New Report Shows Kentucky Child Care Assistance Continues to Fall Short

Kentucky’s Child Care Assistance Program (CCAP) has one of the lowest income eligibility thresholds and has among the highest co-pays for parents among state child care subsidy programs, according to the annual child care report recently released by the National Women’s Law Center (NWLC). The report shows while nationally child care assistance is improving, Kentucky’s program is still weak.

The report assesses all 50 states’ child care programs based on their income eligibility limits, waiting lists, parent co-payments, reimbursement rates to providers and how much leeway parents have when looking for a job. NWLC finds that:

  • Despite the recent restoration of prior CCAP budget cuts that had reduced eligibility based on income, Kentucky still has the ninth lowest eligibility cap in the country. Currently, assistance is limited to those with incomes below 150 percent of the 2011 federal poverty level, or only $27,795 for a family of three.
  • For a family of 3 with 1 child in care living at 100 percent of 2015 poverty levels, monthly co-payments cost $130, which breaks down to roughly 8 percent of that family’s monthly income. This puts Kentucky as having the 13th highest monthly co-payment in the country. The report also looked at co-pays for a family of three at or above 150 percent of the current federal poverty level, but Kentucky doesn’t allow families at that income level to participate.
  • Qualifying child care providers receive a reimbursement from the state when they care for CCAP participating children. The state will only pay up to $24 a day to the provider (minus the parents’ income-determined co-payment). That’s a lower reimbursement rate than what is recommended by federal regulations, according to the report.
  • In 2013 Kentucky stopped adding new children to the CCAP waiting list because of underfunding. However, the Division of Child Care started accepting new applicants in August of 2014 and no families are currently on a waiting list.
  • If a parent loses his or her job while receiving child care assistance and is actively seeking employment, they can continue to use CCAP for up to just four weeks (28 days). One bright spot in this report is that starting December 2015, parents will have 90 days of eligibility while they’re looking for a job. Only six other states meet or exceed a 90 day grace period.

CCAP is a vital program for working families who are already struggling to make ends meet. Many advocates are calling on lawmakers to increase the CCAP eligibility limit to 200 percent of the federal poverty level. Total funding for child care assistance in Kentucky is still 30 percent less than pre-recession levels when adjusted for inflation. Federal funding, by far the largest source, is half of what it was in 2011, and state funding has increased to make up for only a portion of that loss.

Even Big Cuts to New Teachers’ Pensions Would Do Little to Address System’s Funding Challenge

Even if the state were to massively cut pension benefits for new teachers, it wouldn’t result in meaningful savings to the teachers’ retirement system over the 30 year period needed to pay down its unfunded liability, according to information provided to the system’s funding work group.

Thus the state could deeply reduce retirement security for new teachers through benefit cuts — and drive up the challenge of attracting and retaining good teachers — without making a real dent in the serious financial problem now facing Kentucky. Cuts to new teachers’ benefits are no substitute for generating additional revenue to pay back the liability owed to current teachers and retirees.

A consultant to the work group showed that to make the teachers’ pension system sound, annual contributions over the next 30 years should equal approximately 38 percent of teachers’ salaries. Of that amount, nine percent is what teachers contribute from their paychecks and seven percent is the state’s regular contribution for teachers’ benefits (referred to as the “normal cost”). The remaining 22 percent is the amount needed to pay off the unfunded liability resulting from the state failing to make its contributions in the past compounded by investment losses from the last two recessions.

The state’s current contribution is 14 percentage points short of what it should be putting in. At $35 million for each percentage point, that means the state is underfunding the plan by about $490 million a year.

New teachers’ pensions cost the state 6-to-7 percent of salaries, which is only slightly more than other employers in the state and country contribute for their employees’ Social Security (employers put in 6.2 percent of workers’ salaries for Social Security, which employees match). Even if the state were to completely eliminate its contribution for new teachers, the savings as a share of payroll of six-to-seven percent would not be fully realized until the entire workforce is made up of teachers hired after the change is made. That would be about 30 years from now and by that time the state’s large unfunded liability will already be paid off if the system is to stay in accordance with accounting rules.

So such a change would have little impact on closing the annual shortfall we face now of 14 percent of payroll, but it would be a draconian cut in those teachers’ benefits down the line. New teachers would receive roughly 42 percent less in lifetime retirement income than they would receive under the current plan, according to the consultant’s data. Kentucky teachers now receive only $36,000 a year in pension benefits on average and don’t receive Social Security.

New teachers have been a focus of cuts because their plan can be changed more easily than existing teachers and retirees, whose benefits are already legally promised. But the problem can’t be solved on new teachers’ backs because their plan is already inexpensive to the state and any significant savings wouldn’t come for decades — and only then at a painful cost to teachers and Kentucky’s education system.

There’s one critical solution to this problem and that’s for the state to generate the new revenue needed to make the full required contribution each year while also meeting Kentucky’s other important obligations.

Presentation: The State of Working Kentucky 2015

Despite five consecutive years of job growth, Kentucky’s economy is yet to fully recover from the Great Recession and faces longer-term troubling trends when it comes to job quality. The unemployment rate has been dropping, but so has the share of workers participating in the labor force. Real wages have been falling or declining for many workers — as has median household income — and the industry with the biggest increase in employment is temp agencies. Job growth has been concentrated in a minority of counties, while much of rural Kentucky continues to struggle from a lack of opportunities.

KCEP made the following presentation on the status of workers as part of the Kentucky AFL-CIO’s 2015 biennial convention.

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Report Shows Quality Childcare is Out of Reach for Kentucky Families

A new report by the Economic Policy Institute (EPI) shows child care is a heavy burden on Kentucky families’ pocketbooks, reiterating the need for more child care assistance in the state.

In almost every community in the country, families spend more than 10 percent of their budget on child care, the benchmark for affordability established by the Department of Health and Human Services (HHS). In Kentucky, the median income for a family of four in 2014 was $54,000, with families spending an average of 22.5 percent of their income on child care for two children.

Kentucky’s Child Care Assistance Program (CCAP) provides subsidies to help with the cost of care, but eligibility is limited and payments to child care centers are low. While some of the cuts that have been made to this program have been rightfully restored, this study illustrates just how deep the problem of child care affordability is and how much more assistance is truly needed.

Affording child care is an even more serious problem for those in low-wage jobs. According to the report, a full-time, year-round minimum wage earner in Kentucky spends 40.4 percent of his or her salary to pay for child care for a four-year-old. Because infant care requires more staff and licensing, it’s even more costly, so that the same minimum-wage earner with a newborn would need to spend 41.9 percent of his or her income on care.

Higher-education state budget cuts and tuition increases have put greater burdens on students and their families, so comparing the cost of a year of child care to a year of in-state public college tuition is a telling benchmark. Child care for a four-year-old is 70 percent as expensive as in-state tuition in Kentucky ($8,196). When you make the same comparison for an infant it rises to 72.9 percent.

According to EPI, a two-parent, two-child household in Kentucky needs to earn $60,106 annually in order to secure a modest, but adequate standard of living. Even if a family were to achieve this standard, they would still pay close to 20 percent of their monthly income on child care, twice the HHS threshold.

EPI child care table

The study underlines the need for state lawmakers to increase the eligibility limits and payments for child care assistance to bring Kentucky back toward the established benchmark for affordable child care. As the table above shows, there is plenty of work to be accomplished to get there.

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