Welfare Dollars No Longer an Increasing Source of Child Care Funding: Use of Funds in FY 2002 Unchanged from FY 2001, Down from FY 2000.

Since fiscal year (FY) 1997, states have used funds from the Temporary Assistance for Needy Families (TANF) block grant to supplement other funds in efforts to provide more child care assistance. This report provides an overview of the rules governing the use of TANF funds for child care. The report also describes how states used TANF funds to expand child care assistance between FY1996 and FY2000; explains how states spent TANF funds on child care in FY2002, in comparison to FY2001 and in the context of overall use of TANF in FY2002; and discusses why use of TANF for child care is likely to decline. The report then raises policy implications of these data for TANF reauthorization. The report concludes by pointing out that TANF is no longer a growing funding source for state child care programs. The use of TANF for child care was essentially unchanged between FY2001 and FY2002, and remains below the high of FY2000. Other uses for TANF have increased during this time period, although it is unclear if this represents a continuing trend. Indications are that by FY2003 or FY2004, the use of TANF for child care will likely decline due to state budget crises, dwindling or exhausted reserves, and TANF caseload dynamics. It is emphasized that this combination of factors will result in the loss of child care assistance for hundreds of thousands of low-income children, and that states will need more dedicated mandatory child care funding to prevent these cuts and meet any new TANF work requirements. (KB)