Rich Jones, the Bell’s director of policy and research, testified to the House Public Health Care and Human Services Committee.

The Bell Policy Center, the Colorado Children’s Campaign, and the Junior League of Denver support SB16-022 to expand the number of Colorado counties that can participate in the Cliff Effect Pilot Program at no additional cost to the state. This could result in counties from the Eastern Plains, southern Colorado, and parts of the Western Slope participating in the pilot program. A wider variety of counties will help lawmakers, the state, and counties gain a better and deeper understanding of the types of policies that can effectively address the cliff effect throughout Colorado, which is critical to family economic security.

The “cliff effect” occurs when a modest increase in a family’s income puts them over the income limit for child care assistance and they lose all of their benefits. Oftentimes, the value of this important work support is greater than the increased income. As a result, many families take actions such as turning down raises, refusing promotions, and limiting working hours to remain below the income limit. In the long run, these actions are not good for the family, their employers, or state and local governments.

The Cliff Effect Pilot Program was originally established in 2012 (SB12-022). However, partly because counties were not provided additional funding to implement it nor given authority to limit the number of families that could participate in the pilots, no counties established pilot projects.

In 2014, the law was amended (SB14-003) to provide counties with state funding that covers the costs of administering and paying the extended benefits under the pilots. Counties were also given authority to limit “participation in the pilot program to a reasonable percentage of the county’s caseload for the Colorado child care assistance program” and Colorado Child Care Assistance Program families “with children who are thirty-six months of age or younger.” The law also limits the pilot program to the first 10 counties that applied and were approved to participate.

As a result of the changes adopted in 2014, Arapahoe, Douglas, Eagle, El Paso, Grand, Jefferson, Ouray, Routt, San Miguel, and Summit Counties are currently operating pilot programs. Douglas County began operating its pilot in December 2014 and the rest began in 2015, including six counties whose pilots began in July 2015 or later.

SB16-022 lifts the 10-county limit and authorizes the executive director of the Colorado Department of Human Services to select additional counties subject to available moneys in the fund. Based on current expenditures, additional counties can be added without increasing state costs.

The Cliff Effect Pilot Program was designed to allow counties to experiment with different approaches to gradually withdrawing child care benefits as family incomes increased. CDHS is directed to collect and analyze data on the effects of the different approaches and share this information broadly among lawmakers, counties, the state, CCCAP families, family advocates, and others. The goal is to use what is learned to better structure CCCAP locally to help families avoid the cliff effect.

The Bell Policy Center has done considerable work on the cliff effect and finds about one-third of CCCAP families are concerned enough about going over the cliff that they take actions to limit their income. While the number of families who actually go over the cliff is fewer than this, we need to develop approaches that provide incentives for these families to advance economically. The pilot program is key to identifying successful approaches to address the cliff effect.

We thank Representative Pettersen for her leadership of the Early Childhood and School Readiness Legislative Commission that worked on this issue during the interim and for bringing this bill to you today. We also thank Representatives Singer and Wilson for bringing this bill today and for their work on this issue during the summer.

We also thank the committee for the opportunity to share our thoughts with you.