Proposed DC Budget Cuts Funding For Child Care (Again)

May 1, 2010

Mayor Fenty’s proposed Fiscal Year 2011 budget for programs for our youngest residents has me scratching my head.

As the DC Fiscal Policy Institute’s analysis shows, the proposed budget would increase funding for early childhood education programs operated by the public school system and preserve funding for the Pre-K for All Initiative–or nearly so.

No head-scratching here. Lots of research indicates that good preschool education helps children develop cognitive and social skills that improve their subsequent academic performance. Positive long-term returns in crime reduction and economic productivity too.

But subsidized child care is also a smart investment. How else can low-income parents with very young children hold down a job–or, for that matter, get the education and training they need to land one? Parents with older children need child care too, since the school day ends well before the conventional work day.

Yet the mayor’s proposed budget would cut funding for child care by a total of somewhat over $8 million–$4 million out of the budget approved for this fiscal year, plus $4 million more for next fiscal year. On top of prior cuts, this would leave total inflation-adjusted support for child care at $27 million less than in Fiscal Year 2007.

At a recent briefing, Clarence Carter, head of the DC Department of Human Services, said that DHS would be reducing the amount of TANF funds it transfers to the Office of the State Superintendent of Education for the child care program. The department based this decision on information from OSSE which indicated that past funds had not been used.

The OSSE budget chapter confirms this. Funding for child care subsidies, it says, has been reduced to “align with current year spending trends and detailed historical utilization data.”

This seems to mean that fewer parents are using subsidized child care. How can that be?

Part of the answer may be that appropriate child care slots aren’t available for parents to use. A 2008 study for OSSE by the UDC Center for Applied Research and Urban Policy found that 13,196 children were on child care providers’ waiting lists, most of them children under age three. Only 8.9% of family home child care providers and 28.3% of child care centers enrolled children with disabilities.

A big reason for this “mismatch between slots needed and current supply” is probably the large gap between market rates for child care and the reimbursements OSSE provides. For family home day care providers, the 2008 gap for infants was $17 per day and, for one year olds, $15 per day. The gaps were slightly less but still substantial for child care centers.

An analysis by Empower DC shows that the majority of providers, especially in Wards 7 and 8, are shy about $630 per infant per month and about $720 per month for every other preschooler. The typical center, I’m told, gets about $600,000 less a year than it would get if reimbursement rates were at the 2008 level recommended inĀ  federal Child Care and Development Block Grant guidance, i.e., at the 75th percentile of market rates.

So the demand for slots is there, but the supply isn’t keeping pace because expansion wouldn’t yield enough additional revenues. Worth noting here that about 95% of family home child care providers and 25% of child care centers are for-profit operations, thus solely dependent on what they receive in fees.

Expansion here doesn’t mean only new construction or renovation. The UDC Center found that only 78.6% of family home capacity and 86% of center capacity was being used. Lack of money for trained staff and equipment were apparently factors here.

Consider too that total capacity has decreased in the last two years because about 50 providers have closed their doors due to lack of sufficient funds.

In short, the reported “spending trends and historical utilization data” don’t justify the proposed funding cut. Far from it. If OSSE increased its reimbursement rates to reflect market trends, as the Center recommended, it might well find that many thousands more children were cared for by its subsidized providers.

This surely is what the large waiting list seems to tell us.


We Need Action On the Job Crisis Now

December 14, 2009

For months, President Obama has been preoccupied with Afghanistan, the climate change summit and getting a health care reform bill passed. The rest of the country has been saying, Do something about JOBS!

And with good reason. We’re told that the November unemployment figures are good news. But 15.4 million American workers are unemployed–over 38% of them for more than six months. An additional 10 million have given up looking for work or are working part-time because that’s the best they can do.

The situation is even worse for black and Hispanic workers. Unemployment rates for them are 15.6% and 12.7% respectively. The Economic Policy Institute says it expects 40% of them to be unemployed or under-employed at some point over the next year. Worst off are black teenagers, with an unemployment rate close to 50%.

The economy continues to shed jobs, though at a much lower rate than earlier this year. Looking at the Bureau of Labor Statistics’ latest job openings and labor turnover survey, EPI figures there were 6.3 job seekers for every job opening in October.

The ratio of seekers to jobs will grow unless something dramatic happens. Because it won’t be enough for employers to stop eliminating jobs. EPI says the labor market would have to grow by an average of 581,000 jobs a month to bring the unemployment rate back down to its pre-recession level.

Now the President has outlined a plan to jump-start job creation, using funds appropriated for the bank-bailout. I’m still chewing it over. So, I suspect, are members of Congress–except, of course, the House Republican leadership, which is dead set against more spending.

What Congress can–and should–do is act on the most urgent elements now. Otherwise, the extended unemployment insurance provisions in the economic stimulus package will expire–notwithstanding the recent legislation to extend them.

A new brief by the Center for American Progress Action Fund and the National Employment Law Project says that 1 million workers will lose job benefits in January unless Congress acts. By March, the number will have increased to 3.2 million. NELP has a customizable e-mail we can send to support the needed legislation.

Congress should also immediately extend the COBRA health insurance subsidies. Beneficiaries have already started losing these. Millions more could face a tripling of their premiums in the months to come.

A third priority are the stimulus provisions that have helped states balance their over-stressed budgets. An estimated 900,000 jobs will be lost unless Congress extends these ASAP.

More about them in another posting.


Senate Finance Committee Health Care Bill Better and Worse

October 21, 2009

The Senate Finance Committee worked hard, if not collaboratively, on the health care bill introduced by its chairman, Senator Baucus. A whopping 564 amendments considered. What it’s come up with has something for everyone to dislike. And I’m no exception.

Set aside the hot button issues like the lack of a public option and prospective cutbacks in Medicare. The committee failed to resolve two major problems in the Baucus bill that would adversely affect low-income people. In fact, it made at least one of them worse.

One big problem is affordability. The Finance Committee bill made some improvements here. However, both premiums and out-of-pocket expenses for low and moderate income households would still be much higher than under either the main bill pending in the House of Representatives or the bill passed by the Senate Health, Education, Labor, and Pensions Committee.

The Center on Budget and Policy Priorities has again crunched the numbers. As its new brief shows, for people below 200% of the federal poverty line, premiums would be two to four times greater.

If the bill were effective now, deductibles and co-pays for families at 250% of the FPL could be as high as $5,800 a year. For a family of three, this would be on top of an initial $4,349 premium–9.5% of its total income. And, for reasons explained in my earlier posting, premiums would eat up an increasing percentage of income over time.

The Finance Committee apparently recognized that health care would still be hard for many people to afford. But rather than adopt a different cost-sharing scheme, it waived the penalty for not having insurance for households whose premium costs for the lowest-cost plan in the insurance exchange would exceed 8% of their income.

CBPP says the waiver would apply to people with incomes between about 220% and 400% of the FPL. Given the costs of the insurance, many might decide to remain uninsured. Others might opt for the expanded “young invincible plan,” which isn’t just for young people any more. Under this plan, coverage would kick in only after people have met a high deductible–$5,800 for individuals and $11,600 for families.

One way or the other, a lot of low to moderate income people would still not have insurance that enables them to get the health care they need. Those most likely to opt out would be the healthiest–those who feel they’re invincible. But of course they’re not. Major illnesses and injuries can happen to anyone. And if the healthiest opt out, the risk pool would include mostly people with higher health costs. Up go the premiums. Up go the number of people who can opt out.

Another big problem in the Baucus bill was the “free rider” provision, i.e., the requirement that employers who don’t offer health insurance with benefits up to a minimum standard pay a fixed amount only for employees who are eligible for subsidies and work at least 30 hours. The fee would also apply if the insurance they offered was unaffordable for these employees.

Needless to say, this provision give employers a strong incentive to hire only people who don’t qualify for subsidies. It could also prompt them to convert current full-time, low-wage employees to part-time. Hardest hit would be near-poor single parents with dependent children because fees for them will be highest.

The Finance Committee bill strengthens this perverse incentive in two ways. First, it denies employers the right to deduct the costs of the fees as a business expense, even though health insurance is deductible. Second, it changes the formula for calculating the fees in such as way as to make them more costly.

The Finance Committee was trying to reduce the impacts of health care reform on the federal budget. Impacts on low-income people seem to have been of less concern. It could have done a better job if it had adopted a standard pay-or-play option for employers and tapped revenue sources outside the health care system, as the Coalition on Human Needs has recommended.

Senate Majority Leader Harry Reid has the thankless task of reconciling the Finance Committee bill with the Senate HELP Committee bill–and with an eye toward getting the 60 votes needed to get his version passed. It’s bound to have something that everyone–not just the all-but-solid Republican opposition–dislikes.

But will so many Senators, organized interest groups and we grassroots Americans dislike so much of it so much that it fails?


Baucus Health Care Reform Bill Needs Reform

September 22, 2009

I told myself I was going to leave health care reform to more expert bloggers. But I’ve changed my mind because the bill Senator Baucus has introduced would compromise away vital interests of poor and near-poor individuals and families. Several provisions are at issue here.

One is the scheme for subsidizing the health insurance premiums they’d pay. It’s pretty complicated, but essentially involves a sliding scale for offsetting the costs of premiums for individuals and families up to 400% of the federal poverty line.

The Center on Budget and Policy Priorities has crunched the numbers. Its analysis shows that the required premium contributions would be more than many low-income people could afford–and much greater than the contributions that would be required under either the bill pending in the House of Representatives or the bill produced by the Senate Health, Education, Labor, and Pensions Committee.

But that’s only part of it. At the end of the first year, the caps on contributions would shift from a fixed percent of income to a fixed percent of the cost of the insurance premium. So low-income people would wind up paying an ever-greater share of their income for insurance because premiums will almost certainly rise faster than incomes.

And that’s still only part of it. The Baucus bill would mean high out-of-pocket costs for low-income people. Essentially, this has to do with the actuarial values the bill assigns to the various levels of insurance that would be available. The higher the actuarial value, the lower the deductibles and co-pays. People in the lowest income bracket would be entitled to the plan with the highest actuarial value, people in the next-lowest bracket to the plan with the next-highest actuarial value, etc.

So far, so good. But the Baucus bill sets actuarial values lower than either the House or the Senate HELP Committee bill. This translates into higher out-of-pockets. According to CBPP, if the plan were in effect now, a family of three at 250% of the federal poverty line would have to pay 12.6% of its income for deductibles and co-pays before assistance kicked in. And that’s in addition to the 10.5% of its income it would have to pay for the insurance premium. Affordable health care this ain’t.

Last, but far from least, the Baucus bill egregiously limits the “pay or play” scheme that’s a standard element in many health care reform proposals, including the House bill and the HELP Committee bill. Washington Post blogger Ezra Klein calls this “the worst policy in the bill, and perhaps in the world.” Here’s why.

Under the Baucus bill, employers that don’t provide health insurance would have to cover the costs of the subsidies that most of their eligible workers would receive when they purchased health insurance. Employers that do provide health insurance would also have to cover the costs of subsidies for those of their workers who had to pay more than 13% of their income for the premiums in the employer-sponsored plan. But employers would get a “free rider,” i.e., incur no cost at all, for the rest of their workers.

So there’s an incentive here to hire workers whose family income puts them above the subsidy level and workers covered under a family’s insurance plan. And there’s a big disincentive to hire low-income workers entitled to subsidized family plans since these, of course, cost more than individual plans.

Why hire a single mother who’s struggling to support her children when it’s cheaper to hire a well-off teenager–or one of those illegal immigrants who’ve become a favorite talking point for the Republican opposition?

As New York Times columnist Paul Krugman says, we’ve known for a long time that any health care bill that Congress produces will fall short of reformers’ hopes. The question is how bad does a bill have to be to make it too bad to vote for.

The Baucus bill is right on the threshold. It would be a dreadful shame to wind up with a plan that left low-income individuals and families with unaffordable health care costs–plus new challenges to employment. But would it be better to scrap the whole thing if that would leave us with the grossly inequitable, unsustainable system we’ve got?

Perhaps there’s still hope for a bill that won’t force this choice.


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