An Overview of Early Care and Education Issues in the 2013-15 Budget


July 2, 2013

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Changes in Wisconsin Shares and YoungStar

The biennial budget cut $31 million from the Wisconsin Shares child care subsidy appropriation, very close to the Governor’s initial proposal.  The budget cuts $17 million in the first year, and $14 million in the second year, compared to the 2012-13 base level for child care.

2013-14
JFC version

Change from 2012-13 base

2014-15
JFC version

Change from 2012-13 base

 $271 million

 -$17 million

 $274.7 million

 – $14 million

 The $31 million reduction in Wisconsin Shares spending helps make it possible to significantly increase the amount of funding from the welfare reform block grant (Temporary Assistance to Needy Families) that will be diverted to other purposes. The child care cuts help make it possible for the budget bill to shift $19 million of TANF funding per year to fund the Earned Income Tax Credit (EITC), which would replace a comparable amount of state funds now financing that credit.  This shell game diminishes the amount of funding to support services for low income families, such as Wisconsin Shares, while freeing up state funds for purposes, such as the income tax cuts.

The reduction is based on lower-than-anticipated expenditures in the current fiscal year, but it leaves a little room for modest growth in caseload and tiered reimbursement payments.  The budget modifies the reimbursement level for programs rated at four stars by the YoungStar system, increasing the maximum reimbursement rate from up to 5% to up to 10%. The tiered reimbursement system is intended to adjust payments based on the quality level of child care programs as rated on a 5-star scale under YoungStar.

The budget allows the freeze on child care payments to expire, which permits the Department of Children and Families to adjust rates if funding is available. However, the funding level assumes only a very small increase in those rates in 2015, and even that modest improvement might be at risk if W-2 expenditures do not decline as rapidly as the budget committee assumed.  Also included in the budget was a new initiative to develop an electronic benefit card for parents to use to purchase child care under Wisconsin Shares.

Funding for child care quality improvement activities basically stayed about the same as in 2012-13, with $13 million proposed for each year, to be used for the child care provider scholarship and bonus program, information technology to provide quality information to parents, and child care resource and referral services. The budget also includes expenditure authority for the recent federal Race to the Top grant, a 4-year grant with significant focus on improving YoungStar.

Impact on Child Care Quality

The budget provides substantially less funding for child care services, with few significant changes in Wisconsin Shares policies and the YoungStar quality rating and improvement system.  The Committee missed an opportunity to use $31 million to strengthen YoungStar’s efforts to help child care programs move up the 5-star rating scale and correct the long-term decline in Wisconsin Shares payment rates.

YoungStar was created originally with the intention of providing fiscal incentives to help programs improve, building on the base funding from Wisconsin Shares.  But the base payment rates in Wisconsin Shares are not likely to rise much under this budget, and the tiered reimbursement system will continue to reduce funding from far more programs than those that get higher rates—not a recipe for quality improvement.  Research shows that investing in high-quality early learning and development has a high rate of return.

The chart shows that 64% of child care programs are receiving cuts, 25% getting no increase, and only 10 percent (rated at 4 or 5 stars) are receiving increased payments. The incentive boost in payments for 4-star programs is helpful, but this increase affects only 3% of child care programs. 

YoungStar Rating of Child Care Provider

Impact on WI Shares Payments:
Original Schedule
2010

Impact on WI Shares Payments:
2013-15 Budget

Percent of child care programs receiving payments by star level
(April 2013 data)

One Star

No reimbursement

No reimbursement

0%

Two Stars

No change

Up to 5% reduction

64%

Three Stars

5% increase

No change

25%

Four Stars

10% increase

Up to 10% increase*

3%

Five Stars

25% increase

Up to 25% increase

7%

  *The Governor’s proposal increases the 4-star increase from 5% to 10%, a change from 2011-13 budget.

 Rather than reducing the child care budget, the funds could have been used to boost child care quality with better incentives and resources in YoungStar and improved payment rates to child care providers.  Advocates of quality early education are disappointed that the budget missed the opportunity to take any of the following actions:

  • Wisconsin Shares payment rates could have been raised substantially to be more in line with market rates, after 7 years of no increases.
  • Policies for licensed family child care programs could have been changed so that child care providers would not be penalized when children are sick.
  • The tiered reimbursement system could have been adjusted to eliminate the five percent penalty for 2-star programs, and a 5% increase could have been provided for 3-star programs.
  • Wisconsin could have invested more in training, scholarships and rewards for credit-based education (T.E.A.C.H. Early Childhood and R.E.W.A.R.D. stipends), on-site technical consultation, and micro-grants to help child care programs improve and move up the YoungStar 5-star quality rating scale.  

 The budget as completed by the Joint Finance Committee has to be approved by the Legislature and signed by the Governor, but changes appear unlikely.

 Dave Edie