SB 12-22 Maintaining child-care assistance for working families (House Health and Environment Committee)

Senate Bill 12-022

Testimony to the House Health and Environment Committee

Melody Maitland, MSW Fellow

March 20, 2012

Thank you for the opportunity to speak with you today. My name is Melody Maitland, and I am a master of social work student fellow at the Bell Policy Center. The Bell is a non-partisan, non-profit research and policy organization founded on progressive values and dedicated to expanding opportunity for all Coloradans.

The Bell Policy Center supports SB12-022, "Maintaining Child Care Assistance for Working Families," because it is a step in the right direction toward mitigating the child-care cliff effect in Colorado.  It provides families with support to better transition off the Colorado Child Care Assistance Program (CCCAP), helps working families stay on the job and children maintain consistent child care.  It also provides counties with the option to decide whether to participate in this pilot project.

The cliff effect problem is well-documented.[1] It occurs when an increase in income pushes a family over the eligibility limit, causing the family to lose more in public benefits than they gain in increased income. There are differing cliffs depending upon the public program in question, but the steepest cliff occurs when a family loses child-care subsidies.

For example, when a typical family of three (one parent with two children) living in Denver County earns even $1 more than the current eligibility limit of 165% of the federal poverty limit ($31,498 for a family of three) it loses all of its child-care assistance benefits.  The value of these benefits totals $1,320 per month, as shown in the "Status Quo" chart[2] at right. Under the current system, the family is expected to immediately make up the difference between the $306 they are currently paying per month and the full $1,626 per month cost of child care.

There is evidence that some families turn down promotions, reduce work hours and refuse raises to stay eligible for CCCAP – making it harder for them to reach self-sufficiency.[3]

SB12-022 addresses the cliff effect by authorizing counties to allow families to remain eligible for child-care assistance for up to two years, providing the families assume an increasing portion of their child-care costs. At the end of the two-year period, the family would pay the full, unsubsidized cost of child care. This transition period would give families time to prepare to pay the full cost of child care, reduce the disincentives to earn more money and move families toward self-sufficiency.  The "Potential Scenario" chart[4] shows one projection of how this transition could work.

How the transition process would work in practice will be determined by the state Department of Human Services in conjunction with the counties. The pilot project authorized in SB12-022 would allow the state and this committee to gather much-needed data on how the two-year transition toward full payment of child-care costs affects CCCAP families.  This data would provide useful information on how to mitigate the cliff effect and how to more successfully implement the Colorado Child Care Assistance Program.

SB12-022 would provide benefits for all parties involved

• Provides families with support to successfully transition off of the CCCAP program. Participants are provided time and assistance to pay the full cost of child care.
• Helps working parents stay on the job. Considering that the majority of CCCAP recipients are single parents, an immediate loss of child-care support could have devastating effects on the parent's ability to work.
• Provides children with consistent, safe and stimulating care. An immediate loss of subsidies could result in parents having to put their children in cheaper, generally lower-quality child-care arrangements. Further, children, under the current system, do not have enough time to transition to new child-care arrangements.
• Provides stability for child-care providers since fewer children will be abruptly pulled from care.
• Allows counties to maintain control over whether they decide to participate in the pilot project. Thus, this bill does not require counties to do anything they do not choose to do. Further, the bill encourages participating counties to partner with local businesses as a long-term solution toward mitigating the cliff effect.
• Reduces worker turnover and associated costs for employers. Losing an employee because the parent does not have child care is a burden on employers.

Due to budget constraints, we understand that many counties are not currently in a position to participate in the pilot project, but the four-year period allows interested counties to participate when and if it is right for them. We hope to identify and work with several counties that are interested in and willing to create pilot projects if this legislation is passed.

This bill is a step in the right direction for addressing the cliff effect and will provide data that will be helpful in implementing the Colorado Child Care Assistance Program. Therefore, the Bell Policy Center recommends the committee vote in favor of this bill.

Thank you for the opportunity to share this information. We appreciate the chance to address this important bill, and thank Representative Massey for bringing it to you today. If you have any questions, or if I can provide further information, please call me at 303-297-0456 or email me at Maitland@bellpolicy.org.

Endnotes

[1] Dinan, K. A., Chau, M., & Cauthen, N. K. (2007). Two steps forward and three steps back: The 'Cliff Effect' – Colorado's curious penalty for increased earnings. Denver: The Women's Foundation of Colorado & The Women and Family Action Network Coalition; East, J., & Roll, S. (2010). Child care and low-income families: Coping with the cliff effect. Denver: Women's Foundation of Colorado.

[2] For specific calculations and assumptions that led to this chart, please see: The Bell Policy Center (Feb. 13, 2012) SB12-022: Concerning maintaining child care assistance for working families testimony to the Senate Health and Human Services Committee, which can be retrieved at  http://bellpolicy.org/content/sb-12-22-maintaining-child-care-assistance-working-families

[3] East, J., & Roll, S. (2010). Child care and low-income families: Coping with the cliff effect. Denver: Women's Foundation of Colorado.

[4] See Footnote 2