Impact of Welfare Reform on Child Care Subsidies in Milwaukee County: 1996-1999 (Part Three)

Employment and Training Institute, University of Wisconsin-Milwaukee, 1999
Child Care as a Source of Employment

Payments made to all Milwaukee County subsidized child care providers were examined together with state licensed providers to examine the employment experience of provisional and certified providers and any movement toward licensed care status for the period January 1, 1996 through March 1, 1999. Payments included subsidy totals for day care for "W-2" cases, low- income employed families, kinship care and foster care cases. These totals do not include family co-payments, which when made are paid directly to the provider and are not reported to the county.

Table 6:
Payments to Milwaukee County Day Care Providers: 1996- 1998
Family Provisional Family Certified Family Licensed Licensed Group Centers
1996 $2.2 million $5.5 million $1.0 million $22.4 million
1997 $1.6 million $7.7 million $1.6 million $32.0 million
1998 $1.7 million $9.5 million $5.1 million $49.3 million

Provisional Providers

The provisional care status was created for providers who are relatives or have not completed the required 15 hours of training for certified status. Changes in child care policies during 1996 resulted in high but short term use of provisional care. This resulted in very low payments and high turnover. The number of provisional providers decreased from 1,136 in 1996 (as families transitioned from AFDC grant reimbursements for day care to direct payments to providers) to 350 providers during 1998 and only 193 provisional providers shown in the first two months of 1999. Average annual payments to provisional providers rose from $1,908 in 1996 to $5,403 in 1998. The percent of provisional providers earning over $5,000 per year in subsidy payments rose from 8 percent in 1996 to 38 percent in 1998, and the percent earning over $10,000 a year rose from 2 percent in 1996 to 11 percent in 1998.

Table 7:
Provisional Day Care Providers
Number Avg. Annual Payment % Paid Over $10,000
1996 1,136 $1,908 2%
1997 634 $2,624 4%
1998 350 $5,403 11%

Few provisional providers moved to the licensed class of family or group providers. Of the 1,550 provisional providers who received day care payments in the 1996-1999 period, only 36 (or 2 percent) had attained licensed provider status by 1999. Those few who did become licensed providers, however, showed county day care payments averaging $25,864 in 1998.

Certified Providers

The population of certified providers in contrast increased in number and in aggregate amount paid with providers increasing from 841 in 1996 to 1,164 in 1998, and payments rising from $5.7 million in 1996 to $11.67 million in 1998. Average annual payments increased as well from $6,777 in 1996 to $10,078 in 1998. Providers earning $10,000 or more per year rose from 22 percent in 1996 to 39 percent in 1998.

Table 8:
Certified Day Care Providers
Number Avg. Annual Payment % Paid Over $10,000
1996 841 $6,777 22%
1997 973 $8,031 30%
1998 1,164 $10,078 39%

The certified class of providers was much more likely to advance to the more lucrative licensed group of family provider status. Still, by March 1999, only 144 (10 percent) of the 1,164 providers certified in 1998 had a regular or probationary license. (Another 41 certified providers unsuccessfully attempted to become licensed.) Of the 100 certified providers who had moved to licensed care providers in 1998, their combined county payments that year averaged $37,208.

Licensed Family Care Providers

Licensed family care providers are allowed to care for a maximum of 8 children at a considerably higher rate of payment compared to certified providers. During 1996, 83 licensed family providers were paid $1 million. In 1997, 112 licensed family providers were paid $1.6 million, and in 1998, 196 providers were paid $5.1 million. The average annual subsidy payments for these providers doubled from $12,613 in 1996 to $26,260 in 1998.

Table 9:
Licensed Family Day Care Providers
Number Avg. Annual Payment % Paid Over $10,000
1996 83 $12,613 48%
1997 112 $14,027 45%
1998 196 $26,260 67%

Most County Payments Go to Licensed Group Providers

A total of 1,982 day care providers were paid $65,655,740 in 1998. 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. Most county payments were made to licensed group day care centers and were concentrated in 11 provider agencies with annual payments of over $1 million each and total payments of $16 million, and 18 agencies with annual payments between $500,000-$l,000,000 and total payments of $11.6 million.

Payments to Day
Care Providers

Licensed Child Care Capacity Increases in the Central City

Licensed capacity has increased for both family and group providers in the last three years. The number of licensed family day care providers in Milwaukee County increased from 196 in March 1996 to 337 by April 1999. The capacity of licensed family providers increased from 1,565 to 2,693 slots. Licensed group provider sites rose from 229 in March 1996 to 303 in April 1999 and capacity rose from 15,721 slots to 21,519 slots.

Increases took place primarily in the central city where ten zipcode areas accounted for 51 percent of all group capacity in Milwaukee County, up from 41 percent of group capacity in March 1996. Similarly, the ten zipcode areas accounted from 66 percent of family day care capacity in April 1999, compared to 50 percent of the capacity in 1996. Three-fourths (76 percent) of the increase in group center capacity in Milwaukee County and 90 percent of the increase in family capacity took place in the central city.

Availability of evening child care remains a problem with only 24 providers open after 7:00 pm. In April 1999 licensed centers with evening day care had a capacity of 458 slots in central city neighborhoods.

Transportation and Child Care

Access to adequate transportation remains a problem for many families receiving subsidized care. By the end of 1998, only one out of five (19 percent) of the families receiving a "W-2" payment and day care subsidies had a driver's license. For families receiving subsidized day care but not in "W-2," 55 percent had a driver's license.

Subsidized Care Is Concentrated in Central City Neighborhoods

As of the week of February 6, 1999, two-thirds (69 percent) of all child care subsidies were made to providers in eight northside central city zipcodes. Day care providers in these eight central city zipcodes enrolled 65 percent of the children in licensed group care, 84 percent of the children in licensed family care, and 75 percent of children in provisional or certified care.

During the week of February 6, 1999, 11,233 Milwaukee County children received subsidized child care totalling $1.3 million. Most of the children (81 percent) were in licensed care and were enrolled in day care in the eight northside zipcode areas. The table below shows the zipcode areas where providers received the highest day care payments in 1998.

Table 10:
Zipcode Areas With Highest Day Care Payments
Zipcode 1998 Payments
53209 $6,908,228
53206 $6,107,684
53218 $5,319,333
53208 $4,968,439
53216 $4,843,058
53212 $4,823,104
53210 $4,582,244
53204 $2,988,129
53205 $2,722,019
53215 $2,694,055
53225 $2,608,891
53224 $1,931,949
53223 $1,578,042
53233 $1,291,869

Turnover in Child Day Care

The high turnover and high volume patterns of child care, observed in 1996 and 1997, are persisting. Child care patterns mirror the high turnover employment experience of many new entrants to the labor force, and flood the Milwaukee County payment and regulatory system with thousands of short-term child care placements.

A total of 23,240 children received day care support at some time during 1998. Yet only about half of these children were enrolled in any given week of the year. Most children entering the day care system did not receive continuous care during the year and were not receiving payments at the end of the year. For example, of the 909 children entering the day care payment system in the second half of January 1998, only 408 (45 percent) were still receiving payments at the end of the year and only 158 (17 percent) received day care support for all of 1998.

Many children switched day care providers, complicating the work required to process day care subsidies. For example, 27 percent of the children first receiving day care support in the second half of January 1998 showed day care subsidies at the end of December with the same provider. Only 14 percent of the children remained in supported day care with the same provider for all of 1998.

The number of new children entering the day care payment system is declining. The number of new children receiving day care payments was 909 in second half of January 1998 but had dropped to 266 by the second half of December 1998. Meanwhile, families changing day care providers accounted for much of the administrative activity shown in 1998. The number of new child/provider events went from 1,010 in the second half of January 1998 to 500 in the second half of December 1998, suggesting that processing turnover of vendors is accounting for an increasing amount of the administrative day care activity over time.

Factors Relating to Underutilization of Day Care Subsidies for Part-Time Care

Family co-payments for day care are determined by the family's income as a percent of poverty rather than actual cost of day care provided. This 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. The graph below shows the co-payment schedule for a 3-person family with one child needing 15 hours a week of afterschool care. For families with earnings at 135 percent of poverty or above, the family's co-payment exceeds the total weekly cost of provisional care ($26.25). Subsidies (or reimbursements) for less expensive part-time informal care or babysitting are not permitted. Caregivers must be 18 years or older and certified or licensed, even though few licensed providers offer care during the evenings or on a part-time basis.

In many cases, the day care subsidies (even without the family co-payment) exceed the usual fees the centers charge families in non-subsidized care. In addition, centers receive subsidies at a full-time rate for any care above 24 hours per week. As a result, most families on the low-end of the co-payment schedule may not actually be required by their day care center to make any co-payment, while families with higher co-payment requirements and with part-time care are more likely to be required to make co-payments. (The state made an exception for children enrolled in before and afterschool programs operated by Milwaukee Public Schools so that parents would be required to make only 50 percent of their expected co-payment. This exception was intended to lessen the impact of the state formula which discourages state support for less expensive part-time care by establishing parent co-payment schedules which reach or exceed the actual cost of care.)

Funding support for this study was provided in part by the Helen Bader Foundation. For further information, contact the Employment and Training Institute, University Outreach, University of Wisconsin-Milwaukee, 161 W. Wisconsin Avenue, Suite 6000, Milwaukee, WI 53203. PHONE (414) 227-3380. FAX (414) 227-3233.

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