Mandatory Funding

Total funding. Total mandatory or entitlement funding to states for child care during the six-year period FY 1997 to FY 2002 is $13.85 billion. $ 7.2 billion will be used for states' base allocations. The remaining $6.7 billion will be matching funds for the states.

Basic allocation. In each fiscal year, a state’s base allocation will be based on the greater of the federal share of IV-A child care expenditures in FY 1995, FY 1994, or the average of FY 1992-1994--national total of approximately $1.2 billion annually.

• No state match required.
• No maintenance-of-effort (MOE) separate from the 80 percent in TANF.
• Funds may be carried over into the next fiscal year.

Matching funds. The remaining funds will be distributed under the following conditions:

• States must have spent their initial allotment described above and have spent state dollars on child care equal to their FY 1994 or FY 1995 state spending for AFDC-related child care, whichever is higher.
• State expenditures above the MOE level will be matched at the FY 1995 federal medical assistance percentage (FMAP).
• The funds will be distributed according to the proportion of children under age 13.
• Unused funds will be redistributed.
• Total matching funds to states will be $729 million in FY 1997, $827 million in FY 1998, $924 million in FY 1999, $1.121 billion in FY 2000, $1.317 billion in FY 2001, and $1.464 billion FY 2002.

Discretionary Funding

An additional $1 billion is authorized annually, representing the current Child Care Development Block Grant (CCDBG). Allocation of these funds is based on the current CCDBG formula. The legislation states that a "substantial portion of the funds must be used for low-income working families."

Native American tribes. HHS will reserve between 1 and 2 percent annually of the total appropriation for Native American tribes and tribal organizations.

Use of funds.

• States must use at least 70 percent of the total amount of mandatory funds to provide child care assistance to welfare recipients, to those in work programs and attempting to leave welfare, and to those at risk of going on welfare.
• A 4 percent set-aside for activities to improve the quality and availability of care, including activities designed to provide comprehensive consumer education to parents and the public; activities that increase parental choice; and resource and referral services.
• A 5 percent cap on administrative costs, which excludes direct services, applies to all mandatory and discretionary funding. The accompanying manager’s explanation to the bill lists a number of activities that should not be considered administrative expenses in regulations that may be issued by HHS. These include eligibility determination and redetermination; preparation and participation in udicial hearings; child care placements; recruitment, licensing, and inspection of child care placements; and the establishment and maintenance of computerized child care information.
• Requirements of the CCDBG, as amended by the bill, apply to all child care funds.

Health and safety standards. Current law health and safety protections required in the CCDBG are maintained. States must have requirements on prevention and control of infectious diseases, including immunizations; building and physical premises safety; and minimum health and training standards.

Administration of funds. All funds are to be transferred into and administered by the lead agency for the CCDBG. The governor designates lead agency and may select a governmental or nongovernmental agency to administer the funds.

State Plan

States must

• certify that consumer education will be collected and disseminated to parents of eligible children and the general public;
• certify that licensing requirements are in effect that are applicable to child care services provided within the state, and they must provide a detailed description of how the requirements are enforced;
• demonstrate how they are meeting the specific child care needs of families receiving welfare, families attempting through work activities to transition off of welfare, and families who are at risk of going on welfare;
• ensure that a substantial portion of funds will be used to provide assistance to low-income working families other than those described above.

Annual reports and audits.

• Quarterly reports. States must collect information monthly on the following data reporting elements and submit information quarterly:
  • family income;
  • county of residence;
  • the gender and age of children receiving assistance;
  • whether the family includes only one parent;
  • sources of family income, including employment, IV-A cash assistance, housing assistance, food stamp assistance, and other assistance programs;
  • the number of months the family has received benefits;
  • the type of child care in which the child is enrolled;
  • whether the child care provider is a relative;
  • the cost of child care for families; and
  • the average hours per week of care.

  HHS may disapprove the information collected if the state uses a sampling method.

• Biannual reports. States must collect information on the following data reporting elements and submit information every six months:
  • the number of child care providers that received funding;
  • the monthly cost of child care services and the subsidy cost portion;
  • the number of payments made to providers through vouchers, contracts, cash, and disregards under public benefit programs, listed by the type of child care services provided;
  • the manner in which consumer education information was provided to parents; and
  • the total number, without duplication, of children and families served.

Penalties. If the secretary determines the state not to be in compliance, the state may be required to reimburse HHS for any funds that were improperly expended for purposes prohibited or not authorized. HHS may deduct from the administrative portion of the state allotment for the following fiscal year an amount that is less than or equal to any improperly expended funds, or a combination of such options.