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Journal Issue: Financing Child Care Volume 6 Number 2 Summer/Fall 1996

The Financing of Child Care: Current and Emerging Trends
Louise Stoney Mark H. Greenberg


Early care and education services in the United States are financed by a complex mix of public and private funds totaling about $40 billion annually. In this article, the authors describe the principal sources of funding for child care and conclude that parents pay the primary share, followed by funds from the federal government and those state expenditures that are required to match federal funding. The authors detail a fragmented and underfunded system of finance that is the product of unresolved conflicts between child care policy and early education policy, and between tax policy and expenditure policy. The policy conflicts and insufficient resources create fragmentation in service delivery and inequities in allocation of subsidies.

Federal welfare reform will affect many federal child care funding streams. Therefore, welfare and accompanying reforms can potentially resolve some of the fragmentation, but the authors conclude that the eventual effect of these reforms will depend on the policy choices made concerning key issues, including whether funds for child care will be open-ended and/or an entitlement, whether state matches for funding will be required, and which services will be provided for which families with flexible block grant dollars.

While block grants coupled with increased funding might help solve some of the fragmentation issues in the delivery of child care services, true resolution of the problems will depend upon additional change that addresses underlying policy conflicts. Are public dollars to be used to support work force participation by parents, to promote child development, or both? How do the ways in which subsidies are provided (through the tax system to individuals or as expenditures for programs and services) influence our ability to reach policy goals? The authors urge that tax policy and expenditure policy be integrated, and that child care and early education policy goals be considered together.