers the buyer both a tangible itemand a symbol of their support for children.Establishing a quality fund within state govern-ment creates a line item in the state budget.Initially, the line will be for expenditure of fundsraised by the plate, but it also can be used forother appropriations. United Way is confidentthis bill will pass.One theory about how to make good child careaffordable to families holds that if various costcenters in the production of child care services(e.g., food, staff development and facility con-struction) could be supported through separaterevenue sources independent of parent fees, theprice of child care for families could be madeaffordable. Creating a dedicated fund for qualityimprovement has the long-term potential to affectthe price of child care paid by consumers.

Other Sites With Similar StrategyNine stares have some kind of license plate forchildren: Alabama (for education), California (forchild health and safety), Connecticut (Keep KidsSafe), Florida (one for education and one for an earlyintervention trust fund), Indiana (Kids First),Louisiana (for child safety), Missouri (Children'sTrust Fund), Oregon (child abuse prevention) andTennessee (Helping Schools).

ContactMargaret Blood, Vice PresidentUnited Way of Massachusetts Bay/Success By 6245 Summer Street #1401Boston, MA 02210-1121Phone: (617) 624-8150Fax: (617) 624-9123

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FEES AND LOTTERIES

The Georgia Lottery for Education

DescriptionThe Georgia Lottery for Education makes fundsavailable to support the cost of prekindergarten andcollege education for all Georgia children and families.Funds are also generated to support capital projectsrelated to education, including computers and othertechnology in the schools. The legislation expresslystates that lottery funds must be used to supplement,not supplant, existing resources for educationalpurposes and programs.

When EstablishedThe legislation was approved by the voters in 1992.Lottery tickets went on sale in June 1993.

Amount Generated AnnuallyLottery appropriations for 1997 include $185 mil-lion for prekindergarten, $160 million for collegescholarships and $200 million for capital projects(including $83 million for technology).

Services Funded

The Georgia Lottery was established to raise fundsfor three purposes: 1) prekindergarten programs; 2)college scholarships, grants and loans; and 3) capitaloutlay projects for educational facilities (such ascomputer systems, radio communications and tech-nology upgrades for distance learning).

State prekindergarten funds pay for staff, mate-rials, equipment, in-service training (which isrequired) and other program expenses. To receivefunds, programs must offer prekindergarten servicesfor at least six and a half hours per day and mustprovide transportation and family support servicesto income-eligible families who want and needservices. (Income-eligible families include thoseeligible for Medicaid, AFDC, Food Stamps, WIC,free and reduced school lunch, subsidized housingor the federal earned income tax credit.) Prekinder-garten services are provided in a wide range of settings,including nonprofit and proprietary child carecenters as well as public schools.

Hou. Funds DistributedThirty-five percent of total lottery sales is trans-ferred by the Georgia Lottery Commission to aneducation account each quarter. From this account,the legislature makes appropriations for each of thethree priority areas.

Funds for prekindergarten services are adminis-tered by a new state agency, the Office of SchoolReadiness, which is not part of the EducationDepartment and was recently established in law bythe governor and the state legislature. The Office ofSchool Readiness, which is directly accountable tothe governor, issues a request for proposals andselects and monitors local contractors for theprekindergarten program.

The Office of School Readiness contracts directlywith the programs providing prekindergarten services.Parents apply for prekindergarten at their local schoolor at the early childhood program that has beenselected to provide prekindergarten services in theirschool district. No parent fees may be charged forthe prekindergarten services unless the programoperates for more than six and a half hours a dayand/or more than 180 days per year. (Programs thatexceed these hours and/or days may charge proratedfees.) Low-income families may apply for child caresubsidies to help pay for the additional fees. The Officeof School Readiness has negotiated an interagencyagreement with the Department of Families andChildren to facilitate payment of child care subsidies.

Population ServedProceeds from the Georgia Lottery for Educationsupport services that are made available to familiesat all socioeconomic levels. The Georgia prekinder-garten program has been targeted to four-year-oldchildren and was initially limited to low-incomechildren who are at risk of school failure. In statefiscal year 1995-96, however, the program was openedto all four-year-old children, regardless of income.

College scholarships are available to all Georgiahigh school graduates, regardless of income, so longas they maintain a B average in school and attend acollege or university located in Georgia. Funds fortechnology in the schools are made available toschool districts statewide.

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Strategic ConsiderationsGovernor Zell Miller made the Lottery for Educa-tion a cornerstone of his election campaign. Hepromised the voters that he would give them theopportunity to vote on a constitutional amendmentto establish a lottery, and that if they approved theamendment he would dedicate the funds to ensuringthat preschool and college education were availableto all Georgia families, and to expanding technologyin the public schools. In considering this strategy,the following issues should be explored:

Making it clear that lottery funds would be dedi-cated for specific purposes and ensuring that thelaw prohibited the funds from being used tosupplant current expenditures was extremelyimportant to the success of this initiative.Targeting lottery funds to preschool programs andcollege education (the two parts of the educationalsystem that are supported largely by private tuition)and making these services available to families atall income levels helped to garner support from abroad consistency.Allowing private proprietary and nonprofit childcare programs to apply for prekindergarten fundshelped to reduce opposition to the proposal fromprivate child care program operators.A vocal minority (led by conservative religiousgroups) continues to oppose the prekindergartenprogram. These groups believe that governmenthas no role in early education and are stronglyopposed to government-sponsored day care. TheOffice of School Readiness has addressed theseconcerns by continually stressing that the purposeof the Georgia prekindergarten is school-readiness(not child care) and that participation is voluntary.Rapid growth of the prekindergarten program(from 750 to 60,000 children in five school years)has resulted in a number of administrative challenges.Additionally, developing policies that work effec-tively with a wide range of providers (nonprofitand proprietary, in the public and private sectors)has not been easy.The governor recently moved the prekindergartenprogram out of the state Education Departmentinto a new state agency, the Office of SchoolReadiness. This reorganization was designed toestablish a stronger, more institutionalized base of

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support for the prekindergarten program andmake it easier to coordinate early education andchild care funds from various sources. Unlike thestate Education Department, which has an electedchief, the director of the Office of School Readinessis appointed by the governor. In addition toadministering the prekindergarten program, theoffice is currently responsible for the child carefood program and for licensing and monitoringthe private-sector child care programs that partici-pate in the prekindergarten program.Regardless of the purpose for which the funds areused, public lotteries are often controversial. Manyvoters and policy makers question the wisdom ofgovernment urging people to gamble frequently,especially when research shows that low-incomepeople are the heaviest purchasers of lottery tickets.Critics point to the large advertising budgets ofstate lotteries as well as the lack of regulation overthis advertising. Some opponents also feel thatgovernment lottery advertising has help to promotecommunity-wide acceptance of gambling and con-tributed to the rapid spread of casino gambling.

Other Sites With Similar StrategyThirty-six states, in addition to Georgia, operatelotteries. Twelve of theseCalifornia, Florida,Idaho, Illinois, Massachusetts, Michigan, Montana,New Hampshire, New Jersey, New York, Ohio andWest Virginiadedicate a portion of all lotteryprofits toward K-12 or higher education. Concernshave been raised, however, that in many states lot-tery profits do not represent additional dollars foreducation but simply replace general fund dollarsthat would have been spent on education but areredirected to other programs instead.

ContactMike Vollmer, DirectorOffice of School Readiness10 Park Place South, Room 200Atlanta, GA 30303Phone: (404) 651-7434Fax: (404) 651-7430

FEES AND LOTTERIES

The Florida Public Education Lottery

DescriptionThe Florida Public Education Lottery is a self-supporting, revenue-producing operation of stategovernment that is required by stature to functionas much as possible as an entrepreneurial businessenterprise. The net proceeds of the lottery games aredeposited in the Educational Enhancement TrustFund to be used for improvements in public educa-tion and not to substitute for existing resources forpublic education. Lottery funds support three broadcategories of education: public schools, communitycolleges and the state university system. Within thepublic school category are various preschool projects.

When EstablishedA constitutional amendment to permit state-operatedlotteries was approved by Florida voters in the 1986general election. The Florida Legislature officiallyenacted the lottery in 1987.

Legislative amendments in 1991 established that50 percent of the funds from lottery ticket sales bereturned to the public as lottery prizes, at least 38percent of the funds be deposited in the EducationalEnhancement Trust Fund and 12 percent or less beused for operational expenses of running the lottery.

Amount Generated AnnuallyIn the first two years (1987-88 and 1988-89), thelottery was moving into full-scale operation. Since1989-90, the lottery has generated an average of$925 million annually for the trust fund, with arange from $829 million to $1.5 billion. Lotteryfunds represent about 6 percent of the Florida pub-lic school system's overall annual operating cost.

Since 1991, the legislature has appropriatedlump sums of lottery proceeds to three categories ofpublic education and established a fairly consistentallocation pattern: 70 percent is allocated to publicschools and 15 percent each for community collegesand the state university system. Each educationalsystem decides how to further allocate its share.

In fiscal year 1995-96, the lottery generated$828,980,000 for education. The public schoolshare was $580,230,000. Within the 70 percentpublic school share, the legislature sets aside a

specific appropriation for preschool projects$104,167,355 in 1995-96 (about 18 percent of thepublic school portion).

Services FundedPreschool projects are: the Prekindergarten EarlyIntervention Program, Migrant Preschool Education,First Start, Collaborative Community Partnershipsand the State Coordination Council. Families canaccess these programs through their local publicschool district. All local child care resource andreferral agencies have information for families aboutthese programs.

The largest share of funds goes to support thePrekindergarten Early Intervention Program ($94.3million in 1995-96). This program was enacted in1986 to provide a developmental, preventivepreschool education for four-year-old children whosefamily income is at or below 130 percent of thepoverty level. The program now serves 29,000 chil-dren in all Florida school districts. To receive funds,districts must offer a program that operates at leastsix hours per day and 180 days per year. All or partof the operation maybe subcontracted to communi-ty-based nonprofit agencies.

Migrant Preschool Education was established in1978 to supplement the federal Chapter I MigrantProgram and ensure that early education was offered.It serves three- and four-year-old children whosefamilies are migrant workers and operates full days,five days a week, during the school year. In 1995-96,the Migrant Preschool Program appropriation fromlottery funds was $3.3 million, serving about 3,600children. About one-third of all school districts areinvolved. The lottery funds are 60 percent and fed-eral Chapter I (now Title I) funds are 40 percentof the total cost of operation. All or part of theoperation maybe subcontracted to community-basednonprofit agencies.

First Start was established in 1989 to provideearly quality parent/family education and supportservices to families of at-risk children from birth tothree years of age. First Start is modeled on theParents as Teachers program originated in Missouri.The First Start appropriation for 1995-96 was $3million. Twenty-four school districts are involved.All or part of the operation maybe subcontracted tocommunity-based nonprofit agencies.

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Collaborative Community Partnerships areschool-readiness incentive grants to local nonprofitorganizations (including school districts) to promotecollaboration among public school prekindergartenprograms, Head Start and community-based childcare. In 1995-96, a total of $3 million was appropri-ated for Collaborative Community Partnerships,serving 54 counties. The local efforts focused onimproving service quality through professionaldevelopment and program accreditation; increasingaccess to services by centralizing recruitment, intakeand waiting lists; and improving families' access tocomprehensive services through home visits,resource vans and other outreach, and changes inpublic transportation routes.

How Funds DistributedPrekindergarten Early Intervention funds areallocated to school districts based on the numberof full-time equivalent students served and on acosy per full-rime equivalent of $3,200. All schooldistricts participate.

The Chapter I Migrant Program and First Startare noncompetitive grants to school districts, whichmay subcontract with community organizations.Collaborative Community Partnerships are competi-tive grants to community organizations (includingschool districts).

The Office of Early Intervention and SchoolReadiness in the Florida Department of Educationadministers all of the grants for lottery-fundedpreschool projects.

Population ServedAll lottery-funded preschool projects are designed toserve children "at risk of school failure," which maybe defined in a wide variety of ways. The MigrantProgram focuses on families who are migrant work-ers; the Prekindergarten Early Intervention Programfocuses on children whose families have incomes ator below 130 percent of the poverty level.

Strategic Considerations

Earmarking lottery proceeds for a specific widelyacceptable purpose such as education, rather thanfor state general revenue, makes state-operatedlotteries more palatable to voters.

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Supplantation of existing education funds is amajor concern about education lotteries. Whilethe Florida Legislature expressed clear intent thatthe lottery not supplant existing resources forpublic education, the legislative language was notspecific as to how supplantation would be judged.Lottery funds affect the allocation of state generalrevenue to education. Historical analysis in Flori-da shows a slow decrease in the proportional shareof state general revenue allocated to education. In1985-86, before the lottery, 62 percent of stategeneral revenue went to education. In 1995-96,just 51 percent of state general revenue went toeducation. An effective maintenance-of-effort clausereferences both a baseline appropriation as well asa minimum proportionate share of state generalrevenue calculated without the lottery revenue.Since the Florida lottery was enacted, there alsoappears to have been a shift in the state/local shareof education funding, increasing the local share. In1986-87, just before the lottery, the state/localsplit in public school funding was 65 percent stateand 35 percent local. By 1995-96, the split hadshifted to 55 percent state general revenue, 6 per-cent lottery and 39 percent local. This shifts thetax burden toward localities, which rely primarilyon property taxes for revenue.Lottery funds can fluctuate from year to year, makingthem a somewhat unpredictable source of funding.Lotteries are commonly viewed as a "regressive"means of generating revenue, meaning that poorercitizens are generating more of the funds thanwealthier citizens.Some in Florida perceive a modest backlashagainst lotteries for education. Since most lotteryfunds go directly into a school district's generaloperating budget, they are relatively invisible tothe public, who wonder where their "educationlottery" money went. By contrast, preschool iseasy to identify as being lottery-funded and isgenerally regarded as a positive addition. Further,there is no concern about "supplantation," sincepublic preschool programs had no previous cate-gorical source of funds.States generate $11 billion annually from lotteriesand casino gambling.

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State-sponsored lotteries raise concerns aboutthe state's role in promoting gambling, whichcan have significant social costs and is morallyunacceptable to some. At the beginning of thiscentury, all states had outlawed gambling. In theearly 1930s, Nevada legalized gambling. In 1963,New Hampshire established a state-sponsoredlottery. At present, 37 states sponsor lotteries and24 states have legalized casino gambling. State-sanctioned gambling appears to public policymakers to be a less painful alternative for generatingrevenue than is direct taxation.

Other Sites With Similar StrategyLotteries operate in 37 states; 12 dedicate some orall proceeds to education. Only two states allow nogambling in any form (Utah and Hawaii). Oneother state (Georgia) specifically uses state lotteryfunds for preschool education and is profiled onpage 43.

Contacts

Patty Ball ThomasEarly Intervention and School ReadinessFlorida Department of Education325 West Gaines Street, Suite 325Tallahassee, FL 32399-0400Phone: (904) 922-0034

Link JarrettDepartment of Budget and ManagementFlorida Department of EducationCapitol Building, Room 1702Tallahassee, FL 32399Phone: (904) 488-6303

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ALLOCATINGEXISTING PUBLICGENERAL REVENUE

Chart: State-by-Scare Funding for Child Careand Earle Education Services 51Chart: State Investments in Prekindergartenand Family Education Programs 53Wisconsin Works (W-2) (Wisconsin) 55Child Care Quality Improvement Initiatives(Wisconsin) 57Early Childhood /Youth Crime Preventionand Intervention (Colorado) 59Prekindergarten Program (Texas) 60Families and Children First (Ohio) 62The A+ Program (Hawaii) 65

A(LABLE 7

ALLOCATING EXISTING PUBLIC GENERAL REVENUE

The Children's Defense Fund estimated that,in state fiscal year 1994, state expendituresfor all child care and early education services

in the United States totaled more than $2.3 billion.In addition to the minimum allocation required todraw down federal funds, which amounts to $764million across all states, nearly every state appropriatedsignificant additional funds for child care services.Not including state funds to match federal funds, thestate total is over $1.6 billion$900 million forchild care and $750 million for prekindergartenprograms. The "State-by-State Funding for Child Careand Early Education Services" table (see page 51)provides information, state by state, on total expen-ditures for child care and early education services.

State investments in prekindergarten and familyeducation programs have grown dramatically in thelast decade. Before 1980, only a handful of states hadprekindergarten programs. The education reform wavethat swept the country in the early 1980s ushered indozens of new programs. Most, like their predecessors,were part-day public school programs aimed at"educationally at risk, disadvantaged" four-year-olds.Since the mid-1980s, more and more states havecreated or revised their prekindergarten programs.Many of these newer programs are more responsive tofamily needsoffering longer hours for more thanthe school year and including comprehensive services.Also, most recognize the full range of early childhoodprograms (Head Start and child care centers) aspotential providers of prekindergarten services. Abouthalf of all state-funded prekindergarten programs noweither allow direct funding of community-basedprograms or permit school districts to subcontract.

The State Investments in Prekindergarten andFamily Education Programs table (see page 53) listsstate-by-state information on investments in prekinder-garten and family education programs.

States and communities cannot invest in childcare unless they have the financial resources to doso. To this end, a majority of the strategies profiledin this section are aimed at generating additionalrevenue for child care (through targeted taxes, fees,lotteries and private-sector contributions). Whileincreased revenues are an important conditionandoften necessaryincreased spending occurs as childcare becomes a priority.' Thus, many states currentlygenerate significant revenue through a range of non-targeted tax and fee strategies.

States and communities that decide to makechild care a priority and increase the proportion ofgeneral revenue allocated for these services oftenlink the decision to a particular rationale or trendthat helps to garner public support. Some statesstress the importance of ensuring that children areready for school and link increased child care expen-ditures to education reform efforts. Texas used thisrationale to argue for large increases in its stateprekindergarten program. Georgia and Florida, bothof whom used lottery dollars for child care (profiled,respectively, on pages 43 and 45 of this report), arealso prime examples. Ohio, which has a multifac-eted strategy called Families and Children First(which incorporates the federal Head Start program,public school prekindergarten and child care subsi-dies) has used the school-readiness rationale as well.The financing approaches used by Texas and Ohioare profiled in this section of the report.

I. Herk, M. 1993. Helping the Hand that Rocks the Cradle: The Politics of Child Cae Policy at the State Level. Unpublished dissertation:Princeton University. Woodrow Wilson School of Public and International Affairs.

58 49N

States and communities may also use schoolbuildingsand school budgetsto help supportbefore- and after-school child care for school-agechildren. In this case, the rationale isn't necessarilyschool-readiness (although the educational benefitsof school-age child care are sometimes stressed),but rather, the economic viability, convenience andpublic support for using schools for a longer portionof the day and year. Hawaii's A+ Program, whichprovides subsidized after-school child care for alleligible children enrolled in public schools, is anexcellent example.

Colorado recently began to set aside a portion ofcrime and violence prevention funds for early child-hood services. The goal of this effort was to send aclear message that child care and early educationorganizations can play an important role in crimeprevention, and to encourage these organizations todevelop new intervention strategies and communitypartnerships. The Early Childhood/Youth CrimePrevention and Intervention grant program is describedin more detail in this section of the report.

Many states have linked increased child careexpenditures to welfare reform, and have arguedthat women cannot leave the welfare rolls and enterthe workforce without help in paying for child care.Wisconsin's decision to make child care a corner-stone of W-2, its newand very controversialwelfare reform effort, is an example. The child careprovisions of W-2 are profiled in this section.

Child care systems are not built on subsidiesalone. State and local general funds are also spenton initiatives to improve the quality and expandthe supply of child care. In recent years, most states

have used federal Child Care and DevelopmentBlock Grant (CCDBG) funds for this purpose. Butsome jurisdictions supported quality enhancementefforts long before federal funds became available,and used the new federal funds to expand or enhancethese efforts. The child care quality improvementinitiatives in Wisconsin are a prime example, and aredescribed in more detail in a profile' (see page 57).

In many areas, the lack of suitable space in whichto establish child care centers is also a major barrier.These jurisdictions have learned that effectivelyexpanding the supply of child care means securingthe funds necessary to invest in facilities. There are ahost of strategies that can be used to raise funds forchild care facilities, including appropriating a portionof state or local general funds to support grants ordirect-loan programs, guarantee loans in the privatemarket or repay debt on bonds. These strategies havebeen summarized in a separate section, "FinancingChild Care Facilities" (see page 97).

State governments are beginning to recognizethe key role that local funds and partnerships playin child care financing. A number of states requirelocal governments to march state child care appro-priations.' And some have developed strategies, suchas North Carolina's Smart Start (see page 91), thatallocate state general funds to local governments tosupport a diverse range of locally planned childdevelopment services.

Only a handful of the many child care initia-tives that are supported by state general funds areprofiled in this section. The initiatives illustratediverse strategies for using general revenue.

2. A number of states used general funds to support child care quality enhancement initiatives prior to the 1990 passage of the federalchild care (CCDBG) legislation. A decision was made to profile Wisconsin's efforts because the state has maintained support forquality-enhancement efforts, even though it is currently focused on reforming its welfare system.

3. The precise number of states that require a local match for child care funds is unknown. But 11 statesCalifornia, Colorado,Indiana, Minnesota, Montana, New Jersey, New York, North Carolina, North Dakota, Ohio and Wisconsinrequired a localmatch for the Aid to Families with Dependent Children (AFDC) welfare program (now replaced by Temporary Assistance forNeedy Families (TANFD, which included child care subsidies provided to these families (Gold and Ellwood, 1995).

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STATE-BY-STATE FUNDING FOR CHILD CAREAND EARLY EDUCATION SERVICES'(State Fiscal Year 1994)

State Name Total state andfederal funds(Includes federal and state childcare funds, federal and stateHead Start funds and stateprekindergarten funds)'

State fundsappropriated tomatch federalchild care funds(Includes state share of IVAFundsAt-Risk, TCC and AFDC-related IVA child care funds)'

State funds Total state fundsappropriated appropriatedindependent of federalmatching requirementsfor child care'

Alabama $ 97,670,155 $ 6,362,051 $ 2,088,023 $ 8,450,074Alaska $ 32,507,064 $ 2,955,483 $ 18,112,577 $ 21,068,061

Arizona $ 94,689,741 $ 7,322,450 $ 10,811,350 $ 18,133,800Arkansas $ 50,283,847 $ 1,179,740 $ 9,943,453 $ 11,123,193California $1,024,521,403 $ 90,936,934 $ 379,840,244 $ 470,777,178Colorado $ 80,471,138 $ 9,668,489 $ 10,205,349 $ 19,873,838Connecticut $ 86,646,686 $ 15,104,117 $ 17,403,662 $ 32,507,779Delaware $ 18,279,279 $ 4,069,767 $ 1,460,899 $ 5,530,666

Florida $ 381,544,913 $ 42,571,101 $ 89,937,357 $ 132,508,458

Georgia $ 192,776,202 $ 20,239,619 $ 37,133,645 $ 57,373,264Hawaii $ 36,257,667 $ 2,172,926 $ 20,173,766 $ 22,346,692Idaho $ 19,292,594 $ 1,227,690 $ 991,010 $ 2,218,700

Illinois $ 373,427,577 $ 36,850,000 $ 113,984,100 $ 150,834,100Indiana $ 100,955,111 $ 10,497,860 $ 3,090,614 $ 13,588,474Iowa $ 48,943,181 $ 4,216,122 $ 11,201,590 $ 15,417,712

Kansas $ 53,199,570 $ 7,003,065 $ 8,644,266 $ 15,647,331

Kentucky $ 138,343,659 $ 6,913,552 $ 41,763,490 $ 48,677,042Louisiana $ 114,081,498 $ 4,123,191 $ 3,387,816 $ 7,511,007MaineMaryland

$ 28,182,997$ 113,787,200

$ 1,528,181$ 22,821,634

$ 3,503,228$ 19,738,559

$42,560,193

Massachusetts $ 212,032,851 $ 34,988,495 $ 79,833,152 $ 114,821,647

Michigan $ 247,734,231 $ 24,420,170 $ 32,917,700 $ 57,337,870Minnesota $ 116,716,395 $ 17,648,503 $ 34,793,028 $ 52,441,531Mississippi $ 110,027,982 $ 1,319,900 $ 5,770 $ 1,325,670Missouri $ 107,979,505 $ 13,214,653 $ 5,877,421 $ 19,092,074Montana $ 15,730,575 $ 1,363,781 $ 210,100 $ 1,573,881Nebraska $ 42,786,606 $ 6,565,774 $ 6,974,102 $ 13,539,876Nevada $ 16,420,136 $ 2,449,142 $ 1,505,761 $ 3,954,903New Hampshire $ 21,532,240 $ 4,160,509 $ 190,418 $ 4,350,926New Jersey $ 182,044,721 $ 18,962,965 $ 48,158,580 $ 67,121,545New Mexico $ 45,484,860 $ 2,763,025 $ 4,463,680 $ 7,226,705New York $ 624,895,920 $ 78,632,380 $ 216,526,102 $ 295,158,482

1. Data from Children's Defense Fund Report: State-by-State Investments in Child Care and Early Education. 1994, by Gina Adams andNicole Oxendine Poersch.

2. Some states included local funds in their totals.

3. Children's Defense Fund (CDF) reported actual matching levels reported by stares where possible. However. in most cases, CDFestimated the state match based on federal matching rates (using the federal fiscal year). In some cases, this may introduce slighterrors due to differences between state and federal fiscal years.

4. Some states included local funds in their totals.

$0 51

STATE-BY-STATE FUNDING FOR CHILD CAREAND EARLY EDUCATION SERVICES'(State Fiscal Year 1994)

State Name Total state andfederal funds(Includes federal and state childcare funds, federal and stateHead Start funds and stateprekindergarten funds)'

State fundsappropriated tomatch federalchild care funds(Includes state share of IVAFunds At -Risk, TCC and AFDC-related IVA child care funds)'

State funds Total state fundsappropriated appropriatedindependent of federalmatching requirementsfor child care'

North Carolina $ 209,804,597 $ 30,355,210 $ 31,013,230 $ 61,368,440

North Dakota $ 12,527,352 $ 1,171,674 $ 984,223

Ohio $ 325,724,084 $ 35,257,020 $ 61,269,773 $ 96,526,793

Oklahoma $ 112,442,287 $ 9,309,931 $ 24,398,592 $ 33,708,523

Oregon $ 77,200,406 $ 9,736,104 $ 17,573,723 $ 27,309,827

Pennsylvania $ 309,105,979 $ 44,745,580 $ 26,063,420 S 70,809,000

Rhode Island $ 24,393,369 $ 4,376,214 $ 2,191,139 $ 6,567,353

South Carolina $ 89,058,635 $ 3,269,665 $ 16,883,553 $ 20,153,218

South Dakota $ 13,196,263 $ 1,014,409 $ 728,229

Tennessee $ 120,487,965 $ 13,923,916 $ 876,999 $ 14,800,915

Texas $ 500,601,875 $ 34,351,268 $ 103,409,015 $ 137,760,283

Utah $ 46,873,549 $ 1,652,218 $ 15,900,441 $ 17,552,659

Vermont $ 21,090,162 $ 2,703,440 $ 6,341,246 $ 9,044,686

Virginia $ 91,749,641 $ 19,499,655 $ 60,991 S 19,560,646

Washington $ 161,870,510 $ 31,306,329 $ 31,555,559 $ 62,861,888

West Virginia $ 50,040,999 $ 2,270,613 $ 3,174,982 S 5,445,595

Wisconsin $ 106,276,295 $ 13,143,670 $ 15,002,117 $ 28,145,787

Wyoming $ 14,168,077 $ 1,200,229 S 104,449 S 1,304,678

TOTAL $7,115,859,550 $ 763,540,412 $1,590,690,042 $2,353,756,823

5261

STATE INVESTMENTS IN PREKINDERGARTENAND FAMILY EDUCATION PROGRAMS

Annual Budget FY88 Annual Budget FY92

(from The Public School Early Child-hood Study: State Survey. Bank StreetCollege. 1989)

(principally from First Steps. PromisingFutures: State Prekindergarten Initiativesin the Early 19905. Children's DefenseFund. 1994)

Percentage of Change

(1988-1992)An increase to keep pace with inflation overthis period would amount to about 20%.

AlaskaPrekindergarten $197,000Head Start $2.7 millionArizonaPrekindergarten nonexistentArkansasPrekindergarten nonexistentCaliforniaPrekindergarten $35.5 millionColoradoPrekindergarten nonexistentConnecticutHead Start $400,000DelawarePrekindergarten $189,000District ofColumbiaPrekindergartenHead StartFloridaPrekindergarten $1.6 millionChapter I

Migrant Prek. $2.9 millionHead Start nonexistentGeorgiaPrekindergarten nonexistentHawaiiHead Start $291,790IllinoisPrekindergartenHead StartIowaPrekindergarten nonexistentKentuckyEduc. Improvement

Grants $232,123Parent & Child Educ. $900,000KERA nonexistentLouisianaPrekindergarten $1.8 millionMaineECE Grants $27,730Head Start $1.9 millionMarylandPrekindergarten $3.3 millionMassachusettsPrekindergarten $10.3 millionHead Start $4.5 million

$12.2 million$1.1 million

$12.7 millionnonexistent

(incl. in Head Start)$ 5.6 million

$2.0 million

$5.0 million

$83.3 million

$8.9 million

$400,000

terminated


$69.0 million


$37.1 million (FY94)

$529,700

$72 million$500,000

$4.9 million

terminated$2.0 million$30.6 million

$3.5 million

$150,000$2.4 million

$8.9 million


2)

93%

135%

0%

-2%

1,633%

82%

471%

2,780%

94%

32%

170%

-8%

53 1:1

STATE INVESTMENTS IN PREKINDERGARTENAND FAMILY EDUCATION PROGRAMS

Annual Budget FY88 Annual Budget FY92 Percentage of Change

(from The Public School Early Child-hood Study: State Survey, Bank StreetCollege, 1989)

(principally from First Steps, PromisingFutures: State Prekindergarten Initiativesin the Early 1990s, Children's DefenseFund, 1994)

(1988-1992)An increase to keep pace with Inflation overthis period would amount to about 20%.

MichiganPrekindergarten GrantsPrek. Educ, Aid FormulaMinnesotaHead StartEarly Childhood

Family Ed.MissouriParents As TeachersNew HampshireHead StartNew JerseyPrek. Educ. Aid FormulaPrekindergarten GrantsUrban PrekindergartenNew YorkPrekindergartenOhioPrekindergartenHead StartOklahomaPrekindergartenOregonPrekindergartenPennsylvaniaPrek. Educ. Aid FormulaRhode IslandHead StartSpecial ECE ProjectsSouth CarolinaPrekindergartenTexas'Prekindergarten GrantsPrek. Educ. Aid FormulaVermontPrekindergarten GrantsWashingtonPrekindergartenHead StartWest VirginiaPrekindergartenWisconsinPrek. Educ. Aid FormulaHead Start

Total all states:

$300,000$2.0 million

$2.0 million

$8.8 million

$12.0 million

nonexistent

$6.9 million$1.0 millionnonexistent

$27.0 million

$18,000nonexistent

$832,275

$1.1 million

$1.7 million

$365,000nonexistent

$10.9 million

$46.2 million

$500,000

$4.7 million$660,000

$258,574

$4.3 millionnonexistent

S224.3 million


$6.5 million

$13.0 million

$18.9 million (FY94)

$201,000

$9.5 million$1.3 million$2.5 million

$52.2 million


$2.1 million

$8.2 million

S5.4 million (FY95)

$1.96 million$200,000

$15.2 million

$144.0 million

$1.4 million

$17.2 million$530,763

S1.04 million


S747.9 million

1,326%

81%

58%

68%

93%

185,000%

152%

645%

218%

492%

39%

212%

180%

231%

302%

87%

233%

1. In 1990-91, the Prekindergarten Grants program was eliminated and prekindergarten funding was added to the regular education

aid program.

5463

ALLOCATING EXISTING PUBLICGENERAL REVENUE

Wisconsin Works (W-2)

Description

Wisconsin has recently enacted a new welfare reforminitiative (Wisconsin Works, or W-2) that requiresall families to work. Cash welfare benefits will bephased out. Families will be provided with assis-tance in finding employment or with publicemployment opportunities as well as child care andhealth care benefits. The state executive branch tookleadership in winning legislative support for thepremise that, in order for W-2 to succeed, child careand health care must be available to all low-incomefamilies who need them to work. To this end, Wis-consin will now make child care assistance availableto all eligible families who meet the income andasset tests and who need child care subsidies inorder to work, regardless of whether or not they areon welfare. Child care expenditures are expected totriple in the next three years. In addition to newstate funds, funds from the welfare system will be"redeployed" to the child care system to help pay forthis increased demand for subsidized child care.

When Established

W-2 was signed into law on April 25, 1996, andtakes effect statewide in the fall of 1997.

Amount Generated AnnuallyW-2 redeploys revenue that was previously used forwelfare benefits and uses italong with other stateand federal fundsto help support the cost of childcare. The annual allocation for child care subsidiesincreased from $48 million in 1996-97 to $158million in 1997-98, and is projected to increase to$180 million in 1998-99.

In addition, Wisconsin has recently secured aone-time federal allocation of $75 million as a resultof savings from previous welfare-related waivers. Ofthese funds, $25 million will be used to supportefforts to expand the supply and improve the qualityof child care (see page 57 for a description of Wis-consin's quality improvement efforts); the remaining$50 million will be used for child care subsidies.

Services Funded

Subsidies to assist low-income, employed families inpaying for child care.

How Funds Distributed

Vouchers are the primary method used to pay forsubsidized child care. Local W-2 agencies determineeligibility and the family chooses a child care centeror home. The county department of social servicespays a percentage of the price of care (based on familysize, income and a reimbursement ceiling) directlyto the child care provider. The family pays theremaining cost.

Population Served

Child care subsidies will be available to familieswith incomes below 165 percent of the federalpoverty level ($21,420 for a family of three in 1996)regardless of whether or not they have any currentor prior connection to welfare.


W-2 has been a very controversial initiative. Propo-nents argue that it is essential to end "the automaticwelfare check" and replace it with a systemand aneconomic climatethat will encourage work andsupport families who work in low-wage jobs byproviding subsidies for child care and health carecoverage. Critics argue that the program fails tomake true commitments to families or services, andthat it will leave many families poorer than they areunder the current welfare system. While W-2 willmore than triple the funding available to supportchild care subsidies, the initiative also will have adramatic impact on the Wisconsin child care systemas a whole. In considering Wisconsin's approach, thefollowing issues should be explored:

The entire W-2 proposal met with fierce oppositionfrom some children's advocates and welfare rightsgroups. Concerns about the child care provisionsof W-2 focused on two issues: 1) W-2 initiallyincluded large increases in parent fees and revisedthe method of determining parent fees so that feeswere based on a percentage of the price of thechild care (thereby encouraging families to uselower-cost, provisionally certified care). 2) W-2revised child care provider certification require-ments to allow (lower-cost) "provisionallyapproved" family child care providers to servechildren without meeting a training requirement.

64 55

The state legislature added $25 million to thechild care portions of W-2 in order to make parentfees more affordable for families with incomes nearthe poverty level. But co-payments for many fami-lies---especially those with more than one child incareremained very high when W-2 took effecton August 1, 1996. However, when parents who

currently receive subsidized child care receivednotice that their fees would increase so dramatically,they flooded the state legislature and the gover-nor's office with phone calls and letters. A fewdays later, the governor suspended the W-2co-payment policy. An advisory panel was estab-lished to review the co-payment policy and recom-mend revisions. The panel recommended that nofamily pay more than 16 percent of gross incomefor child care, regardless of the type of care theychoose. A new fee policy, based on the panel's rec-ommendations, was approved in December, 1996.Critics argue that the commitment to making childcare universally available is weak because familiesare no longer entitled to child care assistance. Pro-

ponents argue that the state has allocated enoughmoney to cover child care for all eligible families.

W-2 creates a single, coherent funding structurefor child care funds to replace the current, frag-mented child care subsidy system.

56

Other Sites With Similar StrategyRhode Island and Vermont have established income-based child care entitlements.

Contacts

Dave EdieDirector, Office of Child CareWisconsin Department of Workforce DevelopmentP.O. Box 78511 West Wilson StreetMadison, WI 53707Phone: (608) 266-6946Fax: (608) 264-6750E-mail: [email protected]

Anne Arneson or Nan O'BrienWisconsin Council on Children16 North Carroll StreetMadison, WI 53703Phone: (608) 284-0580Fax: (608) 284-0583E-mail: [email protected]

Patricia MappWisconsin Children's Audit Project DirectorUniversity of Wisconsin61 West WisconsinMilwaukee, WI 53202Phone: (414) 227-3250Fax: (414) 227-3267E-mail: [email protected]

65


Child Care Quality Improvement Initiatives(Wisconsin)

DescriptionIn addition to allocating state and federal funds tohelp low-income families pay for child care, Wisconsinallocates state funds to supplement the federal HeadStart program and to help strengthen the child caresystem as a whole. Grants are made available for:

child care program start-up and expansion;child care resource and referral services;quality improvement grants (including programaccreditation, staff training, and improved staffcompensation and benefits); andtechnical assistance to child care providers(including an early childhood credentialingsystem, accreditation promotion and information,mentor teacher training, management assistanceand on-site technical assistance).

Additionally, Wisconsin has funded or spon-sored a number of initiatives aimed at improvingtraining and career development opportunities forpractitioners who work in child care and earlyeducation. In 1985, the Wisconsin Child CareImprovement Project (WCCIP) was established andfunded by the state. WCCIP, which is administeredby a consortium of private-sector organizations,provides pre-licensing consultation and training. In1990, Wisconsin's three child care provider associa-tions came together to articulate a common body ofknowledge for early childhood practitioners. Thisgroup then createdand the state fundeda system(which is called The Registry) to verify that individualsmeet jointly established training requirements andmaintain information on practitioners' professionalaccomplishments beyond the required minimum.More recently, these groups have come togetherand joined with others in the Wisconsin EarlyChildhood Professional Development Initiative.The initiative has sponsored a number of conferencesand training institutes, worked with institutions ofhigher education to help secure college credit forchild care training, and provided leadership fortraining efforts funded under the quality improve-ment and technical assistance grant programs.

When Established

Wisconsin began to fund child care resource andreferral (CCR&R) services in 1987. State Head Startfunds were first allocated in 1990. Start-up andexpansion, quality improvement and technicalassistance grants were established in 1991.

Amount Generated AnnuallyIn state fiscal year 1994-95, $4.95 million in statefunds was used to supplement the federal Head Startprogram. Additionally, state and federal funds wereallocated for the following services: $1 million forCCR&R; $600,000 for start-up and expansion;$1.47 million for quality improvement grants; and$450,000 for technical assistance and traininggrants (including funds to help support programaccreditation, on-site mentoring, management assis-tance, The Registry and the WCCIP initiativedescribed earlier).

Services Funded

Full-day Head Start, start-up and expansion grants,professional development, program accreditation,CCR&R services and technical assistance.

How Funds DistributedHead Start supplemental funds, as well as all otherquality improvement, technical assistance and indi-rect service funds, are awarded as grants. Contractsare negotiated between various state agencies andthe organization receiving the grant. Small start-upand expansion grants are administered by CCR&Ragencies under contracts with the state.

Population Served

By federal regulation, at least 80 percent of thechildren enrolled in Head Start must have familyincomes at or below the poverty level (approximately$13,000 for a family of three in 1996). Qualityimprovement funds are available to nonprofit andproprietary child care programs that serve familiesat all income levels. Start-up and expansion grantsare currently available in 20 high-need counties.


Wisconsin has for many years used state funds tohelp build and support an early childhood care andeducation system. State regulatory requirements areamong the highest in the nation, and state funds

6657

have been used to help increase the quality of carethroughout the system. This commitment to high-quality early childhood care and education has beennurtured by a number of factors, including:

The Wisconsin child care community has providedconsistent and committed leadership. The twolargest child care resource and referral agenciesand the Wisconsin Early Childhood Associationhave provided stable leadership since the early1970s. Led by these groups, the WisconsinWomen's Network established a Child Care TaskForce in the mid-seventies, and this task force hasbeen able to tap broader constituencies, such asthe Wisconsin Nurses Association, the NationalOrganization for Women and others.Wisconsin has public employees who understandchild care and are committed to building a systemof high-quality child care services. These employeesare not just concentrated in the child care divisionof the social services department, but may befound in a variety of state offices and agencies. InJuly 1996, for example, a key staff person fromthe budget and management division was able tosecure a one-time federal allocation of $75 millionin "waiver savings" (from previous welfare-relatedfederal waivers) and ensure that these new fundswould be allocated to child care. Of these funds,$25 million will be used to expand the supply andimprove the quality of child care. The remaining$50 million will be spent for child care subsidies.Wisconsin has been able to forge effective, action-oriented partnerships between child care advocacyleadership and state government. For example,shortly after the federal Child Care and Develop-ment Block Grant (CCDBG) was passed, groupsinside and outside of government began to developand share plans for its implementation. As a result,a consensus plan was developed easily. Meanwhile,advocacy groups were working on educating statelegislators and grooming strong sponsorship. Whilesome of these relationships have become strainedduring the more recent battles over welfare reform,Wisconsin's strong history of public-private part-nerships in child care policy development hashelped to keep child care needs and concerns inthe forefront.

58

Funding for child care quality improvement hasnot diminished as a result of the W-2 welfarereform initiative, even though significant newrevenue were needed to expand subsidized childcare. It is not clear, however, how Wisconsin'scurrent or future child care quality improvementefforts will be linked to W-2.

Other Sites With Similar StrategyA number of states allocate state and/or federal childcare funds to support quality improvement initiativessuch as provider training and technical assistance,child care resource and referral services, start-up andexpansion funds, and so forth. Arizona, Delaware,Indiana and Kentucky make grants available tochild care providers to support the cost of accredita-tion or other quality improvement efforts. Wisconsinis unique, however, in linking quality improvementgrants to staff recruitment and retention, and makingthese funds available to child care providers on anongoing basis.

ContactsKay HendonChild Care CoordinatorOffice of Child CareWisconsin Department of Workforce Development1 West Wilson Street, Room 465P.O. Box 7851Madison, WI 53707Phone: (608) 266-8200Fax: (608) 264-6750E-mail: [email protected] [email protected]

Diane AdamsChild Care/Early Education Consultant5706 Anchorage AvenueMadison, WI 53705Phone: (608) 231-1836Fax: (608) 231-0203E-mail: dadams @facstaff.wisc.edu [email protected]

6 7


Early Childhood/Youth Crime Prevention andIntervention (Colorado)

DescriptionThe Early Childhood/Youth Crime Prevention andIntervention (EC/YCPI) grant program makes statefunds available to community-based crime andviolence prevention or intervention services thattarget children, youth and their families. At least20 percent of these funds have been designated forchildren less than nine years of age.

When EstablishedEC/YCPI was first established in 1994. The 20percent set-aside for early childhood initiatives wasestablished in 1996.

Amount Generated AnnuallyA total of $7 million has been appropriated forEC/YCPI in state fiscal year 1996-97. At least $1.4million of this (the 20 percent set-aside) will bespent for early childhood initiatives.

Services FundedEC/YCPI funds are intended to help expand existingprograms or to start new ones. The programs mustdemonstrate the ability to reduce risk factors forlater crime or promote protective interventions.Some examples might include efforts that seek tostrengthen the bond with parents or other adults,promote healthy belief systems and clear standardsof behavior, improve family literacy and school success,and so forth. The types of early childhood initiativesthat have been funded include school-age child carestart-up grants, a nurse (shared by several earlychildhood programs) to conduct home visiting,a parent mentoring program, a summer readingprogram in the public schools and training for staffwho work with children who are at risk for latercrime or are exposed to violence.

How Funds DistributedApplications are reviewed by a nine-member board(who are appointed by the governor and the legisla-ture). Awards are recommended by the board andapproved by the governor. The Colorado Departmentof Local Affairs, Community Partnership Office,administers contracts and monitors compliance.

Population ServedThe initiative is designed to serve youths, and theirfamilies, who are at risk of crime and violence. Thereare no income guidelines. Rather, funding requestsare expected to compete with one another on thebasis of their ability to effectively address risk andprotective factors in communities of high need.

Strategic ConsiderationsIn response to growing juvenile violence, the gover-nor proposed several crime prevention strategies aswell as a host of detention strategies. Several keymembers of the legislature agreed with him andwere convinced that early intervention (such as HeadStart, school-age child care, parenting initiatives,home visiting and other community service strate-gies) could make a difference. In considering thisstrategy, the following issues should be explored:

The 20 percent set-aside sends a clear message tochild care and early education organizations thatthey can play an important role in crime prevention,and it encourages them to develop new interven-tion strategies and community partnerships.Colorado has found that securing funds for earlyeducation and intervention as a crime preventionstrategy is difficult. EC/YCPI is still only a smallgrants program, and it was established due to theleadership of a few people.Data that demonstrate the effectiveness of thestrategy are needed. To this end, the state legisla-ture set aside 1 percent ($70,000) of the EC/YCPIappropriation to begin a longitudinal evaluationof the program.This initiative directs help to improve programquality and offer important supports to parents; itis not designed to help low-income families payfor early care and education.The initiative has been very visible in severalcommunities and resulted in a group of teens whoare able to speak directly to legislators about theprogram's effectiveness.

68 59

Other Sites With Similar StrategyNone known.

ContactsEsperanza Ybarra-Zachman, Director,

Community Partnership OfficeColorado Department of Local Affairs1313 Sherman Street, #500Denver, CO 80203Phone: (303) 866-4900Fax: (303) 866-4992

Barbara O'Brien, Executive DirectorColorado Children's Campaign225 East 16th Avenue, Suite B300Denver, CO 80203Phone: (303) 839-1580Fax: (303) 839-1354E-mail: [email protected]

60


Prekindergarten Program (Texas)

DescriptionTexas established its prekindergarten program aspart of an education reform package recommendedto the legislature by the Select Committee on PublicEducation appointed by the governor in 1983. Likemost states, Texas established a categorical, part-day,school-year prekindergarten program targeted for at-risk four-year-olds. However, Texas is the only statethat requires school districts to provide a prekinder-garten program (if at least 15 eligible children residein the district). When Texas shifted prekindergartenfunding from categorical education funding to regu-lar school aid funding, Texas joined four other stateswhose prekindergarten programs are funded throughregular school aid formulas.

When EstablishedHouse Bill 72, considered in a special legislativesession called by the governor, was passed andsigned into law in July 1984, with implementationslated for the 1985-86 school year.

Amount Generated AnnuallyIn the 1994-95 school year, state funds forprekindergarten totaled $101,139,600, supporting722 districts serving 110,212 children.

The state appropriation for the first year of theprekindergarten program (1985-86) was $30 millionto serve about 35,000 children in 405 of the state'smore than 1,000 school districts. The original lawcapped the state appropriation at $50 million; thislevel was nearly reached in 1987-88 with a stateappropriation of $46.2 million.

By the 1990-91 school year, the legislature hadeliminated the state budget line item for prekinder-garten and moved the prekindergarten funding forlocal districts into the regular state education aidfunding program. (Regular education aid is calledthe Foundation School Program in Texas.) Statefunds expended for prekindergarten for 1990-91were $54.9 million. Total state expenditures forprekindergarten reached a high of $115 million in1991-92, supporting prekindergarten programs for107,944 children.

69

Services FundedHouse Bill 72 authorized any school district toprovide prekindergarten classes, but required schooldistricts that have more than 15 educationally disad-vantaged four-year-olds within the district to providea program. "Educationally disadvantaged" is definedas either low-income or a nonspeaker of English.

The Texas prekindergarten program is similar tomost other states' prekindergarten programs thatwere created in the wave of early-1980s educationreform. The prekindergarten program can be operat-ed only by school districts and within public schoolfacilities, although subcontracting is permitted andcoordination with other early childhood programssuch as Head Start is encouraged. (As in most states,practically no subcontracting occurs.) Prekinder-garten programs must meet at least three hours aday for the full school year, adhere to the state'sessential elements curriculum (which focuses pri-marily on cognitive and language development), andbe taught by a certified teacher. Class size is limitedto 22 children with one teacher. Other classroompersonnel are not required, although some districtslower the staff:child ratio with aides and volunteers.

How Funds DistributedFor the first three years, a fixed allocation forprekindergarten was a line item in the state educationbudget. The funds were distributed among partici-pating districts based on a funding formula thatfavored poorer districts. The original law requiredthat a local district provide a cash match of up toone-third of the cost of the prekindergarten pro-gram. In practice, districts may be providing morethan a third (data are not available).

When the funding method was changed to theFoundation School Program, each district claimedreimbursement for its prekindergarten programbased on the average daily attendance of childrenenrolled in prekindergarten. Prekindergarten pupilscount as one-half of a pupil in kindergarten and thegrades beyond. Since Foundation funding per pupilfluctuates from year to year, the reimbursement perprekindergarten pupil also varies. For the 1994-95school year, per pupil aid was $2,263, and thisamount rose to $2,444 for the 1995-96 school year.Thus, state aid per prekindergartner was $1,131 for1994-95 and $1,222 for 1995-96.

Population ServedThe prekindergarten program is designed to servechildren at "educational disadvantage"defined asbeing unable to speak or comprehend English orhaving a family income low enough to qualify forfree or reduced lunch under the school meals pro-gram of the U.S. Department of Agriculture (185percent of the poverty level).

In 1991, the state board of education permitteddistricts to serve three-year-olds who met the lan-guage or low-income criteria. The board also ruledthat if all eligible children in a district are served,the district may extend its prekindergarten programto other children, both three- and four-year-olds.The number of three-year-olds served fluctuates;9,000 were served in 1992-93, but only 4,300 wereserved in 1994-95.

Strategic ConsiderationsIn theory, the change from a direct prekinder-garten allocation to including prekindergarten inregular education reimbursement aid allows theprogram to grow at the rate local districts are ableto provide funds, rather than being limited by aspecific annual state budget allocation.In actuality, total state expenditures seemed tohave peaked in 1991-92 (the school year after thechange from line-item allocation to regular aid) anddeclined slightly in years thereafter. There are sev-eral possible explanations for the apparent decline:1) It is possible that total expenditures (consideringstate and local funding combined) may not havedecreased; the costs may have shifted from thestate to local districts.2) The decrease in state funds may be related tomoving from the former prekindergarten allocationsystem, which may have provided higher levels ofsupport for poor districts than the regular educa-tion aid funding formula doesalthough bothfunding schemes take account of district wealth.3) Perhaps districts became more cautious inexpanding their prekindergarten programs becausereimbursement from regular education aid Foun-dation funding is less predictable than the annualline-item allocation.4) Or there may be some "natural" limit onprekindergarten expenditures related to reachinga saturation point with a part-day, school-year-only program that serves a target population very

70 61 II

similar to that of Head Start. That is, all theavailable low-income four-year-olds whose fami-lies' work schedules allow them to enroll theirchildren in a part-day program are being served.

Other Sites With Similar StrategyFour states (Maine, New Jersey, Pennsylvania andWisconsin) and the District of Columbia fundprekindergarten through the regular state educationaid formula. Unlike Texas, which continues to tar-get its prekindergarten program, these other statesprovide publicly funded prekindergarten classes forfour-year-olds with no eligibility criteria except age.

ContactCami Jones, DirectorKindergarten and PrekindergartenTexas Education Agency1701 North Congress Avenue, Room 6125Austin, TX 78701-1494Phone: (512) 463-9581Fax: (512) 463-8057


Families and Children First (Ohio)

DescriptionThe Families and Children First (F&CF) Initiative isa multifaceted, government-led approach to reformingOhio's education, family services and social servicesdelivery systems on the state and local levels. As thegovernor said in announcing F&CF, "The best hopefor the future is the well-being of Ohio's families."'

Inspired in part by leaders who had participatedon the Ohio team at the National Governors' Asso-ciation Policy Academy and in the Ohio HeadStartState Collaboration project, a broad-based,statewide, inclusive strategic planning process estab-lished a vision for Ohio's families with goals andobjectives. Within F&CF's six overall goals, efforthas initially targeted three: health, child develop-ment and education. The three objectives to achievethese goals focus on healthy births and the well-being of young children and families during theearly childhood years.

The child development objective is to ensurethat more young Ohio children will have access tohigh-quality preschool and child care programs bythe year 2000, through:

expansion of early intervention services forchildren birth through five,increased availability of Head Start for three-and four-year-olds,a larger number of children receiving child caresubsidies,an increased number of elementary schools withmulti-age primary programs andan increased number of nationally accredited childcare and preschool programs.

By executive order, the governor established thegoals of F&CF and a set of principles for responsive,family-focused, coordinated systemic reform of edu-cation and human services; ordered all state agenciesand departments serving children to examine theirservices, programs and policies to meet F&CF goalsand systemic reform principles; and ordered them to

1. Ohio Families and Children First Initiative. 1992. Vision Statement, page 2. Ohio Families and Children First Initiative BriefingBook. Columbus, OH: Office of the Governor.

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develop outcome-oriented indicators to meet thegoals and objectives of F&CF. The order created theF&CF Cabinet Council, composed of the governorand the directors of eight state departments andagencies, to make policy decisions on issues affect-ing families and their children. The Cabinet Councilserves as the central coordinating and advisory bodyfor all children and family policy (consolidatingseveral former advisory bodies and collaborative pro-jects). It is responsible for reviewing and monitoringimplementation of F&CF in state agencies, facilitatingcollaboration among state agencies and between stateand local agencies, and promoting and facilitatinglocal collaboration.

When EstablishedThe underlying concept of commitment to familiesand children that is the foundation for the F&CFInitiative was introduced in the governor's state ofthe state address in March 1991. This was followedby an executive order in August 1992 establishingthe F&CF Cabinet Council. F&CF was codified inlegislation in 1994. By 1996, local F&CF councilshad been established in all of Ohio's 88 counties.

Amount Generated AnnuallyFor the state's 1995 fiscal year, just over $195 millionin state general revenue funds were appropriated forchild care and preschool.

Department of EducationPublic preschoolHead StartPreschool special educationSchool-age care expansion

Department of Human ServicesJOBS and transitional

child care subsidiesOther child care subsidiesJOBS/Head Start child careDay care licensing

$15.3 million68.5 million43.8 million

.6 million

$34.0 million25.0 million6.0 million1.9 million

As a result of F&CF, Ohio has been creative andefficient in using its resources, especially in maxi-mizing the drawdown of federal funds requiringstate match. For example, private grants the statereceives (such as a $25,000 grant from the NationalGovernors' Association for school-readiness) are

often routed to the Department of Human Services(DHS) as fiscal agent so that federal matching canoccur when appropriate, thus potentially triplingthe value of a grant. The $6 million for JOBS/HeadStart is a pool of funds targeted to expand the num-ber of full-day, full-year slots in Head Start programsfor JOBS-eligible clients.

In addition, the state general revenue budgetalso includes a line item for F&CF, which providesfor incentive funds to support local F&CF councils.Each county council is allocated $17,000 from thispool. The Department of Education (DOE) is thefiscal agent for these funds.

The F&CF service delivery system objectivesdirected state agencies to work together to increasethe resources (federal, state and local) allocated forpreventive and early intervention services to familiesand children from birth to age eight, and to alignstate budget requests to reach F&CF goals. Thus,the two largest state agenciesEducation andHuman Serviceshave allocated increasing propor-tions of their budgets toward young children as theF&CF initiative has evolved.

Services FundedState funds are directed toward achieving F&CFobjectives relating to child development and earlyeducation. These funds support direct services tochildren as well as the costs for start-up of newprograms and quality improvements such as staffdevelopment. Some funds are more specificallydirected. For example, in awarding grants for state-funded Head Start, the DOE's priority is expansionto serve additional children and for full-day, full-yearoperation. State funds also support the coordinationnecessary for systemic reform, such as the funds forlocal F&CF councils and for the central staff of F&CF.

How Funds DistributedState funds are distributed through the commongovernment mechanismsgrants, contracts andvouchersand administered by state agencies. Gen-erally, requests for applications for funds are releasedby the department whose budget contains the funds.The applicants eligible for some funds are restricted.For example, most Department of Education fundsare available only to school districts or countyboards of education, with the exception of HeadStart funds for which only current Head Start

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grantees (i.e., those receiving either federal or stateHead Start funds) are eligible. New grantees wereadded as part of earlier expansions and in the statefiscal year 1996 budget.

Child care. Ohio has consolidated all federalchild care funds and state child care appropriationsinto one program, which is then allocated to thecounties to administer. Counties then contract withchild care providers. To receive public funds, a centermust be licensed and family child care or home-based providers must be certified. Families areinitially eligible for subsidy if their income is below150 percent of poverty; they remain eligible untiltheir income exceeds 185 percent of poverty. Eligiblefamilies choose whichever licensed or certifiedprovider they wish, and the county pays the providerdirectly. Counties can issue vouchers or use limitedservice contracts (essentially a price agreement). Eachcounty sets its own initial and continuing eligibilitylimits within the overall 150 percent/185 percentstate limits. Families pay a sliding-scale fee rangingfrom $15 per month for a family at poverty or belowand set at 10 percent of income above poverty.

Efficiency. To improve coordination and promoteefficiency in service delivery, in 1994, all applicantsfor DOE early childhood funds were required tohave a Unified Services Provider Plan (USPP). TheUSPP promotes county-wide planning and imple-mentation of comprehensive child developmentservices by requiring an applicant to participate indeveloping a plan based on documented needs andresources for all children in the county. The regionalchild care resource and referral agency facilitates themeeting to initiate the plan, inviting at a minimumall recipients of DOE funds for Head Starr, publicpreschool and preschool special education.

The plan must include data on the number ofchildren three to five years old currently served inany preschool or child care program and show howthe proposed services fit in. The plan requires partic-ipants to develop joint recruitment for all preschoolservices; show how comprehensive services andsmooth transitions from preschool into school willbe assured; and describe the status of communicationamong preschool service providers, cross-training of

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staff and parents, and plans for service deliveryimprovement. The document must be signed by allparticipating agencies and attached to their application.

By 1996, the DOE and the state Department ofHealth agreed to consolidate the USPP and the planrequired of applicants for early intervention servicesinto one plan. In 1996-97, 12 counties are pilotinga consolidated plan for what had been 12 separateplans and applications, and for funding. The processwill be implemented for state fiscal year 1997-98.

Population ServedThe ultimate goal of F&CF is universal access toappropriate services for all families with young chil-dren. For example, a new parent education supportprogram modeled after the state of Hawaii's HealthyStart is designed to be universal. Universal accesscan be achieved among multiple programs withvarious limits on access. Head Start programs aretargeted to families with incomes below the povertylevel. Child care funds may serve families up to 185percent of poverty. Preschool special education andearly intervention services are provided withoutregard to income.

Strategic ConsiderationsTo succeed at systemic reform, government mustmake a long-term commitment of both resourcesand staff to effect the deep changes in attitudesand organizational culture that lead to changes inpolicies and practices.It is often easier to redirect policies and resourcestoward specific objectives through state budgetauthorizations than via stand-alone legislation.Human Services, in Ohio, operates as a state-supervised, county-administered system. Educationis administered by more than 600 local schooldistricts, 88 county boards of education andnumerous joint vocational districts with guidanceand support from the state Department of Education.Mutual trust and effective communication amongall parties has to be developed before multiplestate agencies' budgets and activities can be coor-dinated toward a common goal.Maintaining the F&CF Cabinet Council as theone policy coordination body is essential to acoordinated, focused effort like F&CF.

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Other Sites With Similar StrategyNo other state has both made significant increasesin early childhood funding and demonstrated sus-tained commitment to long-term systemic reform ofits education and human services systems, as Ohiohas done. A number of states are engaged in systemicreform, and other states have made significant allo-cations to child care. North Carolina's Smart Start,profiled on page 91, is an example of increased stateresources for early childhood; Colorado has restruc-tured state government to better support earlychildhood development. Wisconsin's redeploymentto child care of savings from eliminating welfarecash assistance is profiled on page 55.

ContactsLinda Mc CartFamilies and Children First InitiativeOffice of the Governor77 South High Street, 30th FloorColumbus, OH 43266-0601Phone: (614) 752-4044Fax: (614) 728-9441

Jane WeichelOhio Department of EducationDivision of Early Childhood Education65 South Front Street, Room 309Columbus, OH 43215-4183Phone: (614) 466-0224Fax: (614) 728-2338

Richard DavisOhio Department of Human ServicesBureau of Child Care Services65 East State Street, 5th FloorColumbus, OH 43215Phone: (614) 752-6214Fax: (614) 728-6803


The A+ Program (Hawaii)

DescriptionThe A+ Program provides after-school child care for26,642 children enrolled in 175 Hawaii public ele-mentary schools in kindergarten through sixth grade.

When EstablishedThe program was established in 1990.

Amount Generated AnnuallyIn state fiscal year 1994, $16,950,634 was appropri-ated for the program.

Services FundedAfter-school child care (including homework assistance,enrichment activities and supervised recreationalactivities) is provided after school until 5:30 p.m.during the regular school year. The A+ Program isnot open when school is closed for vacation, holidays,during teacher institutes or on days when school isopen only half a day. The 49 A+ programs operatedprivately offer extended hours of operation at noadditional charge and child care on days whenschool is closed for an additional fee.

How Funds DistributedState funds are allocated to local schools. In caseswhere the school selects a private provider to operatethe program, the state Department of Education(DOE) negotiates a contract with the private entity.DOE reimburses private contractors monthly, basedon the enrollment for the first day of each month.Families who are eligible for the free lunch programpay a monthly fee of $6 per child, and those eligiblefor reduced lunch pay $9 per child. All other fami-lies pay a monthly fee of $55 per child. Discountsare available for families with more than one childin the program.' In sites where schools operate theprogram directly, parent fees are deposited into thestate's general fund. Parent fees collected by theschools are not tied to their A+ budget and have nodirect bearing on the program.

1. Sibling discounts for families eligible for free and reduced lunch are deducted in $1 increments (for two children the monthly fee

is $8 per child, for three children the fee is $7 per child, and so forth). Sibling discounts for all other families are deducted in $5

increments (for two children the monthly fee is $50 per child, for three children the fee is $45 per child, and so forth).

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Population Served

Children may participate if they reside with: twoparents, both of whom are employed or in a jobtraining or education program during the hours ofA+ operation; a single parent who is employed orin a job training or education program during thehours of A+ operation; or a parent who is employedin the A+ Program.


A+ was established by the administration of formerGovernor John Waihee prior to his final term inoffice. The initiative was led by the former Lieu-tenant Governor Ben Cayetano (who succeededGovernor Waihee in 1994 and has continued toprovide strong leadership and financial support forthe program). In considering this strategy, the fol-lowing issues should be explored:

A+ was initially established without the approvalof the legislature. While this move may have ini-tially angered some members of the legislature, itallowed rapid program start-up. Strong publicsupport made it easier to gain legislative approvalfor the program the following year.A+ has continued to receive strong public support.Focus groups and surveys indicate high parentssatisfaction.Despite rapid growth, the A+ Program appearsto be running well and has reached most of thechildren it was designed to serve.The decision to house A+ in the public schoolsystem was a pragmatic one and provided theinfrastructure necessary to establish the programquickly. But school sponsorship has also posedsome barriers. For example, allowing the A+ Pro-gram to follow a school calendar and remainclosed during school holidays and vacations placesadditional stress on working parents, who mustscramble for alternative child care. In contrast,private providers appear to be willing and readyto provide care year-round.Staff development activities are limited. Site coor-dinators, principals, teachers and parentsas wellas the evaluators of the programhave raised con-cerns that A+ staff need more in-service training.

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The lack of separate space for the A+ Program hasbeen a significant problem. The cafeteria/auditoriumand playground are the spaces most frequently usedfor the program. Site visits conducted as part ofthe evaluation revealed that, even in very wellmanaged or small sites, noise levels are not con-ducive to doing homework or engaging in quietgroup activities. Access to the playground alsowas limited in some sites. A lack of adequate stor-age facilities is another problem.Concerns have been raised that the parent feestructure is not realistic and that some parentscould afford higher fees.It has been suggested that the DOE sites establisha special fund into which parent fees are depositedrather than returning fees to the general fund.Proponents of this approach believe that it wouldencourage programs to strengthen fee collection.Opponents argue that the policy would requireadditional record keeping and paperwork.Reimbursement to contract providers is basedon a maximum cost of $70 per child (minus theco-payment collected from parents) and has notincreased since the program began. DOE has gen-erated additional revenue for the A+ Program byincreasing the fees charged to parents. (Monthlyfees were $25 per child when the program began.)For private providers, however, the fee increasesreduce reimbursement from DOE and do notresult in increased revenue.

Other Sites With Similar StrategyHawaii is the only state that makes after-schoolchild care universally available to all childrenenrolled in public elementary schools and partiallysubsidizes its cost to parents.

ContactLinda Chung, Educational SpecialistHawaii Department of Education641 18th Avenue, Building V, 2nd FloorHonolulu, HI 96825Phone: (808) 733-9891Fax: (808) 733-9890

FINANCING CHILD CAREIN THE PRIVATE SECTOR

Employers and UnionsThe Con Agra Child Care Initiative (Multistate) 68The Levi Strauss & CompanyChild Care Initiative (Multistate) 70The American Business Collaboration forQuality Dependent Care (National) 72Houston Area Network for Dependent Services(Corporate H.A.N.D.S.) (Texas) 74Child Care Partnership Act (Florida) 75The NYSLMCCAC Enrichment Grants Program(New York) 76The I I99/Employer Child Care Fund(New York City) 78Temporary Disability Insurance Coveragefor Maternity Leave (New Jersey) 79

Community Child Care InitiativesChild Care Scholarship Fund of the Marin CommunityFoundation (Marin County, California) 81The Model Centers Initiative of the Miriamand Peter Haas Fund (San Francisco, California) 83Allegheny County Early Childhood Initiative(Pittsburgh, Pennsylvania) 84

FINANCING CHILD CARE IN THE PRIVATE SECTOR

Employers and unionsIn the past five years, major corporations have investedmore than $350 million in child care initiatives.'These funds have been used primarily to help start newchild care centers, recruit new family child care homesand improve the quality of child care services. (Seethe profiles of the national American Business Collab-orate initiative and Houston's Corporate H.A.N.D.S.in this section for examples of this approach.) Addi-tionally, many employers have established dependentcare assistance plans that help to reduce the cost ofchild care by reducing employees' tax burden (see TaxCredits, Deductions and Exemptions, on page 35,for a further discussion of this strategy) or expandedthe availability of flexible work arrangements such asflextime, part-time, job sharing and telecommuting.But few employers subsidize the recurring weeklycost of child care for their employees.

The Con Agra Child Care Initiative, which issummarized in this section, is a unique departurefrom these trends. In addition to helping expand thequality and supply of child care, Con Agra pays aportion of the weekly cost of care for each of itsemployees. The Con Agra approach is based onfinancial partnerships with community-based HeadStart and child care centers. Levi Strauss & Companyhas developed a strategy for meeting the child careneeds of its hourly workers that combines vouchers,child care resource and referral services, and grantsto help strengthen the quality and supply of childcare services in communities where its employeeslive and work. Both of these companies employhourly workers who, in general, do not qualify forgovernment-subsidized child care but who cannot

afford to send their children to preschool programswithout help in paying for the care.

Florida has recently enacted a new initiative thatwill offer matching state funds to businesses thatemploy low-wage workers and are willing to pay aportion of the weekly cost of child care for theiremployees. The program, which is profiled in thefollowing pages, was passed by the state legislatureearlier this year and will be administered by com-munity-based child care resource and referral agencies.

Collectively bargained labor/management childcare funds also have been an effective way to helpemployees pay for child care. Two initiativesthe1199/Employer Child Care Fund and the Enrich-ment Grants Program sponsored by the New YorkState Labor/Management Child Care AdvisoryCommitteeare profiled in this section.

Parents often seek opportunities to be at homewith their infants. But no more than 2 percent ofemployees are paid during maternity leave. Temporarydisability insurance (TDI) is a promising approach toprovide up to six weeks of paid leave for infant care.Women who are able to add disability benefits toaccumulated sick and vacation pay may be able toremain at home with their newborn child for severalmonths. Statewide temporary disability insuranceprograms now operate in five states and Puerto Rico.The plans are solvent, well-funded and pose a minimalburden on employers and employees. In fact, the TDIprogram in New Jersey (profiled in this section) hasbeen so successful that the state legislature is con-sidering extending it for family members who mustleave employment temporarily to care for a newborn ornewly adopted child or a seriously ill family member.

1. Friedman, D. 1995. "Planning With Business Partners to Assist Low-Wage Workers: Let's Talk About It." Speech presented atthe Administration for Children and Families Planning Conference for State Child Care Administrators,September 27, 1995,

Washington, DC.

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Community child care initiativesChild care is a local issue in many respects. Manycommunities are engaged in planning for child care,and nearly all encounter financing issues in theprocess. The community initiatives profiled hererepresent different approaches to child care financ-ing. In Mann County, community, civic and childcare leaders devised a plan to help families pay forchild care through a scholarship fund. In San Fran-cisco, a philanthropy is devoting the majority of itsresources to improving child care in the city andfocusing significant resources on four centers. InPittsburgh, a diverse group of business leaders,professionals, community representatives and otherconcerned citizens aims to establish a unified systemof early childhood care and education to ensure thatlow-income communities in Allegheny County andthe city of Pittsburgh will have a sufficient numberof affordable programs that provide high-qualitycare and education to low-income children. Localphilanthropies initiated each of these efforts toengage the wider community in.defining problemsand generating solutions.

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FINANCING CHILD CARE IN THEPRIVATE SECTOR (Employers and Unions)

The Con Agra Child Care Initiative (Multistate)

Description

Con Agra Refrigerated Foods has established anemployer-supported child care initiative tailored tothe needs of workers who earn between $6 and $7per hour, do shift work and live in rural areas whereregulated child care is scarce. To meet the child careneeds of its employees, Con Agra has establishedpartnerships with Head Start/child care agencies inthree communities and is currently exploring thefeasibility of adding a fourth. Con Agra works withan existing nonprofit organization and helps theagency to expand the early childhood programs itcurrently runs to include full-time child care forchildren from infancy to school age. The centers areopen from 5:00 a.m. to midnight weekdays, andsometimes on Saturday, to accommodate employeesfrom all shifts. Con Agra makes a contribution forinitial start-up costs of the centers. The companyalso pays a portion of the weekly cost of care foreach of its employees. In addition, the employee'sportion of the cost of care is deducted from theirpaycheck and placed in a pretax dependent careassistance plan (DCAP).

When EstablishedThe first partnershipwhich included a ButterballTurkey plant in Huntsville, Arkansas, and theNorthwest Arkansas Head Start agencywaslaunched in 1992, and currently serves 75 childrenof Con Agra employees as well as children from thesurrounding community.

Amount Generated AnnuallyCon Agra typically makes an initial contribution(from its philanthropic foundation) of between$20,000 and $50,000 to help with start-up costsand, if necessary, will donate land for the child carefacility. Additionally, the company spends over$200,000 per year to help subsidize the cost of childcare for 155 employees.

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Services FundedOne-time grant for capital costs associated withstart-up and weekly child care subsidies for employees.Con Agra purchases "slots" in on-site or near-sitechild care centers, and therefore pays for the careeven during times when the slots are vacant. Thechild care centers serve children of all ages, includingschool-age children who need care after school andduring the summer.

How Funds DistributedCon Agra conducts focus groups with employees tolearn how much they currently payand can affordto payfor child care. These data, along with localmarket rate survey data, are used to help establishthe child care fees paid by employees. (The averagefee is $47 per week.) The balance of the weeklychild care cost is paid by Con Agra. The companydeducts the parent's share of the cost from their payeach week and deposits it in a pretax DCAP. Thecompany combines these payroll deductions with itsshare of the cost and reimburses the child care pro-gram. (The employer's portion of child care costsmust be reported as income to the employee but isnot taxed by the federal or state government.) Thechild care centers are run by a board of directors.Con Agra has one seat on the board of each center.

Population ServedThe initiative assists Con Agra employees, whotypically earn between $6 and $7 per hour and oftencome from immigrant families.

Strategic ConsiderationsCon Agra sought to establish a child care initiativethat would meet the unique needs of its workforce.This meant that the company needed to becomeinvolved in helping to start programs as well asprovide operating assistance to keep the programsrunning. (For example, when child care is needed onSaturdays, the company pays the full cost of openingthe child care center for the day.) Partnerships withHead Start agenciesa major early childhood pro-gram in rural areasproved to be the best strategy.In considering this strategy, the following issuesshould be explored:

The company has demonstrated that turnoveramong workers who have children in their childcare centers has dropped by 50 percent. The childcare centers are also an effective recruiting tool,especially for a company that is growing and"always hiring."Even though most of Con Agra's employees owelittle in the way of taxes, the DCAP saves themabout $3 to $5 per week in child care fees.Using a payroll deduction to collect the parent'sshare of the cost, and reimbursing the child carecenters directly, ensures that all child care fees arepaid and reduces administrative costs in the center.Subsidizing the cost of the work-site centers ensuresthat Con Agra families have access to quality earlychildhood care and education programs.Even with the subsidy provided by Con Agra,the cost of child care is high for many employees,especially those from families with only onewage earner.Some of Con Agra's workforce, especially immigrantfamilies, have been reluctant to send their chil-dren to a child care center. They believe that childcare should always be provided within the family.Con Agra's decision to enter into partnershipswith nonprofit agencies involves some risk. Sincethe company doesn't own and operate the center,it relinquishes control. ("You are only as good asyour partner. When the agency is weak, the pro-gram is weak.")

Other Sites With Similar StrategyWhile many employers have established on-sitechild care centers and/or sponsor other child careinitiatives, few have established initiatives targetedat low-wage workers. (See the October 1995 issue ofWorking Mother magazine for a list of 100 employersthat have established child care initiatives.)

ContactCharlie Romeo, Director, Employee BenefitsCon Agra Refrigerated Foods2000 South Batavia AvenueGeneva, IL 60134Phone: (630) 262-4067Fax: (630) 262-4002

7969


The Levi Strauss & Company Child CareInitiative (Multistate)

Description

Levi Strauss & Company (LS&CO) employs almost20,000 hourly workers in more than 35 productionfacilities located primarily in small towns or ruralcommunities in the United States. Seventy-ninepercent of LS&CO employees are female and havechildren; most are married and living in familieswith two incomes. To meet the needs of this work-force, LS&CO has developed a child care initiativethat includes three components: 1) vouchers to helpfamilies pay for child care; 2) child care resource andreferral (CCR&R) services to help families find andevaluate care; and 3) a charitable giving program(called the LS&CO Child Care Fund) that providesgrants to help improve the quality and expand thesupply of child care in communities where LS&COemployees live and work. At present, the San Antonio,Texas, production facility is the only site participatingin the voucher and CCR&R programs. The charitablegiving program is available in eight communities.


Amount Generated AnnuallyParticipating plants spend approximately $70,000to $100,000 of their annual budget to support thevoucher and CCR&R programs. Corporate head-quarters spends approximately $600,000 per yearon the charitable giving program.

Services Funded

Families receive child care vouchers of up to 50percent of the price of their child care, capped at$100 per month per child. The vouchers may beused for any form of legal child care that is providedto a child under 13 years of age. Enhanced CCR&Rservices (including on-site seminars on choosingchild care) are also available at the San Antoniofacility. The charitable giving program providesfunds for training, planning/partnership, infant care,before-/after-school, preschool, summer/vacation,and resource and referral programs.

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How Funds DistributedLS&CO's voucher program is administered by anoutside vendor. Employees submit receipts directlyto human resources staff at their facility. The vendorprepares monthly checks, which are paid directly tothe child care provider, and handles the year-endreporting to the IRS. Because the voucher programis part of the company's dependent care assistanceplan, the benefit is nontaxable. The CCR&R serviceis provided by local agencies via a contract with thelocal plant facility. The charitable Child Care Fundis managed by the company's Community Affairsdepartment. Grants are provided to local nonprofitchild care agencies to expand or improve services inways that benefit both LS&CO employees and thecommunity. Community Affairs staff provide moni-toring and technical assistance to fund grantees.

Population ServedCCR&R services are available to all employees atthe LS&CO San Antonio production facility. Incomeeligibility for the voucher program is graduated byfamily size, and is capped at approximately $35,000for a family of eight or more. (Unmarried partnersare included in the definition of "family.") Start-upand quality improvement grants under the charita-ble giving programs are available to all types ofnonprofit child care programs, including child carecenters, Head Start programs, school-based pro-grams, family child care homes and other child careservices located in communities where LS&COemployees live and work.

Strategic ConsiderationsLS&CO employees are a prime example of familiesthat, in general, do not qualify for government-sub-sidized child care but cannot afford to send theirchildren to preschool programs without help inpaying for the care. The company voucher programhas been an important benefit for these families. Inconsidering the LS&CO approach, the followingissues should be explored:

Reimbursement levels make a big difference.When the voucher program was initiated, reim-bursement was limited to $50 per month perchild. While vouchers at this level were somewhathelpful to families financially, they were not largeenough to make a difference in the type of childcare selected by families. (With reimbursement

levels this low, most families continued to rely onrelatives, neighbors and friends.) When reim-bursement was raised to $100 per month perchild, participation in the program tripled andhalf of the participating families switched to acenter-based preschool program or a regulatedfamily child care home.Unlike many other industries, LS&CO does notlease its corporate support for the voucher programon a cost-benefit analysis of employee turnover. Ingeneral, turnover at most LS&CO productionfacilities is quite low. However, the company isfinding that new approaches to production andmanagement (such as using computer technology,working in teams and so forth) require a morehighly educated and skilled workforce. In order toattract this new workforce, the company needs toprovide a competitive benefit package.Support for the program is also based on strength-ening employee loyalty and commitment. In anera of widespread corporate downsizing, employeesknow that they are not likely to work for the samecompany their entire lives. They are, therefore,less likely to feel committed to their employer.As a result, many companies are attempting todevelop new social contracts with employees,contracts that help to build worker loyaltythrough family supports and other "quality ofwork-life" programs rather than a commitmentto lifetime employment.

While all production facilities have the option ofparticipating in the voucher program, those whoelect to participate must allocate funds from theirlocal budget to pay for the program. To dare, onlyone local facility has elected to participate (the SanAntonio facility, where the program was piloted andstaff saw the results). It is likely that participationwould be higher if funds to support the programwere allocated from the overall corporate budgetrather than from the local production plant budgets.

In addition to the work/family benefits describedabove, LS&CO has a dependent care assistance plan(which is primarily used by salaried employees atcorporate headquarters) and flexible work schedules.

Other Sites With Similar StrategyWhile many employers have developed voucherprograms and/or enhanced child care resource andreferral services and funds to help improve the qualityand expand the supply of child care, few have estab-lished initiatives targeted at hourly workers withlow or moderate incomes. (See the October 1995issue of Working Mother magazine for a list of 100employers that have established child care initiatives.)

ContactMerle Lawrence, Community Affairs ManagerLevi Strauss & Company1155 Battery Street LS/7San Francisco, CA 94111Phone: (415) 544-6010Fax: (415) 544-6575

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The American Business Collaboration forQuality Dependent Care (National)

DescriptionThe American Business Collaboration for QualityDependent Care (ABC) is a business strategy intend-ed to increase the supply and quality of dependentcare services in the U.S. ABC was formed inresponse to key labor force changes brought aboutby the increasing number of women and dual-earnerfamilies in the labor force and the increasing care-giving responsibilities of employees. Twenty-onemajor U.S. national and international corporations,called the "Champions," form the core of the collab-oration. The collaboration also includes more than100 regional and local businesses who partner withthe Champions in specific initiatives.

The 21 Champion companies are: Aetna Life andCasualty, Allstate Insurance Company, AmericanExpress, Amoco, AT&T, Bank of America, Chevron,Citibank, Deloitte & Touche, Eastman Kodak,Exxon, GE Capital Services, Hewlett-Packard, IBM,Johnson & Johnson, Mobil, NYNEX, Price Water-house, Texaco, Texas Instruments and Xerox.

When EstablishedThe ABC was originally formed in the fall of 1992.The second phase was launched in the fall of 1995,with dollars committed through 2000.

Amount Generated AnnuallyFrom 1992 through 1994, the ABC invested over$27 million in a range of child and elder care servicesand programs. From 1995 through 2000, the ABChas committed to investing an additional $100 mil-lion in targeted communities around the country.

At the end of phase one, approximately 50percent of ABC funds were expended in support ofearly childhood child care projects. The remainingfunds supported school-age care (38 percent) andelder care (12 percent). The plan for phase two is tocontinue the community needs-driven approachused in phase one. Thus, no targeted allocationamong the three areas has been made up front. Eldercare will likely increase along with school-age care,and more projects focused on infant/toddler careprobably will be funded.

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Services Funded

Child care centers, family child care and school-agecare services and improvements have been funded.Existing community services in a target area mayreceive support, while new services also may bedeveloped. ABC funds are for start-up expenses, notthe ongoing expenses of operating a program (e.g.,fee subsidies). These funds are for one-time effortsthat expand or improve services, such as facilityconstruction or renovation to accommodate a pro-gram for infants and toddlers, a center-wide staffdevelopment program, mini-grants for equipmentand other items necessary to achieve accreditation,and the direct costs of accreditation. The expectationis that programs will sustain their ongoing opera-tions through fees and other sources of revenue.

During phase two, greater emphasis is beingplaced on quality improvement, developing servicesthat meet the specific needs of working parents suchas extended hours, and projects focused on servicesfor school-age children.

How Funds DistributedThe ABC is managed by Work/Family Directions, anational provider of corporate work-life services. Theprocess for developing ABC-funded community-based strategies begins with an employee demandassessment focused on employees in a company (orcompanies) in a specific geographic area and a supplyassessment focused on the same area. The resultinggap analysis leads to recommendations for projectsand programs to fill the gap between demand andsupply. The assessments, analysis and recommenda-tions are conducted by Work/Family Directions.The next step is for Work/Family to issue an RFP(request for proposals) to potential community ven-dors. The RFP is tailored to the selected approachesand clarifies employee needs and demands that mustbe addressed. Winning proposals are funded throughcontracts with Work/Family Directions. Anotherway that projects may be funded is through a "spe-cial opportunity"an existing project or initiativethat is aligned with identified employee needs andin which ABC can become a funding partner.

In the second phase of ABC, projects are devel-oped through community-based strategies (describedabove) and through a new strategy: championshipmodels. Championship models are intended to beresearch and development projects that can testinnovative solutions that are national in scope and

can be adapted widely. Currently, there are fourkinds of championship models in the works:1) The Bridge project is a voice mail messagingservice in public schools designed to improve com-munication among parents and teachers.2) Backup Care is developing a series of child andelder care programs matched to employee needs,such as in-home care, programs for mildly ill chil-dren and registries of backup care providers.3) Middle School Youth is developing innovativeafter-school and summer programs for adolescents(10- to 14-year-olds) tailored to the needs and inter-ests of adolescents.4) Partnerships for Quality Care is developinginitiatives in four broad subgroups, keyed to thestructure of child and elder care services.

Additionally, ABC's work also involves:School-age child care accreditation is being devel-oped with leading school-age care associations andtwo funding partners (the U.S. Air Force and theDeWitt WallaceReader's Digest Fund).With leading family child care trainers, additionalfamily child care training curricula are beingcreated based on a professional development pro-gression model with both advanced practice andmentoring curricula.With the National Institute of Adult Daycare, aprogram accreditation system for adult day careprograms is being piloted.Director credentialing is the next step in the over-all strategy of improving quality in center care.The analysis of facilitated center accreditationundertaken in phase one showed that the strongestindicator of successful accreditation is good, soundleadership. Director credentialing is designed toaddress the gap between the need to develop leadersand the scarcity of educational programs to do this.

ABC's role in each of these is to partner with lead-ing organizations and help stimulate interest in theprovider community to advance innovative solutions.

Population ServedABC initiatives are targeted specifically at the needsof employees in a particular geographic area. Typi-cally, the needs of employees determine the types ofservice improvements, expansions or developmentthat occur in a community. During the first phase,45 communities in 25 states and the District ofColumbia were involved in ABC-funded initiatives.

Strategic ConsiderationsBusiness acts in response to bottom-line businessconcerns. The Champion companies, in their jointstatement launching phase two, said, "We believethat supporting the diverse dependent care needsof our employees is critical to our success as it enablesour companies to attract and retain a productive,competitive, committed and motivated workforce."ABC funds are business dollars, not charitabledollars, and must demonstrate a direct link betweenprojects funded and company productivity.ABC concentrates on expanding and improvingthe supply of dependent care. Corporate supportfor the ongoing cost of child care for employees isexpressed through company-sponsored dependentcare assistance plans (DCAPs) and the provision ofother services such as resource and referral pro-grams. (A DCAP is profiled on page 35.)The Champions believe, "By working together wecan do more to meet the dependent care needs ofour employees than if we worked alone." Signifi-cant effort was required to create and maintain thecollaboration among leading national corporations.Community-level models that emulate and link withABC are an effective strategy for child care improve-ment and expansion in areas with concentrationsof corporations. For example, Houston has createdsuch a model (Corporate H.A.N.D.S.). In areaswith one major employer or few large employers,single-company strategies can be effective.

Other Sites With Similar StrategyThe ABC offers opportunities for local and regionalemployers to join the collaboration to work onsolutions in their communities. The Houston AreaNetwork for Dependent Services (H.A.N.D.S.) is alocal employer collaborative that partners with theABC. (H.A.N.D.S. is profiled on page 74.)

ContactBetty J. SouthwickDirector of Community DevelopmentWork/Family Directions930 Commonwealth Avenue WestBoston, MA 02215-1274Phone: (800) 253-5264 or (617) 278-4087

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FINANCING CHILD CARE IN THE PRIVATESECTOR (Employers and Unions)

Houston Area Network for Dependent Services(Corporate H.A.N.D.S.) (Texas)

Description

Corporate H.A.N.D.S. is a collaboration of 30companies in the Houston area who pool theirresources to support investment in dependent careservices.' The companies work together to identifythe dependent care needs of their employees and thecommunity around them. Specific projects are thendeveloped to help meet those needs.

When EstablishedPlanning began in 1991, and the project waslaunched in 1992.

Amount Generated Annually$750,000 was raised in fiscal year 1996.

Services Funded

Improving the quality of early childhood care andeducation (including practitioner training, programaccreditation, on-site visits by child care specialists,scholarships for professional development, peer-supportmeetings, parent education and small equipmentgrants); facility expansion grants; summer programs;and elder care referral, consultation and support.

How Funds DistributedFamilies who are employed by corporate membersnominate programs or projects. Initiatives for Children,a Houston-area child care resource and referral agency,selects child care projects (based on criteria establishedby the corporate members) and administers funds.Sheltering Arms, a local United Way agency, admin-isters the elder consultation and referral service.

Population ServedCorporate H.A.N.D.S. funds and training servicesare made available to community-based and company-sponsored child care and early education programsthat: 1) are located in areas with a high populationof member employees; 2) are already serving somemember employees and are willing to give priorityenrollment to more of these families; and 3) arewilling to participate in training and work towardaccreditation. (It is important to note that, whilethe programs must give priority to the children ofCorporate H.A.N.D.S. members, these programstypically serve a diverse constituency and includemany children from the larger community.)

Recently, Corporate H.A.N.D.S. has been focusingon programs that serve children between the ages of 10and 13, including efforts to make afternoon enrichmentprograms more accessible to school-age children andencourage planning among the staff at middle schools,local parks and recreation departments, and others.

Strategic ConsiderationsCorporate H.A.N.D.S. seeks to enhance the produc-tivity of participating businesses and strengthen thechild care and education programs in the communityat large. In considering the feasibility of replicatingthis strategy, the following issues should be explored:

Pooling resources strengthens the capacity of allparticipants. Smaller companies see a greaterimpact from the limited dollars they can contribute;larger companies see more cost-benefit and widerutilization of the initiatives they sponsor.Including child care (for children of all ages) and eldercare issues allows the initiative to reach more families.Corporate members appreciate that H.A.N.D.S. isa locally developed and administered initiative; theircontributions have a direct impact in Houston.Funds raised by Corporate H.A.N.D.S. are used toincrease the quality and supply of child care andearly education programs in the community. Theinitiative does not help parents pay for child care.It also does not provide the operating assistancemany child care programs need to attract andretain qualified teachers.

1. In 1996, H.A.N.D.S. included the following members: Aetna Life and Casualty, Allstate Insurance Company, Amoco Corporation,AT&T, Chevron, College of the Mainland, Cooper Industries, Deloitte & Touche, Dow Chemical, Enron Corporation, Exxon, FirstInterstate Bank of Texas, Houston Chronicle, Houston Lighting & Power Company, IBM, KHOU-TV, Lyondell Petrochemical,Marathon Oil Company, Meridian Oil, Inc., Mervyn's, Mobil, Pan Energy Corporation, Santa Fe Resources, Inc., Tenneco, Texaco,Texas Commerce Bank, Texas Instruments, Transcontinental Gas Pipe Line Corporation and UTMB.

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Approximately half of the members of CorporateH.A.N.D.S. are members of the national AmericanBusiness Collaborative (ABC) initiative. Initiativesfor Children has worked out a cooperative agreementwith Work/Family Directions (the entity chatadministers ABC) to allow these dollars to be spentin Houston following the locally developed plan.

Other Sites With Similar StrategyCorporate Champions in Charlotte, North Carolina,as well as corporate/community initiatives in Seattle,Washington; Fort Worth and San Antonio, Texas;Denver, Colorado; Rochester, New York; and manyother cities.

ContactKathleen RowlandInitiatives for Children, Inc.5433 Westheimer Road, Suite 620Houston, TX 77056-5305Phone: (713) 840-0948Fax: (713) 235-1022


Child Care Partnership Act (Florida)

DescriptionThe Child Care Partnership Act is designed toencourage businesses that employ low-wage workersto pay a portion of the cost of child care for theiremployees. When the legislation is implemented,matching funds will be made available to employerswho help subsidize the cost of child care for thelow-income individuals they employ. The act createsa nine-member Executive Partnership, comprised ofcorporate leaders, to establish more specific guide-lines and eligibility criteria for the program.

When EstablishedThe act was included as part of Florida's most recentwelfare reform legislation, which was passed duringthe 1996 legislative session.

Amount Generated Annually$2 million was appropriated for the initial, pilotphase of the Partnership.

Services FundedChild care subsidies for employed families withlow incomes.

How Funds DistributedThe act specifies that funds will be administered bychild care resource and referral agencies, the privatenonprofit organizations that administer child caresubsidies in Florida. Further details will be devel-oped by the Executive Partnership.

Population ServedWorking families with incomes at or below 150percent of the federal poverty level (approximately$26,000 for a family of three).

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Strategic ConsiderationsThe Child Care Partnership Act grew out of severalactivities that were taking place more or less simul-taneously. These include the following:

The waiting list for subsidized child care hadgrown to more than 20,000 names statewide.Members of the Florida State Legislature werelooking for ways to encourage greater employerinvolvement in child care and began to explorethe feasibility of developing a matching grantsprogram.The Florida Children's Forum and the Child CareAction Campaign held a child care symposium (atthe state capital) for employers and policy makers.The Child Care Partnership matching grants pro-posal was presented to the group and was receivedvery favorably.A federally funded child care research partnershipexamined the employment patterns for familieswho receive child care subsidies and was able toidentify, in several regions of the state, the specificindustries in which workers receiving child caresubsidies were likely to be employed. This put ahuman face on the data and helped legislators tounderstand who, specifically, would be affected bythe bill.

These activities, taken together, helped to solidifybipartisan support for the act, which was included aspart of the welfare reform legislation developed by aRepublican member of the legislature. Additionally,a number of business leaders offered strong supportfor the legislation.


Contact

Susan Muenchow, Executive DirectorFlorida Children's Forum250 East 7th AvenueTallahassee, FL 32303Phone: (904) 681-7002Fax: (904) 681-9816

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The NYSLMCCAC Enrichment Grants Program(New York)

DescriptionThe New York State Labor/Management Child CareAdvisory Committee (NYSLMCCAC) has established,and continues to support, a network of 51 work-sitechild care centers for children of state employees.In addition to providing technical assistance andstart-up grants, NYSLMCCAC has established anEnrichment Grants program to enable the centersto address program quality issues and also maintainaffordable fees for employee parents. Grant funds aredistributed to the centers based on formula thattakes into consideration the number of stateemployees' children enrolled and the percentage oflow-income parents served. Centers that receiveaccreditation from the National Academy of EarlyChildhood Programs receive a one-time additional$5,000 in their operating grants.

When EstablishedNYSLMCCAC was established, and began to pro-vide start-up grants and technical assistance, in1981. In 1986, support from NYSLMCCAC wasexpanded to include health and safety grants. In1989, the health-and-safety-grant concept wasbroadened to include staff development and otheroperating costs, and was renamed the EnrichmentGrants program.

Amount Generated AnnuallyIn the 1995-96 state fiscal year, $1,703,310 wasexpended for the Enrichment Grants program.These funds, and others overseen by the NYSLMC-CAC, are set aside as part of the collective bargain-ing process with the following unions: Civil ServiceEmployees Association (CSEA), Public EmployeesFederation (PEF), United University Professions(UUP), Council 82, District Council 37 and theGraduate Student Employees Union. The Governor'sOffice of Employee Relations also contributes onbehalf of management/confidential employees.

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Services FundedThe grants may be used for the following: staff salaries(with some restrictions) and benefits, staff development,health and safety projects, professional services (suchas bookkeeping and legal assistance), supplies, equip-ment, nonroutine maintenance, liability insurance,advertising, food and occasional labor.

How Funds DistributedFunds are distributed through contracts betweeneach center and the Governor's Office of EmployeeRelations (which staffs the NYSLMCCAC.) Thecenters are required to submit an expenditure planfor the total grant amount, a staffing plan, a list ofboard members, a year-end audit, the board's responseto the audit management letter, and certificationof grant expenditures. Additionally, all networkcenters must establish a sliding fee scale.

Population ServedNetwork centers serve primarily children of stateemployees, although they may serve the largercommunity as welland many do. Rather thanrequiring the centers to serve a specific percentageof state employees, NYSLMCCAC expects the centersto give priority to children of state employees and toestablish a sliding fee scale for these employees.

Strategic ConsiderationsDuring the years that it helped to establish a net-work of work-site child care centers, NYSLMCCAClearned firsthand that child care was criticallyunderfunded. It became clear to the committee thatin order for the centers to keep parent fees affordableand also maintain high quality standards, operatingsupport in addition to parent fees was necessary. Inconsidering this strategy, the following issues shouldbe explored:

New York State's network of work-site child carecenters is a very visible, tangible response toemployees' needs for high-quality child care.Several of the centers provide care during oddhours (for example, shift workers at state mentalhealth and correctional facilities). Many providebefore- and after-school programs as well as holi-day programs and summer camps. Employees arevery pleased with the centers. The state benefitsfrom improved morale and productivity anddecreased absenteeism.

Many state employees are not able to benefit fromthe work-site centers. Most of the centers havelong waiting lists, and services for infants andtoddlers are extremely limited. NYSLMCCAC hasattempted to address this concern by developing anumber of related programs, including: enhancedresource and referral services; a Work and FamilyInitiatives Fund that makes small grants availableto local labor/management committees for projectsor services designed to address local identifiedneeds; and a Dependent Care Advantage AccountProgram (profiled on page 35 of this report.)

Other Sites With Similar StrategyTwenty-six states have at least one work-site childcare center (although most states have only one ofthese centers). Most of these states made funds avail-able to help renovate the facility and to cover otherstart-up costs. Many of these states provide thecenters with free rent, utilities and maintenance ser-vices, but none provide operating assistance similarto the NYSLMCCAC Enrichment Grants program.

ContactDeborah Miller, Staff DirectorNew York State Labor/Management Child Care

Advisory CommitteeSouth Swan Street BuildingCore 1, 2nd Floor6 Empire State PlazaAlbany, NY 12223Phone: (518) 473-8091Fax: (518) 473-3581

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The 1199/Employer Child Care Fund(New York City)

Description

The 1199/Employer Child Care Fund includescontributions, set aside as part of the collective bar-gaining process, from 147 employers. The funds areused to help meet the child care needs of employeeswho are members of Local 1199, the NationalHealth and Human Services Employees Union.

When Established .The fund began in 1992 with contributions from 16hospitals and nursing homes.

Amount Generated Annually$7.9 million was contributed in 1996.

Services Funded

The fund supports seven initiatives, which include:one on-site center; contracts with community-basedchild care centers and family child care homes;vouchers that reimburse up to $75 per week forchild care provided in a wide range of formal andinformal child care settings; contracts with morethan 100 summer camps in the metropolitan area;contracts with programs offering care during schoolholidays; child care resource and referral services; anda weekend cultural arts program for children andteens interested in dance, music, art, theater, tutor-ing, SAT/PSAT preparation and physical education.

How Funds DistributedA board of trustees (13 union representatives and 13management representatives) establishes broad poli-cy guidelines for the fund. One hundred and twentylocal child care committees, located at worksites,conduct needs assessments, analyze and allocate thechild care budget, promote child care programs,serve as liaisons to the fund, assist with programregistrations and recommend child care programs tothe fund staff.

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Population ServedChildren (from infancy to 17 years of age) of 1199members.

Strategic ConsiderationsThe 1199/Employer Child Care Fund was establishedto increase 1199 members' access to high-quality,affordable child care services and information.(Eighty percent of 1199 members are women.) Inconsidering the strategy, the following issues shouldbe explored:

Establishing the fund under the umbrella of Local1199 allows the resources of many employers tobe combined (147 employers currently participate).The initiative serves children of all ages and has amix of approaches and payment methods to meetdiverse family needs.Local work-site child care committees play apivotal role in identifying needs, approving fundallocation and developing new programs.

Other Sites With Similar StrategyThe New York State Joint Labor/ManagementChild Care Advisory Committee is a child care fundestablished by several public employees unions, butit is not as large or as diverse as the 1199 fund.Other private-sector, collectively bargained childcare funds have not been identified.

ContactCarol Joyner, Executive Director1199/Employer Child Care Fund330 West 42nd StreetNew York, NY 10036Phone: (212) 564-2220Fax: (212) 564-2971

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Temporary Disability Insurance Coverage forMaternity Leave (New Jersey)

DescriptionNew Jersey's temporary disability insurance (TDI)program has three components: the state plan, pri-vate plans, and disability during unemployment.The state plan levies a tax on employers andemployees of .5 percent of the first $18,000 ofwages. Benefits are equal to two-thirds of a worker'sweekly wages, up to a maximum of $339 per week,for up to 26 weeks. Employers are permitted, how-ever, to provide disability insurance coverage toemployees through private plans approved by thestate. These plans must provide coverage that meetsor exceeds state plan benefits with respect to com-pensation, eligibility requirements and paymentduration. Both the state and private plans extendcoverage to disabilities that begin within 14 daysafter the last day of employment. After the 14thday, workers are covered under the disability duringunemployment program. This separate program isadministered as part of the unemployment compen-sation system.

When EstablishedThe New Jersey TDI program began in 1949, when$50 million was transferred from the Unemploy-ment Insurance Trust Fund. Initially, coverage wasgiven for all disabling conditions except pregnancy,which was added in 1961.

Amount Generated AnnuallyEmployees with an annual income of at least$18,000 pay $90 per year for TDI. The potentialbenefit, per employee per year, is $8,814 for 26weeksbut pregnancy-related claims do not typi-cally reach this maximum. Data for 1990 indicatethat the average duration of pregnancy-relatedclaims was approximately 82 days. (The averageduration for all other benefits is approximately 72days.) Pregnancy currently accounts for approxi-mately one-sixth of all benefits.

Services FundedTDI benefits are limited to a nonoccupational illnessor disability, including pregnancy.

How Funds DistributedThe state plan and the disability during employmentprogram are directly administered by the Divisionof Unemployment and Disability Insurance. Thisagency is responsible for determining claimanteligibility and paying benefits. Private plans areadministered by private insurance companies orthrough self-insurance.

Population ServedIn 1990, the New Jersey Department of Laborreported that almost 97 percent of women who filedfor TDI benefits earned less than $25,000 per year.A 1991 report indicated that 31 percent of thewomen filing for TDI earned between $10,000 and

$15,000 per year.

Strategic ConsiderationsWork on the initial TDI proposal began in 1943,when a state commission on postwar economic wel-fare began to explore how to develop a program toprotect workers against wage loss caused by illnessor nonoccupational accidents. Pregnancy was addedas an allowable "disability" in 1961. The law wasfurther amended in 1979 to comply with the federalPregnancy Discrimination Act.

The benefits available under TDI, though verylimited, can be an important source of support foremployed mothers with low to moderate incomes.When combined with accumulated vacation andsick leave, TDI benefits can help a mother to stayhome with her newborn child for several months. Inconsidering this strategy, the following issues shouldbe explored:

Partial wage replacement under TDI is an inex-pensive way to support parental leave, and onethat allows the cost to be shared by employers andemployees. It helps to keep many low-incomewomen off welfare and has not caused a significanteconomic strain on employers. Although the NewJersey TDI claims load has increased, the fund hasremained solvent due in part to the fact that thetaxable wage base is adjusted each year withincreases in the average weekly wage. Interestincome on the fund also contributes to its solvency.

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The cost of TDI benefits is considerably less thanthe cost of subsidizing infant care for low- andmoderate-income families.The New Jersey approach to TDI is especiallyhelpful for small employers who could not affordto provide paid parental leave without a statefund. In 1952, 72 percent of employees were cov-ered under private plans. Over time, however,smaller employers found that it didn't pay to havea private plan, and some private insurers found itwasn't profitable enough to compete with thestate. More and more employers enrolled in thestate plan. By 1994, only 21 percent of coveredworkers and 3 percent of covered employers usedprivate plans.TDI is currently limited to a pregnancy-related"disability" that is corroborated by a physician. Itmay not be used to care for a newborn, an adoptedchild or by a father or other family member (noneof whom gave birth to the child and were there-fore not "disabled" by pregnancy). However, theNew Jersey Legislature is currently consideringlegislation (A1660) to extend TDI to providereplacement income for family members whomust leave employment temporarily to care for anewborn or newly adopted child, or a seriously illfamily member.

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Other Sites With Similar StrategyFive states in addition to New Jersey have temporarydisability insurance programs, including: RhodeIsland (funded by employee tax); California (fundedby employee contributions); New York (funded byemployer tax or joint employer/employee contribu-tions); Puerto Rico (funded by employers andemployees); and Hawaii (funded by an employer andemployee tax). Additionally, more than half of allworkers in the United States receive TDI benefitsfrom their employer through private insurance plans.

ContactsWilliam Schwartz (contact for current TDI program)Unemployment Insurance/Employment Services OfficeNew Jersey Department of LaborCN-387, 11th FloorClinton, NJ 08625Phone: (609) 292-2680

Gregory L. Williams (contact for new legislationto expand TDI)

Senior Research AssociateNew Jersey State LegislatureOffice of Legislative Services, Central StaffState House Annex, CN-068Trenton, NJ 08625-0068Phone: (609) 984-0445Fax: (609) 777-2998

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FINANCING CHILD CARE IN THEPRIVATE SECTOR(Community Child Care Initiatives)

Child Care Scholarship Fund of the MarinCommunity Foundation (Marin County, California)

DescriptionThe Child Care Scholarship Fund (CCSF) providesfinancial assistance to low- and moderate-incomeMarin County families. It was launched by theMarin Community Foundation, which was estab-lished in 1987, anchored by a $600 million trustfund and other donor bequests. The CCSF is anendowment fund managed by the Marin Communi-ty Foundation. The proceeds from the CCSF supportthe Child Care Scholarship Program (CCSP), whichis administered by the Marin Education Fund(MEF), which administers a variety of other voca-tional and educational scholarship programs.

When EstablishedThe CCSF was announced in 1990 with a $3 milliondonation from the Marin Community Foundation toestablish the endowment. The foundation also estab-lished an additional pool of up to $3 million ofchallenge funds to be used to match communitydonations. The first scholarship awards were madein 1993.

Amount Generated AnnuallyIn 1990, the Marin Education Fund was selected todesign and administer the scholarship program aswell as to raise the community funds to draw downthe match. The Marin Education Fund had 10 yearsof successful experience managing vocational andeducational scholarships for the community. For thefirst few years of fund development, the MarinCommunity Foundation set a 3-to-1 match rate$3 for every $1 donated by the community. For1994-95, the match rate was 2-to-1, declining to1-to-1 for 1995-96 and beyond. The original goalwas to have a total of $9 million in the CCSF by1997. Community donations amounting to$650,000 were raised from local businesses, otherphilanthropies and a few individuals, in particularone anonymous individual who donated $250,000structured to provide additional giving incentives.

Currently, the value of the CCSF endowmentstands at $6 million. This generates about $300,000annually for scholarships, administration and furtherfund development. $225,000 is allocated annuallyto child care scholarships.

Sep-vices Funded

The CCSP was originally designed to help Marinfamilies whose incomes exceeded the eligibility lim-its for state child care subsidies. This was modifiedover the years to cover families with lower incomeswho needed help to bridge a gap between publicsubsidies, to adjust the upper income for inflation,and to reduce the number of years that a particularfamily was assisted, in order to enlarge the numberof families who could be helped.

Currently, the proceeds from the CCSF providefinancial assistance in the form of child care scholar-ships to low- and moderate-income families.

Scholarships cannot be used for purely childenrichment programs or for child-protective reasons.Families must use licensed child care providers(either centers or family child care homes) to qualifyfor assistance.

Families must have low to moderate incomes.The upper income limits currently range from$35,000 for a family of two to $40,000 for a familyof four or more. Scholarships are awarded to coverbetween 30 percent and 90 percent of the family'schild care fees, based on the family's income. Assis-tance is designed to be a time-limited bridge tohelp the family make the transition to self-sufficiency.Scholarship awards are not made for longer than twoyears, and many are for six months or less.

How Funds DistributedFamilies learn about the CCSF through child careproviders, the local child care resource and referralagency, word of mouth and outreach materials fromthe Marin Education Fund. Families who call theMEF can speak directly to a child care advisor, listento a voice mail informational message and/or havewritten informational materials mailed to them. Afamily completes an application and is then inter-viewed by the child care advisor (who works as partof a team of financial counselors).

Once the family is approved for a scholarship,MEF issues an award letter providing the specific termsof the grant (length, total amount and percentage of

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fee). Payments are made to the child care provideron a monthly basis. Scholarship awards are reviewedevery six months for continued eligibility.

Population ServedScholarships are available to families who are MarinCounty residents, have incomes below $40,000 andneed child care because they are employed, activelyengaged in a vocational or educational program,or are seeking work directly after completing sucha program.

Strategic ConsiderationsThe ease of raising $3 million in community fundsto match the challenge grant offered by the MahnCommunity Foundation was underestimated.The task proved difficult and more costly thananticipated. The original estimate of more thana 10 percent return on investment for the CCSFalso was overly optimistic. The MEF believes thesedifficulties were due, in part, to the economic climateof California and the county, which worseneddramatically between the late 1980s when theCCSF was conceived and the early 1990s whenthe fund-raising began.The original design for CCSP in the late 1980scalled for supporting families with incomesbetween $15,000 and $28,000 at an average 50percent subsidy over the years until their childrenreached age 10. At that time, it was estimatedthat between 600 and 700 Mahn families wouldqualify. By the time CCSP was launched andbegan making scholarship awards in 1993-94, theestimate of eligible families had soared to morethan 4,000, primarily due to economic and demo-graphic changes. Eligibility criteria wereredesigned to match the resources available, whileremaining true to the original intent of helpingfamilies who were ineligible for public subsidy.The Mahn Community Foundation was criticizedwhen the CCSF was announced because the CCSFwas promoted as "the answer"the one best strat-egy to address child care needs of Mahn Countyfamilies. Previously, the foundation had madegrants to many local child care centers. Eventually,the foundation resumed its community-basedchild care grantmaking at an annual level of about$500,000. The focus is on child care improvementand expansion, especially in relation to community

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development and the economic self-sufficiencyof families.The experience of the CCSF shows that a scholar-ship fund is insufficient to address the full rangeof child care issues in a community. Scholarshipfunds are a valuable and important part of anoverall strategy designed to increase public andbusiness concern about child care and increaseinvestment on behalf of lower-income families.Strategies and resources also have to 1) build thecapacity of the child care community to functionmore effectively and expand its services, and 2)build the civic constituency to support child careas an integral part of community economic andoverall planning. The underlying message is thatcommunity health depends on good, affordablechild care services.

Other Sites With Similar StrategyA similar scholarship fund is being set up by theCommunity Foundation of Collier County inNaples, Florida.

The Vermont Community Foundation is host toa new initiative, which may be similar, called theChild Care Fund of Vermont. The fund's long-termgoal is to change the funding structure of child carein the state of Vermont in order to increase overallinvestment by 50 percent. The fund's immediateactivities are focused on fund development and onpublic engagement designed to raise the level ofdebate around child care issues, creating a publicconsensus for greater investment.

Contacts

Susan Badger, PresidentMarin Education Fund1010 B Street, Suite 300San Rafael, CA 94901Phone: (415) 459-4240Fax: (415) 459-0527

Julie Cadwallader-Staub, DirectorThe Child Care Fund of Vermontdo The Vermont Community FoundationP.O. Box 30Middlebury, VT 05753Phone: (802) 241-2585Fax: (802) 241-2979E-mail: [email protected]

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FINANCING CHILD CARE IN THE PRIVATESECTOR (Community Child Care Initiatives)

The Model Centers Initiative of the Miriam andPeter Haas Fund (San Francisco, California)

DescriptionThe Model Centers Initiative provides significant,multiyear support to a small number of child careprograms in San Francisco that serve low-incomefamilies with preschool-age children. The goal is tohelp each center become a "model center" that pro-vides developmentally appropriate, high-qualitychild care. The initiative is the central focus of thefund's grantmaking strategy to improve the qualityof life for young children and their families in SanFrancisco. The fund's overall grantmaking programfocuses primarily on early childhood care and educa-tion in San Francisco.

When EstablishedThe Model Centers Initiative was designed during1995, and the first four centers were selected toparticipate in 1996.

Amount Generated AnnuallyAnnual grants to the centers range from $100,000to $400,000. The fund has committed to supportthe initiative for three years and may extend itscommitment to five years.

Services FundedEligibility criteria specified that centers be full-day,full-year, nonprofit programs serving low-incomepreschoolers and their families. The group of centersselected must reflect the cultural and ethnic diversi-ty of the city of San Francisco, and be located ingeographically diverse neighborhoods of the city.Further, the selection process took into account thequality of leadership, the nature of the current pro-gram and the community support of each center.

Each center requested funds for specificimprovements. Across all four centers, these includeditems such as staff development, salary enhancements,equipment and supplies, comprehensive service staff(e.g., social workers), physical renovations and planningfor the purchase and/or construction of a new site.

In addition to funding the initial needs assess-ment consultation for each center, the fund has paidfor a three-year evaluation of the initiative. Anumber of the fund's grants to other organizationsinclude an agreement to provide technical assistanceto the model centers as part of their funded work.Fund staff spend a significant portion of their timeon work related to the model centers.

How Funds DistributedAfter a thorough needs assessment for each center(commissioned by the fund), each center prepared animprovement plan and associated funding request.After review and approval by the fund of the annualplan, each center receives a quarterly payment basedon the cash flow required to implement its plan.

Population ServedLow-income families in San Francisco who use oneof the model centers for child care are the populationserved directly. Four centers are currently funded; asmall number of additional centers may be selectedafter the results of the evaluation are considered.

Strategic ConsiderationsThe Model Centers Initiative represents a signifi-cant financial investment and commitment on thepart of a philanthropic organization to child carein a city.The Miriam and Peter Haas Fund is concernedthat its commitment and infusion of resources toearly childhood serve as a catalyst encouragingother hinders to increase, rather than reduce, theircommitments to early childhood. The fund istracking both public and private investment inearly childhood activities in San Francisco. Further,the fund is actively engaged inand providingfinancial support in partnership with other fun-ders tocommunity initiatives such as a projectto improve the school district's child developmentprograms and the new San Francisco Starting PointsInitiative. (San Francisco is one of about two dozenlocalities selected by the Carnegie Corporation towork toward systemic change to improve childdevelopment outcomes for babies and young chil-dren.) The fund intends share the lessons learnedin San Francisco through model centers to persuadeother private fenders to make a similar commit-ment to early childhood in their own cities.

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To the extent that the fund can target its resourcesto improving the context in which all San Franciscocenters operate, it will be more likely to producelasting improvements in the model centers andimprovements that will reach beyond them. Con-textual factors that might be addressed includeprofessional development, public financing for childcare services, facility development and financing.Initiatives designed to directly help a relativelysmall proportion of the child care centers in a givencity will miss roughly half of all child care (thatwhich is home-based). However, the contextualchanges that result have the potential to positivelyaffect the wider child care community.

Other Sites With Similar StrategySome community foundations make grants tosupport child care projects. Other family founda-tions also support child care improvement effortsin communities.

ContactCheryl Polk, Program DirectorMiriam and Peter Haas Fund201 Filbert StreetSan Francisco, CA 94133Phone: (415).296-9249Fax: (415) 296-9249

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FINANCING CHILD CARE IN THE PRIVATESECTOR (Community Child Care Initiatives)

Allegheny County Early Childhood Initiative(Pittsburgh, Pennsylvania)

Description

The Allegheny County Early Childhood Initiative(ECI) seeks to ensure 7,500 children in up to 80low-income neighborhoods receive high-qualityearly childhood care and education by 2001. Thisgoal doubles the number of children currentlyserved in Allegheny County and the city of Pitts-burgh. ECI is a collaborative effort that emphasizesneighborhood-based decision making; builds on suc-cessful agencies, enterprises and partnerships alreadyoperating in Pittsburgh and Allegheny County; andaims to establish a unified system of early childhoodcare and education. The private sector will providethe initial supportfor as much as five yearsandthe public sector will sustain the effort over thelonger range.

When EstablishedECI was sparked in October 1994 when UnitedWay of Allegheny County responded to a $1 millionchallenge grant from The Heinz Endowments totake the lead in developing a plan to manage a com-munity-wide initiative to address the downwardspiral in the status of low-income children. UnitedWay pulled together a diverse group of businessleaders, professionals, community representativesand other concerned individuals to plan the effort.On June 4, 1996, the United Way Board of Directorsapproved the ECI business plan and the initiativewas officially launched.

Amount Generated AnnuallyUnited Way of Allegheny County has committed toraising $59 million from the private sector to supportthe initiative during the first five years. During thisstart-up phase, gradually increasing public-sectorsupport will be mobilized to eventually sustain thesystem, beginning in year six and for the long term.

Services FundedECI funds will be used to support early childhoodeducation provided in child care centers, familychild care homes and Head Start programs, as wellas informal school-readiness activities such as Begin-ning with Books and Even Start. Each municipali-ty/neighborhood will conduct an inclusive planningprocess and prepare a proposal requesting participa-tion in the Ea. This process will determine thetypes of early child care programs that will be sup-ported. All programs selected to participate in ECImust meet quality standards established for theinitiative. Neighborhoods may also receive ECIfunds to support the cost of building or renovatingchild care facilities, providing training and technicalassistance to early childhood programs, helping withthe cost of program accreditation, and other qualityimprovement and supply-building efforts.

How Funds DistributedA methodology for distributing funds is currentlybeing developed. The goal is to create agreementsamong the early childhood care and education pro-grams (which will provide the care and education),community representatives (who will help monitorprogram quality) and the United Way (which willadminister the funds).

Population ServedECI targets low-income children in "at-risk" neigh-borhoods. "Low-income" is defined as families withincomes at or below the federal poverty level if theyare not employed, or at or below 185 percent ofpoverty level if they are working. "At-risk neighbor-hood" is defined as a census tract that meets at leastthree of the five "Kids Count" criteria established bythe Annie Casey Foundation (poverty rate, female-headed households, high school dropouts, unemployedmales, and families receiving public assistance).


ECI is focused on elevating early childhood enrich-ment to a community-wide priority; creating anintegrated system; improving the quality of earlychildhood education; and expanding the enrollmentof low-income children in child care, Head Start orpreschool enrichment programs. In considering thisapproach, the following issues should be explored:

ECI focuses on promoting opportunities for earlycare and education among poor children birth tofive years of age. (Many of the early childhoodeducation initiatives profiled in this compendiumtarget three- to five-year-olds.)ECI was conceived by an 80-member group ofbusiness leaders, professionals, community repre-sentatives and concerned individuals. The scopeand diversity of this group were crucial to obtain-ing broad support for the initiative.ECI represents a significant financial commitmentfrom the private sector. United Way of AlleghenyCounty has agreed to lead the fund-raising effort.Before committing to an initiative of this magni-tude, the organization commissioned a feasibilitystudy to determine whether the necessary fundscould be raised. (The ECI fund-raising initiative isin addition toand not intended to competewiththe annual United Way fund drive.) Thefeasibility study confirmed that it was indeed pos-sible. By August 1996, United Way of AlleghenyCounty had already secured funding commitmentsfrom The Howard Heinz Endowment and theGrable Foundation. A number of additional foun-dations, corporate sponsors and individuals areexpected to come on board soon.A business plan for the initiative was preparedwith pro bono help from Ernst & Young andMcKinsey & Company, two nationally recognizedaccounting and management consulting firms.These firms helped to quantify every aspect of theproject and to describe the initiative in terms thatwere meaningful to the business community. Thebusiness plan was the key to getting approvalfrom the United Way board to proceed with theproject. Assistance from Ernst & Young andMcKinsey & Company was invaluable in garner-ing private-sector support for the project.A public-sector committee, including representa-tives from all levels of government, business leadersand United Way board members, has been estab-lished. The role of this committee is to develop aplan to help the project make the transition fromprivate to public sponsorship during year six andthereafter.

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Other Sites With Similar StrategyThe scope and level of commitment expressed byECI are unique. While many communities areinvolved in planning and coordination efforts aimedat improving early childhood care and education,few have committed large sums of money to supportthese efforts.

Contacts

Martha W. Is ler, ConsultantThe Early Childhood InitiativeUnited Way of Allegheny CountyOne Smithfield Street, 5th FloorPittsburgh, PA 15230Phone: (412) 456-6793Fax: (412) 394-5376

Margaret M. Petruska, Senior Program Officer andDirector of Health and Human ServicesThe Howard Heinz Endowment30 CNG Tower, 625 Liberty AvenuePittsburgh, PA 15222Phone: (412) 338-2615Fax: (412) 281-5788E-mail: [email protected]

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FINANCING CHILD CARETHROUGH PUBLIC-PRIVATEPARTNERSHIPS

The Early Childhood Investment Fund (New York) 88Smart Start (North Carolina) 91The TE.A.C.H. Early Childhood'. Project(North Carolina) 93Rochester/Monroe County Early ChildhoodDevelopment Initiative (New York) 94

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FINANCING CHILD CARE THROUGHPUBLIC-PRIVATE PARTNERSHIPS

The need for child care services and subsidies,the types of child care selected by parentsand the prices paid for care vary from com-

munity to community as do financial partners. Insome communities, schools have invested in childcare and early education; in other areas, the city, townor county government is a major player. Businessestypically believe that the contributions they makeshould be spent in the communities where theiremployees live and work. Their philanthropic dol-lars are generally targeted to specific neighborhoodsor programs. It is not surprising, then, that effortsto finance child care via public-private partnershipsare usually local, community-based initiatives.

Most child care programs are supported byfunds from many sources. This funding mix oftenoccurs in a haphazard fashion. All too often, thechild care services available to families reflect thefund-raising skill of the program operator ratherthan a planned and equitable system of publicfinance. But some communitiessuch as Rochester,New Yorkhave developed strategies to bringchild care funders together in order to establishcollaborative approaches to financing, implement-ing, evaluating and monitoring services. Rochester'sstrategy is profiled in this section of the report.

State governments are beginning to recognizethe key role that local partnerships play in childcare financing, and several states have developedinitiatives designed to support this approach. NorthCarolina's Smart Start is not only an excellent examplebut also the largest and most well-funded of theseinitiatives. The New York State Early ChildhoodInvestment Fund (ECIF) is another state-level ini-tiative that was designed to spur contributions to,and planning for, child care at the local level. Butunlike Smart Start, which is a comprehensive initia-tive that supports a wide range of early childhoodeducation and support services, ECIF focused solelyon efforts to increase the quality and supply of childcare. Both of these initiatives are profiled in thefollowing pages.

The T.E.A.C.H. Early Childhood® Project,which began in North Carolina and has been repli-cated in Georgia, Florida and Illinois, is anothercommunity-based strategy that leverages funds froma variety of sectors to support educational scholar-ships and wage increases for child care practitioners.A profile of this initiative is included.

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The Early Childhood Investment Fund(New York)

Description

The Early Childhood Investment Fund (ECIF) was apartnership founded in 1992 by the American ExpressFoundation, the Travelers Foundation and New YorkState. ECIF supported public-private partnerships incommunities throughout the state that improve thedelivery of early childhood services to enable parentsto work. ECIF offered two kinds of support: fundingand technical assistance. Funding was available tocommunity consortia to expand the supply andenhance the quality of early childhood services. Bothcommunity planning and direct-service projects couldbe funded. Technical assistance and support wereoffered to communities in the form of outreach toinform them about the availability of ECIF grants,targeted assistance during the application processfrom ECIF staff and consultants, and ongoing con-tact during the project period.

When Established

In 1992, Governor Mario Cuomo proposed $100,000in state funds from the Department of Social Servicesto launch the Early Childhood Investment Fund(ECIF) to provide additional support for early child-hood services. The state investment was matchedwith $50,000 each from the American Express andTravelers foundations. In August 1992, the Depart-ment of Economic Development issued the requestfor proposals (RFP) for a nonprofit organizationwith statewide capacity to administer the ECIF. TheRFP called for a year of start-up activity prior tograntmaking. United Way of New York State wasselected and began operations in early 1993. ECIFwas in place from 1994-1996.

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Amount Generated AnnuallyECIF generated funds in three ways: 1) annual budgetappropriations from the state of New York; 2) private-sector contributions from individuals, foundationsor corporations that added to the state-appropriatedfunds; and 3) local private-sector contributions tomeet the local cash match required for some grants.Communities that apply for funds from ECIF wererequired to have a private local commitment of $2for every $1 requested from ECIF. Projects servinglow-income families were required to have $1 of pri-vate local match for every $1 requested from ECIF.

Over the life of ECIF, total state appropriationsamounted to $781,000. The great majority of thesefunds were released to communities as grants (ratherthan being expended on technical assistance or onadministration). Private-sector support for ECIFoutreach, technical assistance and administrationtotaled $344,649. Generally, ECIF followed a planof using state dollars for grants and private funds foroutreach, technical assistance and administration.

During the nearly three years of grantmaking,ECIF awarded 18 planning grants and 22 direct-ser-vice grants to communities. The total expenditurefor grants was $552,052. These funds generated anadditional $1,577,273 in local match.

Services Funded

The goal of ECIF was to stimulate long-term sys-temic change in order to increase and improve thequality of early childhood services for families whoare working or pursuing work. The ECIF fundedcommunity initiatives not likely to be fully fundedby existing public or private sources. All projectswere developed by community collaborations as partof long-range community-wide planning thatinvolved the full range of public- and private-sectorstakeholders (e.g., employers, schools, parents, gov-ernment agencies, early childhood service providers).Projects that affected a single agency (e.g., one childcare center, one school district) were considered onlyif they were the result of community-wide planningand are supported by the community collaboration.Priority was given to projects that represented com-munity-wide efforts affecting many programs.

The ECIF funded three kinds of projects:1) Planning grants to develop solutions to commu-

nity child care problems (up to a maximum of$10,000 with no local match requirement).

2) Direct-service grants based on demonstratedcommunity need for start-up of new programsand services or for expansion of existing programsand services. ECIF funds could be used to directlysubsidize parent fees.

3) Quality improvement grants in four areas:systemic approaches (e.g., creating a familychild care network, developing a communityscholarship fund)program-specific activities (e.g., accreditationsupport or program equipment)professional development that is part of along-range community plan (not one-timetraining)public awareness and consumer educationcampaigns

Technical assistance and support was availablefrom ECIF to communities for developing consortia,assessing community needs, generating local matchand developing proposals.

How Funds DistributedECIF was managed by United Way of New YorkState and governed by a policy board composed of 21public and private leaders including representativesof state agencies (the Departments of Education,Economic Development and Social Services; Divisionfor Women, Division of the Budget and Council onChildren and Families), the legislature, business,philanthropy and the early childhood community.

Any organization in a community in New Yorkcould request information and application materialsfrom ECIF. The application requested a brief projectdescription, a budget and information about thelead agency, and a form for all collaborators to signindicating their role in developing the proposal andtheir support for it. The lead agency could be anyincorporated entity, for-profit or nonprofit. Applicationswere accepted on a rolling basis and for submissionat any time during the year. The ECIF Policy Boardreviewed and approved applications at its regularmeetings, which are scheduled at least quarterlythroughout the year.

Since ECIF was managed outside the publicsector, its grantees are not subject to the delays anddifficulties sometimes encountered in releasinggovernment funds. Once approved, project fundswere paid directly from United Way to the leadcommunity agency based on mutual agreement toa simplified contract document. If the grant was formore than $10,000, the payments were split intotwo equal amounts. Regardless of the duration of aproject, only two reports were required of grantees:an interim report of progress at the midpoint of theproject, and a final report at the end.

Population ServedEvery community in New York could apply forECIF funds. Priority was given to low-income com-munities. The only restriction was that the projectmust address the child care needs of working fami-lies. In three years of grantmaking, ECIF awardedfunds to communities in every region of the state.

To encourage proposals from communitiesserving low-income families, ECIF reduced matchrequirements. Applicants could use a variety ofmethods to demonstrate the low-income status oftheir community, including designation as a NewYork State Economic Development Zone, or eligibilityfor the Neighborhood Based Alliance (a communityrisk designation from the Department of SocialServices), or presentation of statistical indicatorsof poverty and economic disadvantage.

As a result of ECIF's insistence on a collabora-tive community process of project design and itsstrong encouragement toward a unified child caresystem serving families across all income levels in acommunity, all ECIF-funded projects were servinglow-income families to some extent. Most applicantswho focused primarily on serving low-income com-munities were able to secure more than the $1-for-$1 match. Only two projects requested the reducedmatch rate.

Strategic ConsiderationsThe simple application process and the generoussupport and technical assistance offered toprospective grantees are strong points of ECIF.Many applicants, although initially surprised bythe offer of help, found it to be sincere and useful.

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Many improved their proposals, gained access toprivate-sector support and to public fundingsources they had not been aware of, and made sig-nificant improvements in community relation-ships as a result. Some communities realized manyof these benefits even though they did not end upapplying for funds from ECIF.The high level of ECIF local match support demon-strates strong business interest in investing in childcare services that affect their employees and/or thecommunities in which they do business. In manyinstances, the ratio of private-sector support toECIF dollars was nearly 3-to-1, although only a 2-to-1 match was required. Using public funds toleverage private support to meet community-iden-tified needs is a viable approach to expandinginvestment in early childhood services.The proposed state budget for 1996-97 appropri-ated no state funds for the continuation of ECIF,despite the efforts of various constituencies, prin-cipally the United Way and the foundations andcorporations who serve on the ECIF Policy Board.The policy board decided to close ECIF as ofDecember 31, 1996, and to have a summativeevaluation conducted by an outside consultant tounderstand what ECIF accomplished and whatelements of the partnership may be worth repli-cating in other states and communities. The finalstate budget (which passed more than three monthslate, in mid-July) did include $150,000 for ECIFto fund previously approved applications, but noother funds.Setting up the policy and operational structuresof a pooled fund takes time. ECIF staff feel that atleast a year should be devoted to this phase, withoutpressure to begin making grants. When publicfunds are involved, pressure is high to expendgrant funds during the year in which the funds areappropriated. Without a clear mandate to inventfirst and grant later, ECIF was still definingprocess as it began reviewing grants.Initially, a leadership council had been envisionedas a companion to the policy board. While thepolicy board was the hands-on oversight, the lead-ership council was meant to be the "corporatechampions" who would direct public attention toECIF and generate support for it. The lieutenantgovernor and the CEO of Primerica agreed tocochair it and recruit other leaders. By 1994,

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five additional members had been invited.Development of the council was slower thanexpected and moved to the back burner oncegrantmaking began.The first phase of the ECIF was focused on creat-ing the structures and policy to guide operationsand grantmaking. The next phase was focused onoutreach to communities and grantmaking. Fund-raising effort focused on ensuring that the annualstate appropriation for ECIF was included in thebudget each year. Broadening the private-sectorfund-raising base beyond the founding philanthropicpartners was not given sufficient attention earlyon. One view is that if ECIF had been successfulin leveraging additional state funds to be used forgrants and had sought to expand private-sectorcontributions to create a multimillion-dollar fund-ing pool that was equally dependent on publicand private funds, it might have had the stabilityto weather the political changes of a new adminis-tration. A significantly large fund that hastouched many communities generates a strongconstituency of supporters.

Other Sites With Similar StrategySimilar funds exist in the states of California (ChildCare Initiative), Maine (Child Care DevelopmentProject), Michigan (Child Care Campaign), Oregon(Child Development Fund) and in several communi-ties across the country such as Charlotte, NorthCarolina (Corporate Champions).

ContactMary ShaheenEarly Childhood Investment Fund155 Washington AvenueAlbany, NY 12210Phone: (518) 449-0767Fax: (518) 463-2534


Smart Start (North Carolina)

DescriptionSmart Start is a comprehensive initiative designed tomake early childhood education and support servicesavailable to every child under six years of age whosefamily needs and wants them. The initiative alsoseeks to ensure that North Carolina early childhoodprograms and family services meet high qualitystandards and performance measures.

When EstablishedSmart Start was proposed by the governor andpassed by the general assembly in 1993.

Amount Generated AnnuallyIn 1995-96 the state legislature appropriated$57,257,864 for Smart Start. Amendments passedin 1995 also required the North Carolina Partner-ship for Children and local partnerships to match10 percent of the annual Smart Start appropriation.(No more than half of this match may be in-kinddonations.) Last year, Governor James Hunt and theNorth Carolina Partnership for Children raised $9.5million in contributions from the corporate sector.Local partnerships raised an additional $4.8 millionin leveraged grants and cash, in-kind and volunteercontributions.

Services FundedWhile Smart Start funds may be used for a diversearray of services, most of the funds have been direct-ed to providing early childhood care and education,immunizations and children's health services, andfamily support services for children of low- andmoderate-income families. Many counties have usedSmart Start funds to reduce waiting lists for subsi-dized child care as well as to raise income eligibilitylevels and/or child care provider reimbursementraces. Orange County established the WAGE$Project, which provides salary supplements (basedon attaining educational goals) to teachers, directorsand family child care providers.

How Funds DistributedThe state awards Smart Start funds to countiesthrough a competitive grant application process.To qualify, local applicants are required to establishprivate, nonprofit partnership boards to govern andcoordinate local programs. The local partnershipsmust include families, educators, nonprofits, serviceproviders, community groups, religious and businessleaders, and county and municipal officials, andmust develop a plan for collaborative child andfamily development services in their area. SmartStart funds are made available to help supportimplementation of the plan. At present, 35 localpartnerships in 43 counties are participating in theinitiative. Twelve additional partnerships represent-ing 12 counties have been selected and are awaitingapproval from the general assembly. The governor'sgoal is to gradually expand Smart Start to cover all100 counties.

The Smart Start legislation established a state-level, private, nonprofit entitythe North CarolinaPartnership for Childrenexclusively to oversee andhelp coordinate the activities of local Smart Startinitiatives. The partnership has established statewidegoals and outcomes that serve as a framework for thelocal partnerships. Additionally, it offers technicalassistance to local partnerships and helps to raisematching funds.

Funds currently flow to the counties via con-tracts between the state Department of HumanResources and the local partnerships. However, thePartnership for Children may assume responsibilityfor managing these contracts in the future.

Population ServedSmart Start funds may be used for a wide range ofservices and are not necessarily limited to low-incomefamilies. The primary goal is to create systemicchange that can improve the quality, affordabilityand supply of child development services for allyoung children in the community.

Strategic ConsiderationsFrom its inception, Smart Start has had a significantinfluence on overall child care policy in the state.For example, the Smart Start bill was packaged with,and helped to pass, a number of child care systemreforms that a bipartisan legislative commission hadbeen working on for several years. These include

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legislation to improve staff -to-child ratios in childcare settings, increase child care subsidy funds andincrease the state child care tax credit for lower-income families.

Smart Start was a centerpiece of GovernorHunt's campaign and clearly stressed that "parentshave the primary duty to raise, educate and transmitvalues to young preschool children." The initiativeseeks to help parents fulfill this role by empoweringfamilies and supporting the communities in whichthey live. Because Smart Start is very important to(Democratic) Governor Hunt, the Republicanopposition has attempted to discredit and kill theinitiative. Every aspect of its implementation hasbeen carefully audited, and lengthy legislative battleshave been fought over funds for the initiative. Thesebattles have intensified since the 1994 election, whenthe Republicans gained the majority of the House ofRepresentatives. (Prior to 1995, the Democrats hada strong majority in the House.) Despite theseefforts, Smart Start has continued to grow and hasgained strong support from North Carolina voters.Potential reasons for this support include:

Smart Start funds are not limited to poor familieswho need child care. Local initiatives can addressissues that affect all socioeconomic levels, and mayinclude family support services such as parentingeducation, child development, health care, literacyand others. (One local plan includes vouchers forstay-at-home moms; others support vans to pro-vide transportation to services, and so forth.)Smart Start is locally based, allows for variationsamong communities and requires strong localparticipation.In addition to providing flexible funds, the initia-tive encourages counties to establish local capacityto collaborate in the planning and delivery ofservices to children and families. The focus oncollaboration and public-private partnershipshelps to involve a broad constituency. The focus onplanning and outcomes promotes accountability,vision and leadership.The initiative uses public funds to help leverageprivate contributions.

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Prior to the introduction of Smart Start, a biparti-san legislative research commission had reviewedmany aspects of the child care system and recom-mended a number of reforms. Thus, key membersof the legislature already understood child careneeds and concerns and were ready to work withthe executive branch when Smart Start was proposed.

But implementing Smart Start has not beeneasy. The fast pace of the initiative required countiesto develop a plan and begin providing servicesalmost immediately after the grant was awarded.This time line put a lot of pressure on local partner-ships and the state administrative office.

While local partnerships have been creative inspending Smart Start funds, the initiative has yet tosucceed in changing the large, categorical fundingstreams that support most services for children andfamilies. Systems reform and interagency collaborationin the state and federal government are necessary toachieve this level of change.

Other Sites With Similar StrategySmart Start is unique in its scope, diversity of ser-vices and level of funding. A number of states havedeveloped initiatives that encourage and supportcommunity planning and service integration. However,most of these efforts are either small demonstrationprograms or statewide initiatives that encouragecollaboration but do not provide additional, flexiblefunds. A source for further information is the recentpublication, Map and Track: State Initiatives for YoungChildren and Families, available from the NationalCenter for Children in Poverty.

Contacts

Stephanie D. Fanjul, DirectorDivision of Child Development319 Chapanoke Road, Suite 120Raleigh, NC 27626-0553Phone: (919) 662-4543Fax: (919) 662-4568

David Walker, Executive DirectorNorth Carolina Partnership for ChildrenP.O. Box 10483Raleigh, NC 27605-0483Phone: (919) 821-7999Fax: (919) 821-8050

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The T.E.A.C.H. Early Childhood® Project(North Carolina)

DescriptionThe T.E.A.C.H. (Teacher Education and CompensationHelps) Early Childhood® Project provides educa-tional scholarships for child care teachers, centerdirectors and family child care providers statewide.Under the T.E.A.C.H. Early Childhood® umbrella,scholarships partially fund the cost of tuition, booksand travel for individuals who are interested inachieving formal education leading to the attain-ment of the North Carolina Child Care credential,the Child Development Associate (CDA) credential,and associate and bachelor's degrees in child devel-opment. Wage increases or bonuses are providedupon completion of an agreed-upon number ofcourse hours or upon attainment of the North Car-olina Child Care credential. Some scholarships alsoprovide paid release time.

When EstablishedThe project was piloted in 1990 and provided schol-arships for 21 child care providers in that year. By1995, more than 2,000 child care providers wereparticipating in the program.

Amount Generated AnnuallyThe amount of funding varies annually, and representsa combination of both private and public dollars. Theproject has received allocations of between $850,000and $1,000,000 of state funds for each of the lastthree years. Additionally, the project has receivedfederal funds from the Child Care and DevelopmentBlock Grant, corporate and foundation grants, andpartnered dollars with participants in the program.

Services FundedAll scholarships funded through the T.E.A.C.H.Early Childhood® Project provide partial funds fortuition and books and include a travel stipend. Somescholarships provide partial reimbursement to childcare center sponsors or direct payments to familychild care providers for release time. All participantswho successfully complete their contract receiveeither a raise or a bonus.

How Funds DistributedOnce awarded a scholarship, recipients are allowed tocharge their tuition at their respective educationalinstitutions. They are reimbursed for the cost of theirbooks, minus their share of the cost of tuition andbooks, and receive a quarterly or semester travel stipend.

Sponsoring programs are billed for their shareof tuition and are reimbursed for release time givento scholarship participants. Family child careproviders also are reimbursed for release time taken.Bonus awards or raises are paid directly to the schol-arship participant either from their sponsoringprogram, the T.E.A.C.H. Early Childhood® Projector a combination of the two.

Population ServedScholarship eligibility is extended to center-basedteachers, directors and family child care providerswho work 20 to 30 hours per week in a regulatedchild care setting in North Carolina.

Strategic ConsiderationsInception of the T.E.A.C.H. Early Childhood® Pro-ject was based on research about North Carolina'searly childhood workforce. The project was estab-lished to: increase the knowledge base of child carestaff and therefore improve the quality of early careand education that children receive; encourage childcare programs to support continuing staff education;offer a sequential professional development path forchild care personnel; link increased compensation totraining; reduce staff turnover; and create modelpartnerships focusing on improving the quality ofchild care. The T.E.A.C.H. Early Childhood® Pro-ject has received bipartisan support because it helpsteachers and family child care providers help them-selves. Other strategic considerations include:

T.E.A.C.H. isn't perceived as "big governmentrunning programs." The focus is on providing aframework to help community-based organizationsand individuals work together to solve problems.The T.E.A.C.H. Early Childhood® Project isflexible enough to adapt to individual needs andcircumstances.Funds are available in almost every county in thestate and use broad eligibility criteria for scholar-ship recipients (including staff in many HeadStart, nonprofit and proprietary child care pro-grams), thereby reaching a broad constituency.

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Child care quality is raised without significantlyincreasing parent fees and without more regulations.Funds are leveraged from the private sector.Direct incentives are provided for the higher edu-cation system to become more responsive to theeducational needs of the child care workforce.(Early childhood courses are given byandtuition paid tocommunity and technicalcolleges across the state.)

Other Sites With Similar StrategyA license to replicate the T.E.A.C.H. Early Childhood®Project has been issued to not-for-profit organizationsin Georgia, Florida and Illinois. Several other statesare exploring the feasibility of pursuing a license toreplicate the project.

ContactSusan Russell or Edith LockeDay Care Services AssociationP.O. Box 901Chapel Hill, NC 27514Phone: (919) 967-3272Fax: (919) 967-7683

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Rochester/Monroe County Early ChildhoodDevelopment Initiative (New York)

DescriptionThe Rochester/Monroe County Early ChildhoodDevelopment (ECD) Initiative was developed topromote broad commitment and collective responsi-bility for early childhood development. ECD hasestablished and implemented a broad-scale, priority-based agenda to support child development servicesin the county. The members of ECD now participatein an annual collaborative process of reviewing localneeds, gaps and resources. The group works togetherto develop community solutions for the highest-priority problems. These solutions include collabo-rative approaches to financing, implementing,evaluating and monitoring services.

When EstablishedThe Early Childhood Development Initiative beganin 1990.

Amount Generated AnnuallyIn 1994 financial participation of the ECD partnerswas estimated as follows:Federal child care funds

(including Head Start)State and county child care fundsSchool district funds (federal/state /local)City child care fundsRochester United WayDiocese of Rochester

(including private grants)Grantmakers Forum

(local foundations, etc.)Total third-party contributionsEstimated parent feesTotal contributions

$ 6,000,00020,000,0006,400,000

200,0004,000,000

2,000,000

400,000$39,000,000

35,000,000$74,000,000

Services FundedExpanded early childhood care and education ser-vices in a wide range of settings (including reducedwaiting lists and increased reimbursement rates forchild care subsidies); grants to help centers andhomes obtain National Association for the Educa-tion of Young Children (NAEYC) accreditation;

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scholarships to help staff obtain Child DevelopmentAssociate credentials; a Home Instruction Programfor Preschool Youngsters (HIPPY) to increase in-home support for parents as teachers; start-up fundsfor new child care facilities; family learning centersin two city schools; comprehensive model programsin the northeast and southwest quadrants of thecity; a "transportable" Montessori facility offeringprekindergarten for 80 children; an ECD awarenesscampaign; and new associations to promote the useof the arts in child development and to bring sci-ence and technology into the preschool curriculum.Planning and evaluation tools also were developed,including an annual budget strategy, a retrospectiveanalysis of ECD's impact on 400 young children,and community quality standards. A longitudinalevaluation of 4,000 children is planned.

How Funds DistributedFunds are not pooled. Partners administer theirshare of the funds based on the annual commitmentof their respective organizations and informed bythe priorities and analysis of ECD. Local fundersoccasionally collaborate on projects that none areprepared to finance alone. When collaborative pro-jects occur, one partner is selected as the "workinginterface" with the service provider or lead agency.State, county and diocese funds are administered asvouchers; United Way funds, as vouchers or grants;Head Start, city and other grantmakers' funds, asgrants or contracts. Parents apply for child careassistance at the county social services departmentand/or at the early childhood program they use.

Population ServedMembers of ECD have agreed to target funds basedon the following priorities: 1) inner-city, at-riskthree- and four-year-old children; 2) three- and four-year-old children county-wide; 3) inner-city, at-riskinfants, toddlers and school-age children; and 4)infants, toddlers and school-age children county-wide. To the extent possible, the eligibility criteriaused by each member are structured to meet thesegoals. (Income eligibility for child care assistancefrom Department of Social Services and United Wayis capped at 200 percent of poverty, or approximately$26,200 for a family of three.)

Strategic ConsiderationsMembers of the ECD Initiative were initiallyconvened (by Rochester Mayor Thomas P. Ryan) toconsider the conclusions and recommendationsdeveloped by a special task force and corroboratedby a demographic study done by the Center forGovernmental Research (both funded by theRochester Area Foundation). The group was chargedwith developing a feasible strategy that wouldadvance the community agenda, including practicalfunding recommendations. It became evident thatprogress on early childhood development issuesrequired concurrence on priorities, and that no par-ticipant standing alone could financeor gain thecommitment of community leaders to financethenecessary array of projects. Important elements ofthis collaborative strategy include the following:

ECD is a "neutral" body, with a volunteer facilita-tor and no single sponsor or funder. Members ofthe group were pushed to think systemically,maintain communication and work together.Thinkingand workingsystemically requiredthe members of ECD to focus on services ratherthan providers. This distinction has been criticalto the approach to program evaluation and sys-tems change. In some cases, this focus changed therelationship between funders and service providers,and fostered new approaches to accountability andfund allocation. While this has been a difficultprocess at times, most members feel that it hasstrengthened the provider community, the fendersand those involved in local policy development.The process resulted in a community-wide planand increased fundsfor early childhood serviceswith clearly defined roles and levels of financialcontribution from each partner. However, theplanning process is dynamic and has been able tochange as federal, state and local needs and invest-ments in early childhood services have changed.Despite the focus on collaborative planning, limitedfunds and a growing demand for services haveforced the group to make difficult compromises.For example, ECD negotiations recently resultedin revisions to the United Way child care scholar-ship program that lower reimbursement levels andraise parent fees.

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ECD was never conceived as a permanent body.One of its key aims was to "go out of business"once it had succeeded in establishing an ongoingprocess of strategic, collaborative planning. Tothis end, the group has recently agreed to mergewith a new, systems reformoriented communityeffort (called the CHANGE initiative) linked tothe public schools. Some ECD members have keyroles in that initiative, and the facilitator becamethe ECD Coordination Team chairman.

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Other Sites With Similar StrategyThe United Way and the Oregon CommunityFoundation both use the Oregon State Benchmarksto help focus their grantmaking activities. TheCharlotte-Mecklenburg Children's Services Network(an interagency, public-private collaboration) facilitatesplanning and resource allocation in MecklenburgCounty, North Carolina. Community planning effortsare occurring in cities and counties across the coun-try. Unfortunately, information indicating whetherthese efforts have fostered a systemic approach toplanning and resource allocation is not available.

ContactHoward L. Mills, ConsultantRochester Area Foundation335 Main Street EastRochester, NY 14604Phone: (716) 325-4353Fax: (716) 546-5069

FINANCINGCHILD CARE FACILITIES

General Obligation Bonds (Nlinnesora) 99Tax-Exempc Bonds (Illinois) 100Child Cart: Center Start-up and Health andSarety Grant Programs (New York) 102Family Child Care Starr -up and Health andSafety Grant Program (New York) 104State Loan Guarantee Program (Maryland) 105Child Care Facilities Direct Loan Program(Maryland) 106Special Child Care Revolving Loan Fund(Maryland) 107Community Development Financing(North Carolina) 108Community Development Finance FundLinked Deposits (Ohio) 110Commercial LenderPublic-Sector Partnership(District of Columbia) 111

a At

FINANCING CHILD CARE FACILITIES

Most large and small businesses borrow fundswhen they need to improve or expand theirfacilities. Child care businesses, though

especially those in nonprofit programs located inlow-income neighborhoodsoften have troublesecuring loans. There are several reasons for this lackof creditworthiness. First, many child care programswere established in space that was donated or madeavailable to them at reduced rent, and the rates theycharge are based on these low occupancy costs. Inthese cases, incurring debt means raising parent feesor securing increased reimbursement rates from thegovernment agencies that subsidize child care.Second, child care programs often do not have theequity they need to secure a loan. Third, child careoperators typically know more about teachingyoung children than about financial management,fund-raising, or facility construction or renovation.

Because so many child care programs find itdifficult to carry debt, a number of states and com-munities have developed grant programs to helpaddress the need for more and better child carefacilities. Several strategies have been used to gener-ate funds for child care grantmaking. Minnesotauses funds from the issuance of general obligationbonds; child care is one of many uses of bond pro-ceeds. Approximately every two years, the state ofMinnesota sells bonds and uses a portion of theproceeds to provide grants to help build or renovatechild care facilities. Each year, state funds are appro-priated to repay the bond debt. Illinois has usedtax-exempt bonds to finance the construction of childcare facilities. Rather than issuing the bonds itself,the state worked with an intermediary organization,which sold the bonds and takes responsibility forrepayment. Illinois annually appropriates funds tothis organization to repay the bond debt. Manystates, such as New York, simply allocate a portion

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of state general funds to support grants for child carefacilities. Each of these grantmaking strategies isdescribed in more detail in the attached summaries.

Some child care programs can carry debt, butthey need help securing loans and negotiating theworld of capital finance. Child care centers thatserve middle- and upper-income families and chargesubstantial fees, as well as Head Start and child careprograms that have stable government funding, areexamples of programs that have been able to secureloans. Several strategies have been used to helpthese small businesses to obtain loans. Maryland hasestablished a state loan guarantee program, throughwhich state funds are appropriated, invested andavailable to repay a commercial loan made to a childcare business if default occurs. State general fundsalso support two revolving-loan programs that areadministered by the state and can supplement pri-vate loans or grants. Ohio also appropriated stategeneral funds for child care lending, but rather thanadminister the funds itself, the state has the fundsadministered by a private-sector community devel-opment corporation (CDC). The CDC uses manyinvestment strategies, including "linked deposits,"to encourage private banks to make loans to HeadStart and child care programs. North Carolina alsoappropriated state general funds to an intermediaryorganization, Self-Help, a large, statewide communitydevelopment financial institution. The District ofColumbia participates in a public-private partnershipin which public funds are used to help leverage,guarantee and administer loan funds from commerciallenders. Each of these child care lending strategies isdescribed in more detail in the profiles that follow.

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State Financing Strategies as Grants:General obligation bonds (Minnesota)Tax-exempt bonds (Illinois)Child care center start-up and health

and safety grants (New York)Family child care start-up and health

and safety grants (New York)

State Financing Strategies as Loans:State loan guarantee program (Maryland)State direct loans (Maryland)Special revolving loan fund (Maryland)Community development financing

(North Carolina)Linked deposits (Ohio)Commercial lenderpublic-sector partnership

(District of Columbia)

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These profiles represent a few of the most commonstrategies used to generate funds for the develop-ment of child care facilities. They are by no meansthe only strategies. Facilities financing is very com-plex, and it must be tailored to the unique strengthsand needs of a particular child care program and thefinancial resources available in a specific communityor state. Financing the cost of building or renovat-ing a child care facility typically requires a numberof different strategies that, depending upon the sizeof the effort, may be used independently or in coor-dination. Large construction projects generally relyon a "package" of different grants and loans. Puttingthis package together requires strong business acu-men and skill in negotiating financial markets.

Technical assistance is crucial to child care facil-ities financing. Child care programs must carefullyprepare the materials they submit to lenders and/orgrantmakers, who will scrutinize the child care pro-gram's current business practices and assets, as wellas its proposed plans and cost estimates. Many childcare programs need help in preparing for this reviewprocess. Successful facilities financing strategies offerchild care program operators a range of technicalassistance services as well as help in identifying andpackaging multiple sources of funding.

Citywide, regional and statewide communitydevelopment financial institutions (CDFIs), which wereestablished to help generate new sources of capitalto support redevelopment of housing and economicdevelopment in low-income communities, havebecome more involved in child care lending. Inter-mediary organizations like community developmentcorporations, which generally focus on economicdevelopment and housing issues in economicallydistressed communities, are important resources aswell. States are increasingly recognizing the uniquerole these agencies can play in helping to financechild care facilities, and many of the organizationshave begun to work together nationally to identifycommon needs and share information. A NationalChildren's Facilities Network has been established(see Appendix 4 on page 127 for a membership list).Additionally, the Center for Policy Alternatives hasbegun to work on a national database to documentthe performance of various child care loans. Thisdatabase will soon be available on the World WideWeb. (See page 112 for information on how to con-tact the Center for Policy Alternatives.)

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General Obligation Bonds (Minnesota)

DescriptionGeneral obligation bonds are repaid from the taxbase of the governmental body issuing the bonds. Inother words, a government entity sells the bonds,uses the proceeds to support one-time capital costsand then allocates a portion of its annual revenue topay toward the debt each year. General obligationbonds are often used to finance prison expansion orpublic utilities (such as water and sewer systems).The state of Minnesota has used proceeds from itsgeneral obligation bond issuance to help pay for HeadStart and other early childhood learning facilities.

When EstablishedMinnesota first used funds from general obligationbonds to support capital costs for early childhoodlearning facilities in 1992. Funds from the 1994and 1996 bond issuances also were made available.

Amount Generated AnnuallyIn 1992 and 1994, $2 million from the generalobligation bond issuance was made available tosupport capital costs in early childhood learningfacilities. It is anticipated that the 1996 allocationwill be at least $2 million.

Services FundedGrants of up to $200,000 are awarded to schooldistricts or cities to support the cost of constructingor renovating early childhood learning facilities. Thefacility must be owned by a public entity and usedprimarily to provide Head Start, Early ChildhoodFamily Education or early childhood special educa-tion services.

How Funds DistributedRequests for capital grants are submitted to theDepartment of Economic Security. The Departmentsof Administration and Finance review applicationsand business plans. Chairs of the Senate Finance andHouse Ways and Means committees approve final.selections. Approximately 12 grants are awardedeach biennium. The public entity that receives bondfunds builds or renovates the facility and eitheroperates the program itself or rents the facility

(at minimum cost) to a nonprofit group that pro-vides Head Start, Early Childhood Family Educationor early childhood special education services.

Population ServedThe facilities serve children and families who partic-ipate in Head Start and/or the Early ChildhoodFamily Education program, as well as families whohave children with disabilities and are eligible forearly childhood special education services.

Strategic ConsiderationsMinnesota has allocated state funds to supplementand expand the Head Start program (approximately$11.5 million each year). Additionally, the state hasestablished the Early Childhood Family Educationprogram, which operates in 360 school districts andoffers a range of early childhood learning activitiesto children at all income levels. Combined state andlocal funding for the program is currently over $30million annually. The bond funds are targeted tothese programs, as well as early childhood specialeducation services. In considering this strategy, thefollowing issues should be explored:

Proceeds from the general obligation bondissuance may be granted only to public entities(typically school districts or local governments)and are limited by the legislation to "early child-hood learning facilities," a definition that excludesmost nonprofit and proprietary child care programsunless they are operating programs in facilitiesthat are owned by public entities.The bond funds may not be used,to supportrenovation or construction of facilities that areused primarily for school-age child care.While school districts or local governments typi-cally rent their facilities at very reasonable rates,bond funds cannot be used to help community-based organizations purchase facilities. Head Startand other early childhood learning programs thatare operated by community-based organizationsthat wish to buy the facility in which they havebeen paying rent must pay fair market value forthe facility.The requirements for receiving bond funds arequite significant and can be time-consuming.The slow pace at which funds are released hasbeen frustrating for some program operators.

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Other Sites With Similar StrategyMassachusetts is currently attempting to passlegislation authorizing a general obligation bondissuance to help finance early childhood care andeducation facilities.

ContactElizabeth RoeBonding Program CoordinatorDepartment of Economic Security390 North Robert Street, 1st FloorSt. Paul, MN 55101Phone: (612) 297-7850Fax: (612) 282-6977E-mail: [email protected]


Tax-Exempt Bonds (Illinois)

DescriptionThe Illinois Facilities Fund (IFF) borrowed fundsthrough tax-exempt bonds for the purpose of con-structing five and renovating two child care centersin Illinois) The bonds were purchased by privateinvestors and were secured by an equity contribu-tion from the IFF, a debt service reserve fund raisedby the IFF and a commitment by the IllinoisDepartment of Children and Family Services torepay the debt over 10 years, subject to annualappropriation. The IFF owns the buildings(although ownership will revert to the child careprograms when the mortgages are repaid) and leasesthem to child care providers for $1 per year. TheIFF is completely liable for the debt if the state isunable or unwilling to pay.

When EstablishedThe bonds were issued in November 1992. Landacquisition and design began immediately. Thefirst building opened in September 1992, and thesixth opened in April 1993. The seventh, which washeld up due to environmental problems, opened inearly 1994.

Amount Generated AnnuallyThe IFF bond issuance was for $13 million. Addi-tional fund-raising was required from the child careproviders (10 percent of construction costs), andother construction funds were raised by the IFF. Intotal, the programs attracted $24 million, including$4 million for a primary health clinic in one of thebuildings. Each year, the Illinois Legislature allocatesapproximately $1.5 million to repay the debt. Addi-tionally, the state made grants to the IFF totaling$900,000 over three years (1991-93) to cover theadministrative costs of the program and the cost ofcreating management systems for the centers.

1. The Illinois Facilities Fund is a community development financial institution that makes loans to Illinois human services agenciesthat rely on government contracts and are unable to obtain other financing. Additionally, IFF provides management-skills pro-grams, construction oversight and other technical assistance to its borrowers and child care partners. Overseeing the financing anddevelopment of the seven child care centers discussed in this profile is one of many projects sponsored by the IFF.

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Services FundedThe bond issue funds covered all costs associatedwith design and construction of five new buildingsand renovation of two buildings.

How Funds DistributedA request for proposals was issued jointly by theIllinois Department of Children and Family Servicesand the IFF. An internal committee, a screeningcommittee and a final panel were used to select thechild care providers who received the buildings.

Population ServedThe child care centers housed in the buildings servelow-income working families and, in the case of fourHead Start classrooms, families who qualify forHead Start.

Strategic ConsiderationsUnlike general obligation bonds, which are ownedby the governmental body issuing them, this strategyrelies on bonds that are owned by a "conduit," inthis case, the Illinois Facilities Fund. In consideringthis strategy, the following issues should be explored:

A strong, experienced intermediary is crucial to thesuccess of this strategy. The conduit selected to sellthe bonds and build the facilitiesthe IllinoisFacilities Fundhad extensive expertise and arecord of accomplishment in other financing efforts.Strong commitment from the private sector alsowas important to the success of this strategy. TheIFF was created by the Chicago CommunityTrust, which also provided a $2 million grant toserve as equity. A $1 million loan from the IllinoisDevelopment Finance Authority was secured asreserve funds. Foundation funding also coveredthe cost of early planning and implementation.

Each year, the state of Illinois appropriatesfundsin addition to the funds allocated for childcare subsidiesto repay principal and interest onthe IFF debt. It is unlikely that an intermediaryorganization would assume this level of risk with-out this commitment of state funds.Economies of scale are important. The decisiondesign and build seven centers at once resultedan estimated savings of $700,000.Child care programs that carry significant debtmust have effective fiscal management proceduresin place to ensure that cash flow is available torepay the loan. Many child care programs do nothave fiscal expertise. IFF has played a crucial rolein strengthening the fiscal management capacityof the programs it finances.The multimillion-dollar buildingswhich arelocated in very low income neighborhoods plaguedby poverty, drug abuse and violenceprovidemore than child care and Head Start. Some arefamily centers; one houses a health clinic; manyhave served as an important "anchor" and spurredadditional development in the community.

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Other Sites With Similar StrategyThe Hawaii legislature recently approved theissuance of tax-exempt revenue bonds for child carecenter construction and renovation.

ContactTrinita Logue, PresidentIllinois Facilities Fund300 West Adams Street, Suite 431Chicago, IL 60606Phone: (312) 629-0060Fax: (312) 629-0065E-mail: [email protected]

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Child Care Center Start-up and Health andSafety Grant Programs (New York)

Description

New York State currently has three grant programsto help support the cost of starting new child carecenters and helping existing centers to assure thehealth and safety of the children being served. Theprograms include: 1) predevelopment planning grants(up to $75,000 per project); 2) child care centerstart-up and expansion grants (up to $100,000 forfull-day programs and $25,000 for part-day programsfor school-age children); and 3) health and safetygrants for existing child care centers (up to $10,000).

When EstablishedNew York established its first child care start-upgrants program in 1984, when the state legislatureappropriated $600,000 to help start new school-agechild care programs. Since that time, a number ofdifferent child care grant programs have been addedand revised.

Amount Generated AnnuallyIn 1996, up to $750,000 was made available forpredevelopment planning grants, up to $1.8 millionfor start-up grants and up to $900,000 for healthand safety grants. In prior years, annual appropriationsfor child care center start-up, expansion and facilityimprovement grants combined have fluctuated froma high of $11.2 million in fiscal year 1991-92 to alow of $1.8 million in fiscal year 1992-93.

Services Funded

Predevelopment planning grants may be used fordesign studies, site assessment, architectural/engi-neering fees, financial planning, fund-raising and otherpredevelopment work. Start-up/expansion grantsmay be used for planning and setting up programenvironments, hiring staff, purchasing supplies andequipment, recruiting children, and minor remodel-ing that is necessary to comply with housing, firesafety or other regulatory requirements. Health andsafety grants may be used to address newly identifiedfire, health and safety issues in existing facilities aswell as to conduct minor remodeling to make theprogram more accessible to children with disabilities.

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How Funds DistributedThe Department of Social Services (DSS) issues arequest for proposals, reviews applications and makesthe final selection. The department then executes acontract with the applicants selected for funding.

Population ServedIncorporated nonprofit and proprietary child careprograms as well as public agencies and local gov-ernmental units may apply for start-up and healthand safety grant funds. Nonprofit organizations mayapply for predevelopment planning grants. Priorityis given to projects that: serve low-income familieswho receive child care subsidies or public assistance;serve special high-need populations; provide careduring nontraditional hours; and are located inempowerment zones, enterprise communities, eco-nomic development zones, or adolescent pregnancyprevention and services sites.

Strategic ConsiderationsThe child care grant programs described above are,by and large, limited to minor renovations and the"soft" costs associated with planning and opening achild care program. Funds to help pay for the "hard"costs of building or renovating a child care facilitymay be obtained from several other grant and loanprograms in New York State. One example is theRegional Economic Development Partnership Pro-gram administered by the Empire State DevelopmentCorporation. This program is designed to "fostereconomic growth, strengthen economic vitality,and...create new job opportunities" in a wide rangeof businesses. Child care grants and loans are anallowable activity under this program. In additionto "generic" grant and loan programs designed tospur economic growth, from time to time fundsspecifically targeted to child care are made availablewithin the state's Department of Economic Devel-opment. In state fiscal year 1994-95, for example,$4 million was made available to support grants forchild care capital construction. These funds wereused to help finance 12 projects. An additional $1million was allocated in state fiscal year 1995-96,and will be used to support a few more child careprojects. Additional issues to consider when explor-ing the feasibility of replicating the approach usedin New York State include the following:

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While a number of different grant programs areavailable in New York to help support the cost ofrenovating or building a child care facility, theseprograms are administered by different govern-ment entities. None of these agencies has thetime, resources or expertise to help pull togetherthe package of grants and loans that are typicallynecessary to fully finance a project. The Depart-ment of Social Services and the Empire StateDevelopment Corporation requested proposals forthe start-up and construction grants at differenttimes, making it difficult to use the predevelopmentplanning grants as a "first step" for constructionloans and grants, or to coordinate the variousgrant programs.Organizations that seek to develop, expand orimprove child care programs often need technicalassistance in a host of areas, including capitalfinancing, design, program planning and so forth.Technical assistance of this sort was not built intoany of the New York State grant programs. As aresult, a number of the applications received bythe state agencies (particularly requests for capitalconstruction grants or loans) are of poor qualityand cannot be funded.The child care start-up grants awarded by theDepartment of Social Services typically representonly a small portion of the overall financing pack-age necessary to start a new child care program.Organizations that apply for these funds must alsoraise (or borrow) large sums from other sources. Itcan be difficult for a state-level entity like DSS(with limited staff and limited expertise in facili-ties development or small business financing) toassess whether a potential applicant can operate astrong, viable business and can secure the fundsnecessary to complete the project.

Other Sites With Similar StrategyAt least 21 jurisdictions (including Alaska, Califor-nia, Delaware, Indiana, Kentucky, Louisiana,Nebraska, New Jersey, New Mexico, New York,North Carolina, Ohio, Oklahoma, South Dakota,Tennessee, Washington, West Virginia, Wisconsin,Wyoming, the District of Columbia and Guam)have established some form of grant program forchild care centers and/or home providers. Most ofthese programs make very small grants available forminor renovations, equipment purchase or programimprovements. The grant programs are typicallyadministered by a state agency and are generally notlinked to larger sources of funding for capital con-struction. A few states (including North Carolina,Ohio and Illinois) have chosen to administer theseprograms through a community development finan-cial institution (CDFI) or community developmentcorporation (CDC) that is able to "package" thefunds with other grants and loans and provide in-depth technical assistance and support. A list ofcommunity-based "intermediary" organizations thattarget child care is included in the appendix on page127 of this report.

Contacts

Lola ColeNew York State Department of Social ServicesBureau of Early Childhood Services40 North Pearl StreetAlbany, NY 12243Phone: (518) 474-9883Fax: (518) 474-9617

Terri Trifari or Suzanna SteinEmpire State Development Corporation633 Third AvenueNew York, NY 10017Phone: (212) 803-3641Fax: (212) 803-3615

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Family Child Care Start-up and Health andSafety Grant Program (New York)

Description

New York State has established a grants program tohelp family child care (up to eight children) andgroup family child care (up to 14 children) providersconduct quality early childhood development pro-grams. Grants of up to $500 per home may be usedto cover start-up costs or to help existing providersensure the health and safety of children in their care.This grants program is administered by local orga-nizations (primarily child care resource and referralagencies) that have the capacity to recruit newproviders, assist them in starting a child care busi-ness and provide continued technical assistance.Grant funds to partially support the cost of techni-cal assistance staff and overhead are made availableto the local agencies that administer the familychild care grants program.

When EstablishedThe New York State Legislature first established astart-up grants program for family child careproviders in 1987.

Amount Generated AnnuallyIn 1996, $2.6 million was made available for thisprogram.

Services Funded

New family child care providers may use these fundsto purchase the equipment, toys and supplies theyneed to open a family child care home. Existingfamily child care providers may used the funds forhealth and safety items such as fire alarms or smokedetectors, window guards, outlet covers, first aidkits, medical examinations, water testing, cribs andsome educational supplies.

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How Funds DistributedThe Department of Social Services (DSS) issues arequest for proposals to community-based organiza-tions seeking to administer the program. DSSstaff review proposals and select a single entity ineach geographic area to administer the funds. Thedepartment then executes contracts with theseagencies to administer the program. Local adminis-trative agencies are responsible for recruiting familychild care homes, providing technical assistance andawarding mini-grants to eligible family-based childcare programs.

Population ServedMini-grants are awarded to family child care andgroup family child care homes that serve primarilylow-income families who receive subsidized childcare. Local agencies that administer this programmust have a strong relationship with the localdepartment of social services and demonstratedexperience in recruiting and supporting family childcare homes.

Strategic ConsiderationsUsing local organizations (such as child careresource and referral agencies) to administer thisprogram is an effective strategy. These agencies havethe capacity to recruit new providers, assist themin starting a child care business and provide thecontinued technical assistance they need to providequality child development services. Additionally,it is difficult for a state agency to administermini-grants. (State contracting procedures are notdesigned for such small grants, making adminis-tration cumbersome and expensive.)Many family child care providers (especially thosethat serve low-income families) are unable to carrydebt. Making small, targeted grants (rather thanloans) to these providers is an effective way toincrease the supply of child care.The mini-grants initially were limited to start-upcosts. Local administrative agencies and licensingstaff reported, however, that many existing familychild care providers needed to address health andsafety concerns but did not have the funds to doso. As a result, the program was expanded toinclude these providers.

Other Sites With Similar StrategyAt least 21 jurisdictions (including Alaska, California,Delaware, Indiana, Kentucky, Louisiana, Nebraska,New Jersey, New Mexico, New York, North Caroli-na, Ohio, Oklahoma, South Dakota, Tennessee,Washington, West Virginia, Wisconsin, Wyoming,the District of Columbia and Guam) have estab-lished some form of child care grant program. Manyof these programs make funds available to familychild care homes. The extent to which these statesuse local agencies to administer the funds is unknown.Private-sector partnerssuch as employersoftenmake small grants available to family child carehomes, and typically use local child care resourceand referral agencies to administer these funds.(For further information on private-sector initia-tives, see the sections on Employers/Unions andPublic-Private Partnerships in this report.)

Contact

Lola ColeNew York State Department of Social ServicesBureau of Early Childhood Services40 North Pearl StreetAlbany, NY 12243Phone: (518) 474-9883Fax: (518) 474-9617


State Loan Guarantee Program (Maryland)

Description

The Maryland State Loan Guarantee Program isdesigned to help day care programs (including childcare centers and facilities that provide day care fordisabled adults and the elderly) obtain loans fromcommercial lending institutions. The state willguarantee up to 80 percent of a loan. Interest ratesare set by the lending institution and are usuallyabout 2 points above the prime lending rate. The sizeof guarantee portion varies widely. The program hasguaranteed loans as small as $15,000 and as large as$1.6 million.

When EstablishedThe loan guarantee program was established by thelegislature in 1984.

Amount Generated AnnuallyThe state legislature initially appropriated $750,000for the program. Since 1984, several additionalappropriations have been made. Additional incomehas been generated from guarantee fees and intereston investments. While the law permits these fundsto be leveraged up to five times, the Marylanddepartment of Business and Economic Developmenthas elected to limit guarantees to three times itsfund balance. The department is currently able toguarantee loans that total up to $6.2 million.

Services FundedGuaranteed loans may cover the cost of construc-tion, renovation, equipment, supplies and some ofthe working capital necessary to develop or expand afacility that provides care for children, the elderly ordisabled persons of all ages.

How Funds DistributedA loan agreement is executed between a commerciallender and the day care program, backed by theguarantee. The state treasurer's office invests thefunds used to guarantee the loans. Invested fundsare held in a separate account and earn interest.

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Population ServedMaryland has guaranteed loans to a wide range ofchild care centers, including nonprofit and for-profitprograms as well as Head Start. Many of the loanshave been for expansion projects.

Strategic ConsiderationsMaryland has not experienced a single default sincethe program was established, although it does haveseveral loans in the "work-out" process. (This meansthat the state currently is working with the borrowerto restructure the loan.) Other considerations include:

State loan guarantee programs can be an inexpen-sive way to help day care programs obtain loans inthe commercial market. However, loan guaranteeprograms do not create capital for loans or ensurelower interest rates.A loan guarantee program is relatively easy toadminister, and it may be combined with otherprivate and public funds to help finance capitalconstruction.While not all child care programs may be able toparticipate in a loan guarantee program, child caremarkets are diverse enough that some providerswill find the program helpful. Some states havefound that loan guarantee programs are used pri-marily by proprietary child care programs that cancharge high parent fees, although Maryland hasnot found this to be the case.

Other Sites With Similar StrategyArkansas, California, North Carolina and Tennesseecurrently have state loan guarantee programs. InNew York, the Chase Community DevelopmentCorporation has used guarantees from the State ofNew York Mortgage Agency to support child careconstruction lending.

ContactJoan Case, DirectorDay Care Financing ProgramsMaryland Department of Business

and Economic Development217 East Redwood, Suite 2246Baltimore, MD 21202Phone: (410) 767-6345Fax: (410) 333-6931

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Child Care Facilities Direct Loan Program(Maryland)

DescriptionThe Child Care Facilities Direct Loan Program usesfunds appropriated by the state legislature to makeloans at or below the prime lending rate. Loans withrepayment schedules of up to 20 years may besecured for up to 50 percent of the cost of buildingor renovating a child care facility.

When EstablishedThe program was established in 1988 and initiallylimited loans to 20 percent of the hard cost (that is,the cost of construction, renovation and equipmentfixed to the building). No loans were issued in thefirst year. In 1989, the program was revised to allowloans of up to 50 percent of the hard costs. The firstloan was issued in 1989.

Amount Generated Annually$1.75 million was appropriated by the legislaturefor the program in the first year, and additionalappropriations followed in subsequent years. Thesefunds have been further augmented by interest andloan fees. At present, the fund has $1.8 millionavailable. The smallest loan awarded to date hasbeen for $35,000. The largest has been for $350,000.The average loan is for approximately $200,000.

Services Funded

The loan fund is limited to construction and renova-tion costs. Equipment that is fixed to the buildingmay be included, but all other equipment, suppliesand start-up costs are excluded.

How Funds DistributedApplications are submitted to the Maryland Depart-ment of Business and Economic Development, DayCare Financing Programs. Staff review businessplans. An independent committee authorizes finan-cial participation in the program. Once approved,the loan payments are processed by the department'sLoan Administration Unit.

Population ServedBoth nonprofit and proprietary child care centers areeligible to apply for the loan funds. (Family childcare providers are not eligible for the program.)Since loans may be for no more than 50 percent ofthe total project cost, applicants must have securedor identified a source forthe remaining funds.Applicants who apply for both a direct loan and aloan guarantee may borrow no more than 20 percentof total project costs under the direct loan program.

Strategic ConsiderationsThe program was established because the state legis-lature wanted to ensure that an affordable source ofcapital funds was available to support the cost ofconstructing or renovating child care facilities. TheMaryland Department of Business and EconomicDevelopment has found that, while not all childcare programs may be able to carry debt, child caremarkets are diverse enough that some providers willfind the program helpful. Packaged together withthe loan guarantee program, direct loans help to makelower-cost capital funds available to child care centers.

Maryland has not experienced any defaults sincethe program was established, although it does haveseveral loans in the "work-out" process. (This meansthat the state is currently working with the borrow-er to restructure the loan.)

Other Sites With Similar StrategyVirginia has a similar child care loan programadministered by the state. Other states may have"generic" business development initiatives that makeloans to child care businesses. (The Regional EconomicDevelopment Partnership Program administered bythe New York State Department of EconomicDevelopment is one example.) North Carolina hasawarded funds to a community development financialinstitution (the North Carolina Community Facili-ties Fund) to administer a child care loan program.

ContactJoan Case, DirectorDay Care Financing ProgramsMaryland Department of Business

and Economic Development217 East Redwood, Suite 2246Baltimore, MD 21202Phone: (410) 767-6345Fax: (410) 333-6931


Special Child Care Revolving Loan Fund(Maryland)

DescriptionThe Special Child Care Revolving Loan Fund wasdesigned to provide low-cost, short-term loans tohelp cover the cost of minor renovations in childcare facilities and small group day care homes. Theminimum loan that may be approved is $1,000, andthe maximum is $10,000. Although the loans typi-cally are made at the prime lending rate, lower ratesare available for providers serving targeted popula-tions such as low-income families, teen parents andchildren with disabilities.


Amount Generated AnnuallyThe Maryland Department of Human Resources hasallocated a portion of federal Child Care and Devel-opment Block Grant (CCDBG) funds for the loanprogram in each of the past five years. Allocationshave ranged from a low of $62,000 in state fiscalyear 1995 and state fiscal year 1996, to a high of$125,857 in state fiscal year 1994.

Services FundedLoans may be secured for minor renovations necessaryto meet licensing requirements, make the facilityaccessible to the handicapped, improve the structureor program, and so forth.

How Funds DistributedApplications are submitted to the Maryland Depart-ment of Business and Economic Development. Thedepartment reviews and approves all applications.An independent approval committee authorizesfinancial participation. Once approved, the loanpayments are processed by the department's LoanAdministration Unit.

Population ServedChild care centers and small group day care homes(those with more than eight children). Family childcare homes are not eligible for the revolving loan fund.

119107

Strategic ConsiderationsThe legislature and the Maryland Department ofHuman Resources established the loan programbecause they wanted to maximize the use ofCCDBG funds available for quality improvementand recognized the need for financing to help childcare programs improve their facilities. A revolvingloan fund was appealing because it did not require alarge appropriation and could potentially be self-supporting as loans were repaid.

The Department of Business and EconomicDevelopment has found this program to be morelabor-intensive than the other loan programs itadministers. Greater staff time is required becausethe loans are smaller, there is a greater number oftransactions and, in some cases, the loans incur morerisk (requiring staff to become involved in "work-outs" or defaults).

A number of child care programs that receivedloans under this program were unable to repay theloans. Unanticipated reductions in enrollment,which resulted in lower revenue, were the primaryreason given for default. Lower enrollment appearsto have resulted from downsizing among local busi-nesses and "freezes" or cuts in the subsidized childcare system.

Other Sites With Similar StrategyVirginia has a similar child care loan programadministered by the state. A number of other states(such as North Carolina and Maine) have allocatedfunds to a community development financial insti-tution or other community-based organization toadminister a loan program for home-based child careproviders.

ContactJoan Case, DirectorDay Care Financing ProgramsMaryland Department of Business and

Economic Development217 East Redwood, Suite 2246Baltimore, MD 21202Phone: (410) 767-6345Fax: (410) 333-6931

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Community Development Financing(North Carolina)

DescriptionThe community development financing approachused by the Center for Community Self-Help(Self-Help) in North Carolina is supported withfunds from three primary sources: 1) deposits to theSelf-Help credit union; 2) grants (from foundations,individuals, government and others) for capitalfinancing; and 3) program-related investments (PRIs).PRIs are zero- or low-interest investments or loansmade by organizations or individuals that are used ascapital and reloaned to community-based enterprisessuch as child care organizations. Self-Help makesloanswhich range from $500 to a family childcare home to $850,000 to help finance the cost ofbuilding a new child care center. Interest rates chargedare at or slightly above the prime lending rate.

When EstablishedSelf-Help--a statewide community developmentfinancial institution with five regional officeswasestablished in 1980. Although the organization hadalways financed child care under its small-businesslending, in 1993, it decided to specifically targetthe child care industry.

Amount Generated AnnuallyTo date, Self-Help has made approximately $3.5million in loans to child care programs, and theirlending in this area is growing rapidly.

Services FundedSelf-Help makes short- and long-term (up to 20-year) loans to early childhood programs throughoutthe state of North Carolina. Unlike most commer-cial lenders, Self-Help is willing to consider "risky"loans and provide technical assistance to potentialborrowers. Technical assistance may include helpinga family child care provider create their first budget;helping an organization seeking to build or expanda child care center put together a comprehensivefinancing package; making sure that child care pro-grams that apply for loans know about the U.S.Department of Agriculture (USDA) child care foodprogram and other public subsidies; and so forth.

120

Self-Help has produced a detailed reference manualentitled The Business Side of Child Care, whichdiscusses a wide range of issues such as assessingbusiness risk, estimating revenue and planning facil-ities, and it includes specialized spreadsheets thatare also available on computer disk.

Hou; Funds DistributedLoan applications are submitted to Self-Help,which operates like a bank and administers allaspects of the loan, including processing paymentsand working with borrowers who are having diffi-culty repaying the loan.

Population ServedSelf-Help makes loans to early childhood programs ofall types and sizes, including nonprofit, church-basedand proprietary child care and Head Start centers, aswell as large and small family child care homes. Self-Help primarily meets the needs of child care borrowerswho have the capacity to carry debt but have troubleobtaining a loan from a commercial lender.

Strategic ConsiderationsIn 1993, Self-Help examined its small-businesslending and realized that child care was the industryto which it had made the most loans. After a surveyof child care providers, resource and referral agencies,and state child care personnel indicated that therewas more than $80 million in loan demand in thechild care industry, the organization decided to pro-vide targeted loans and technical assistance to theseproviders. The effort has been very successful, anddemand for child care loans has grown dramaticallyin recent years. In exploring the feasibility of repli-cating Self-Help's strategy in another jurisdiction,the following considerations should be explored:

The community development financing strategyused by Self-Help is an effective way to help childcare programs access capital. It does not, however,lower the cost of borrowing money.Economy of scale is an important factor. Creditunion deposits and many PRIs are small or forshort periods of time, and therefore they mightnot be a viable source of capital for the long-termloans many child care operators need. But Self-Help is able to combine small and short-terminvestments with other large, long-term invest-ments that have been made to its institution.Additionally, Self-Help can package its loans with

loans from other state and federal partners such asthe Small Business Administration, Housing andUrban Development, the Rural Development Agencyand others. (Self-Help also administers a child careloan fund for the state's Division of Child Devel-opment, which is funded with federal CCDBGdollars.) Taken together, these funds provide capitalneeded to offer both long- and short-term loans.Technical assistance is a crucial element of childcare lending. Self-Help has the capacity and thecommitment to provide intensive technical assis-tance to many of its borrowers.Self-Help has found the delinquency rate on childcare lending to be higher than it is for other lending,but actual losses have been minimal. (Loan losseshave represented only two-tenths of one percent ofits portfolio.) Self-Help's management of the loanshas been critical to ensuring that the funds arerepaid. Not surprisingly, borrowers who providedchild care to middle- and upper-income familieshad no delinquency problems, while the majorityof those that aimed for a low-income clientele suf-fered delinquency problems. Self-Help also foundthat for-profit borrowers had more delinquencyproblems than nonprofits.

Other Sites With Similar StrategyCommunity development financial institutions(CDFIs) have been established in many states andcommunities. (See appendix on page 127 for a list of"intermediary organizations" that focus on child carelending.) Some of these institutions are quite smalland provide limited services to only one communityor neighborhood, or they target specific areas oflending (such as low-income housing). Many do nothave credit unions or the capacity to solicit pro-gram-related investments. But most large CDFIs(such as Coastal Enterprises, in Maine) use financingstrategies similar to those described above.

ContactLaura Benedict, DirectorNorth Carolina Community Facilities Fundc/o Center for Community Self-HelpP.O. Box 3619Durham, NC 27702-3619Phone: (919) 956-4430Fax: (919) 688-3615E-mail: [email protected]

121109


Community Development Finance FundLinked Deposits (Ohio)

Description"Linked deposits" involves depositing funds into aconventional lending institution for the specificpurpose of encouraging the bank to loan funds at areduced rate to a specific borrower. The Ohio Com-munity Development Finance Fund (CDFF) hasused this strategy to lower the cost of short-termconstruction loans made to nonprofit entities,including child care or Head Start programs.

When EstablishedIn July 1995, the Ohio State Legislature appropriated$3 million for a child care facilities fund. CDFF wasselected to administer the fund and to use the fundto leverage additional dollars from the private sec-tor. Linked deposits is one of the strategies CDFFuses to help leverage funds.

Amount Generated AnnuallyThe legislature made a one-time allocation of $3million to CDFF.

Services FundedLinked deposits currently are used to support short-term construction loans (of approximately sixmonths' duration). Once construction is complete,the construction loan is converted to a mortgage.The mortgage is held by the lending institution andis an agreement between the Head Start or childcare facility and the bank; CDFF is not involved inthis aspect of the financing.

Hotv Funds DistributedCDFF makes a deposit in the bank, linked to aspecific loan to a specific Head Start or child careprogram, at a specific interest rate, and incorporatingany other specific concessions. The bank loans fundsto the Head Start or child care program at a reducedrate. Interest on the deposit is used to help offsetthe cost of making a low-cost loan to the Head Startor child care program.

110

Population ServedCDFF serves nonprofit organizations that provide awide range of community services, including childcare. All of the child care and Head Start programsit assists serve primarily low-income families.

Comments:

Linking deposits is one of several financing strategiesthat CDFF uses to support capital financing in childcare. CDFF provides Head Start training and techni-cal assistance in financing and facilities development,and it also administers a special state-supported HeadStart facilities planning grants program. Additionally,CDFF helps to administer funds that support localrevolving loan funds for child care "micro-enterprises."The agency has recently developed a new "gapfinancing" loan program that will directly loanfunds to help cover the gap between the mortgagesecured by a child care or Head Start agency and thetotal cost of the construction or renovation project.

Strategic ConsiderationsThe $3 million appropriation for the Ohio Commu-nity Development Finance Fund grew out of CDFF'sexperience in working with Head Start agencies anda growing recognition that additional funds wereneeded to support capital construction in Head Startand child care. Making decisions about the mostappropriate strategy for financing child care facili-ties in various markets requires careful thinking andexperience. One step builds on the next, and differ-ent strategies are appropriate in different situations.To more fully understand linked deposits and otherstrategies used by CDFF, the following issues shouldbe considered:

The decision to use a linked deposits strategy wasbased on CDFF's experience using a similar strategyin the area of low-income housing.CDFF is currently exploring ways to use the stateappropriation as equity to support the issuance ofsecurities (i.e., stocks) to capitalize the facilitiesfund. The agency has determined that an addi-tional $3 millionbringing the total facilitiesfund to $6 millionwill be needed to support asecurities issuance. CDFF believes that $6 millionin equity could support a securities issuance thatwould leverage $10 million a year.

122

The decision to develop a "gap financing" loanprogram grew out of CDFF's research into whatsteps are necessary to establish the experiencerequired to successfully issue securities to capital-ize the facilities fund.

Other Sites With Similar StrategyA number of other states and cities have used alinked deposits strategy to leverage funds for low-income housing and small business development.However, the Ohio Community DevelopmentFinance Fund appears to be the only entity usingthis strategy for capital financing in child care.

ContactJim Klein, Executive DirectorOhio Community Development Finance Fund42 E. Gay Street, Suite 1000Columbus, OH 43215-3119Phone: (614) 221-1114 or (800) 959-2333Fax: (614) 221-7493E-mail: [email protected]


Commercial LenderPublic-Sector Partnership(District of Columbia)

DescriptionUsing the inclusion of child care lending in the newCommunity Reinvestment Act regulations as anincentive, the Center for Policy Alternatives (CPA)brought together a consortium of 20 banks' in theWashington, D.C., metropolitan area to develop childcare loans. A high-level, public-private advisorycommittee guides the work.' Local policy makersprovide loan guarantees and technical assistancefunding. Three products are included: 1) "mini" micro-loans (up to $1,500) to family child care providers;2) micro-loans (up to $25,000) to nonprofit childcare centers; and 3) real estate mortgage lending (upto $1 million) for major rehabilitation or constructionof a child care facility. Interest rates on these loansare below prime, or at the lowest possible rate (butsufficient to cover administrative costs).

When EstablishedThe initiative began in May 1995, with the mini-loan fund implemented in 1996. The other fundsare still in the planning stages.

Amount Generated AnnuallyThe bank consortium committed $350,000 for the"mini" micro-loan program and $2 million for themicro-loan program. The District of Columbia'sloan guarantee for the "mini" micro-loan fund is$75,000 from the Child Care Development BlockGrant (CCDBG) funds.

The banks will also donate $70,000 (20 percentof their loan funds) to support administration of the"mini" micro-loan fund and the provision of technicalassistance to child care providers seeking loans. Thiscontribution is matched with a $75,000 CCDBGgrant to support technical assistance and training forparticipating providers. Additional funds for technicalassistance to child care providers will be supported bylocal foundations.

1. Russell Simmons, senior vice president of Riggs Bank, is chair of the project's banker working group. Participating banks include:Citibank, NationsBank, First National Bank of Maryland, Crestar Bank and others.

2. James Gibson of the District of Columbia Agenda Project chairs the advisory committee. Representatives from the District ofColumbia Board of Trade, the Metropolitan Washington Council of Governments, the Freddie Mac Foundation, the MetropolitanBankers Group, the Washington Child Development Council and the Moriah Fund are among the committee members.

1-1.1

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Services Funded

Loans are available to home-based and center-basedchild care providers for minor renovations, supplies,equipment, costs associated with program accredita-tion, lines of credit and other non-asset-based lending.(Micro-loans will be limited to nonprofit providers.)Technical assistance on finance issues will be providedby community development corporations (CDCs).Technical assistance on quality assurance will beprovided by the Washington Child DevelopmentCouncil, a child care resource and referral agency.

How Funds DistributedThe $350,000 commercial lender commitmentfor the "mini" micro-loan program, the 20 percentset-aside and the $75,000 CCDBG grant for admin-istration and technical assistance, will be transferredto the ARCH Development Corporation, for adminis-tration of the loan fund. The $2 million commerciallender commitment for micro-loans will be distrib-uted by a consortium of community developmentcorporations. Metropolitan Washington BankersGroup members will administer the child caremortgage loans. Technical assistance for qualityassurance issues is handled through the WashingtonChild Development Council.

Population Served

The loan products will be available to a wide rangeof child care providers that serve families at allsocioeconomic levels.


The Center for Policy Alternatives worked for severalyears to ensure that the Community ReinvestmentAct (CRA) include child care lending. The organiza-tion is now working with commercial lenders toencourage child care lending and leverage additionalfunds (in the form of loan guarantees, funds fortechnical assistance, and start-up and renovationgrants, for example) from the public sector. In con-sidering replication of this strategy, the followingconsiderations should be explored:

The high-level, public-private advisory committeecreated for this project was crucial to its success.The committee was able to help open doors,expand relationships and draw attention to theneed forand viability ofchild care lending.

112

The project focused on child care as an economicdevelopment effort with the potential to createjobs, generate tax dollars and contribute to thelocal economy, rather than as a request for fundsfor human services.In Washington, D.C., child care is estimated to bea $40 million industry.

Other Sites With Similar StrategyIn Ohio, Society Bank and Starting Points (a ChildCare Resource and Referral Agency [CCR&RD havejoined forces to underwrite and administer a non-profit loan fund for child care providers who do notqualify for traditional bank financing.

In Portland, Oregon, the Metro CCR&R agencyfinances child care through no-interest loans toproviders. Metro pays the interest to the bank, andthe provider pays the principal.

Colorado is exploring a multibank strategy forfacilities financing.

Contacts

Richard Ferlauto or Tracey ArvinCenter for Policy Alternatives1875 Connecticut Avenue, Suite 710Washington, DC 20009Phone: (202) 387-6030Fax: (202) 986-2539E-mail: [email protected] or [email protected]

Russell SimmonsSenior Vice PresidentRiggs National Bank of Washington, D.C.Retail Banking GroupCommunity Reinvestment800 17th Street, NWWashington, DC 20074-0796Phone: (202) 835-5289Fax: (202) 835-4955

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RESOURCES AND INDEX

References and Bibliography 113Appendik 1: Revenue-Generation Methods 115Appendix 2: Understanding Tax Strategies andthe Powers of Government 117Appendix 3: Key National Organizations inChild Care and Family Support 119Appendix 4: National Children's Facilities Network 127Index 129

BEST COP 1

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APPENDIX 1: REVENUE-GENERATION METHODS

Taxation

The public sector generates revenue primarily throughown, spend and earn. Taxation occurs at all levels of go

Types of taxes levied by various unitsof governmentWhat you own

property taxes on real estatepersonal property taxesmotor vehicle taxes

What you spendsales taxes on purchases of goods and servicesexcise taxes on specific goods (e.g., cigarettes,liquor, fuel) and services (e.g., hotels)

What you earnincome taxes (personal and corporate)capital gains taxes

Local government(city, county, school district)What you own

property taxes (the major source of localrevenueover half goes to schools)

What you spendsales taxesmost states with sales taxes permitlocalities to levy additional sales taxesreal estate transfer taxes

What you earnincome taxes (17 states permit localities to taxpersonal and corporate income)capital gains taxes

taxation. Taxes are assessed based on what youvernment.

State governmentWhat you own

personal property taxesmotor vehicle taxes

What you spendsales taxes (45 states)the major source ofrevenue for statesreal estate transfer taxes

What you earnincome taxes (41 states)individual taxes arethe second-largest source of revenue for statescapital gains tax

Federal governmentWhat you own

no national property tax

What you spendno national sales taxexcise taxes (e.g., fuel, air travel, alcohol,cigarettes)

What you earnpersonal income taxes (the major source offederal revenue)corporate income taxescapital gains taxes

128115 IC

Fees

Public-sector revenue also can be generatedby fees, which can be collected at any level ofgovernment but are more common at the locallevel.

Impact fees anticipate the need for govern-ment services (e.g., roads, water, schools) thatwill result from actions by the private sectorthat will cause population growth, and areintended of offset their costs.

Service fees shift the cost (or part of thecost) from government to the user of a publicservice (e.g., mortgage/deed records, garbagecollection).

Enterprise fees are generated from a self-supporting enterprise created by government(e.g., municipal golf course, state lottery,national park) for which fees can be charged.The profits generated by the enterprise areused for other government expenses.

3 116 120

APPENDIX 2: UNDERSTANDING TAX STRATEGIESAND THE POWERS OF GOVERNMENT

TAX STRATEGIESMany of the innovative mechanisms for financingchild care profiled in this catalog involve taxes: newtaxes, tax deductions, tax credits. In this appendix,basic tax information is provided, including a dis-cussion of the control state government has overlocal revenue generation.

The federal personal income taxThe federal government imposes an annual incometax on the earnings of every individual resident andcitizen of the United States. It derives about two-thirds of its revenue from taxes on personal andbusiness incomes. Individuals are taxed on what iscalled their "taxable income," which is definedunder federal income tax law as gross income minusallowable deductions.

Deductions are one way the federal governmentprovides what can be thought of as tax subsidies.(The same is true for states that provide deductionsor tax credits.) For example, federal law allowsdeductions for charitable contributions and homemortgage interest payments. It also allows deduc-tions for what are called "personal exemptions," forthe taxpayers themselves and for any of their depen-dents. Deductions are important to taxpayersbecause they usually reduce the amount of theincome tax below what it would have been withoutthe deduction.

Taxpayers also can receive tax subsidies throughwhat are called tax credits. Federal law allows a taxcredit for "dependent care," which is described morefully in the section on tax credits, deductions andexemptions. The earned income tax credit (EITC) isanother example of a tax credit under federal taxlaw. Tax credits are subtracted from the tax other-wise owed by the taxpayer. Thus, in contrast to adeductionwhich only reduces taxes owed by theamount of the allowable deduction (multiplied then

by the taxpayer's applicable tax rate)a tax crediteffectively gives the taxpayer a dollar-for-dollar taxreduction. In general, therefore, tax credits are morevaluable to lower-bracket taxpayers.

Finally, federal income tax law allows individualtaxpayers to deduct the amount of certain state andlocal taxes they have paid from what they calculateto be their total federal taxable income, includingthe state and local personal income taxes they havepaid and any local real property taxes they havepaid. This deduction is available only for those tax-payers who are able to itemize their deductions, thatis, those with deductions in excess of 7.5 percent oftheir income. If increasing certain state or localtaxes to fund children's services is under considera-tion, the fact that taxes are deductible might beused as an argument to assuage those taxpayers whofight against tax hikes. Since only the higher-wageearners are able to itemize their deductions (two-thirds of taxpayers take the standard deduction),this argument will be most persuasive to higher-income voters.

State taxesHistorically, states have been responsible for thehealth, safety and welfare of their citizens (as con-trasted with the federal government, which is theprotector of citizens' national rights, e.g., voting,speech). Thus, states are free to tax their citizens asmuch as their elected officials are willing to allow.Most states, like the federal government, have a per-sonal income tax. Together with corporate incometaxes, they are a major source of state revenue. Theother major source of state revenue is from salestaxes. States also rely on motor fuel taxes, motorvehicle taxes and license taxes to generate revenue.As federal grants-in-aid to states continue to dwindle,states have begun to rely on new taxes, such as thoseon tobacco or alcohol, to increase tax revenue.

117

Local taxesVery few localities have a personal income tax(several large cities have imposed an income tax,e.g., New York City). Rather, the mainstay of localtax. revenue is the property tax (generating approxi-mately 75 percent of localities' revenue). The tax isimposed on real property owned within the locality.Localities are granted by their states the authority toboth set the rates of and collect property taxes. Ahundred years ago, states levied and collected prop-erty tax, but they gradually relinquished this dutyto localities because property taxation is much moreeasily administered at the local level (as is the casewith many taxes).

A more recent development in state and localfiscal relations is an increase in the number of statesallowing localities to enact non-property taxes.Non-property taxes are sometimes referred to as"permissive" taxes, and they include taxes on:incomes, sales, hotel room occupancy, restaurantmeals, taxi rides, cigarettes, gasoline and grossreceipts. Use of such permissive taxes, along withthe property tax, provides localities with new mech-anisms to generate revenue.

LIMITATIONS ON GOVERNMENTS' POWERSAcross the country, not all localities share the samerights or authority. Under state and local governmentlaw, the simple rule is that the local government cando anything that the state permits it to do andnothing more. Thus, state legislatures decide whichaspects of health, safety and welfare can be theresponsibility of their localities.

Authorization for localities to act in a specificarea can come in one of two ways: expressly throughstate legislation or through what is known as "homerule." The home rule movement was born fromlocalities that wanted to engage in self-governmentin areas that seemed classically local in character(e.g., fire, education, land use, zoning). In response,many states began to grant specific powers to theirlocalities. Today, the two sources of local powerenabling legislation and home ruleare not adichotomy but more nearly define the ends of acontinuum. Most states have elements of both models;however, each state is different: some states havegranted ultimate decision-making power to localitieson issues that have been deemed "local" (e.g., Colorado),and others have reserved the power to preempt localdecisions (e.g., Massachusetts).

1. Jerome R. Hellerstein & Walter Hellerstein, State & Local Taxation, West Publishing Co., 1988, p. 15 (citations omitted).

2. William D. Andrews, Basic Income Taxation, Little Brown & Co. 1991, pp. 19-21.

3. Marvin A. Chirelstein, Federal Income Taxation, Foundation Press, 1994, p. 170.

4. Hellerstein & Hellerstein p. 4.

5. Hellerstein & Hellerstein p. 11.

118 31

APPENDIX 3: KEY NATIONAL ORGANIZATIONSIN CHILD CARE AND FAMILY SUPPORT

National constituentmembership organizations

Ecumenical Child Care Network is an organizationof church-related child care providers that began inthe early 1980s as a project associated with theNational Council of Churches Child Advocacy Office.Today, it is an independent organization that con-ducts research and public education, and providesresources and supports, including an accreditationsystem for church-related programs with mentoringand self-study components.

Carmelita Madison, Executive DirectorEcumenical Child Care Network8765 West Higgins Road, Suite 405Chicago, IL 60631(312) 693-4040

National Association for Family Child Care isa national membership organization of family daycare providers, and local and state family day careassociations. It sponsors an annual national conferenceand an accreditation program for family day careproviders. NAFCC has about 3,500 members and isgoverned by a board of 10 regional representatives.NAFCC is focusing its efforts on supporting familychild care associations and promoting qualitythrough accreditation.

Deborah Eaton, PresidentNational Association for Family Child Care206 Sixth Avenue, Suite 900Des Moines, IA 50309-4015(515) 282-8192(619) 466-8340 (in California)

National Association for the Education ofYoung Children is a national membership organi-zation organized in the early 1900s to work onbehalf of the needs, rights and well-being of allyoung children. It has about 85,000 members, isgoverned by an elected board of 17 members andhas more than 425 affiliate groups in the U.S. andoverseas. NAEYC sponsors the National Academy ofEarly Childhood Programs, which accredits center-based programs for children birth through age five.NAEYC's Early Childhood Professional DevelopmentInstitute works to establish professional standardsand definitions in the field for all programs servingchildren birth through age eight. NAEYC publishesa bimonthly journal, Young Children, and sponsors anational conference annually.

Marilyn Smith, Executive DirectorNational Association for the Education

of Young Children1509 16th Street, NWWashington, DC 20036-1426(800) 424-2460

32 119

National Association of Child Advocates wasfounded in 1984 to create and sustain state- andcommunity-based child advocacy organizations. Its51 member organizations in 40 states and sevencities and communities are citizen-based, nonprofit,independent, multi-issue advocates working toeducate decision makers on children's programs,collect data on the status of children, litigate whenneeded and inform the public and the media onchildren's issues including food, shelter, security,health and education.

Eve Brooks, Executive DirectorNational Association of Child Advocates1522 K Street, NW, Suite 600Washington, DC 20005(202) 289-0777

National Association of Child Care Resourceand Referral Agencies is a national organizationbegun in 1986 to promote the growth and develop-ment of high-quality resource and referral servicesand to exercise national leadership to build a diverse,high-quality child care system with choice andequal access for all families. It has close to 500member agencies and is governed by a board thatincludes representatives of its eight regions. NAC-CRRA sponsors a national policy symposium annually,as well as eight regional conferences for training andtechnical assistance.

Yasmina Vinci, Executive DirectorNational Association of Child Care Resource

and Referral Agencies1319 F Street, NW, Suite 810Washington, DC 20004(202) 393-5501

120

National Black Child Development Institute,founded in 1970, is dedicated to improving thequality of life for black children and families. Childcare/early childhood education is one of its four majorareas of focus. NBCDI is a public policy and publiceducation organization. Its local affiliates, in mostmajor cities and many other areas of the country,provide direct services to black children and youth.

Evelyn K. Moore, Executive DirectorNational Black Child Development Institute1023 15th Street, NW, Suite 600Washington, DC 20005(202) 387-1281

National Center for the Early Childhood WorkForce is a national resource and advocacy organizationdedicated to improving child care quality throughbetter wages and working conditions for child carestaff. It was formerly the Child Care EmployeeProject, which began in Oakland, California, in the1980s. NCECW conducts research, public educationand demonstration projects. Its Mentor TeacherProject is a model staff -development programaddressing both the supervision and compensationissues in child care. The NCECW supports thegrassroots Worthy Wage Campaign.

Claudia Wayne, Executive DirectorNational Center for the Early Childhood Work Force733 15th Street, NW, Suite 1037Washington, DC 20005(800) U-R WORTHY(202) 737-7700

I33

National Head Start Association is a membershiporganization representing children, parents, staff anddirectors of Head Start programs. The mission ofthe organization is to advocate for children and fam-ilies and provide opportunities for the Head Startcommunity to affect Head Start. Its board is com-posed of equal numbers of representatives from theNational Head Start Parent Association, the NationalHead Start Directors Association, the NationalHead Start Staff Association and the National HeadStart Friends Association.

Sarah Greene, Chief Executive OfficerNational Head Start Association1631 Prince StreetAlexandria, VA 22314(703) 739-0875

National School-Age Child Care Affiance is amembership organization of individuals and groupsformed in 1987. NSACCA is committed to advocat-ing and supporting the development and expansionof quality, affordable, accessible school-age child carenationally and promoting the professionalism ofschool-age child care. It is an all-volunteer organiza-tion that sponsors an annual national conference andactively works to develop state and local school-agechild care alliances. NSACCA has about 2,000 mem-bers and is governed by a 28-member elected board.

Ellen Clippinger, PresidentNational School-Age Child Care Alliance2140 West 44th StreetIndianapolis, IN 46208(317) 283-3817

National education organizations with earlycare and education interests

Council of Chief State School Officers is thenational organization of the superintendents of edu-cation of the 50 states and U.S. territories. In 1988,CCSSO endorsed a policy statement on early childhoodand family education and did significant work with itsmembers to implement it. CCSSO played a key rolein marshaling the support of education organizationsfor passage of the 1990 federal child care legislation.Its Resource Center on Educational Equity isinvolved in a number of early childhood projects;Cynthia Brown is the resource center's director.

Gordon Ambach, Executive DirectorCouncil of Chief State School OfficersOne Massachusetts Avenue, NW, Suite 700Washington, DC 20001-1431(202) 408-5505

National Association of Early ChildhoodSpecialists in State Departments of Educationis a national membership organization for the earlychildhood specialists who work in each state'sdepartment of education. It has about 75 membersand has been in existence for more than 20 years.Although it does not have an office or paid staff,NAECS/SDE has issued many influential policystatements on subjects ranging from kindergartenpractices to a national children's policy.

Susan Andersen, PresidentOffice of Educational Services for Children,

Families and CommunitiesIowa Department of EducationGrimes State Office BuildingDes Moines, IA 50319-0146(515) 281-4747

134121

National Association of Elementary SchoolPrincipals is the national membership organizationfor elementary principals. NAESP defined the stan-dards of good practice for early childhood programsin schools during 1993, and in 1994 it releasedstandards for school-age child care.

National Association of Elementary School Principals1615 Duke StreetAlexandria, VA 22314(703) 684-3345

National Association of State Boards of Educa-tion is the membership organization for membersof state boards of education. Since 1987, NASBEhas had an early childhood program directed byTom Schultz. Its widely distributed publication,Right from the Start, proposed a collaborative rela-tionship between schools and other early childhoodeducation programs and was influential with manypolicy makers and practitioners. NASBE convened aNational Task Force on School Readiness (chaired bythen-Governor Bill Clinton). The task force report,Caring Communities, redefines readiness as a sharedobligation between government, communities andfamilies, and offers clear directions for achieving thefirst national education goal.

National Association of State Boards of Education1012 Cameron StreetAlexandria, VA 22314(703) 684-4000

National policy makers' organizations

National Conference of State Legislatures wasfounded in 1975 as a bipartisan organization dedicatedto serving lawmakers and staffs of the nation's 50states, commonwealths and territories. NCSL iscommitted to improving the quality and effectivenessof state legislatures, fostering interstate communica-tion and cooperation and ensuring legislatures astrong, cohesive voice in the federal system. NCSLserves as a conduit for communication amonglawmakers and a source for research, publications,consulting services, meetings and seminars. NCSL'sChildren and Families Program provides services tolegislators and staff working to improve state policiesaffecting children and their families. Issues includejuvenile violence, child welfare, child protection,welfare reform, human services reform, and early childcare and education. Scott Groginsky is the state spe-cialist for child care and early childhood education.

Shelley Smith, DirectorChildren and Families ProgramNational Conference of State Legislatures1560 Broadway, Suite 700Denver, CO 80202(303) 830-2200

National Governors' Association was founded in1908 to enable governors to deal collectively withissues of public policy and governance. NGA's missionis to support the work of governors by providing abipartisan forum to help shape and implement nationalpolicy and to solve state problems. Its members arethe governors of the nation's 50 states, territoriesand commonwealths. The Center for Policy Researchis the research and development arm of the associa-tion, working in a number of policy fields includingeducation and social services.

National Governors' Association444 North Capitol StreetWashington, DC 20001(202) 624-5300

Other national organizations with an earlycare and education focus

Center for Career Development in Early Careand Education at Wheelock College is devoted toimproviri$ the quality of care and education for youngchildren by creating a viable career development systemfor practitioners. In late 1993, the center released areport, Making a Career of It, based on its nationalstudy of career development in the states. The studyexamined regulation, training opportunities andfinancial support for the preparation of home- andcenter-based practitioners. The center is working ina number of states to create career development sys-tems that link local projects with state policy changesand the higher education community. The center isa clearinghouse on information about career devel-opment activities across the country. The center'sAction Packs on planning, financing, training andother issues are valuable resources.

Andrea Genser, DirectorCenter for Career Development

in Early Care and EducationWheelock College200 The RiverwayBoston, MA 02215-4176(617) 734-5200, ext. 211

Child Care Action Campaign is a national coalitionof organizations and individuals formed in 1983 torespond to the nationwide child care crisis. Throughpublications, research and media projects, CCACprovides resources to the public to help them under-stand child care problems and work for change.

Barbara Reisman, Executive DirectorChild Care Action Campaign330 Seventh Avenue, 17th FloorNew York, NY 10001(212) 239-0138

Child Care Law Center is a national, nonprofit legalservices organization founded in 1978. The centeruses legal tools to advance and implement publicpolicy initiatives that help families meet child careneeds and help child care providers deliver high-quality services. CCLC provides legal support to thechild care community as a legal services supportcenter, through training and through its publications.

Deena Lahn, Executive DirectorChild Care Law Center22 Second Street, 5th FloorSan Francisco, CA 94105(415) 495-5498

Children's Defense Fund is a national advocacyorganization focused on children, especially childrenin poverty. Through its publications, research andfederal legislative advocacy efforts, CDF seeks toimprove the quality of life for poor children and theirfamilies. CDF has various departments organized byissues area, e.g., child welfare, child care. It sponsorsan annual conference and publishes a regular newsletter.

Helen BlankChild Care and Development DivisionChildren's Defense Fund25 E Street, NWWashington, DC 20001(202) 662-3547

1 36 123

National Center for Children in Poverty wasestablished in 1989 at the School of Public Health,Columbia University. Its mission is to identify andpromote strategies that reduce the number of youngchildren living in poverty in the U.S., and thatimprove the life chances of the millions of childrenunder six who are growing up poor. The centeralerts the public to demographic statistics aboutchild poverty and scientific research on its impacts;conducts field-based studies to identify promisingprograms, policies and practices that benefit youngchildren and their families; convenes public-privatemeetings and issues reports; and disseminates infor-mation on early childhood care and education, childhealth, and family and community support. AnnCollins is the program associate for early childhoodcare and education.

J. Lawrence Aber, DirectorNational Center for Children in PovertyColumbia School of Public Health154 Haven AvenueNew York, NY 10032(212) 304-7100

National Child Care Information Center wasestablished to complement, enhance and promotechild care linkages and to serve as a mechanism forsupporting quality comprehensive services for childrenand families. NCCIC is an activity of the Child CareTechnical Assistance Project funded by the federalAdministration for Children and Families. Thecenter supports the Child Care Bureau to collectand analyze child care data and maintains a databaseof information reported by states, tribes and territo-ries. NCCIC is the national clearinghouse for childcare publications and research within the EducationResources Information Clearinghouse (ERIC) system.The center publishes the bimonthly Child CareBulletin, and offers toll-free phone, fax and electronicaccess to information.

Anne Goldstein, DirectorNational Child Care Information Center301 Maple Avenue, Suite 602Vienna, VA 22180(800) 616-2242

124

School-Age Child Care Project is a national policyresearch, training and technical assistance projectfocused on improving the quantity and quality ofschool-age child care and raising public awareness ofthe importance of children's out-of-school time. It ispart of the Center for Research on Women atWellesley College. The SACC Project began in1977 and has developed quality assessment tools forschool-age child care programs, provided trainingacross the country and conducted research on variousaspects of school-age care. The SACC Project worksclosely with the National School-Age Child CareAlliance, and in partnership they are developing aprogram accreditation system.

Michelle Seligson, DirectorSchool-Age Child Care ProjectWellesley College Center for Research on Women106 Central StreetWellesley, MA 02181(617) 283-2547

Zero to Three: National Center for Infants,Toddlers and Families, formerly known as theNacional Center for Clinical Infant Programs, is anational organization dedicated solely to improvingthe chances for healthy physical, cognitive and socialdevelopment of infants, toddlers and their families.It was founded in 1977 by a dozen experts inhealth, mental health and human development whowanted to share with families, caregivers and policymakers the "new" knowledge about how infants andtoddlers develop.

Michael Melman, Executive DirectorZero to Three734 15th Street, NWWashington, DC 20005(202) 638-1144

137

Family support and parenteducation organizations

Family Resource Coalition is a national membershiporganization dedicated to communicating about familysupport. The coalition is a network of people andprograms committed to community-based preventiveservices for families. FRC publishes a quarterly maga-zine and a bimonthly networking newsletter, alongwith numerous other publications, and sponsors nationalmeetings and an annual conference. FRC operatesthe National Resource Center for Family SupportPrograms, which provides information and technicalassistance to individuals, states and communities.

Family Resource Coalition200 S. Michigan Avenue, Suite 1520Chicago, IL 60604(312) 341-0900

National Center for Family Literacy is a trainingand technical assistance organization devoted to pro-moting family literacy based on the model developedin Kentucky (Parent and Child Education, or PACE).PACE later served as the foundation for the nationalEven Start program. Family literacy combines adultbasic education, parenting education, and earlychildhood education incorporating some parent-childactivities. The center publishes a newsletter, offerspublications and sponsors national conferences.

Sharon Darling, Executive DirectorNational Center for Family LiteracyWaterfront Plaza, 325 W. Main Street, Suite 200Louisville, KY 40202-4251(502) 584-1133

Parents as Teachers National Center was estab-lished by the Missouri Department of Elementaryand Secondary Education in 1987 to support andpromote replication of the PAT model within andoutside of Missouri. In 1990, the center became anindependent nonprofit organization. It providestraining and technical assistance to a wide variety ofstates, school districts and other agencies on familyeducation through the PAT approach.

Mildred Winter, Executive DirectorParents as Teachers National Center9374 Olive BoulevardSt. Louis, MO 63132(314) 432-4330

138 125

National organizations with a business focus

American Business Collaboration for QualityDependent Care was formed in 1992 to increasethe supply and quality of dependent care services inthe U.S. ABC is a partnership among 156 businessesand public-/private-sector organizations. By helpingcompanies identify common interests and pool theirresources, ABC enables the business community toinvest in a range of services in many geographic areas.These efforts target specific needs of company employees

and also support existing community services. Thenational corporate work-life services consultingfirm, Work/Family Directions, manages ABC.

Work/Family Directions930 Commonwealth AvenueBoston, MA 02215(800) 767-9863

Employer Group is a limited membership groupof 25 major corporations and one governmentagency that focuses on the work-family concernsof low-wage and entry-level workers. The group isco-chaired by a representative from Marriott Inter-national and one from J.C. Penney. The Familiesand Work Institute staffs the group.

Families and Work Institute is a national, non-profit organization that addresses the changingnature of work and family life through research-based strategies that foster mutually supportive con-nections among workplaces, families and communi-ties. FWI works in the business, public policy andchild care communities, locally and nationally. FWIstaffs New York City's Early Education BusinessLeadership Group, the national Employer Groupand the national Early Childhood Public Engage-ment Campaign. FWI produces research reports andother publications on a wide variety of topics.

Ellen Galinsky, PresidentFamilies and Work Institute330 Seventh AvenueNew York, NY 10001(212) 465-2044

APPENDIX 4: NATIONAL CHILDREN'SFACILITIES NETWORK

Laura Benedict, DirectorNorth Carolina Community Facilities Fundc/o Center for Community Self-HelpP.O. Box 3619Durham, NC 27702-3619Phone: (919) 956-4430Fax: (919) 688-3615

Gerald Cutts, Executive DirectorDevelopment Corporation for Children212 Third Avenue N., Suite 310Minneapolis, MN 55401Phone: (612) 338-3023Fax: (612) 333-4068

Carol Glazer, Senior Vice-PresidentAmy Gillman, Assistant Program DirectorLocal Initiatives Support Corporation (LISC)733 Third AvenueNew York, NY 10017Phone: (212) 455-9834Fax: (212) 682-5929

Jim Klein, Executive DirectorOhio Community Development Finance Fund (CDFF)42 E. Gay Street, Suite 1000Columbus, OH 43215-3119Phone: (614) 221-1114, (800) 959-2333Fax: (614) 221-7493E-mail: [email protected]

Trinita Logue, PresidentKaren Schmuhl, Director of Finance and LendingBob Palmer, Research AssistantThe Illinois Facilities Fund (IFF)300 W. Adams Street, Suite 431Chicago, IL 60606Phone: (312) 629-0060Fax: (312) 629-0065E-mail: [email protected]

Norah McVeigh, Associate Directorof Financial Services

Non-Profit Facilities Fund70 W. 36th Street, 11th FloorNew York, NY 10018Phone: (212) 868-6710Fax: (212) 268-8653

Phebe Royer, Loan and Investment OfficerCoastal Enterprises, Inc.Water StreetP.O. Box 268Wiscasset, ME 04578Phone: (207) 882-7552Fax: (207) 882-7308

Wanda James Speight, Director of LendingDelaware Valley Community Reinvestment

Fund (DVCRF)924 Cherry Street, 3rd FloorPhiladelphia, PA 19107Phone: (215) 925-1130, ext. 211Fax: (215) 923-4764E-mail: 74363,[email protected]

14012 7

Janette Stokley, Child Care Project ManagerThe National Economic Development

& Law Center (NED&LC)2201 Broadway, Suite 815Oakland, CA 94612Phone: (510) 251-2600Fax: (510) 251-0600E-mail: [email protected]

Carl SussmanChild Care Capital Investment Fundc/o Sussman & Associates294 Washington Street, Suite 330Boston, MA 02108-4608Phone: (617) 357-8555Fax: (617) 728-3028E-mail: [email protected]

128

Susan Trusty-Holman, Executive DirectorEarly Childhood Facilities Fund of New Jersey65 S. Main Street, Building DPennington, NJ 08534Phone: (609) 730-1070Fax: (609) 730-1075

141

INDEX

A+ Program (Hawaii) 50, 65-66Accreditation

Allegheny County Early Childhood 68, 84-86Initiative (Pittsburgh, Pennsylvania)The American Business 5, 72-73Collaboration for QualityDependent CareChild Care Quality Improvement 57-58Initiatives (Wisconsin)Children's Services Special 11-15Taxing Districts (Florida)Commercial Lender-Public-Sector 111-112Partnership (District of Columbia)The Florida Public Education Lottery 10, 45-47Houston Area Network for 67, 74-75Dependent Services (CorporateH.A.N.D.S.; Texas)"Invest in Children" License Plate 4, 9, 42(Massachusetts)Rochester/Monroe County Early 4, 87, 94-96Childhood Development Initiative(New York)Voluntary Income Tax Checkoff 8, 25-26for Child Care (Colorado)

Administrative servicesThe Children's Services Fund: 7, 18-19Proposition J (San Francisco,California)NYSLMCCAC Enrichment 76-77Grants Program (New York)

After-school programsThe American Business 5, 72-73Collaboration for QualityDependent CareA+ Program (Hawaii) 50, 65-66

Note: Green page numbers indicate material in tables.

Child and Dependent 27, 31-32Care Credit (Minnesota)Child and Dependent Care 27, 28-30Tax CreditThe Children's Services Fund: 7, 18-19Proposition J (San Francisco,California)Children's Services Special 11-15Taxing Districts (Florida)Con Agra Child Care Initiative 27, 67, 68-69Families and Education Levy 7, 16-17(Seattle, Washington)Levi Strauss & Company 67, 70-71Child Care Initiative1199/Employer Child Care Fund 67, 78(New York City)

Alabamafunding for child care/early education 51income tax provisions for child care 33

Alaskafunding for child care/early education 51

8, 27, 3353

income tax provisions for child careinvestment in prekindergartenand family education

Allegheny County Early Childhood 68, 84-86Initiative (Pittsburgh, Pennsylvania)

The American Business Collaboration 5, 72-73for Quality Dependent Care

Ames, Iowa, Local Option Sales Tax 8, 23-24Arizona

funding for child care/early education 51income tax provisions for child care 33investment in prekindergarten andfamily education 53state lottery 10

142 1.29

Arkansasfunding for child care/early educationincome tax provisions 8, 27,for child careinvestment in prekindergartenand family education

Aspen, Colorado, Dedicated Sales Tax 4, 8,At-Risk Child Care

5131, 33

53

20-221

Bond issuesgeneral obligation (Minnesota)tax-exempt (Illinois)

Buildings.See Facility construction / improvement

99-100100-101

CaliforniaChild Care Scholarship Fund of the 68,Marin Community Foundation(Marin County)The Children's Services Fund:Proposition J (San Francisco)funding for child care/early educationincome tax provisions for child careinvestment in prekindergartenand family education

Child Care Licensing Fees (Virginia) 9, 40-41Child Care Partnership Act (Florida) 5, 67, 75-76Child Care Quality 57-58

Improvement Initiatives (Wisconsin)Child care resource and

referral services (CCR&R)Child Care Quality 57-58Improvement Initiatives (Wisconsin)Dedicated Sales Tax 4, 8, 20-22(Aspen, Colorado)Enterprise Zone Contributions 37Tax Credit (Colorado)Houston Area Network for 67, 74-75Dependent Services(Corporate H.A.N.D.S.; Texas)Levi Strauss & Company 67, 70-71

81-82 Child Care InitiativeLocal Option Sales Tax (Ames, Iowa) 8, 23-241199/Employer Child Care Fund 67, 78(New York City)

Child Care Scholarship Fund of the 68, 81-8251 Marin Community Foundation33 (Marin County, California)53 The Children's Services Fund: 7, 18-19

Proposition J (San Francisco, California)Children's Services Special 11-15

Taxing Districts (Florida)Colorado

Dedicated Sales Tax (Aspen) 4, 8, 20-22Early Childhood/Youth Crime 50, 59-60Prevention and InterventionEnterprise Zone Contributions 37Tax Creditfunding for child care/early education 51income tax provisions for child care 9, 28, 33investment in prekindergarten and 53family educationstate lottery 10Voluntary Income Tax Checkoff for 8, 25-26Child Care (Colorado)

Commercial Lender-Public-Sector 111-112Partnership (District of Columbia)

Community child care initiatives.See Private sector financing

Community Development Finance Fund 110-111Linked Deposits (Ohio)

Community Development Financing 108-109(North Carolina)

Con Agra Child Care Initiative 27, 67, 68-69

7, 18-19

The Model Centers Initiativeof the Miriam and Peter Haas Fund(San Francisco)

68, 83-84

state lottery 10Child and Dependent

Care Credit (Minnesota) 27, 31-32Child and Dependent Care Tax Credit 27, 28-30Child care

costs of 2, 3defined 1functions in society 1rationales for 4revenue sources for 3state-by-state funding for 51-52state dependent care provisions 8, 33-34state investments in 49, 53-54system of 2

Child-Care and Development 1, 50Block Grant (CCDBG)

Child Care and Development Fund 1Child Care Center Start-up and Health

and Safety Grant Program (New York)102-103

Child Care Facilities 106-107Direct Loan Program (Maryland)

130 143

Connecticutfunding for child care/early educationincome tax provisions for child careinvestment in prekindergarten andfamily education

Crime prevention.See Delinquency prevention

5128, 33

53

Dedicated Sales Tax (Aspen, Colorado) 4, 8, 20-22Delaware

funding for child care/early education 51income tax provisions for child care 33investment in prekindergarten and 53family education

Delinquency preventionThe Children's Services Fund: 7, 18-19Proposition J (San Francisco, California)Children's Services Special 11-15Taxing Districts (Florida)Early Childhood/Youth Crime 50, 59-60Prevention and Intervention (Colorado)

Dependent care assistance plans (DCAPs) 2Con Agra Child Care Initiative 27, 67, 68-69described 9, 27Federal Dependent Care 9, 27, 35-36Assistance Plan (New York)

Disability insurance programs, Temporary 67, 79-80Disability Insurance Coverage forMaternity Leave (New Jersey)

District of ColumbiaCommercial Lender-Public-Sector 111-112Partnershipincome tax provisions for child care 33investment in prekindergarten and 53family education

The Early Childhood Investment Fund 87, 88-90(New York)

Early Childhood/Youth Crime Prevention 50, 59-60and Intervention (Colorado)

Enterprise Zone ContributionsTax Credit (Colorado)

Equipment and materialsThe American Business Collaboration 5, 72-73for Quality Dependent CareChild Care Facilities Direct Loan 106-107Program (Maryland)

Family Child Care Start-up and 104-105Health and Safety Grants Program(New York)The Georgia Lottery for Education 10, 43-44Houston Area Network for 67, 74-75Dependent Services(Corporate H.A.N.D.S.; Texas)"Invest in Children" License Plate 4, 9, 42(Massachusetts)The Model Centers Initiative of the 68, 83-84Miriam and Peter Haas Fund(San Francisco, California)NYSLMCCAC Enrichment Grants 76-77Program (New York)State Loan Guarantee Program 105-106(Maryland)

Facility construction/improvement 50, 97-112Allegheny County Early Childhood 68, 84-86Initiative (Pittsburgh, Pennsylvania)The American Business Collaboration 5, 72-73for Quality Dependent CareChild Care Center Start-up and 102-103Health and Safety Grant Programs(New York)Child Care Facilities Direct Loan 106-107Program (Maryland)Child Care Quality Improvement 57-58Initiatives (Wisconsin)Children's Services Special Taxing 11-15Districts (Florida)Commercial Lender-Public-Sector 111-112Partnership (District of Columbia)Community Development Finance 110-111Fund Linked Deposits (Ohio)Community Development Financing 108-109(North Carolina)Con Agra Child Care Initiative 27, 67, 68-69Enterprise Zone Contributions 37Tax Credit (Colorado)

37 Families and Children First (Ohio) 62-65Family Child Care Start-up and 104-105Health and Safety Grants Program(New York)general obligation bonds (Minnesota) 99-100

144 131

Houston Area Network for 67, 74-75Dependent Services(Corporate H.A.N.D.S.; Texas)Local Option Sales Tax (Ames, Iowa) 8, 23-24The Model Centers Initiative of the 68, 83-84Miriam and Peter Haas Fund(San Francisco, California)Rochester/Monroe County 4, 87, 94-96Early Childhood DevelopmentInitiative (New York)Special Child Care Revolving 107-108Loan Fund (Maryland)State Loan Guarantee Program 105-106(Maryland)tax-exempt bonds (Illinois) 100-101

Families and Children First (Ohio) 62-65Families and Education Levy 7, 16-17

(Seattle, Washington)Family-based child care programs

Allegheny County Early Childhood 68, 84-86Initiative (Pittsburgh, Pennsylvania)Child and Dependent Care Credit 27, 31-32(Minnesota)Child and Dependent Care Tax Credit 27, 28-30Child Care Licensing Fees (Virginia) 9, 40-41The Children's Services Fund: 7, 18-19Proposition J (San Francisco, California)Commercial Lender-Public-Sector 111-112Partnership (District of Columbia)Family Child Care Start-up and 104-105Health and Safety Grants Program(New York)Federal Dependent Care 9, 27, 35-36Assistance Plan (New York)1199/Employer Child Care Fund 67, 78(New York City)

Family Child Care Start-up and Health 104-105and Safety Grants Program (New York)

Family education programs.See Parent /consumer education

Federal Dependent Care 9, 27, 35-36Assistance Plan (New York)

Federal income tax credits, deductions, 2and exemptions (personal)

Child and Dependent Care 27, 28-30Tax Creditdescribed 8, 27

132

Federal income tax credits and deductions(corporate). See Dependent care assistance

plans (DCAPS)Fees 40-42

categories of 9Child Care Licensing Fees (Virginia) 9, 40-41described 7, 9, 40"Invest in Children" License Plate 4, 9, 42(Massachusetts)

FloridaChild Care Partnership Act 5, 67, 75-76Children's Services Special Taxing 11-15Districts (Tampa and Palm Beach)The Florida Public Education Lottery 10, 45-47

funding for child care/early education 51investment in prekindergarten and 53family education

Gambling.See Lotteries

General obligation bonds (Minnesota) 99-100Georgia

funding for child care/early education 51The Georgia Lottery for Education 10, 43-44income tax provisions for child care 33investment in prekindergarten and 53family education

Grants to nonprofit centers 98, 99-105Child Care Center Start-up and 102-103Health and Safety Grant Program(New York)Child Care Center Start-up and 102-103Health and Safety Grant Programs(New York)Children's Services Special 11-15Taxing Districts (Florida)Dedicated Sales Tax 4, 8, 20.22(Aspen, Colorado)general obligation bonds (Minnesota) 99-100Rochester/Monroe County 4, 87, 94-96Early Childhood DevelopmentInitiative (New York)tax-exempt bonds (Illinois) 100-101

145

HawaiiA+ Program 50, 65-66funding for child care/early education 51income tax provisions for child care 33investment in prekindergarten and 53family education

Head Start programs 1Allegheny County Early Childhood 68, 8486Initiative (Pittsburgh, Pennsylvania)Child Care Quality Improvement 57-58Initiatives (Wisconsin)Children's Services Special 11-15Taxing Districts (Florida)Community Development Finance 110-111Fund Linked Deposits (Ohio)Families and Children First (Ohio) 62-65Families and Education Levy 7, 16-17(Seattle, Washington)The Florida Public Education Lottery 10, 45-47general obligation bonds (Minnesota) 99-100state investments in 53-54See also Prekindergarten programs

Health and safetyChild Care Center Start-up and 102-103Health and Safety Grant Programs(New York)The Children's Services Fund: 7, 18-19Proposition J (San Francisco, California)Family Child Care Start-up and 104105Health and Safety Grants Program(New York)NYSLMCCAC Enrichment 76-77Grants Program (New York)Smart Start (North Carolina) 50, 87, 91-92

Houston Area Network for 67, 74-75Dependent Services(Corporate H.A.N.D.S.; Texas)

Idahofunding for child care/early educationincome tax provisions for child carestate lottery

Illinoisfunding for child care/early educationincome tax provisions for child careinvestment in prekindergarten andfamily educationstate lotterytax-exempt bonds

513310

513353

10100-101

Indianafunding for child care/early education 51income tax provisions for child care 33

Infant careThe American Business Collaboration 5, 72-73for Quality Dependent CareLevi Strauss & Company 67, 70-71Child Care Initiative

Information dissemination and referralprograms. See Child care resource andreferral services (CCR&R)

"Invest in Children" License Plate 4, 9, 42(Massachusetts)

Iowafunding for child care/early education 51income tax provisions for child care 33investment in prekindergarten and 53family educationLocal Option Sales Tax (Ames) 8, 23-24

Job-readiness programsThe Children's Services Fund: 7, 18-19Proposition J (San Francisco, California)Property Tax Abatement 9, 28, 38-39(Travis County, Texas)

Kansasfunding for child care/early educationincome tax provisions for child carestate lottery

Kentuckyfunding for child care/early educationincome tax provisions for child careinvestment in prekindergarten andfamily education

513310

513353

Latchkey programs.See After-school programs

Levi Strauss & Company 67, 70-71Child Care Initiative

Licensing and monitoring 107-108Special Child Care Revolving LoanFund (Maryland)

Loan programs 98, 105-112Child Care Facilities Direct 106-107Loan Program (Maryland)Commercial Lender-Public-Sector 111-112Partnership (District of Columbia)

146 133

Community Development FinanceFund Linked Deposits (Ohio)Community Development Financing(North Carolina)Special Child Care RevolvingLoan Fund (Maryland)State Loan Guarantee Program(Maryland)

Local Option Sales Tax (Ames, Iowa) 8, 23-24Local property taxes (corporate) 8

described 9, 28Property Tax Abatement 9, 28, 38-39(Travis County, Texas)

Local property taxes (personal)The Children's Services Fund:Proposition J (San Francisco, California)Children's Services SpecialTaxing Districts (Florida)described 7Families and Education Levy 7, 16-17(Seattle, Washington)

Lotteries 7described 10, 40The Florida Public Education Lottery 10, 45-47The Georgia Lottery for Education 10, 43-44

Louisianafunding for child care/early education 51income tax provisions for child care 8, 33investment in prekindergarten and 53family education

110-111 Massachusettsfunding for child care/early education 51

108-109 income tax provisions for child care 34"Invest in Children" License Plate 4, 9, 42

107-108 investment in prekindergarten and 53family education

105-106 state lottery 10Maternity leave.

See Minnesota Child and Dependent CareCredit; Temporary Disability InsuranceCoverage for Maternity Leave (New Jersey)

Michiganfunding for child care/early education 51

11-19 income tax provisions for child care 347, 18-19 investment in prekindergarten and 54

family education11-15 state lottery 10

Migrant preschool education, 10, 45-47The Florida Public Education Lottery

Minnesotafunding for child care/early education 51general obligation bonds 99-100income tax provisions 8, 27, 31-32, 34for child careinvestment in prekindergarten and 54family educationstate lottery 10

Minnesota Child and 27, 31-32Dependent Care Credit

Mississippifunding for child care/early educationincome tax provisions for child care 34

51 Missouri33 funding for child care/early education 5153 income tax provisions for child care 34

investment in prekindergarten and 54family education

The Model Centers Initiative of the 68, 83-84Miriam and Peter Haas Fund(San Francisco, California)

Montanafunding for child care/early education 51income tax provisions for child care 34state lottery 10

Multicultural training and curricula, 4, 9, 42"Invest in Children" License Plate(Massachusetts)

Mainefunding for child care/early educationincome tax provisions for child careinvestment in prekindergarten andfamily education

MarylandChild Care FacilitiesDirect Loan Programfunding for child care/early educationincome tax provisions for child careinvestment in prekindergarten andfamily educationSpecial Child CareRevolving Loan FundState Loan Guarantee Programstate lottery

134

106-107

513353

107-108

105-10610

147

Nebraskafunding for child care/early education 51income tax provisions for child care 34

Nevadafunding for child care/early education 51

New Hampshirefunding for child care/early education 51investment in prekindergarten and 54family educationstate lottery 10

New Jerseyfunding for child care/early education 51income tax provisions for child care 34investment in prekindergarten and 54family educationstate lottery 10Temporary Disability Insurance 67, 79-80Coverage for Maternity Leave

New Mexicofunding for child care/early education 51income tax provisions for child care 34

New York City, 1199/Employer 67, 78Child Care Fund (New York City)

New York (state)Child Care Center Start-up and 102-103Health and Safety Grant ProgramsThe Early Childhood Investment Fund 87, 88-90Family Child Care Start-up and 104-105Health and Safety Grants ProgramFederal Dependent Care 9, 27, 35-36Assistance Planfunding for child care/early education 51income tax provisions for child care 34investment in prekindergarten and 54family educationNYSLMCCAC Enrichment 76-77Grants ProgramRochester/Monroe County Early 4, 87, 94-96Childhood Development Initiative(New York)state lottery 10

North CarolinaCommunity Development Financing 108-109funding for child care/early education 52income tax provisions for child care 34Smart StartT.E.A.C.H. Early ChildhoodProject

50, 87, 91-925, 87, 93-94

North Dakotafunding for child care/early educationincome tax provisions for child care

NYSLMCCAC Enrichment GrantsProgram (New York)

5234

76-77

OhioCommunity Development Finance 110-111Fund Linked DepositsFamilies and Children First 62-65funding for child care/early education 52income tax provisions for child care 34investment in prekindergarten and 54family educationstate lottery 10

Oklahomafunding for child care/early education 52income tax provisions for child care 34investment in prekindergarten and 54family education

1199/Employer Child Care Fund 67, 78(New York City)

Oregonfunding for child care/early education 52income tax provisions for child care 8, 34investment in prekindergarten and 54family educationstate lottery 10

Palm Beach, Florida, Children's Services 11-15Special Taxing Districts

Parental leave.See Minnesota Child and Dependent CareCredit; Temporary Disability InsuranceCoverage for Maternity Leave (New Jersey)

Parent/consumer educationThe Children's Services Fund: 7, 18-19Proposition J (San Francisco, California)The Florida Public Education Lottery 10, 45-47Houston Area Network for 67, 74-75Dependent Services(Corporate H.A.N.D.S.; Texas)"Invest in Children" License Plate 4, 9, 42(Massachusetts)Rochester/Monroe County 4, 87, 94-96Early Childhood DevelopmentInitiative (New York)Smart Start (North Carolina) 50, 87, 91-92state investments in 49, 53-54

148135 NI

PennsylvaniaAllegheny County Early Childhood 68, 84-86Initiative (Pittsburgh)funding for child care/early education 52income tax provisions for child care 34investment in prekindergarten and 54family education

Personal Responsibility and Work 1Opportunity Reconciliation Act (PRWORA)

Pittsburgh, Pennsylvania, Allegheny 68, 84-86County Early Childhood Initiative

Prekindergarten programsFamilies and Education Levy 7, 16-17(Seattle, Washington)The Florida Public Education Lottery 10, 45-47The Georgia Lottery for Education 10, 43-44Prekindergarten Program (Texas) 60-62Rochester/Monroe County Early 4, 87, 94-96Childhood Development Initiative(New York)state investments in 49, 53-54

Preschool programsThe Children's Services Fund: 7, 18-19Proposition J (San Francisco, California)Families and Education Levy 16-17(Seattle, Washington)The Florida Public Education Lottery 10, 45-47Levi Strauss & Company 67, 70-71Child Care InitiativeRochester/Monroe County Early 4, 87, 94-96Childhood Development Initiative(New York)

Private sector financing 2, 67-86community child care initiatives 81-86

Allegheny County Early Childhood 68, 84-86Initiative (Pittsburgh, Pennsylvania)Child Care Scholarship Fund of the 68, 81-82Marin Community Foundation(Marin County, California)The Model Centers Initiative of the 68, 83-84Miriam and Peter Haas Fund(San Francisco, California)

employers and unions 67The American Business Collaboration 5, 72-73for Quality Dependent CareChild Care Partnership Act 5, 67, 75-76(Florida)Con Agra Child Care Initiative 27, 67, 68-69

136

Houston Area Network for 67, 74-75Dependent Services(Corporate H.A.N.D.S.; Texas)Levi Strauss & Company 67, 70-71Child Care InitiativeNYSLMCCAC Enrichment 76-77Grants Program (New York)1199/Employer Child Care Fund 67, 78(New York City)Temporary Disability Insurance 67, 79-80Coverage for Maternity Leave(New Jersey)

- See also Public-private partnershipsProfessional development and

training programsAllegheny County Early Childhood 68, 84-86Initiative (Pittsburgh, Pennsylvania)The American Business Collaboration 5, 72-73for Quality Dependent CareChild Care Licensing Fees (Virginia) 9, 40-41Child Care Quality Improvement 57-58Initiatives (Wisconsin)Children's Services Special 11-15Taxing Districts (Florida)Enterprise Zone Contributions 37Tax Credit (Colorado)Families and Children First (Ohio) 62-65Families and Education Levy 7, 16-17(Seattle, Washington)The Florida Public Education Lottery 10, 45-47Houston Area Network for 67, 74-75Dependent Services(Corporate H.A.N.D.S.; Texas)"Invest in Children" License Plate 4, 9, 42(Massachusetts)Levi Strauss & Company 67, 70-71Child Care InitiativeThe Model Centers Initiative of the 68, 83-84Miriam and Peter Haas Fund(San Francisco, California)NYSLMCCAC Enrichment 76-77Grants Program (New York)The T.E.A.C.H. Early Childhood 5, 87, 93-94Project (North Carolina)Voluntary Income Tax Checkoff 8, 25-26for Child Care (Colorado)

Property Tax Abatement 9, 28, 38-39(Travis County, Texas)

149

Property tax exemptions.See Local property taxes (corporate);

Local property taxes (personal)

Proposition J: The Children's 7, 18-19Services Fund (San Francisco, California)

Public-private partnerships 2, 87-96The Early Childhood 87, 88-90Investment Fund (New York)Rochester/Monroe County 4, 87, 94-96Early Childhood DevelopmentInitiative (New York)Smart Start (North Carolina) 50, 87, 91-92The T.E.A.C.H. Early Childhood 5, 87, 93-94Project (North Carolina)

Quality improvementAllegheny County Early Childhood 68, 84-86Initiative (Pittsburgh, Pennsylvania)The American Business Collaboration 5, 72-73for Quality Dependent CareArkansas dependent care credit 8, 27, 31, 33Child Care Quality Improvement 57-58Initiatives (Wisconsin)Children's Services Special 11-15Taxing Districts (Florida)Commercial Lender-Public-Sector 111-112Partnership (District of Columbia)The Early Childhood 87, 88-90Investment Fund (New York)Families and Children First (Ohio) 62-65Families and Education Levy 7, 16-17(Seattle, Washington)The Florida Public Education Lottery 10, 4547Houston Area Network for 67, 74-75Dependent Services(Corporate H.A.N.D.S.; Texas)"Invest in Children" License Plate 4, 9, 42(Massachusetts)The Model Centers Initiative of the 68, 83-84Miriam and Peter Haas Fund(San Francisco, California)Voluntary Income Tax Checkoff 8, 25-26for Child Care (Colorado)

Rhode Islandfunding for child care/early educationincome tax provisions for child careinvestment in prekindergarten andfamily education

523454

Rochester, New York,Rochester/Monroe County EarlyChildhood Development Initiative

4, 87, 94-96

Sales taxes.See State and local sales taxes

San Francisco, CaliforniaThe Children's Services Fund: 7, 18-19Proposition J (San Francisco)The Model Centers Initiative of the 68, 83-84Miriam and Peter Haas Fund

Scholarships for teachersChild Care Licensing Fees (Virginia) 9, 40-41The Georgia Lottery for Education 10, 43-44

67, 74-75Houston Area Network forDependent Services(Corporate H.A.N.D.S.; Texas)Rochester/Monroe County Early 4, 87, 94-96Childhood Development Initiative(New York)The T.E.A.C.H. Early Childhood 5, 87, 93-94Project (North Carolina)

School-age child care.See After-school programs; Summer programs

Seattle, Washington, Families and 7, 16-17Education Levy (Seattle, Washington)

Smart Start (North Carolina) 50, 87, 91-92South Carolina

funding for child care/early education 52income tax provisions for child care 34investment in prekindergarten and 54family education

South Dakotafunding for child care/early education 52state lottery 10

Special Child Care Revolving Loan Fund 107-108(Maryland)

Special taxing districts, Florida 7, 11-15Staff development and training.

See Professional development and

training programsStart-up assistance

The American Business Collaboration 5, 72-73for Quality Dependent CareChild Care Center Start-up and 102-103Health and Safety Grant Programs(New York)Child Care Facilities Direct Loan 106-107Program (Maryland)

150137 II

Child Care Quality Improvement 57-58Initiatives (Wisconsin)Commercial Lender-Public-Sector 111-112Partnership (District of Columbia)Con Agra Child Care Initiative 27, 67, 68-69Early Childhood/Youth Crime 50, 59-60Prevention and Intervention (Colorado)Families and Children First (Ohio) 62-65Family Child Care Start-up and 104-105Health and Safety Grants Program(New York)general obligation bonds (Minnesota) 99-100The Model Centers Initiative of the 68, 83-84Miriam and Peter Haas Fund(San Francisco, California)State Loan Guarantee Program 105-106(Maryland)tax-exempt bonds (Illinois) 100-101

State and local sales taxes 20-24Dedicated Sales Tax 4, 8, 20-22(Aspen, Colorado)described 7-8, 20Local Option Sales Tax (Ames, Iowa) 8, 23-24

State income tax checkoffs 8, 25-26described 8, 25Voluntary Income Tax Checkoff for 8, 25-26Child Care (Colorado)

State income tax credits, deductions,and exemptions (personal)

chart 33-34Child and Dependent Care Credit 27, 31-32(Minnesota)described 8, 27

State income tax credits anddeductions (corporate)

described 28Enterprise Zone ContributionsTax Credit (Colorado) 37

State Loan Guarantee Program (Maryland) 105-106Subsidies for children

Child Care Partnership Act 5, 67, 75-76(Florida)Child Care Scholarship Fund of the 68, 81-82Marin Community Foundation(Marin County, California)Children's Services Special 11-15Taxing Districts (Florida)Con Agra Child Care Initiative 27, 67, 68-69

138

Dedicated Sales Tax 4, 8, 20-22(Aspen, Colorado)Enterprise Zone Contributions 37Tax Credit (Colorado)Families and Education Levy 7, 16-17(Seattle, Washington)Levi Strauss & Company 67, 70-71Child Care Initiative1199/Employer Child Care Fund 67, 78(New York City)Property Tax Abatement 9, 28, 38-39(Travis County, Texas)Rochester/Monroe County Early 4, 87, 94-96Childhood Development Initiative(New York)Smart Start (North Carolina) 50, 87, 91-92Wisconsin Works (W-2) 50, 55-56

Summer programsThe Children's Services Fund: 7, 18-19Proposition J (San Francisco, California)Children's Services Special 11-15Taxing Districts (Florida)Houston Area Network for 67, 74-75Dependent Services(Corporate H.A.N.D.S.; Texas)Levi Strauss & Company 67, 70-71Child Care Initiative1199/Employer Child Care Fund 67, 78(New York City)

Tampa, Florida, Children's Services 11-15Special Taxing Districts

Tax-exempt bonds (Illinois) 100-101T.E.A.C.H. Early Childhood Project 5, 87, 93-94

(North Carolina)Teacher training programs.

See Professional development

and training programsTechnical assistance programs

Allegheny County Early Childhood 68, 84-86Initiative (Pittsburgh, Pennsylvania)Child Care Quality Improvement 57-58Initiatives (Wisconsin)Commercial Lender-Public-Sector 111-112Partnership (District of Columbia)Community Development Financing 108-109(North Carolina)

151

The Early Childhood Investment Fund 87, 88-90(New York)"Invest in Children" License Plate 4, 9, 42(Massachusetts)

Temporary Disability Insurance Coverage 67, 79-80for Maternity Leave (New Jersey)

Tennessee, funding for child care/ 52early education

Texasfunding for child care/early education 52Houston Area Network for 67, 74-75Dependent Services(Corporate H.A.N.D.S.; Texas)investment in prekindergarten and 54family education,Prekindergarten Program 60-62Property Tax Abatement 9, 28, 38-39(Travis County)

Transitional Child Care 1Tuition assistance.

See Subsidies for children

Utahfunding for child care/early educationincome tax provisions for child care

Vermontfunding for child care/early educationincome tax provisions for child careinvestment in prekindergarten andfamily education

VirginiaChild Care Licensing Feesfunding for child care/early educationincome tax provisions for child care

Voluntary Income Tax Checkoff forChild Care (Colorado)

Vouchers.See Subsidies for children

WashingtonFamilies and Education Levy (Seattle) 7, 16-17funding for child care/early education 52investment in prekindergarten and 54family education

West Virginiafunding for child care/early education 52income tax provisions for child care 34investment in prekindergarten and 54family educationstate lottery 10

WisconsinChild Care Quality 57-58Improvement Initiativesfunding for child care/early education 52income tax provisions for child care 34investment in prekindergarten and 54family educationWisconsin Works (W-2) 50, 55-56

Wyoming, funding for child care/ 52early education

Youth crime prevention.52 See Delinquency prevention

34 Youth services (general), 1199/Employer 67, 78Child Care Fund (New York City)

523454

9, 40-415234

8, 25.26

152139 II

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