Child Care
North Carolina's child care subsidy programs represent a fraction of the nearly $18 billion operating budget managed by North Carolina's Department of Health and Human Services. Amid concerns about the state's economic woes, however, some have begun to question whether government should spend hundreds of millions of dollars a year to subsidize child care expenses for a relatively small number of children.
Key Facts
- The Division of Child Development and Early Education of the Department of Health and Human Services (DHHS) oversees the Subsidized Child Care Program, but county social services departments actually administer the subsidy program. A third entity, the N.C. Child Care Commission, adopts regulations that ensure DHHS compliance with legislation passed by the N.C. General Assembly.
- The Subsidized Child Care Program provides vouchers to eligible families for child care services in daycare centers and family homes. Families typically contribute between 8 and 10 percent of the cost. Parent fees depend on income, family size, and the cost of child care services provided.
- About one-third of the funding for the Subsidized Child Care Program comes from state sources, including Smart Start. Federal funding makes up the remainder. As of January 2012, the total budget for child care subsidies exceeded $400 million.
- During the 2011-2012 year, nearly 85,000 children received subsidized child care services from one of North Carolina's 4,900 regulated child care centers and 3,300 regulated family child care homes. This represents a third of the 260,000 children enrolled in regulated facilities throughout North Carolina.
- The child care subsidy program requires families to meet both situational and income eligibility requirements. Eligible families include 1) those who have a parent who is attempting to find work or is enrolled in an educational program, 2) those who have a child with developmental needs, or 3) those who receive child welfare services.
- The Division of Child Development uses a star rating system to evaluate the quality of all licensed child care centers and family child care homes in North Carolina. The lowest quality child care facility receives one star. The highest quality facility receives five stars.
Recommendations
- Child care subsidy programs should be eliminated in favor of a refundable tax credit for the families of preschool children. In North Carolina, most preschoolers do not spend their days in centers or homes where paid staff care for them. Stay-at-home mothers, working mothers and fathers, relatives, and neighbors supply the vast majority of care provided to preschoolers, and on a non-paid basis. A refundable tax credit would provide a small measure of relief to these families.
- Parents should also be able to make tax-deductible contributions into Educational Savings Accounts for use in paying preschool expenses or accumulating assets for the future educational needs of their children. Families are by far the most important providers of preschool services. Educational Savings Accounts would promote investment in the developmental and educational needs of children.
- Policymakers should limit regulation of day-care operations to health and safety requirements only. Parents should make their own decisions about the trade-offs between price and child-staff ratios or qualifications.
Analyst: Dr. Terry Stoops
Director of Education Studies
919-828-3876 • tstoops@johnlocke.org
