University of Wisconsin-Milwaukee
Employment and Training Institute


Impact of Welfare Reform on Child Care Subsidies in Milwaukee County: 1996-1999

by John Pawasarat and Lois M. Quinn, University of Wisconsin-Milwaukee Employment and Training Institute, October 1999

As part of its "W-2" ("Wisconsin Works") reforms of the state welfare system, the State of Wisconsin made a substantial commitment to provide day care support for low-income employed families, using federal TANF (Temporary Assistance to Needy Families) and child care block grant funds. This report on day care usage was developed to assist Milwaukee County and the State of Wisconsin in their long-term efforts to build an effective day care payment delivery system for employed families. The analysis examines the utilization of child care subsidies for "W-2" and low-income families in Milwaukee County from January 1996 through February 1999, analyzes payments to care providers, and reviews public assistance records ("W-2," food stamps and medical assistance) to assess use and type of child care subsidized in the county. Totals include payments for "W-2" and low-income employed families and do not include payments for children in foster care and kinship care cases. The study also explores the experience of adults offering provisional, certified and licensed child care to gauge income received for this work in 1998, compared to prior years. (Funding support for this study was provided in part by the Helen Bader Foundation. The full report is available online.)


Expenditures Increase As Do Average Costs Per Family

  • The number of Milwaukee County families receiving low-income day care support more than doubled over the last three years, from 3,011 in January 1996 to 6,876 in January 1999. Monthly day care subsidy payments increased from $1.5 million in January 1996 to $5.2 million in January 1999. (These totals do not include payments for foster care and kinship care cases.)

  • Most of the increases occurred as the "W-2" program took effect and families with young children and more children required care. For these families the cost of child care often exceeded their "W-2" payments. For over half (56 percent) of these families the day care provider received a subsidy payment which was higher than the family's combined earnings and "W-2" payment. Another 2,453 employed families received food stamp benefits but not "W-2" payments in January 1999, and about a third (31 percent) of these families showed lower total wages than the day care payments made to their child care provider.

  • The average monthly day care subsidy was $759 per family in January 1999, up from $510 in January 1996. This amount is equal to the total earnings of a minimum wage ($5.15 an hour) worker employed 36 hours a week. Almost 700 mostly "W-2" families received subsidized child care payments at an annualized rate of $20,000 or more.

  • Almost a fourth (23 percent) of day care payments were for children under age two. Over half (56 percent) of children under age two were in care for 50 or more hours a week and three-fourths (79 percent) were in care for 40 hours or more a week in January 1999.

Working Poor Not on Welfare Make Up Small Portion of Population Served

  • Public child care assistance was intended not only for families in the "W-2" Wisconsin welfare program but also for other financially eligible working adults with children. However, almost all (93 percent) of the 11,768 families who received day care support at some time in 1998 were in the welfare system, while only 7 percent did not appear to have been on public assistance.

Families with a Childcare Subsidy by Type of Public Assistance

  • By contrast, 53,513 low-income employed Milwaukee County families with children claimed the state and federal earned income tax credit (EITC) in 1997. An estimated 90 percent of eligible low-income employed Milwaukee County families claim the credit.

Licensed Capacity Increases in Central City

  • Licensed capacity has increased for both family and group day care providers in Milwaukee County over the last three years. The number of licensed family providers increased from 196 in March 1996 to 337 by April 1999 (1,565 slots to 2,693 slots). The number of licensed group provider sites increased from 229 to 303 (15,721 slots to 21,519 slots) over the three year period. Increases took place primarily in the central city neighborhoods of Milwaukee.

  • A total of 1,982 day care providers were paid $65,655,740 in 1998 (including day care payments for "W-2," low-income, foster care and kinship care cases). These included 1,164 certified providers who were paid $9.5 million, 350 provisional providers paid $1.7 million, and 468 licensed family and group center providers paid $54.5 million.

  • Day care support is focused on moving children into licensed or certified day care settings and does not encourage in-home care. Yet, only 24 licensed child care providers (with a total capacity of 458 slots) are open after 7:00 p.m. in central city neighborhoods.

Family Day Care As an Employment Option

  • The percent of certified family day care providers earning over $10,000 per year in day care subsidy payments rose from 22 percent in 1996 to 39 percent in 1998. The percent of licensed family providers earning over $10,000 in subsidies rose from 2 percent in 1996 to 11 percent in 1998.

  • Few provisional day care providers (relatives and adults who have not completed the required 15 hours of training for certified status) moved to the licensed class of family or group providers. Of 1,550 provisional providers who received county day care payments in 1996-1999, only 2 percent had attained licensed provider status by 1999. Those few who did become licensed providers, however, showed county income payments averaging $25,864 in 1998.

High Turnover, Transportation and Underutilization Concerns

  • The high turnover and high volume patterns of child care, observed in 1996 and 1997, are persisting. Of the 909 children entering the day care payment system in the second half of January 1998, only 45 percent were still receiving day care support at the end of the year and only 17 percent received day care support for all of 1998. Families changing day care providers account for a growing portion of the county activity administering day care payments.

  • Access to adequate transportation remains a problem for many families receiving day care support. Only one in five "W-2" families receiving day care subsidies in 1998 had a driver's license, while over half (55 percent) of families receiving day care support but no "W-2" payments had a license.

  • The state's day care co-payment schedule adversely effects use of part-time afterschool care in cases where the family's required co-payment exceeds or is almost equal to the actual cost of care. For example, employed three-person families with one child needing 15 hours a week of afterschool care are required to make higher co-payments than the cost of provisional care ($26.25) once their income reaches 135 percent of poverty. (To encourage use of Milwaukee Public Schools before and after school programs, an exception was made which allowed parents to pay only half of the usual co-payment, to bring the co- payment more in line with actual program costs.)

  • In many cases the child care subsidy (even without the family co-payment) exceeds the revenues received from non-subsidized clients. As a result, day care centers may not expect lower-earning families to make any co-payment, while families with higher co-payment requirements and part-time care are more likely to be required to make co- payments.


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