Beware the Child Care Cliff

How states determine who is and isn’t eligible for child care assistance can plunge families into financial turmoil.

A small boy playing with blocks in front of a collage of stripes, flowers, and a cliff.
Photo illustration by Slate. Photos by Thinkstock.

Amanda Marcus thought she was doing all the right things. Only six weeks after giving birth, she was already back to work: waitressing every weekday, picking up extra shifts on weekends, sometimes working as late as 3 a.m. When a better job as a bank teller opened up, she jumped on it. When extra training at the bank was offered, she signed up for it.

But then one day she got a raise—and everything started to fall apart.

The raise was supposed to be a good thing, a reward for all her long hours and hard work. But it put her a few dollars over the income limit for child care subsidies in Jefferson County, Colorado. Suddenly, instead of paying $489 per month for her little blue-eyed boy’s day care, she’d be on the hook for the full sticker price of nearly $1000 every month. For earning just a few dollars extra in her paycheck, her monthly budget would take a $500 hit. It felt like two steps forward, 500 steps back.

The child care “cliff effect,” as it’s called, is a serious problem for low-income working families, says Jennifer Greenfield, a professor of social work at the University of Denver. “Families normally pay modest copays that gradually increase as their incomes go up, but then all of a sudden there’s this huge jump where the subsidy falls away completely,” she says. “And they just can’t absorb it.” Ironically, it often happens because the families are doing precisely the things society wants them to do—working extra hours, earning extra tips, or getting promoted into positions of greater responsibility.

But what if the cliff were more of a slope, where families were eased off the subsidy gradually, giving them time to adjust? Fortunately for Marcus, Colorado’s state Legislature had recently approved a program designed to smooth the transition for families like hers. Instead of “falling off the cliff,” Marcus would have two years to incrementally take on more and more of the cost of Corbin’s child care. “They asked me if I wanted to participate in the pilot program, and I was like, ‘Oh my gosh, of course!’ ” says Marcus. “What an awesome idea. I was so grateful for it. Because you feel so boxed in, otherwise—you want to take the new position to improve yourself, but then to be prevented because you can’t afford child care? I wanted to build a better life for myself and my son.”

Across the country, other states have been experimenting with similar programs to keep low-income working parents from falling off the child care cliff, in keeping with the recommendations in the Child Care and Development Block Grant Act passed in 2014. So far, half of all states have already established a higher “exit income limit” than “entrance income limit” for child care subsidies, says Karen Schulman, director of child care and early learning research at the National Women’s Law Center. That’s good news for families like Marcus’s, because it means that they can continue receiving child care assistance beyond the initial income limit, gradually reducing their subsidy either until they reach a new, higher income limit, or until a set period of time (often two years) expires.

“It’s so important for families to know that they will not be thrown off the program if they have a change in their work hours or have to change jobs,” she says, “and it’s important for the child to be in a stable child care setting even if their parent’s work situation changes.”

“We had parents telling us things like, ‘It helped me stay afloat,’ ‘it gave me peace of mind,’ ‘it eliminated stress, and that helps me be more successful,’ ” says Natalie Wood, a senior policy analyst at Denver’s Bell Policy Center, which conducted a survey of participants in Colorado’s slope-effect program. “Parents worry about the child care cliff, and we found that reducing worry could spur positive action toward increasing income, by working more hours, taking a new job, or accepting a promotion.” One mother told her that, without the slope-effect program, she would have had to take a pay cut to maintain her child care eligibility and be able to afford to work. “And she said, ‘That’s just ridiculous,’ ” says Wood. “Families don’t want to move backward.”

Fortunately, about half of states don’t have this mismatch of a higher exit eligibility than entrance eligibility. The 2014 law required states to take certain steps to help families get and retain child care assistance—and many have taken steps like allowing families to stay eligible for assistance for a full year without having to continuously recertify their income level, giving them a semblance of certainty about their finances for at least the coming year.

But other parts of the law—like the recommendations to offer a higher exit eligibility limit, and to average several months’ income so that a single spike in income wouldn’t cause the family to be kicked off the program—were simply that: recommendations. Of course, if half of all states are supporting families’ economic progress by offering a higher exit limit than entrance limit, that means that the other half aren’t. Since the new law didn’t include any new federal funding for implementation, states in many cases were scrambling for state funds to fulfill the required items, let alone find money for anything not explicitly required.

With $2.9 billion in new child care funding recently approved by Congress, Schulman is hopeful that more states will smooth out the child care cliff, and fewer families will find themselves falling off of it. But it takes a comprehensive approach, she cautions.

For example, at first glance, the state of Ohio initially looks family friendly for allowing families to remain on child care assistance through one of the highest income levels in the nation ($61,260 for a family of three). But the entrance limit—the income limit you must have to START receiving child care assistance—is one of the lowest: A family of three must make less than $26,208 to begin receiving child care assistance.

“So you’ve got someone making $27,000 who can’t even qualify in the first place, isn’t getting any help, and someone making $60,000 who is,” says Schulman. “The thing is, they both need help, and we shouldn’t have to choose between them, because that family who worked their way up to the higher limit is probably still struggling to catch up on bills. But does it make sense to shut someone out at $27,000 who never gets assistance at all?”

“It’s great to ease people out gradually, but there are people who are facing a closed door to begin with,” she says. Indeed, one of the most shocking statistics about child care in the United States is this: Only 1 in 6 children eligible for child care assistance ever get it at all. Think about that: On a playground filled with 100 kids whose families need and qualify for child care assistance, only 16 of them will get it. Last year, the state of Texas had a stunning 41,593 children on its waiting list for child care assistance; North Carolina had 26,608; Massachusetts had 24,202. The state of Georgia froze its waiting list entirely, simply turning away families without taking their names.

It comes as a surprise to many people that simply meeting an income limit doesn’t necessarily mean a family gets any help. Unlike food stamps—where if you meet the income limits, you receive the benefit—subsidies for child care, heating, and housing are different: The pot of money for it can run dry. And it often does. In 2017, 19 states had waiting lists for child care assistance.

“When the money’s gone, the money’s gone,” says Schulman.

“There are a lot of administrative and paperwork hurdles that make it difficult for families to get enrolled in child care assistance, and, unfortunately, that’s partly intentional,” says Greenfield. If a state can keep a family from applying for child care assistance simply by making it too hard—making the application too complicated, requiring unnecessarily detailed documentation, requiring multiple in-person interviews only on weekdays, perhaps at a distant office or only during the hours most people are working—that’s one fewer family whose child care they have to fund, and one fewer family on their waiting list. States may also require parents to be working in order to qualify, which creates a head-scratching Catch-22: They need a job to qualify for affordable child care, but need child care to be able to search for and interview for jobs.

And when states fail to increase their per-child payments to keep pace with market rates, parents find themselves armed with a voucher than no one will take: Since the child care providers can make more money accepting a child whose parents can afford to pay market rates, that’s what they do.

Schulman hopes that, armed with new federal funding to tackle these challenges, states will step up and begin filling the gaping holes in the American child care system—smoothing out the child care cliff while also making it easier for families access care in the first place, increasing the number of American kids who spend their days playing, coloring, building, and singing in a safe, caring environment their parents can actually afford.