quality

Child Care Tax Credits Part 2 – Supporting Child Care Providers

July 31, 2014 – This is the second in a series of blogs about opportunities to improve the quality of Michigan’s child care system through tax credits.  This week, I’m going to blog more in-depth about Louisiana’s child care tax credits for child care providers and what a similar model could do for Michigan.

In Louisiana, for-profit and non-profit child care centers who serve children in the foster care system or children who participate in the child care subsidy program are eligible for a refundable tax credit.  The credit is based on the average monthly number of children served and the quality rating of the child care center and ranges from $750 per eligible child for a 2-star rated program to $1,500 per child for a 5-star rated program.

Here in Michigan, our Quality Rating and Improvement System known as Great Start to Quality has two levels – the five-star rating for licensed programs and the three-tier rating for unlicensed family, friend and neighbor care.  Michigan could structure its child care credits similar to the Louisiana model for licensed programs.  And, to ensure that families can maintain choice in their child care provider, we could also provide a tax credit for families who choose family, friend, or neighbor care at the second or third tier.  This type of tax credit would incentivize child care providers to increase the quality of their care by allowing providers to target some of the investment from this refundable tax credit towards ongoing quality improvement needs, which we know to be expensive.  Quality improvements costs go towards things like employing credentialed staff, ongoing professional development, maintaining optimal teacher-to-child ratios, etc. – costs that are typically ongoing.  And, this tax credit would incentivize providers to move up the quality rating scale so that they can receive larger credits.

Michigan should also consider aligning the eligibility requirement for this tax credit with our early childhood system already in place – specifically, with eligibility for Michigan’s Great Start Readiness Program.  This way, we can bolster our state’s significant investment in high quality preschool by increasing the quality of other settings that serve those children and others.  Michigan legislators have already identified that children who have factors that place them at-risk – children living in families with low- and moderately low-income, children in foster care, children who are homeless, and children in special education – benefit the most from access to high quality early care and education.  Similarly, a tax credit should go to providers who serve those same populations from birth all the way through age 12.  Aligning the tax credit eligibility with GSRP would incentivize the highest quality child care programs to serve Michigan’s most challenged families to ensure the best possible outcomes for kids.

A note about school-aged care.  School-aged child care (i.e. before- and after-school and summer care) currently isn’t included in Great Start to Quality, but efforts to infuse those programs into the system are underway.  Any child care tax credit system must include those programs so that school-aged children could also benefit from high quality child care settings that keep them academically on-track and engaged in their education.

If high quality child care is something you, your family or your neighbors struggle to afford, please consider talking to candidates running for public office about this issue.

Learn more about opportunities through child care tax credits in our Issues for Michigan’s Children publication.

-Mina Hong

Child Care Tax Credits Part 1 – Supporting Michigan’s Working Families

July 24, 2014 — Last week, I blogged about the concept of tax credits to support the quality of Michigan’s child care system.  The next series of child care tax credit blogs that I’ll write will break down each of Louisiana’s four tax credits so that we can better understand how their model if replicated in Michigan could assist families, child care providers, child care teachers and directors, and businesses here in our own state.  First, I’ll focus on direct assistance for families.

As I laid out last week, the family child care tax credit allows families to receive a refundable credit for children enrolled in a child care program that has a rating of at least two out of five stars in the state’s Quality Rating and Improvement System.  This credit increases in value as families access higher-rated child care programs, and is dependent on the number of children in the family in a two-star rated program or higher.  Being refundable allows the lowest-income families – those making $25,000 a year or less in Louisiana – to receive a check in the mail for the amount of their credit.  Families making more than $25,000 can apply their credit to their tax liability.

Here in Michigan, we know that child care costs vary significantly with multiple factors influencing cost including the age of the child, the type of care (i.e. a child care center, family-run group home, or someone caring for a family member), and the quality of care.  For Michigan’s Children, ensuring that children have access to high quality child care is paramount – regardless of the child’s age or whether they are in a child care center or being watched by grandma.  We know that high quality child care is more costly for multiple factors including the ongoing training needed by child care teachers and directors, curricula that may be used, personnel costs as it relates to staffing with appropriate credentials or exceeding minimum licensing requirements as it relates to teacher-child ratios, appropriately engaging and partnering with parents and communities, etc.

A child care tax credit for families will reduce some of the financial burden associated with accessing higher quality care, and may be just the incentive that parents need to opt for higher quality care that will better support their children’s learning and development.  While there is a federal tax credit in place for child care that is not refundable, the State of Michigan currently provides no tax relief to families who need child care, so a model similar to Louisiana’s would be welcomed.

If high quality child care is something you, your family or your neighbors struggle to afford, please consider talking to candidates running for public office about this issue.

Learn more about opportunities through child care tax credits in our Issues for Michigan’s Children publication.

-Mina Hong

Supporting Michigan’s Working Families

July 18, 2014 — Child care is expensive.  Hands down, if you are a parent, you know that one of the most significant costs that you will bare right from the get-go is the cost of child care.  And yet parents want and need access to high quality child care that supports their children’s learning and development while they earn money to support their families.  For Michigan’s struggling families, high quality child care can help their kids start kindergarten with the skill set they need to succeed in school.  As for the child care industry, they struggle to pay for costly quality improvements since many quality indicators require ongoing costs to maintain.

One strategy to increase the quality of and access to child care is through tax credits.  Louisiana provides a fabulous tax credit model built upon its Quality Rating and Improvement System (QRIS) that provides financial incentives that help families access higher quality child care and encourages providers to increase the quality of their programs.  Called the School Readiness Tax Credit, the Louisiana model supports and bolsters the child care system by providing refundable tax credits, which allows taxpayers to receive a check for the amount of the credit if they have no tax obligation.  This is particularly important for nonprofit child care providers and for low-income families who benefit the most from these credits.

Louisiana’s School Readiness Tax credits are as follows:

  1. Families can receive a tax credit for kids enrolled in a child care program that has a rating of at least two out of five stars in the QRIS.  The tax credit increases in value as families access higher-rated child care programs.
  2. Child care providers who participate in the QRIS are eligible for a tax credit based on the number of stars they earn and the number of children they serve who are subsidized by their state’s child care subsidy system or are in foster care.
  3. Child care teachers and directors are eligible to receive a tax credit if they teach in a child care program that participates in the QRIS, and is based on the level of education the individual has attained.
  4. Businesses that provide financial support to child care programs that participate in the QRIS – either through donations to support their infrastructure or to support their employees’ child care – are eligible for a credit with its value based on the star rating of the child care program.  Businesses can also receive a credit for donations made to child care resource and referral agencies.

Michigan is well-poised to implement a child care tax credit system similar to the Louisiana model, with our QRIS known as Great Start to Quality already in place.  Each four of these pieces would provide significant benefits to families, child care providers, child care teachers and directors, and our local businesses to support families while ensuring our economy can continue to rebuild.  Keep your eyes out for a series of blogs focused on each component of Louisiana’s School Readiness Tax Credit and how a similar system could benefit Michigan children and families.

Learn more about opportunities through child care tax credits in our latest Issues for Michigan’s Children publication.

-Mina Hong

Child Care Realities

February 19, 2014 – This month marked the end of my maternity leave and the start of Lennon’s time in child care.  As a mom whose day job focuses on early childhood public policy issues, I am familiar with the ins and outs of what a high quality child care provider looks like and subsequently, what that means for costs.  As we were shopping around for child care providers; I, of course, was asking about Great Start to Quality ratings, curriculum, whether programs utilized a lower teacher-to-baby ratio than required by state licensing, and other questions that a typical parent searching for child care might not think to ask.  Lennon now spends a couple days a week in a NAEYC accredited, five-star rated program that we all love.  And our monthly finances have taken a significant hit to reflect that.

I say this because at the same time that Lennon was embarking on his child care experiences, Governor Snyder made some recommendations to strengthen Michigan’s public child care subsidy system – the Child Development and Care (CDC) program – in his budget presentation early this month.  One of his recommendations is to provide tiered reimbursement rates such that higher quality child care providers would receive a higher rate.  In theory, this is a step in the right direction since higher quality care is more expensive.  However, if you take a step back and look at the CDC program, you’ll see that this is a positive recommendation built upon a very weak structure.

For Lennon’s child care, we pay a monthly fee for his spot at the center.  In fact, his child care center doesn’t even accept payment on an hourly, daily, or weekly rate because they know that they need to rely on a certain amount of revenue each month to maintain the operations of their quality program.  For families who rely on the state’s child care subsidy, providers are reimbursed on an hourly rate.  Clearly this makes it extremely challenging for child care providers to support their businesses if they have to depend on on a less reliable hourly payment based on attendance.

Additionally, Michigan’s reimbursement rates are pitifully low, making it impossible for a low-income family who relies on the child care subsidy to afford a high quality program.  The current rate for an infant to attend a 5-star rated program in a child care center is $3.75 an hour.  Governor Snyder is proposing to increase that rate to $4.00 an hour for 3-star rated programs, $4.25 an hour for 4-star rated programs, and $4.50 an hour for 5-star rated programs.  Finding a high quality child care provider willing to accept $4.50 an hour to care for an infant is pretty much impossible.  For the very low-income families who are eligible for the CDC program, paying the difference between the subsidy and the true cost of care would be extremely challenging if not impossible.

What does this mean?  While tiered reimbursement is a positive step, Michigan must also restructure its payment system to better support parents and providers.  Not only do we need to address our hourly reimbursement system, but we also need to take a closer look at the reimbursement rates and what the marketplace demands.

Another one of Governor Snyder’s recommended changes to the CDC program is to increase the number of reimbursable hours from 80 to 90 hours in a two-week period.  This is a step in the right direction but continues to fall short.  At Lennon’s child care center – understanding that most full-time individuals work at least 8.5 hours a day once you factor in a lunch break, and that parents need time to travel to and from their workplace to the center – they allow parents to leave their children in care for up to 9.5 hours each day.  At that rate, we could access 95 hours of child care in a two-week period.  If I had to work multiple jobs to support my family, I would clearly need more hours of child care.  So while the Governor’s recommendation moves the state towards better supporting full-time working parents, it continues to fall short of the realities of what parents need.  Michigan should look to what many states have done and have no cap on the maximum number of subsidized child care hours that our state’s lowest-income working families can access.

In a nutshell, I’m glad to see the Governor begin to take a closer look at the CDC program and to move Michigan towards better supporting low income families.  These small steps are steps in the right direction.  However, to truly support families, we must consider more significant shifts to the structure of the CDC program.  While I feel fortunate to be able to send Lennon to a high quality child care program that provides a nurturing environment that promotes healthy development and early learning, I know that the children who could benefit the most from his program are the ones who likely can’t access it.  Michigan must do more to ensure that our state’s most challenged young children can benefit from high quality child care experiences – the quality experiences that can ensure all children have a great start in life.

-Mina Hong

Federal Child Care Changes Will Benefit Michigan Children

Last week was the final week to submit comments to the federal Administration for Children and Families – Office of Child Care regarding proposed rule changes to the Child Care and Development Fund (CCDF).  The CCDF is a federal program that provides a subsidy to child care providers to allow low-income parents work or attend training/education.  In Michigan, 27,700 families benefit from the child care subsidy to support care for their young children and before- and after-school care for children through age 12.  The CCDF currently gives states the flexibility to design subsidy systems that take into account local market dynamics, budgetary limitations and other factors unique to the local child care landscape which has resulted in significant differences in the child care subsidy system across states.  Many of the proposed rule changes would tighten up some of this flexibility based on research and data on what children and families need through a child care subsidy system.  The proposed rule changes would increase quality and access to child care for Michigan’s lowest-income families and would assist us in moving towards a more family-friendly child care system.

One of the proposed changes is to require rather than allow a period of job search for families receiving child care assistance who lose their jobs.  Michigan is only one of four states where families who receive the child care subsidy immediately lose this benefit if they lose their job.  In Michigan, where we’re continuing to rebuild our economy and struggle with unemployment rates higher than the national average, the lowest income earners are often the ones who have the least stability in their employment.  Thus, allowing some period for job searching can ensure that families retain their subsidy and that children can have some consistency in their care.

Another proposed change would require states to include a description of how their payment practices take into account the quality of child care and support high quality.  While the CCDF was set-up primarily as a work support, it does require states to spend at least four percent of their CCDF funds on activities designed to improve the quality of child care to promote healthy child development.  In Michigan, this has supported efforts to boost quality in child care settings for young children, but no efforts have been made to reform the payment structure to support higher quality settings.  This rule change would be a struggle for Michigan, since we’re one of three states that reimburse providers on an hourly schedule, with the vast majority of states providing daily, weekly, or even monthly payment structures that are more aligned with the current child care market.  Providing an hourly rate makes it more difficult for child care providers to provide quality care if they’re not receiving payment for times when a subsidized child is absent – times when private paying families would consistently be paying for their child care slot.  This inconsistency in payment makes it difficult for providers to rely on a consistent source of revenue to support their quality programming.

Furthermore, Michigan’s subsidy payments are sorely inadequate to ensure access to high quality child care.  Current CCDF rules require states to survey child care providers’ market rates every two years and recommend that rates be set so that families would be able to access 75 percent of the child care providers in their community (the 75th percentile).  However, this is currently a suggestion rather than a mandate.  In Michigan, payment rates vary between $1.35 an hour to a maximum of $3.75 an hour, depending on the age of the child and the setting for which s/he receives care – falling significantly short of the recommended 75th percentile.  For example, for a Michigan family to send their four-year-old to a child care center would cost, on average, $974 per month but with the child care subsidy, would only receive $433 per month.  Clearly these reimbursements are inadequate for parents to purchase high quality care.  If Michigan truly wants to provide a quality experience for low income children, providing a more robust reimbursement rate that aligns with the market would ensure that families can access the types of out-of-home learning environments they seek for their children.

Overall, the proposed rule changes to the CCDF are welcomed here in Michigan as we continue to build a comprehensive P-20 education system that also supports children in child care settings.  Access to high quality care can ensure that young children are better prepared for kindergarten and that students in elementary and middle school can access quality before- and after-school programming that promotes their learning.  Critical steps include: allowing families to maintain their subsidy when they lose their jobs and are seeking new employment; shifting the payment structure to daily, weekly, or monthly rates; and increasing the subsidy payment.  Regardless of the eventual rule changes, Michigan needs to work more proactively to provide a more family-friendly system that would allow families to access consistent, quality child care.

-Mina Hong

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