3.5. Federal and State Subsidies

West Virginia Tiered Reimbursement Program

The West Virginia Department of Health and Human Resources has a tiered reimbursement system in place that provides higher subsidy payments for child care programs that meet higher standards of care [111]. Programs are defined as child care centers, family child care facilities or child care homes. A licensed center is automatically categorized as a Tier I provider, and receives Tier I reimbursement rates through the state’s child care subsidy program. If programs are able to meet specific higher quality standards they may apply for Tier II or Tier III reimbursement rates [112].

In order to qualify, programs must meet certain criteria in: curriculum, program management, professionalism, positive interactions and relationships, family and community, health, safety and nutrition, child growth and development, and child observation and assessment [113].

Tiered rates are based on the age of the children in care and the center’s (facility or home) tier level. Tier II and Tier III programs receive $2.00 and $4.00 extra daily, per full day (of care) per child, respectively. To be eligible for Tier III reimbursement, providers must be nationally accredited through either the National Association for the Education of Young Children (NAEYC) or the Council on Accreditation (COA) [114]. The tables below show reimbursement rates per tier and age range for a West Virginia child care center, family child care facility and family child care home. Definitions of different types of child care providers can be found in a footnote [115].

Table 1. Tiered Reimbursement Rates for Child Care Centers

Rate Type	Infant (0-24 Months) Day	Toddler (25-36 Months) Day	Pre-School (37-59 Months) Day	School-Age (60 Months & Up) Day
Tier I	$32	$30	$28	$25
Tier II	$34	$32	$30	$27
Tier III - National Accreditation	$36	$34	$32	$29

Source: West Virginia Department of Health and Human Resources

Table 2. Tiered Reimbursement Rates for Family Child Care Facilities

Rate Type	Infant (0-24 Months) Day	Toddler (25-36 Months) Day	Pre-School (37-59 Months) Day	School-Age (60 Months & Up) Day
Tier I	$27	$25	$25	$25
Tier II	$29	$27	$27	$27
Tier III - National Accreditation	$31	$29	$29	$29

Source: West Virginia Department of Health and Human Resources

Table 3. Tiered Reimbursement Rates for Family Child Care Homes

Rate Type	Infant (0-24 Months) Day	Toddler (25-36 Months) Day	Pre-School (37-59 Months) Day	School-Age (60 Months & Up) Day
Tier I	$25	$22	$22	$20
Tier II	$27	$24	$24	$22
Tier III - National Accreditation	$29	$26	$26	$24

Source: West Virginia Department of Health and Human Resources

Nevertheless, West Virginia providers report that state subsidies are not sufficient to cover the costs associated with meeting the requirements of higher tiers. That is, the state’s child care subsidy program does not offer strong enough incentives for higher quality services (small increase in state subsidy per child as providers move up tiers, which are subject to stricter regulations and higher standards of care). For this reason, some child care businesses function as a Tier III provider (i.e., they provide care commensurate to Tier III quality standards) but are categorized as Tier I. Such programs do not apply for Tier III reimbursement rates due to the difficulties in complying with complex regulations.

The gap between the state child care subsidy reimbursement rate and the estimated cost of center-based licensed child care for an infant in West Virginia is $533 per month [116]. Infant care in West Virginia is 70 percent more expensive than care for preschoolers, while subsidies for infant care are only 14 percent higher [117]. Opportunities Exchange, in turn, estimates that the “cost gap” of inadequate reimbursement rates – considering a small child care center (one classroom per age group) in a southern state that meets the minimum licensing requirements – is about $260 per child per year for preschool age children, and $3,800 per child per year for infants and toddlers [118]. In essence, reimbursement rates should reflect the true cost of providing care for preschoolers as well as infants and toddlers.

Census and Child Care and Development Block Grant

Child Care and Development Block Grant (CCDBG) funding allows states to provide child care subsidies (for center- or home-based care) for low-income families, with children under 13, whose income is below 85 percent of the state median income [119]. One of the purposes of the CCDBG is to provide financial support to low income families for child care, so they can work or take part in an educational program or job training [120]. For the most part, funds are used to serve children under 5 years of age, with the remainder going toward children 5-13 years old while they are not in school [121]. CCDBG funds are also put toward quality initiatives and professional development for early educators [122]. According to the national partnership The State of Child Care in America, only 6.6 percent of eligible low-income children in West Virginia are being served under the program [123].

The Administration for Children and Families allocates funds to states and other territories based on a formula. The formula is partially based on the number of children who are under 5 and 13 years of age in the state (i.e., the ratio of the number of children under age 5 (or 13) compared with the number of children under age 5 (or 13) in the country) [124]. For this reason, the upcoming U.S. Census Bureau count could have a high impact on funding for West Virginia child care providers and low-income working families, especially because current trends show that West Virginia’s population is likely to decrease [125].

Child Care Cliff Effect

The child care cliff effect is an issue that affects caregivers who do not make enough money to pay for child care services and at the same time are not eligible for subsidies. Families that receive subsidies for child care pay small co-pays that gradually increase as their income goes up. However, if caregivers start making slightly more than the income limit for eligibility for subsidies, the benefit is completely removed, making it significantly difficult for them to absorb child care costs [126].

For this reason, the abrupt, rather than gradual, loss of child care subsidies inadvertently discourages workforce participation and/or prevent caregivers from accepting promotions and higher pay (i.e., higher pay that is not sufficient to offset the no longer subsidized child care costs). The Colorado State Legislature has recently passed a bill that gives family a period of two years to adjust to the loss of the subsidy (subsidies are gradually reduced during the transition period, so caregivers can plan accordingly). Some other states have passed bills that create “higher exit income limits” than “entrance income limits” [127].

In West Virginia, according to a representative with Our Future West Virginia, if a caregiver qualifies and applies for a subsidy, it is almost guaranteed that he or she is going to receive it. However, West Virginia does not have a law that provides for the gradual reduction of child care subsidies to prevent caregivers from falling off of the “cliff.”