Not Enough Revenues To Break The Shortfall Cycle

December 4, 2010

FuseDC blogger Charise puts her finger on an issue I’ve been mulling over. Only difference is that she’s furious and I’m just stymied.

As Charise says, “front-end investments in prevention and intervention measures for youth and families” cost a whole lot less than programs that address our failures to provide the integrated education, training and other services that will get young people into ongoing living-wage employment.

Yet we don’t want to pit investments that will in the long run pay off in higher tax revenues and reduced social spending against programs that provide a safety net for those our system has failed.

Nor, I trust, do we want to opt for investments in youth development if that means neglecting the needs of people who for various reasons can’t become fully self-sufficient. What about seniors who worked at low-wage jobs their whole lives and now depend on meager Social Security retirement benefits? What about individuals with severe physical and/or mental disabilities?

And what about investments in programs that can lift adults out of poverty? These too will reduce safety net spending — and probably needs for spending on young high school dropouts and other “disconnected youth” as well.

So here’s the quandary. We know that robust, well-targeted investments in public education, job creation, workforce development, child care and other poverty reduction programs will help get us out of the current cycle of budget gaps that repeatedly have sent District officials back to the drawing board.

In fact, they’ll generate more revenues to plow back into these investments. But the budget gaps result largely from revenue shortfalls. So we don’t have the funds to turn the spending cycle around — more on prevention and early intervention, less on safety net because less needed.

Look, for example, at what the DC Council faces now. Say it finds the funds to make the adult job training program whole again. That would still leave local funding for the program at only $9.2 million — this when a 2007 Brookings Institution study found that as many as 61,000 low-income working-age residents needed more training and related services.

Say the Council rejects the proposed cut in funding for subsidized child care. That would still leave about 13,000 children on the waiting list for placements.

Parents with very young and/or disabled children would still face a formidable barrier to sustained full-time employment. More child care providers could close their doors, putting yet more people out of work — and likely in need of additional training.

Same story for a host of other investments that pay off in the long run.

The Council can and should find alternatives to Mayor Fenty’s proposed cuts that don’t make a bad situation worse — a new top income tax bracket among them.

But I think the District is in the same situation as state governments across the country. The need to maintain a balanced budget when this deep recession has so depressed revenues severely limits measures that could generate more revenues without further tax increases while also reducing pressures on the safety net.

The federal government doesn’t have to keep its budget balanced. It could shore up hard-pressed state and local programs, including some that have been under-funded for a long time. Instead, we see a range of initiatives to slash federal spending — not just in the long term, but right now.

Not a damn thing we can do about this so far as I can see.


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.