In all, 34 states  reported declines in the average monthly number of children served by  CCDF from fiscal year 2006 to 2008, and the remaining states reported  increases. In addition to the recent decline in the numbers served by CCDF, from  fiscal year 2006 to 2007, a key performance measure also shows a decline  in the estimated proportion of potentially eligible children whose families  receive child care subsidies funded by several federal block grants. As shown in table 1, all of these estimates indicate that about one-third or  fewer of the potentially eligible children have received child care subsidies  funded by CCDF, TANF, and SSBG between fiscal years 2004 and 2007. Multiple Factors Could Have Contributed to the Recent Decline in the Number of Children Served by State Child Care Subsidy Programs, but Some States Have Taken Steps to Expand Access

HHS, state officials, and experts we contacted cited multiple factors as  potential influences on the overall decline in the numbers served by CCDF  from fiscal years 2006 to 2008, which occurred even as some states took  steps to expand access. The potential factors fell into three groups:    state decisions that affect resource allocation, such as availability of TANF  for child care or trends toward higher provider payments;    changes in provider supply and requirements; and,    economic factors that may affect parents’ ability to meet work-related  eligibility criteria for subsidies or their child care choices. However, 17 states individually saw increases  in the number served during this same time period. 10). States gave various reasons for  the increases in income eligibility limits, such as keeping up with changes  in the federal poverty level, which would not necessarily affect the number  of children eligible, although the number of children in poverty has  increased since 2006. In addition, two of these  studies looked at the relationship between federal or state funding for  child care subsidies and employment outcomes. While studies have found similar results related to the direction of the  effect of child care subsidies or decreases in child care prices on low- income mothers’ employment, their results varied in the size of these  subsidies’ effects on employment, due in part to differences in data, scope,  and methodology. Studies we reviewed and experts we spoke to also indicated that the  extent of these subsidies’ effects on employment can vary due to multiple  factors, such as the child care options and employment flexibilities  available to families. Experts we interviewed suggested that when child  care prices increase, mothers may change their scheduled work hours or  shift to lower-quality child care, for example, rather than simply exiting  the labor force. In its comments HHS generally  agreed with GAO’s findings. HHS also provided technical comments, which GAO incorporated as  appropriate. Staff who made key contributions to this report are listed in  appendix V.

Appendix I: Objectives, Scope and Methodology

Our review focused on (1) trends in federal estimates of the number and  proportion of eligible children and families who receive child care  subsidies, (2) factors that may affect trends in estimates of the number of  children served, and (3) what is known about the extent to which access  to child care subsidies supports low-income parents’ employment. Coverage Rate Estimates for Child Care Subsidies

To address our first objective, we spoke with U. S. Department of Health  and Human Services (HHS) officials from the Child Care Bureau to learn  about Child Care and Development Fund (CCDF) administrative data  that the agency uses to develop coverage rate estimates. In addition, we obtained information on state data collection efforts  from our survey of state child care administrators and interviews with  state child care and Temporary Assistance for Needy Families (TANF)  program administrators in four selected states. The survey was directed to state child care administrators in all 50  states and the District of Columbia. As required by federal statute, states must report to HHS on the  numbers of children and families served by CCDF, including TANF funds  transferred to CCDF.
Why GAO Did This Study

As Congress considers reauthorization of the laws which provide funding for the Child Care and Development Fund (CCDF), there is interest in understanding what accounts for recent trends in child care subsidy receipt among eligible families and what research says about subsidies' effects on parents' ability to obtain and maintain employment. The U.S. Department of Health and Human Services (HHS) administers CCDF, but states have flexibility in its implementation. As requested, GAO examined: (1) trends in federal estimates of the number and proportion of eligible children and families who receive child care subsidies, (2) factors that may affect trends in estimates of the number of children served, and (3) what is known about the extent to which access to subsidies supports low-income parents' employment. To address these issues, GAO reviewed recent federal estimates of the number and proportion of eligible children and families served; conducted a survey of state child care administrators in 50 states and the District of Columbia; interviewed HHS officials, state officials in four selected states, and researchers and experts in child care subsidies; and reviewed research on the relationship between subsidy receipt and employment outcomes. GAO is not making recommendations in this report. HHS generally agreed with the report and provided technical comments, which GAO incorporated as appropriate.

What GAO Found

From 2006 to 2008, the estimated average monthly number of children served by CCDF declined by about 170,000 (10 percent), after remaining relatively stable for a number of years. However, state data vary, as 34 states reported decreases in the number served during this period, while 17 states reported increases. Along with a decline in the number served by CCDF, an estimate for a key performance measure also shows a decline in the proportion of eligible children whose families received subsidies funded by key federal programs from 2006 to 2007. Overall, estimates indicate that annually about one-third or fewer of eligible children received subsidies funded by CCDF and other federal programs between 2004 and 2007. Estimates occur at this level partly because many states cannot serve all eligible families with available resources and partly because eligible families do not always seek subsidies. HHS, state officials, and experts cited multiple factors that could have influenced the recent overall decline in children served by CCDF. These include state decisions about resource allocation, such as increasing provider payments, as reported in GAO's survey, or decreasing Temporary Assistance for Needy Families funds transferred to CCDF, as shown by expenditure data. Also, changes in state-level requirements and the recession may have affected the availability of providers. Finally, economic factors can affect the demand for subsidies, and the recession may have affected parents' child care choices or their ability to meet work-related requirements. However, since 2006, some states took actions that could increase access to subsidies, such as increasing income eligibility limits or extending eligibility to unemployed parents. Research has linked access to child care subsidies to increases in the likelihood of low-income mothers' employment. Study results have varied in the extent to which subsidies affect employment, in part due to differences in data, scope, and methodology. Some research reviewed and experts interviewed indicated that the size of the effect on employment outcomes may vary based on other factors, such as child care options and employment flexibilities available to families. Experts also suggested that when child care prices increase, mothers may change their work hours or shift to lower-cost providers, for example, rather than exiting the labor force altogether.