Research is a critical resource for policymakers to understand complex issues facing Nebraska children and families. For early childhood public policy, one such complex issue is the Child Care Subsidy program. At First Five Nebraska, we recently led a study on the impact of expanding the income limits for the Child Care Subsidy in Nebraska.[1]
In 2021, the Nebraska Legislature passed LB485, expanding the initial income eligibility limit for the child care subsidy from 130% of the Federal Poverty Level (FPL) to 185% FPL.[2] LB485 also expanded the income limit for transitional child care from 185% to 200% FPL for families who were redetermined eligible. To understand the impact, we looked at many things—how many children received subsidized care through the expansion, the economic impact of expansion on families, child care providers and Nebraska and how expansion affected the everyday lives of families and the child care providers who serve them. The answers to these questions are in our recently published report: Impact of Income Eligibility Expansion of the Child Care Subsidy Program in Nebraska Legislative Summary Report
Today we want to explore one finding from our report that reveals the complexity of changes to child care subsidy eligibility: What was the impact of child care subsidy income eligibility expansion on child care providers?
What did we expect to find?
By increasing the upper limit to income to qualify, we anticipated that more families overall would enroll in the child care subsidy program, therefore increasing the demand for subsidized care. To provide subsidized care, child care providers must enter into a subsidy contract with the Nebraska Department of Health and Human Services (NDHHS). As such, we expected that as more families in their community became eligible for subsidized care, more providers would be willing to enter into subsidy contracts with NDHHS.
One of our first steps was to see if the anticipated outcomes—more families enrolled in the subsidy program and more child care programs enrolling subsidized families—was correct. The short answer is no.
Based on the administrative data we analyzed, since 2019 fewer children and families enrolled in the child care subsidy program. Given that the demand for subsidized child care did not increase, it is also understandable that the number of child care providers enrolling families in the child care subsidy program did not increase.
Although it’s difficult to pin down an exact cause for these trends, several things happened during the time income eligibility changed that affected the child care industry. When the subsidy expansion law went into effect in August 2021, child care providers were struggling to sustain their businesses and many of their communities have never fully recovered.
One community member in Cherry County told us, “We have been in a ‘crisis mode’ since COVID—since before COVID.” Inflation and workforce shortages have put providers in precarious financial situations, and since 2019, Nebraska has seen a decrease in licensed family child care home providers overall.
How do providers experience expanded income eligibility?
We can learn a lot about the child care subsidy system by looking at the trends of children receiving care and child care providers enrolling subsidized families, but to understand how expanded income eligibility impacted child care providers, we needed to go straight to the source.
In addition to analyzing administrative data, an important part of the impact study was talking to parents, child care providers and communities about their experiences with expanded income eligibility for the child care subsidy program. The child care providers we spoke to offered a complex perspective, one that highlighted the benefits of subsidized care for families and communities but complicated by the business impacts on child care providers.
Expanding the child care subsidy income limits is good for Nebraska
Providers we spoke with said expanding the income eligibility limits was good for Nebraska. They mentioned that accepting the child care subsidy was important for serving their community and that they value their ability to provide quality care for families who would not be able to afford it without the child care subsidy program.
“If you’re going to serve [my community], you’re going to accept [the subsidy]. You can’t serve [my community] and only accept self-pay families.” — Child Care Center Director, Dodge County
“I think that a child from Title 20 is worth receiving the same care we provide for a child whose parent pays. It’s the same care because in my case, I do not show any preference. I take care of them the same way. My responsibility is the same.” — Family Child Care Provider, Douglas County
These providers also acknowledged how they could make a difference in a child’s life. “You know that the kids are going to be in a place where they’re safe and they’re going to be nurtured and they’re going to be in an educational environment,” one family child care home provider told us. “So, if they’re not getting that in their home environment, you can hopefully bring them up to speed eventually on where they should be developmentally.” When it comes to how providers viewed the child care subsidy in general, a clear message from providers was that the child care subsidy supports their communities by helping families receive quality early childhood education.
Accepting the child care subsidy strains child care businesses
Although providers said the child care subsidy was good for children, families and communities, many providers said that accepting the child care subsidy was bad for business. Providers said repeatedly that accepting subsidy negatively impacted their revenues, resulted in increased labor and administrative burdens, and that the time period in which income eligibility was expanded, accepting subsidy added strain to the business during a time of economic upheaval.
Most of the providers we spoke to said accepting subsidy meant a decrease in their revenue when compared to providing child care for families who pay privately. In addition to losing revenue, child care providers are often saddled with administrative costs that are not included in their reimbursement.
“You get more money for a private pay than you do a subsidy. And they’re the most vulnerable children that we have to serve.” — Child Care Center Director, Dodge County
“I actually did the math in the last six months. We are losing about $150 per child per week in our center, which is huge. And that’s because costs have increased with staff.” — Child Care Center Director, Lancaster County
Child care centers highlighted these challenges as direct labor costs. To provide subsidized child care, they needed staff who could manage the additional administrative burden. For family child care providers, who are reimbursed at a lower rate for providing subsidized child care, this burden is measured in unpaid time.
“I have one person dedicated [for child care subsidy] at my center that oversees all the clients. It’s a cost. How am I not going to have that person? That piles up into a cost of operations that’s not even considered in the direct cost of providing the child care support.” — Child Care Center Director, Lancaster County
“I think it’s unfair that they pay less for the daycares in homes as opposed to daycare centers when they demand the same things from both. We have the same requirements, the same regulations. And they always say: ‘Oh well, you see, we have many expenses.’ Yes, but you have 100 kids. You have 200 kids. You have 300 kids, and we only have 10 or 12.” — Family Child Care Provider, Douglas County
Why do providers accept the child care subsidy?
If providing care for children enrolled in the child care subsidy negatively impacts their revenues, why do providers accept the subsidy at all? Wouldn’t it be better for their bottom lines to accept only private-paying families?
Providers told us that even though it’s a difficult balance to run a child care business, at the end of the day, it’s the children that matter most. One family child care home provider in Dakota County told us, “People say, ‘Well, I don’t want to accept state pay.’ But you don’t know the difference you could make in a kid. You’re just looking at the money, you need to look at the kids. Because there are kids that really need you.” These providers see the great benefit that the child care subsidy has for children and their families.
In summary
Despite the challenges providers face, they told us the child care subsidy expansion income limits should remain. As business owners, providers see the value in providing care to Nebraska’s most vulnerable families. One family child care home provider in Adams County put it simply, “I have always taken subsidy. All families need care, so I just don’t care how I get paid as long as I get paid, you know.” Providers also see themselves as integral to their communities as the ones holding up the workforce, while helping children learn and thrive. One provider from Lancaster County told us, “If you want the workforce to succeed, if you want Nebraska to succeed, you need a strong workforce to have that strong workforce, you need a strong child care network and that means you’re going to need to help some of these women pay for child care.”
Learn more about the Child Care Subsidy Expansion Impact Study
If you have questions about the subsidy expansion study, please contact FFN’s Policy Research Manager Katie Bass at kbass@FirstFiveNebraska.org
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[1] First Five Nebraska. (2024). Impact Study of Income Eligibility Expansion of the Child Care Subsidy Program in Nebraska [Legislative Report]. https://nebraskalegislature.gov/FloorDocs/108/PDF/Agencies/Health_and_Human_Services__Department_of/847_20240830-163951.pdf
[2] Neb. L. 2021, LB485 § 1
[3] Nebraska Department of Health and Human Services. (2021). Child care licensing data from 2018 to 2021. Data requested and analyzed by First Five Nebraska.
[4] Nebraska Department of Health and Human Services. (2022). Licensed Child Care Roster. Accessed June 8, 2022.
[5] Nebraska Department of Health and Human Services. (2023). Licensed Child Care Roster. Accessed August 30,2023.
