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Child Care Needs of Low-Income Employed Parents in Milwaukee County Under W-2

by John Pawasarat, Lois M. Quinn, Terry Howell and Dan Scullard, University of Wisconsin-Milwaukee Employment and Training Institute, July 1996
Policy makers recognize that funding and access to quality, affordable care for young children is essential both for parents and for employers. The new Wisconsin welfare initiatives including "W-2" (Wisconsin Works) "assure child care is available to all working families" below 166 percent of poverty and to all able-bodied mothers on public assistance now required to work up to 35 hours per week. Recent Wisconsin welfare reform initiatives including W-2 also for the first time require mothers with very young children (including babies over 90 days old) to comply with full-time work requirements. These mothers have historically been exempt from welfare work requirements due to the high cost of infant care.

This report attempts to assess the current use and availability of child care as well as the potential demand for care under W-2. The analysis focuses on Milwaukee County and examines the challenges facing Milwaukee County agencies and community organizations as they seek to provide adequate child care for parents entering the labor force, expanding their work hours, or participating in mandatory community service activities.

To provide an analysis of current child care openings and capacity, the Employment and Training Institute conducted a survey of all regulated day care providers in Milwaukee County central city neighborhoods and a sample survey of the certified child care providers currently active with the Milwaukee County Department of Human Services. The Institute analyzed current usage in subsidized child care programs using data on all Milwaukee County child care payments for the month of February 1996 and all child care deductions taken for Milwaukee County children receiving AFDC or food stamps. Estimates of the current and potential demand for child care under W-2 were constructed using a database of all children and families on public assistance in Milwaukee County and U.S. Census data on employed low-income families in Milwaukee County not receiving public assistance.

Findings

  1. While W-2 and related welfare reform initiatives offer the promise of child care and expand subsidies for up to 15,000 children in Milwaukee County at an estimated cost of $80 million per year, appropriations are capped at levels insufficient to meet the likely demand and availability of adequate child care is limited. The cost of subsidizing child care for low-income working families and W-2 participants will exceed the budgeted amount despite changes in child care funding policies which: 1) require AFDC/W-2 recipients for the first time to pay for a share of child care costs, 2) eliminate child care supports for low- income employed families between 166 and 225 percent of poverty, and 3) dramatically increase child care copayments for employed low-income families between 100 and 165 percent of poverty.

  2. It is estimated that 89,450 Milwaukee County children aged 12 and under are potentially eligible for up to 15,000 child care subsidies under W-2. Almost 30,000 of these children are in families currently employed, not on public assistance and eligible as low- income employed families. (Another 5,240 children are in low-income families receiving food stamps but not AFDC.) Many of the employed families currently have their children in child care but receive no subsidy, and over 4,000 of these children are already on the county's low-income waiting list for child care subsidies. It is not clear how many more families would apply for the subsidies if funds were available. However, state officials have budgeted child care on the assumption that most low- income families will not apply.

  3. In addition to the employed families with children already in child care, there are 54,220 children ages 12 and under living in AFDC families expected to work. The requirement that women with very young children on AFDC work up to 35 hours per week accounts for the most expensive additional demand for child care. Up to 9,200 children under 2 years of age, 20,570 2-5 year olds, and 24,450 6-12 year olds live in AFDC families expected to work. Child care costs of over $1,000 per month may be necessary for many single mothers with 2 pre-school children. Child care subsidies require an outlay almost double the amount of the AFDC/W-2 grant provided to these families.

  4. The $80 million in capped block grant funds expected to be allocated to Milwaukee County for child care under W-2 would support 10,000 to 15,000 full-time slots. These funds appear to fall far short for the population eligible under W-2 and may barely cover existing child care use. Providing child care support for the 12,795 children in 7,553 families already using AFDC related child care, on Milwaukee County waiting lists for care subsidies, or with reported child care deductions under AFDC or food stamps would use up $72 million of the $80 million in child care budgeted for W-2 in 1997.

Anticipated Subsidy Costs for AFDC/Low-Income Employed Families Currently Using Child Care
CURRENT FAMILIES WITH CARE: ESTIMATED ELIGIBLE W-2 CARE:
Monthly CasesNo. of Children Annualized 1996 cost*No. of CasesNo. of ChildrenAnnualized 1997 Cost*
Low Income Subsidies693 967 $5.02 mil 693 967 $ 5.2 million
Waiting List 0 0 0 2,748 4,122 22.2 million
Sub-Total 693 967 $5.02 mil 3,441 5,089$27.4 million
AFDC/JOBS Subsidies1,6952,385$17.64 mil 1,6952,385$18.4 million
Crisis Respite Care 391 1,332 $ 4.5 mil 391 1,332$ 4.7 million
Child Care Deductions from Grant:
AFDC1,4222,8831,422 2,883
Food Stamps6041,106 6041,106
Sub-Total2,0263,989 ** 2,026 3,989$21.5 million
Total with Children Currently in Child Care4,8058,673 7,55312,795$72.0 million

* Annualized 1996 cost based on February 1996 expenditures, estimated 1997 annualized cost at 4 percent inflation. ** Maximum grant deductions are $175 for a child over 2 years and $200 for a child under 2; total cost of care is unknown.

This would leave only $8 million in Milwaukee County child care funds to serve the residual W-2 population of 20,000 AFDC families not now employed but subject to W-2 work requirements. This population includes an estimated 42,000 children ages 12 and under.

  1. Under W-2, families who are required to work are not entitled to the child care subsidy. If funds are insufficient to cover the costs of Milwaukee County child care, it is not clear from the present W-2 legislation which families, if any, will receive priority for child care and under what conditions families will be required to participate in W-2 activities or be terminated from public assistance when child care is not available.

  2. The Employment and Training Institute surveys of child care openings in regulated and certified care suggest that W-2 child care needs far exceed the limited openings available and greatly exaggerate the capacity of the newly created low-cost "provisional" child care pool in Milwaukee County. Over 23,000 Milwaukee County pre- school children on AFDC or food stamps will for the first time be effected by W-2 and related work initiatives, creating a demand for child care services which far exceeds current capacity of licensed and certified providers.

    Graph 1: Openings in Central City Milwaukee Licensed Day Care, March 1996

    In March 1996, licensed care providers reported 1,253 vacancies for child care in the central city neighborhoods of Milwaukee County where 90 percent of the over 40,000 AFDC children ages 0-12 reside. These vacancies are in large part attributable to normal client turnover rather than increased availability or expansions. Only 406 of these openings were for infants under twelve months of age, and 251 for children ages 1-2 years.

    3. Graph 2: Day Care Openings with Milwaukee County Certified Providers, March 1996

  3. A new category of low-cost unregulated care ("provisional" care) is established under the W-2 plan, which is designed to reimburse providers at half the price of current regulated care. However, a survey of Milwaukee County active certified child care providers already shows high business turnover, limited openings and high poverty levels among certified providers. One-third of providers were themselves on public assistance, and 38 percent were not able to be reached and assumed out-of-business due to telephone disconnections or no answer during working hours. The high level of non-availability among certified providers suggests a very shallow pool of potential child care providers in the certified level and raises serious questions about the feasibility of the "provisional" day care anticipated by state planners for most W-2 parents.

  4. The W-2 plan increases the child care copayment required of families. Under W-2, child care copayments from employed families will increase dramatically as the family's gross income approaches the poverty level. The W-2 payment schedule also impacts regulated day care providers who will immediately see their county payment decreased while at the same time they will be required to collect a copayment from the family. The higher copayments required for regulated care encourage employed low-income single parents to move their children from licensed day care centers into unlicensed care or the new class of "provisional" care providers.

Graph 3: Monthly Day Care Costs for 2 Children Compared to W-2 Family Grant

Graph 4: Required Copayment for Employed Parent: $1000 Gross Monthly Income, 1 child

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