Financial Aid For Up to 30,000 Restored at the Wire

Child Care Assistance and Preschool Improved in Budget Agreement

The two-year budget agreement now being considered by Governor Bevin made incremental but substantial changes to the state’s two main investments in early childhood care and education (ECCE). The state’s Child Care Assistance Program (CCAP) was given $21.2 million more across the biennium than in the previous budget, so more families can become eligible for assistance. State funded preschool was held harmless, but its income eligibility limit was also increased.

While the state only uses General Fund money for public preschool, CCAP spending comes from the General Fund, tobacco settlement money and federal money through a grant called the Child Care Development Fund (CCDF). The proportions of these funds have shifted greatly since 2008 toward more state and fewer federal dollars, but overall CCAP funding has fallen, even with a significant state increase in the 2014-2016 biennial budget that offset an expected decline in CCDF funds. With the exception of a 42 percent cut in 2011, preschool funding has remained relatively level since 2008, but remains below its peak of $94.4 million in 2010.

The current budget agreement provides $10.6 million in each budget year for CCAP so the income eligibility limit can be increased from 150 percent of the 2011 federal poverty level, to 160 percent of the federal poverty level as annually determined by the federal Cabinet for Health and Human Services. If approved by the governor, a family of 4 making up to $38,880 would now be able to receive help paying for child care. This increase means an estimated 7,200 additional children will be eligible for assistance (though traditionally only about 20 percent of eligible children participate). And because the eligibility limit will no longer be anchored to a particular past year’s poverty level, CCAP can be responsive to changes in the economy over time.

Although the budget agreement did not increase funding for preschool, it raised the income eligibility limit from 160 percent to 200 percent of the federal poverty level so that, for example, a family of four making up to $48,600 could send their children to public preschool. An increase of this amount is likely to serve an additional 1,000 children. The $90.1 million appropriation also includes a $7.5 million grant program to encourage collaboration between private child care providers and public preschool programs. Such collaborations in the past have provided full-day, high quality early childhood education.

The department of Community Based Services, under which CCAP is administered, was cut 9 percent across the biennium, making this program one of the few that saw any increases. And after large cuts to higher education and flat-lined spending on K-12, these modest improvements to ECCE are all the more important.

High quality ECCE is widely recognized as an effective tool for providing children with opportunity later in life. While Gov. Bevin makes final decisions about Kentucky’s next budget he should protect these investments in our future.

New Early Childhood Education Report Highlights Benefits of Investment

Too little funding for early childhood care and education (ECCE) in Kentucky means that quality care is too expensive for low-income families, and remains unaffordable for most Kentuckians.

A new report from the Economic Policy Institute lays out a broad argument for why bold investment in ECCE is needed. In short, children who have high quality early childhood experiences benefit immediately and well into adulthood, families with access to affordable care are able to invest in their income-earning potential and pursue careers, and states can more generally invest in a better prepared workforce.

Specifically, the report proposes that families shouldn’t have to spend more than 10 percent of their income on child care. This proposal is based on the recommendation the Federal Cabinet for Health and Human Services makes to states who receive the Child Care Development Fund grant, which pays for a large portion of child care assistance programs such as Kentucky’s CCAP. Such a goal would require considerable public investment, but the returns to Kentucky would be worth it. EPI describes four main types of benefit:

Better care means better outcomes for kids:

Lowering cost of childcare would help working families make ends meet:

  • In Kentucky, capping child care costs at 10 percent of income would mean $974 more each year for the typical family with an infant.
  • Extra savings from in-kind child care policies would mean families could save for college, pay for needed health care or pay for rent, which is unaffordable for most renters in Kentucky.

Ensuring consistent child care will increase parents’ opportunity to work:

  • Studies have shown that in places where child care assistance was improved, every 1 percent increase in subsidy raised the maternal labor force participation by roughly .25 percent.
  • In Kentucky, EPI estimates that capping child care costs for families at 10 percent of income would result in a 0.5 percent, or $939 million boost to the state economy due to increased labor force participation.

Better wages for child care workers would reverse the trend of depressed wages in the industry, and remove barriers to a higher quality workforce:

  • In Kentucky, a typical child care worker makes $18,621 per year. Nationally, child care workers’ median pay is 39.3 percent less than that of workers in other occupations.
  • Research confirms that high-quality programs that benefit children’s wellbeing and success later in life, such as the Chicago Child-Parent Program, have well-trained, well-compensated staff.

Kentucky’s HANDS program, CCAP, and publicly funded preschool are examples of ECCE programs that EPI more generally refers to throughout their report. However, such programs don’t reach everyone who needs assistance. For example, many families are unable to qualify for CCAP and must pay full market rates.  Only 43.3 percent of Kentucky families can afford child care for infants, and significantly fewer can afford care for two children.


Further, CCAP only reimburses providers between $6 and $25 per child per day, depending on several factors such as part or whole-day care and the age of the child. This is far below the recommended 75th percentile of current market rates which range between $17 and $30 per child per day, meaning that the quality of care children receive may suffer due to inadequate funding.

State and federal funding as well as parental co-pays make up CCAP funding, and all three have declined in recent years. However, the approved biennial budget, now on Gov. Bevin’s desk, takes steps in the right direction. It adds $10.6 million in each fiscal year to raise the limit of eligibility for families to receive child care assistance from $33,525 to $38,880 for a family of four 1 . Additionally, $7.5 million of the public preschool appropriation will be used as a grant to encourage full-day collaborations between local school districts and private child care providers.

Meaningful investment in ECCE in Kentucky will help families make ends meet, give children more opportunity for a successful life, get more parents to work and bring much needed income to an underpaid workforce. This recent report from EPI affirms that bolstering Kentucky’s ECCE is crucial.

  1. The current standard for CCAP income eligibility is 150 percent of the 2011 Federal Poverty Level. The budget enhancement would instead make families “at or below 160 percent of the federal poverty level as determined annually by the U.S. Department of Health and Human Services” eligible for assistance.

General Assembly’s Budget Includes Critical Scholarship Investments

The final budget agreement that passed the legislature includes significant new investment in the state’s college scholarship programs. Over the biennium, the funding increase for Kentucky Higher Education Assistance Authority (KHEAA) is $121.5 million over what was budgeted for the prior two-year period. This new money for scholarships is important for helping Kentuckians better afford college — particularly the state’s low-income students — and the governor should affirm these investments as he makes final decisions about the budget.

These improvements in financial aid funding are especially critical given the budget’s 4.5 percent cut, or $60.4 million over the biennium, to public universities and community colleges. Last year, Kentucky already ranked 11th among states in highest per-student cuts to higher education since 2008. With new budget reductions for postsecondary institutions Kentucky’s national position will only worsen, as will its college affordability problem as the public universities and community colleges will likely need to raise tuition in order to help compensate for the funding shortfall.

Already a college education remains financially out of reach for many Kentuckians. We have the highest community college tuition in the region, tuition increases since 1999 in the range of 206 percent (at Murray State) to 286 percent (at Western Kentucky) at the state’s public postsecondary institutions and the third highest student loan default rate in the nation.

State scholarship programs can help somewhat mitigate these costs — particularly need-based financial aid like the state’s College Access Program (CAP). And unlike in recent years, the budget agreement provides close to full statutory funding for both CAP and the Kentucky Tuition Grant (KTG). For several years, tens of thousands of qualified students have been turned away from these programs because much of the lottery money intended by law to fund them was instead siphoned off to help with other areas of the budget. In contrast, the two scholarships would receive $238.9 million across the biennium in the new budget agreement, nearly $55 million more than in the previous biennium. This translates to close to 30,000 more need-based scholarships in total. These funds were appropriated in the budget bill as well as through a supplemental appropriation in House Bill (HB) 10.

Additionally, the state legislature agreed to create a new $25 million scholarship program to pay full tuition costs (after other scholarships) for graduating high school students entering associate’s degree programs at the state’s community colleges, public universities and nonprofit colleges. The program, called Work Ready Kentucky, will contribute toward making college affordable for selected traditional age students seeking associate degrees. The budget bill also includes a new dual credit scholarship ($15 million over the biennium) through the merit-based Kentucky Education Excellence Scholarship (KEES) for high school students enrolling in college classes.

The budget bill that passed the General Assembly and HB 10 are awaiting Governor Bevin’s approval, veto or line-item veto. Given the additional cut to university and community college funding contained in the budget and the growing recognition that financial barriers at the key challenge to college completion, it’s critically important that the thousands of scholarships that help students afford college be included in the final document.

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Biennial Budget, Road Plan on Path to Governor’s Desk After Passing House, Senate

Kentucky Governor Matt Bevin Faces Lawsuit Over Unprecedented Higher Education Cuts

What Are Taxes For?

Since completing forms and mailing off checks may not inspire reflection on the bigger purpose of taxes, here’s a Tax Day reminder of what we are chipping in for:

Through our local, state and federal governments, our tax dollars are pooled together and invested in schools and universities, roads and bridges, social services for vulnerable children and adults and other public services essential for shared prosperity and thriving communities in the Commonwealth.

In other words, taxes are a critical tool for doing important things together we cannot do alone. Here in Kentucky, state tax dollars go for:

Education: Early childhood education and child care; K-12 education; higher education; adult education; worker training; vocational education; libraries; public television.

Health Care: Health insurance for people with disabilities, pregnant women, low-income children and adults, and the elderly in nursing homes through Medicaid; public health; mental health services; disability services; substance abuse services.

Human Services & Supports: Child and domestic violence protection; foster care and adoption; housing; nutrition assistance; support for low-income families; support for veterans; support for the elderly.

Infrastructure: Roads; water and sewer systems; public transit.

Environmental Protection: Land conservation; enforcement of laws protecting land, air and water; state parks; forest protection and management.

Public Safety & Justice: Court system; public defenders and prosecutors; state police; jails and prisons; disaster relief; consumer and worker safety protection.

Economic & Community Development: Small business development; tourism; job development; agricultural development; arts and culture.

Kentucky is projected to collect about $10.3 billion in revenue in its General Fund in 2016. Forty-one percent of the General Fund is expected to come from the individual income tax; thirty-three percent from the sales tax; six percent from the property tax; seven percent from corporate taxes and the remaining from the coal severance tax, cigarette tax, lottery and other sources.

Over the current biennium, General Fund resources are allocated as follows:

tax day 2016

Source: Office of the State Budget Director

For a closer look at how our state tax dollars get appropriated to different budget areas, click here. And to see where federal tax dollars go, click here.

Despite these essential investments, Kentuckians often hear we’d be better off reducing certain taxes. But starving the very public services and structures we need for a strong workforce and economy – through tax breaks powerful interests fight for and benefit from – is bad policy. Individual and corporate income tax cuts are not the way to a stronger economy and more jobs. What we actually need is to clean up our tax code of special interest tax breaks so we can restore our investments in the Commonwealth.

The important Tax Day takeaway is that by paying taxes, Kentuckians are investing in thriving communities and a stronger state.

Three Kentucky Representatives Ask to Join AG Beshear’s Lawsuit on Higher Education Cuts

Indiana Medicaid Waiver Model Should Not Be Replicated in Kentucky Without Evaluation

With Kentucky considering pursuing a waiver that makes changes to its Medicaid program — and looking at Indiana’s waiver design in particular — it is important to keep in mind how much we still don’t know about the model’s implementation and effectiveness.

As shown in a new paper by the Center on Budget and Policy Priorities (CBPP), there are serious questions about the data coming out of Indiana. As CBPP argues, it’s unwise to replicate the ideas Indiana has piloted before they are thoroughly evaluated.

Indiana is one of six states currently using waivers to implement their Medicaid expansions. The law around waivers says they are intended to provide additional flexibility to states and act as demonstration projects to test ideas while still promoting Medicaid’s objective of delivering health care services to vulnerable populations who can’t otherwise afford them.

Indiana was granted a waiver for Healthy Indiana Plan (HIP) 2.0, to test the impact of premiums on participation in health coverage and the efficient use of health services. HIP 2.0 is supposed to test whether or not its monthly premiums are affordable and do not create a barrier to health care access.

State and federal evaluations of the waiver have not yet been completed and there are many concerns and unanswered questions about its implementation. Specifically, there are concerns about whether or not the program is following through with its design to base premiums on beneficiaries’ actual incomes and collect data on third-party payments.

For instance, based on reporting so far, the state seems to be counting an improbably large number of enrollees as having little or no income, which makes premium amounts easier to calculate and collect. Indiana reports over half of HIP 2.0 enrollees have incomes below 5 percent of the poverty line, even though Census data show that only 12 percent of Medicaid expansion-eligible adults have incomes that low. Under the program, those very low income participants pay $1 a month and no calculations around premiums as a share of income are required.

The extent of third-party premium payments occurring with HIP 2.0 is also unclear. Indiana is reporting on the number of HIP 2.0 participants whose premiums are paid by employers and non-profit organizations — but not by health care providers or other third parties. For instance, they recently reported to the Centers for Medicare and Medicaid Services (CMS) that some payments on behalf of Medicaid participants may not be captured in the numbers reported — i.e., from hospitals, friends and family. As noted in the CBPP paper, “If third parties are paying premiums for a large share of beneficiaries and this is not being reported to CMS, the demonstration is not a true test of the impact of premiums on enrollment and utilization of services.”

Without accurate data on premium payments, conclusions cannot be made about whether or not they are manageable for low-income participants. Past research has overwhelmingly shown premiums have a negative impact on health care access.

Indiana’s waiver was also granted to test whether presumptive eligibility and fast-track prepayments will prevent gaps in health care coverage. These mechanisms are important as HIP 2.0 delays coverage until premiums are paid (or those with incomes below the poverty line are shifted to more basic health benefits after 60 days). However, there are important questions that need to be answered about how Indiana is implementing presumptive eligibility and fast-track prepayments.

Presumptive eligibility allows providers to screen and immediately enroll in Medicaid persons who appear to be eligible so they can begin using benefits right away while they complete the eligibility process. Fast-track prepayments are $10 payments made when applying for Medicaid, before eligibility is determined, that allow those found eligible for coverage to have it starting on the first day of the month they are found to qualify.

However, Indiana’s reporting to CMS raises questions about how the state is implementing presumptive eligibility. For instance, it appears that a declining share of providers are participating. In addition, Indiana’s reports to CMS lack data on the number of individuals making prepayments, which makes it unclear whether they mitigate harm from delays in coverage.

These unanswered questions mean we don’t know whether or not the Indiana Medicaid waiver model negatively impacts access to health coverage. Kentucky should not model its Medicaid program after an unevaluated approach, at least until there is a full understanding of its results. Our state’s Medicaid expansion has been very successful at insuring low-income Kentuckians and promoting preventive care for participants. Changing the program in ways that potentially reduce access to coverage would be detrimental to many individuals and the state as a whole, which benefits from having a healthier population.