	Introduction

The welfare reform law of 1996 ( P.L. 104-193 ) provided an increase in federal child carefunding for low-income families, with the expectation that newly implemented work requirementsfor welfare recipients (many being single mothers) would create a greater demand for child careservices. This additional funding was accompanied by the creation of a unified and expanded ChildCare and Development Block Grant (CCDBG) program, with the aim of serving low-incomefamilies, regardless of welfare status. These two funding streams are commonly referred to incombination as the Child Care and Development Fund (CCDF). (As will be discussed later, a portion of federal mandatory funding to statesis contingent on states spending some of their own state funds on child care.) Authorization for thediscretionary portion of the CCDF and appropriations for both the CCDF mandatory funds, as wellas the TANF block grant, are due to expire at the end of FY2002. Recent TANF expenditure data show that states are spending increasingamounts of TANF funds for child care services within the TANF program ($2.2 billion in FY2000);however, the extent to which this will continue during an economic downturn is an unansweredquestion for TANF and child care state administrators alike. Three were associated with the cash welfare system. In addition to creating the new block of mandatory child care funding, the 1996 welfare law reauthorized and amended the CCDBG. This combination of new mandatory funding and expanded CCDBG discretionary funding is commonly referred to as the Child Care and Development Fund (CCDF) and makes up the largestsource of federal program funding ($4.8 billion in FY2002) appropriated solely for child caresubsidies and child care activities for low-income families. In order for a state to be eligible for its share of the remaining funds (also known as "matching funds" ), that state must first meet a "maintenance-of-effort (MOE) requirement." In other words, the amount transferred from TANF to CCDF in FY2000 ($2.4 billion)exceeds the amount that was appropriated directly in discretionary CCDF funds for FY2002 ($2.1billion), or any single fiscal year so far. Transferring funds to the CCDF is not the only channel through which states may use TANF funding to support child care services for low-income families. In FY2000,states reported spending a total of $2.2 billion of federal TANF and related state funds on child care. SSBG. The most recent available data indicate that in FY2000, combined child care expenditures made fromthese two programs totaled over $9 billion - more than double the level of expenditures made forchild care via these same two programs in FY1997. No match applies to the discretionary fund. Furthermore, mandatory fundsbring with them state matching requirements (for the non-"guaranteed" portion). Discretionary and mandatory CCDF funds also carry with them different time limits for states to obligate and spend the money.
The welfare reform law of 1996 ( P.L. 104-193 ) sharply increased federal child care funding for low-income families, with the expectation that new work requirements for welfare parents (most ofwhom were single mothers) would increase demand for child care services. This additional fundingwas accompanied by the creation of a unified and expanded Child Care and Development BlockGrant (CCDBG) program, with the aim of serving low-income families, regardless of welfare status. The expanded program is financed through two funding streams commonly referred to incombination as the Child Care and Development Fund (CCDF).
CCDF appropriations in FY2002 from the two funding streams total $4.8 billion: $2.7 billion in mandatory funding and $2.2 billion in discretionary funds ( Figure 1 ). The two funding streamsfall under separate committee jurisdictions, and carry with them different rules regarding allocation,state matching requirements, and time limits for obligating and spending money. A portion of themandatory funding is "guaranteed" to states and is based on states' spending on child care prior tothe 1996 welfare law. In order for a state to be eligible for its share of the remaining mandatoryfunds, which require state matching, the state must first spend a designated amount (also based onhistorical spending) of its own state funds. Discretionary CCDF funding is 100% federal (i.e.,requires no state match) and is allocated according to a different formula than either portion ofmandatory funds. Both the mandatory and the discretionary funding streams expire at theend ofFY2002 and are due to be reauthorized this year, the mandatory funding as part of welfare (TANF)reauthorization.
Although the CCDF is the only federal grant program dedicated solely for the purpose of providing child care subsidies and activities for low-income families, states also are using two otherfederal block grants for this purpose: TANF and the Social Services Block Grant (SSBG). Stateshave increasingly used TANF dollars for child care services within their TANF programs ($2.2billion in FY2000) in addition to transferring TANF funds to the CCDF. The TANF transfers toCCDF in FY2000 ($2.4 billion) exceeded the discretionary funds appropriated for any single yearso far. Overall, expenditure data show that in FY2000, states spent more than $9 billion in federaland state funds associated with the CCDF and TANF - more than double the amount spent on childcare via these programs in FY1997. SSBG expenditure data are not available for FY2000, but statesare reported to have spent almost $400 million in SSBG funds in FY1999 to support child careservices.
As Congress decides how much funding to make available for child care, it will need to consider multiple programs, and the various funding streams within them. It is unclear whether thecurrent level of child care funding via TANF and SSBG will be sustained if the recent economicdownturn gives rise to needs perceived to be more pressing.